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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
 
 
 
X
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the Fiscal Year Ended December 31, 2017
 
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
For the transition period from ____________ to ____________
 
 
Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
 
 
Commission
File Number
Registrant, State of Incorporation or Organization, Address of Principal Executive Offices, Telephone Number, and IRS Employer Identification No.
1-11299
ENTERGY CORPORATION
(a Delaware corporation)
639 Loyola Avenue
New Orleans, Louisiana 70113
Telephone (504) 576-4000
72-1229752
 
1-35747

ENTERGY NEW ORLEANS, LLC
(a Texas limited liability company)
1600 Perdido Street
New Orleans, Louisiana 70112
Telephone (504) 670-3700
82-2212934
 
 
 
 
 
 
 
 
 
 
1-10764
ENTERGY ARKANSAS, INC.
(an Arkansas corporation)
425 West Capitol Avenue
Little Rock, Arkansas 72201
Telephone (501) 377-4000
71-0005900
 
1-34360

ENTERGY TEXAS, INC.
(a Texas corporation)
10055 Grogans Mill Road
The Woodlands, Texas 77380
Telephone (409) 981-2000
61-1435798
 
 
 
 
 
 
 
 
 
 
1-32718

ENTERGY LOUISIANA, LLC
(a Texas limited liability company)
4809 Jefferson Highway
Jefferson, Louisiana 70121
Telephone (504) 576-4000
47-4469646
 
1-09067

SYSTEM ENERGY RESOURCES, INC.
(an Arkansas corporation)
1340 Echelon Parkway
Jackson, Mississippi 39213
Telephone (601) 368-5000
72-0752777
 
 
 
 
 
 
 
 
 
 
1-31508

ENTERGY MISSISSIPPI, INC.
(a Mississippi corporation)
308 East Pearl Street
Jackson, Mississippi 39201
Telephone (601) 368-5000
64-0205830
 
 
 

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Securities registered pursuant to Section 12(b) of the Act:
Registrant
Title of Class
Name of Each Exchange
on Which Registered
 
 
 
Entergy Corporation
Common Stock, $0.01 Par Value – 180,770,383 shares outstanding at January 31, 2018
New York Stock Exchange, Inc.
Chicago Stock Exchange, Inc.
 
 
 
Entergy Arkansas, Inc.
Mortgage Bonds, 4.90% Series due December 2052
New York Stock Exchange, Inc.
 
Mortgage Bonds, 4.75% Series due June 2063
New York Stock Exchange, Inc.
 
Mortgage Bonds, 4.875% Series due September 2066
New York Stock Exchange, Inc.
 
 
 
Entergy Louisiana, LLC
Mortgage Bonds, 5.25% Series due July 2052
New York Stock Exchange, Inc.
 
Mortgage Bonds, 4.70% Series due June 2063
New York Stock Exchange, Inc.
 
Mortgage Bonds, 4.875% Series due September 2066
New York Stock Exchange, Inc.
 
 
 
Entergy Mississippi, Inc.
Mortgage Bonds, 4.90% Series due October 2066
New York Stock Exchange, Inc.
 
 
 
Entergy New Orleans, LLC
Mortgage Bonds, 5.0% Series due December 2052
New York Stock Exchange, Inc.
 
Mortgage Bonds, 5.50% Series due April 2066
New York Stock Exchange, Inc.
 
 
 
Entergy Texas, Inc.
Mortgage Bonds, 5.625% Series due June 2064
New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:
Registrant
Title of Class
 
 
Entergy Arkansas, Inc.
Preferred Stock, Cumulative, $100 Par Value
 
 
Entergy Mississippi, Inc.
Preferred Stock, Cumulative, $100 Par Value
 
 
Entergy Texas, Inc.
Common Stock, no par value


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Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.
 
Yes
 
No
 
 
 
 
Entergy Corporation
ü
 
 
Entergy Arkansas, Inc.
 
 
ü
Entergy Louisiana, LLC
ü
 
 
Entergy Mississippi, Inc.
 
 
ü
Entergy New Orleans, LLC
 
 
ü
Entergy Texas, Inc.
 
 
ü
System Energy Resources, Inc.
 
 
ü

Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
 
Yes
 
No
 
 
 
 
Entergy Corporation
 
 
ü
Entergy Arkansas, Inc.
 
 
ü
Entergy Louisiana, LLC
 
 
ü
Entergy Mississippi, Inc.
 
 
ü
Entergy New Orleans, LLC
 
 
ü
Entergy Texas, Inc.
 
 
ü
System Energy Resources, Inc.
 
 
ü

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.  Yes þ No o

Indicate by check mark whether the registrants have submitted electronically and posted on Entergy’s corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [ ü ]


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Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

 
Large
accelerated
filer
 
Accelerated
filer
 
Non-
accelerated
filer
 
Smaller
reporting
company
 
Emerging
growth
company
Entergy Corporation
ü
 
 
 
 
 
 
 
 
Entergy Arkansas, Inc.
 
 
 
 
ü
 
 
 
 
Entergy Louisiana, LLC
 
 
 
 
ü
 
 
 
 
Entergy Mississippi, Inc.
 
 
 
 
ü
 
 
 
 
Entergy New Orleans, LLC
 
 
 
 
ü
 
 
 
 
Entergy Texas, Inc.
 
 
 
 
ü
 
 
 
 
System Energy Resources, Inc.
 
 
 
 
ü
 
 
 
 

If an emerging growth company, indicate by check mark if the registrants have elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act.)  Yes o   No þ

System Energy Resources meets the requirements set forth in General Instruction I(1) of Form 10-K and is therefore filing this Form 10-K with reduced disclosure as allowed in General Instruction I(2).  System Energy Resources is reducing its disclosure by not including Part III, Items 10 through 13 in its Form 10-K.

The aggregate market value of Entergy Corporation Common Stock, $0.01 Par Value, held by non-affiliates as of the end of the second quarter of 2017 was $13.8 billion based on the reported last sale price of $76.77 per share for such stock on the New York Stock Exchange on June 30, 2017.  Entergy Corporation is the sole holder of the common stock of Entergy Arkansas, Inc., Entergy Mississippi, Inc., Entergy Texas, Inc., and System Energy Resources, Inc.  Entergy Corporation is the direct and indirect holder of the common membership interests of Entergy Utility Holding Company, LLC, which is the sole holder of the common membership interests of Entergy Louisiana, LLC and Entergy New Orleans, LLC.  

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders, to be held May 4, 2018, are incorporated by reference into Part III hereof.

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TABLE OF CONTENTS
 
SEC Form 10-K Reference Number
Page Number
 
 
 
 
 
Entergy Corporation and Subsidiaries
 
 
Part II. Item 7.
 
Part II. Item 6.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Notes to Financial Statements
 
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Entergy’s Business
 
 
Part I. Item 1.
Part I. Item 1.
Part I. Item 1.
 
 
 
Part I. Item 1A.
Unresolved Staff Comments
Part I. Item 1B.
None

i
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Entergy Arkansas, Inc. and Subsidiaries
 
 
Part II. Item 7.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 6.
Entergy Louisiana, LLC and Subsidiaries
 
 
Part II. Item 7.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 6.
Entergy Mississippi, Inc.
 
 
Part II. Item 7.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 6.
Entergy New Orleans, LLC and Subsidiaries
 
 
Part II. Item 7.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 6.
Entergy Texas, Inc. and Subsidiaries
 
 
Part II. Item 7.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.

ii
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Part II. Item 8.
Part II. Item 6.
System Energy Resources, Inc.
 
 
Part II. Item 7.
 
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 8.
Part II. Item 6.
Part I. Item 2.
Part I. Item 3.
Part I. Item 4.
Part I. and Part III. Item 10.
Part II. Item 5.
Part II. Item 6.
Part II. Item 7.
Part II. Item 7A.
Part II. Item 8.
Part II. Item 9.
Part II. Item 9A.
Part II. Item 9A.
Part III. Item 10.
Part III. Item 11.
Part III. Item 12.
Part III. Item 13.
Part III. Item 14.
Part IV. Item 15.
Part IV. Item 16.
 
 
 
 
 

This combined Form 10-K is separately filed by Entergy Corporation and its six “Registrant Subsidiaries:” Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.  Information contained herein relating to any individual company is filed by such company on its own behalf.  Each company makes representations only as to itself and makes no other representations whatsoever as to any other company.

The report should be read in its entirety as it pertains to each respective reporting company.  No one section of the report deals with all aspects of the subject matter.  Separate Item 6, 7, and 8 sections are provided for each reporting company, except for the Notes to the financial statements.  The Notes to the financial statements for all of the reporting companies are combined.  All Items other than 6, 7, and 8 are combined for the reporting companies.

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FORWARD-LOOKING INFORMATION

In this combined report and from time to time, Entergy Corporation and the Registrant Subsidiaries each makes statements as a registrant concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance.  Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “may,” “will,” “could,” “project,” “believe,” “anticipate,” “intend,” “expect,” “estimate,” “continue,” “potential,” “plan,” “predict,” “forecast,” and other similar words or expressions are intended to identify forward-looking statements but are not the only means to identify these statements.  Although each of these registrants believes that these forward-looking statements and the underlying assumptions are reasonable, it cannot provide assurance that they will prove correct.  Any forward-looking statement is based on information current as of the date of this combined report and speaks only as of the date on which such statement is made.  Except to the extent required by the federal securities laws, these registrants undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Forward-looking statements involve a number of risks and uncertainties.  There are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, including (a) those factors discussed or incorporated by reference in Item 1A. Risk Factors, (b) those factors discussed or incorporated by reference in Management’s Financial Discussion and Analysis, and (c) the following factors (in addition to others described elsewhere in this combined report and in subsequent securities filings):

•
resolution of pending and future rate cases, formula rate proceedings and related negotiations, including various performance-based rate discussions, Entergy’s utility supply plan, and recovery of fuel and purchased power costs;
•
long-term risks and uncertainties associated with the termination of the System Agreement in 2016, including the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators;
•
regulatory and operating challenges and uncertainties and economic risks associated with the Utility operating companies’ participation in MISO, including the benefits of continued MISO participation, the effect of current or projected MISO market rules and market and system conditions in the MISO markets, the allocation of MISO system transmission upgrade costs, and the effect of planning decisions that MISO makes with respect to future transmission investments by the Utility operating companies;
•
changes in utility regulation, including with respect to retail and wholesale competition, the ability to recover net utility assets and other potential stranded costs, and the application of more stringent transmission reliability requirements or market power criteria by the FERC or the U.S. Department of Justice;
•
changes in the regulation or regulatory oversight of Entergy’s nuclear generating facilities and nuclear materials and fuel, including with respect to the planned, potential, or actual shutdown of nuclear generating facilities owned or operated by Entergy Wholesale Commodities, and the effects of new or existing safety or environmental concerns regarding nuclear power plants and nuclear fuel;
•
resolution of pending or future applications, and related regulatory proceedings and litigation, for license renewals or modifications or other authorizations required of nuclear generating facilities and the effect of public and political opposition on these applications, regulatory proceedings, and litigation;
•
the performance of and deliverability of power from Entergy’s generation resources, including the capacity factors at Entergy’s nuclear generating facilities;
•
increases in costs and capital expenditures that could result from the commitment of substantial human and capital resources required for the operation and maintenance of Entergy’s nuclear generating facilities;
•
Entergy’s ability to develop and execute on a point of view regarding future prices of electricity, natural gas, and other energy-related commodities;
•
prices for power generated by Entergy’s merchant generating facilities and the ability to hedge, meet credit support requirements for hedges, sell power forward or otherwise reduce the market price risk associated with those facilities, including the Entergy Wholesale Commodities nuclear plants, especially in light of the planned shutdown or sale of each of these nuclear plants;
•
the prices and availability of fuel and power Entergy must purchase for its Utility customers, and Entergy’s ability to meet credit support requirements for fuel and power supply contracts;
•
volatility and changes in markets for electricity, natural gas, uranium, emissions allowances, and other energy-related commodities, and the effect of those changes on Entergy and its customers;

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FORWARD-LOOKING INFORMATION (Continued)

•
changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation;
•
changes in environmental laws and regulations, agency positions or associated litigation, including requirements for reduced emissions of sulfur dioxide, nitrogen oxide, greenhouse gases, mercury, particulate matter, heat, and other regulated air and water emissions, requirements for waste management and disposal and for the remediation of contaminated sites, wetlands protection and permitting, and changes in costs of compliance with these environmental laws and regulations;
•
changes in laws and regulations, agency positions, or associated litigation related to protected species and associated critical habitat designations;
•
the effects of changes in federal, state or local laws and regulations, and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental, or energy policies;
•
uncertainty regarding the establishment of interim or permanent sites for spent nuclear fuel and nuclear waste storage and disposal and the level of spent fuel and nuclear waste disposal fees charged by the U.S. government or other providers related to such sites;
•
variations in weather and the occurrence of hurricanes and other storms and disasters, including uncertainties associated with efforts to remediate the effects of hurricanes, ice storms, or other weather events and the recovery of costs associated with restoration, including accessing funded storm reserves, federal and local cost recovery mechanisms, securitization, and insurance;
•
effects of climate change, including the potential for increases in sea levels or coastal land and wetland loss;
•
changes in the quality and availability of water supplies and the related regulation of water use and diversion;
•
Entergy’s ability to manage its capital projects and operation and maintenance costs;
•
Entergy’s ability to purchase and sell assets at attractive prices and on other attractive terms;
•
the economic climate, and particularly economic conditions in Entergy’s Utility service area and the Northeast United States and events and circumstances that could influence economic conditions in those areas, including power prices, and the risk that anticipated load growth may not materialize;
•
federal income tax reform, including the enactment of the Tax Cuts and Jobs Act, and its intended and unintended consequences on financial results and future cash flows, including the potential impact to credit ratings, which may affect Entergy’s ability to borrow funds or increase the cost of borrowing in the future;
•
the effects of Entergy’s strategies to reduce tax payments, especially in light of federal income tax reform;
•
changes in the financial markets and regulatory requirements for the issuance of securities, particularly as they affect access to capital and Entergy’s ability to refinance existing securities, execute share repurchase programs, and fund investments and acquisitions;
•
actions of rating agencies, including changes in the ratings of debt and preferred stock, changes in general corporate ratings, and changes in the rating agencies’ ratings criteria;
•
changes in inflation and interest rates;
•
the effect of litigation and government investigations or proceedings;
•
changes in technology, including with respect to new, developing, or alternative sources of generation such as distributed energy and energy storage, energy efficiency, demand side management and other measures that reduce load;
•
the effects, including increased security costs, of threatened or actual terrorism, cyber-attacks or data security breaches, natural or man-made electromagnetic pulses that affect transmission or generation infrastructure, accidents, and war or a catastrophic event such as a nuclear accident or a natural gas pipeline explosion;
•
Entergy’s ability to attract and retain talented management, directors, and employees with specialized skills;
•
changes in accounting standards and corporate governance;
•
declines in the market prices of marketable securities and resulting funding requirements and the effects on benefits costs for Entergy’s defined benefit pension and other postretirement benefit plans;
•
future wage and employee benefit costs, including changes in discount rates and returns on benefit plan assets;
•
changes in decommissioning trust fund values or earnings or in the timing of, requirements for, or cost to decommission Entergy’s nuclear plant sites and the implementation of decommissioning of such sites following shutdown;


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FORWARD-LOOKING INFORMATION (Concluded)

•
the decision to cease merchant power generation at all Entergy Wholesale Commodities nuclear power plants by mid-2022, including the implementation of the planned shutdowns of Pilgrim, Indian Point 2, Indian Point 3, and Palisades;
•
the effectiveness of Entergy’s risk management policies and procedures and the ability and willingness of its counterparties to satisfy their financial and performance commitments;
•
factors that could lead to impairment of long-lived assets; and
•
the ability to successfully complete strategic transactions Entergy may undertake, including mergers, acquisitions, divestitures, or restructurings, regulatory or other limitations imposed as a result of any such strategic transaction, and the success of the business following any such strategic transaction.

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DEFINITIONS

Certain abbreviations or acronyms used in the text and notes are defined below:
Abbreviation or Acronym
Term
 
 
AFUDC
Allowance for Funds Used During Construction
ALJ
Administrative Law Judge
ANO 1 and 2
Units 1 and 2 of Arkansas Nuclear One (nuclear), owned by Entergy Arkansas
APSC
Arkansas Public Service Commission
ASLB
Atomic Safety and Licensing Board, the board within the NRC that conducts hearings and performs other regulatory functions that the NRC authorizes
ASU
Accounting Standards Update issued by the FASB
Board
Board of Directors of Entergy Corporation
Cajun
Cajun Electric Power Cooperative, Inc.
capacity factor
Actual plant output divided by maximum potential plant output for the period
City Council
Council of the City of New Orleans, Louisiana
D.C. Circuit
U.S. Court of Appeals for the District of Columbia Circuit
DOE
United States Department of Energy
Entergy
Entergy Corporation and its direct and indirect subsidiaries
Entergy Corporation
Entergy Corporation, a Delaware corporation
Entergy Gulf States, Inc.
Predecessor company for financial reporting purposes to Entergy Gulf States Louisiana that included the assets and business operations of both Entergy Gulf States Louisiana and Entergy Texas
Entergy Gulf States Louisiana
Entergy Gulf States Louisiana, L.L.C., a Louisiana limited liability company formally created as part of the jurisdictional separation of Entergy Gulf States, Inc. and the successor company to Entergy Gulf States, Inc. for financial reporting purposes.  The term is also used to refer to the Louisiana jurisdictional business of Entergy Gulf States, Inc., as the context requires. Effective October 1, 2015, the business of Entergy Gulf States Louisiana was combined with Entergy Louisiana.
Entergy Louisiana
Entergy Louisiana, LLC, a Texas limited liability company formally created as part of the combination of Entergy Gulf States Louisiana and the company formerly known as Entergy Louisiana, LLC (Old Entergy Louisiana) into a single public utility company and the successor to Old Entergy Louisiana for financial reporting purposes.
Entergy Texas
Entergy Texas, Inc., a Texas corporation formally created as part of the jurisdictional separation of Entergy Gulf States, Inc.  The term is also used to refer to the Texas jurisdictional business of Entergy Gulf States, Inc., as the context requires.
Entergy Wholesale Commodities
Entergy’s non-utility business segment primarily comprised of the ownership, operation, and decommissioning of nuclear power plants, the ownership of interests in non-nuclear power plants, and the sale of the electric power produced by its operating power plants to wholesale customers
EPA
United States Environmental Protection Agency
ERCOT
Electric Reliability Council of Texas
FASB
Financial Accounting Standards Board
FERC
Federal Energy Regulatory Commission
FitzPatrick
James A. FitzPatrick Nuclear Power Plant (nuclear), previously owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which was sold in March 2017
Grand Gulf
Unit No. 1 of Grand Gulf Nuclear Station (nuclear), 90% owned or leased by System Energy

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DEFINITIONS (Continued)

Abbreviation or Acronym
Term
 
 
GWh
Gigawatt-hour(s), which equals one million kilowatt-hours
Independence
Independence Steam Electric Station (coal), owned 16% by Entergy Arkansas, 25% by Entergy Mississippi, and 7% by Entergy Power, LLC
Indian Point 2
Unit 2 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Indian Point 3
Unit 3 of Indian Point Energy Center (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
IRS
Internal Revenue Service
ISO
Independent System Operator
kV
Kilovolt
kW
Kilowatt, which equals one thousand watts
kWh
Kilowatt-hour(s)
LDEQ
Louisiana Department of Environmental Quality
LPSC
Louisiana Public Service Commission
Mcf
1,000 cubic feet of gas
MISO
Midcontinent Independent System Operator, Inc., a regional transmission organization
MMBtu
One million British Thermal Units
MPSC
Mississippi Public Service Commission
MW
Megawatt(s), which equals one thousand kilowatts
MWh
Megawatt-hour(s)
Nelson Unit 6
Unit No. 6 (coal) of the Nelson Steam Electric Generating Station, 70% of which is co-owned by Entergy Louisiana (57.5%) and Entergy Texas (42.5%) and 10.9% of which is owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Net debt to net capital ratio
Gross debt less cash and cash equivalents divided by total capitalization less cash and cash equivalents
Net MW in operation
Installed capacity owned and operated
NRC
Nuclear Regulatory Commission
NYPA
New York Power Authority
Palisades
Palisades Nuclear Plant (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
Parent & Other
The portions of Entergy not included in the Utility or Entergy Wholesale Commodities segments, primarily consisting of the activities of the parent company, Entergy Corporation
Pilgrim
Pilgrim Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment
PPA
Purchased power agreement or power purchase agreement
PRP
Potentially responsible party (a person or entity that may be responsible for remediation of environmental contamination)
PUCT
Public Utility Commission of Texas
Registrant Subsidiaries
Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.

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DEFINITIONS (Concluded)

Abbreviation or Acronym
Term
 
 
River Bend
River Bend Station (nuclear), owned by Entergy Louisiana
RTO
Regional transmission organization
SEC
Securities and Exchange Commission
System Agreement
Agreement, effective January 1, 1983, as modified, among the Utility operating companies relating to the sharing of generating capacity and other power resources. The agreement terminated effective August 2016.
System Energy
System Energy Resources, Inc.
TWh
Terawatt-hour(s), which equals one billion kilowatt-hours
Unit Power Sales Agreement
Agreement, dated as of June 10, 1982, as amended and approved by the FERC, among Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy, relating to the sale of capacity and energy from System Energy’s share of Grand Gulf
Utility
Entergy’s business segment that generates, transmits, distributes, and sells electric power, with a small amount of natural gas distribution
Utility operating companies
Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Vermont Yankee
Vermont Yankee Nuclear Power Station (nuclear), owned by an Entergy subsidiary in the Entergy Wholesale Commodities business segment, which ceased power production in December 2014
Waterford 3
Unit No. 3 (nuclear) of the Waterford Steam Electric Station, 100% owned or leased by Entergy Louisiana
weather-adjusted usage
Electric usage excluding the effects of deviations from normal weather
White Bluff
White Bluff Steam Electric Generating Station, 57% owned by Entergy Arkansas

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ENTERGY CORPORATION AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.

•
The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.  
•
The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” below for discussion of the operation and planned shutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants.

Following are the percentages of Entergy’s consolidated revenues generated by its operating segments and the percentage of total assets held by them. Net income or loss generated by the operating segments is discussed in the sections that follow.
 
% of Revenue
 
% of Total Assets
Segment
2017
2016
2015
 
2017
2016
2015
Utility
85

83

82

 
92

89

86

Entergy Wholesale Commodities
15

17

18

 
12

15

18

Parent & Other
—

—

—

 
(4
)
(4
)
(4
)

See Note 13 to the financial statements for further financial information regarding Entergy’s business segments.
 
    
    


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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


Results of Operations

2017 Compared to 2016
 
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2017 to 2016 showing how much the line item increased or (decreased) in comparison to the prior period.
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other (a)
 
Entergy
 
(In Thousands)
2016 Consolidated Net Income (Loss)

$1,151,133

 

($1,493,124
)
 

($222,512
)
 

($564,503
)
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
138,617

 
(73,433
)
 
(16
)
 
65,168

Other operation and maintenance
108,187

 
13,922

 
4,869

 
126,978

Asset write-offs, impairments, and related charges
—

 
(2,297,265
)
 
—

 
(2,297,265
)
Taxes other than income taxes
38,897

 
(14,657
)
 
814

 
25,054

Depreciation and amortization
49,491

 
(6,731
)
 
31

 
42,791

Gain on sale of asset
—

 
16,270

 
—

 
16,270

Other income
64,815

 
132,734

 
1,962

 
199,511

Interest expense
(10,245
)
 
856

 
5,362

 
(4,027
)
Other expenses
24,859

 
12,874

 
—

 
37,733

Income taxes
370,228

 
1,045,783

 
(56,182
)
 
1,359,829

2017 Consolidated Net Income (Loss)

$773,148

 

($172,335
)
 

($175,460
)
 

$425,353


(a)
Parent & Other includes eliminations, which are primarily intersegment activity.

Refer to “ SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES ” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.

Results of operations for 2017 include: 1) $538 million ($350 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; 2) a reduction in net income of $181 million, including a $34 million net-of-tax reduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in net income of $52 million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemaking process due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet and see Note 14 to the financial statements for further discussion of the impairment and related charges. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in the tax classification.


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Management’s Financial Discussion and Analysis

Results of operations for 2016 include: 1) $2,836 million ($1,829 million net-of-tax) of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values; 2) a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and 3) a reduction in expenses of $100 million ($64 million net-of-tax) due to the effects of recording in 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 14 to the financial statements for further discussion of the impairment and related charges, see Note 3 to the financial statements for additional discussion of the income tax items, and see Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing 2017 to 2016.
  
Amount
  
(In Millions)
 
 
2016 net revenue

$6,179

Retail electric price
91

Regulatory credit resulting from reduction of the
  federal corporate income tax rate
56

Grand Gulf recovery
27

Louisiana Act 55 financing savings obligation
17

Volume/weather
(61
)
Other
9

2017 net revenue

$6,318


The retail electric price variance is primarily due to:

•
the implementation of formula rate plan rates effective with the first billing cycle of January 2017 at Entergy Arkansas and an increase in base rates effective February 24, 2016, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016;
•
a provision recorded in 2016 related to the settlement of the Waterford 3 replacement steam generator prudence review proceeding;
•
the implementation of the transmission cost recovery factor rider at Entergy Texas, effective September 2016, and an increase in the transmission cost recovery factor rider rate, effective March 2017, as approved by the PUCT; and
•
an increase in rates at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016.

See Note 2 to the financial statements for further discussion of the rate proceedings and the Waterford 3 replacement steam generator prudence review proceeding. See Note 14 to the financial statements for discussion of the Union Power Station purchase.


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The regulatory credit resulting from reduction of the federal corporate income tax rate variance is due to the reduction of the Vidalia purchased power agreement regulatory liability by $30.5 million and the reduction of the Louisiana Act 55 financing savings obligation regulatory liabilities by $25 million as a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.

The Grand Gulf recovery variance is primarily due to increased recovery of higher operating costs.

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing.

The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in industrial usage. The increase in industrial usage is primarily due to new customers in the primary metals industry and expansion projects and an increase in demand for existing customers in the chlor-alkali industry.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing 2017 to 2016.
  
Amount
  
(In Millions)
 
 
2016 net revenue

$1,542

FitzPatrick sale
(158
)
Nuclear volume
(89
)
FitzPatrick reimbursement agreement
57

Nuclear fuel expenses
108

Other
9

2017 net revenue

$1,469


As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by approximately $73 million in 2017 primarily due to the absence of net revenue from the FitzPatrick plant after it was sold to Exelon in March 2017 and lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more outage days in 2017 as compared to 2016. The decrease was partially offset by an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017 and a decrease in nuclear fuel expenses primarily related to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. Revenues received from Exelon in 2017 under the reimbursement agreement are offset by other operation and maintenance expenses and taxes other than income taxes and had no effect on net income. See Note 14 to the financial statements for discussion of the sale of FitzPatrick, the reimbursement agreement with Exelon, and the impairments and related charges.


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Following are key performance measures for Entergy Wholesale Commodities for 2017 and 2016.
 
2017
 
2016
Owned capacity (MW) (a)
3,962
 
4,800
GWh billed
30,501
 
35,881
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
83%
 
87%
GWh billed
28,178
 
33,551
Average energy and capacity revenue per MWh
$50.04
 
$47.31
Refueling Outage Days:
 
 
 
FitzPatrick
42
 
—
Indian Point 2
—
 
102
Indian Point 3
66
 
—
Pilgrim
43
 
—
Palisades
27
 
—

(a)
The reduction in owned capacity is due to Entergy’s sale of the 838 MW FitzPatrick plant to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick.

Other Income Statement Items

Utility

Other operation and maintenance expenses increased from $2,360 million for 2016 to $2,468 million for 2017 primarily due to:

•
an increase of $46 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals, including additional training and initiatives to support management’s operational goals at Grand Gulf, partially offset by a decrease in regulatory compliance costs. The decrease in regulatory compliance costs is primarily related to additional NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See Note 8 to the financial statements for a discussion of the ANO stator incident and subsequent NRC reviews;
•
an increase of $24 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to the prior year;
•
an increase of $20 million in transmission and distribution expenses due to higher vegetation maintenance costs;
•
the effects of recording in 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of approximately $19 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and
•
the deferral in the first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February 2016 as part of the Entergy Arkansas 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements for further discussion of the rate case settlement.

The increase was partially offset by a decrease of $23 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs .

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Taxes other than income taxes increased primarily due to increases in ad valorem taxes, local franchise taxes, state franchise taxes, and employment taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher revenues in 2017 as compared to the prior year. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law which became effective for 2017.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union Power Station purchased in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase.

Other income increased primarily due to higher realized gains in 2017 as compared to the prior year on the decommissioning trust fund investments, including portfolio rebalancing in 2017, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, including the St. Charles Power Station project.

Other expenses increased primarily due to increases in deferred refueling outage amortization costs primarily associated with the most recent ANO plant outages compared to previous outages.

Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $915 million for 2016 to $929 million for 2017 primarily due to:

•
FitzPatrick’s nuclear refueling outage expenses and expenditures for capital assets being classified as other operation and maintenance expenses as a result of the sale and reimbursement agreements Entergy entered into with Exelon. These costs would have not been incurred absent the sale agreement with Exelon because Entergy planned to shut the plant down in January 2017. The expenses are offset by revenue realized pursuant to the reimbursement agreement and had no effect on net income. See Note 14 to the financial statements for discussion of the sale and reimbursement agreements;
•
the effect of recording in 2016 final court decisions in litigation against the DOE for the reimbursement of spent nuclear fuel storage costs, which reduced other operation and maintenance expenses in 2016 by $60 million. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and
•
an increase of $37 million in severance and retention costs in 2017 as compared to the prior year due to management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

The increase was partially offset by a decrease due to the absence of other operation and maintenance expenses from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick.

The asset write-offs, impairments, and related charges variance is primarily due to $538 million ($350 million net-of-tax) of impairment charges in 2017 compared to $2,836 million ($1,829 million net-of-tax) of impairment and related charges in 2016. The impairment charges in 2017 are due to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. The impairment and related charges in 2016 were primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2,

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and Indian Point 3 plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of the impairments and related charges.

Taxes other than income taxes decreased primarily due to the absence of ad valorem taxes from the FitzPatrick plant after it was sold to Exelon in March 2017. See Note 14 to the financial statements for discussion of the sale of FitzPatrick.

The gain on sale of assets resulted from the sale in March 2017 of the 838 MW FitzPatrick plant to Exelon. Entergy sold the FitzPatrick plant for approximately $110 million, which includes a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain of $16 million on the sale. See Note 14 to the financial statements for a discussion of the sale of FitzPatrick.

Other income increased primarily due to higher realized gains in 2017 as compared to the prior year on the decommissioning trust fund investments, including the result of portfolio rebalancing in 2017, and the increase in value realized upon the receipt from NYPA of the decommissioning trust funds for the Indian Point 3 and FitzPatrick plants in January 2017. See Note 9 to the financial statements for discussion of the trust transfer agreement with NYPA.

Other expenses increased primarily due to increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016, which closed in January 2017, to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and revisions to the estimated decommissioning cost liabilities for the Entergy Wholesale Commodities’ Indian Point 2 and Palisades plants as a result of revised decommissioning cost studies in the fourth quarter 2016. The increase was partially offset by a reduction in deferred refueling outage amortization costs related to the impairments of the Indian Point 2, Indian Point 3, and Palisades plants and related assets. See Note 9 to the financial statements for discussion of the trust transfer agreement with NYPA and the revised decommissioning cost studies. See Note 14 to the financial statements for discussion of the impairments and related charges.

Income Taxes

See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates, and for additional discussion regarding income taxes.

The effective income tax rate for 2017 was 56.1%. The difference in the effective income tax rate versus the statutory rate of 35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President Trump in December 2017, which changed the federal corporate income tax rate from 35% to 21% effective in 2018, partially offset by a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants, which resulted in both permanent and temporary differences under the income tax accounting standards. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in tax classification.

The effective income tax rate for 2016 was 59.1%.  The difference in the effective income tax rate versus the statutory rate of 35% for 2016 was primarily due to a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit, partially offset by state income taxes and certain book and tax differences related to utility plant items. See Note 3 to the financial statements for additional discussion of the change in the tax classification and the tax settlement.

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2016 Compared to 2015
 
Following are income statement variances for Utility, Entergy Wholesale Commodities, Parent & Other, and Entergy comparing 2016 to 2015 showing how much the line item increased or (decreased) in comparison to the prior period.

 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
Entergy
 
(In Thousands)
2015 Consolidated Net Income (Loss)

$1,114,516

 

($1,065,657
)
 

($205,593
)
 

($156,734
)
 
 
 
 
 
 
 
 
Net revenue (operating revenue less fuel expense, purchased power, and other regulatory charges/credits)
350,528

 
(123,791
)
 
(33
)
 
226,704

Other operation and maintenance
(83,265
)
 
15,269

 
9,726

 
(58,270
)
Asset write-offs, impairments, and related charges
(68,672
)
 
799,403

 
—

 
730,731

Taxes other than income taxes
(10,229
)
 
(16,259
)
 
(432
)
 
(26,920
)
Depreciation and amortization
49,600

 
(39,180
)
 
(509
)
 
9,911

Gain on sale of asset
—

 
(154,037
)
 
—

 
(154,037
)
Other income
15,153

 
8,666

 
4,281

 
28,100

Interest expense
14,414

 
(3,930
)
 
12,417

 
22,901

Other expenses
19,589

 
(15,074
)
 
—

 
4,515

Income taxes
407,627

 
(581,924
)
 
(35
)
 
(174,332
)
2016 Consolidated Net Income (Loss)

$1,151,133

 

($1,493,124
)
 

($222,512
)
 

($564,503
)

Refer to “ SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES ” which accompanies Entergy Corporation’s financial statements in this report for further information with respect to operating statistics.

Results of operations for 2016 include $2,836 million ($1,829 million net-of-tax) of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of the impairment and related charges. Results of operations for 2016 also include a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and a reduction in expenses of $100 million ($64 million net-of-tax) due to the effects of recording in 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 3 to the financial statements for additional discussion of the income tax items. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

Results of operations for 2015 include $2,036 million ($1,317 million net-of-tax) of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ FitzPatrick, Pilgrim, and Palisades plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of the impairment and related charges. As a result of the Entergy Louisiana and Entergy Gulf States Louisiana business combination, results of operations for 2015 also include two items that occurred in October 2015: 1) a deferred tax asset and resulting net increase in tax basis of approximately $334 million and 2) a regulatory liability of $107 million

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($66 million net-of-tax) as a result of customer credits to be realized by electric customers of Entergy Louisiana, consistent with the terms of the stipulated settlement in the business combination proceeding. See Note 2 to the financial statements for further discussion of the business combination and customer credits. Results of operations for 2015 also include the sale in December 2015 of the 583 MW Rhode Island State Energy Center for a realized gain of $154 million ($100 million net-of-tax) on the sale and the $77 million ($47 million net-of-tax) write-off and regulatory charges to recognize that a portion of the assets associated with the Waterford 3 replacement steam generator project is no longer probable of recovery. See Note 14 to the financial statements for further discussion of the Rhode Island State Energy Center sale. See Note 2 to the financial statements for further discussion of the Waterford 3 replacement steam generator prudence review proceeding.

Net Revenue

Utility

Following is an analysis of the change in net revenue comparing 2016 to 2015.
  
Amount
  
(In Millions)
 
 
2015 net revenue

$5,829

Retail electric price
289

Louisiana business combination customer credits
107

Volume/weather
14

Louisiana Act 55 financing savings obligation
(17
)
Other
(43
)
2016 net revenue

$6,179


The retail electric price variance is primarily due to:

•
an increase in base rates at Entergy Arkansas, as approved by the APSC. The new rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. The increase included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. A significant portion of the increase was related to the purchase of Power Block 2 of the Union Power Station;
•
an increase in the purchased power and capacity acquisition cost recovery rider for Entergy New Orleans, as approved by the City Council, effective with the first billing cycle of March 2016, primarily related to the purchase of Power Block 1 of the Union Power Station;
•
an increase in formula rate plan revenues for Entergy Louisiana, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station; and
•
an increase in revenues at Entergy Mississippi, as approved by the MPSC, effective with the first billing cycle of July 2016, and an increase in revenues collected through the storm damage rider.

See Note 2 to the financial statements for further discussion of the rate proceedings. See Note 14 to the financial statements for discussion of the Union Power Station purchase.

The Louisiana business combination customer credits variance is due to a regulatory liability of $107 million recorded by Entergy in October 2015 as a result of the Entergy Gulf States Louisiana and Entergy Louisiana business combination. Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination; accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ($66 million net-of-tax). These costs are being

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amortized over a nine-year period beginning December 2015. See Note 2 to the financial statements for further discussion of the business combination and customer credits.

The volume/weather variance is primarily due to the effect of more favorable weather during the unbilled period and an increase in industrial usage, partially offset by the effect of less favorable weather on residential sales. The increase in industrial usage is primarily due to expansion projects, primarily in the chemicals industry, and increased demand from new customers, primarily in the industrial gases industry.

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing.

Included in Other is a provision of $23 million recorded in 2016 related to the settlement of the Waterford 3 replacement steam generator prudence review proceeding, offset by a provision of $32 million recorded in 2015 related to the uncertainty at that time associated with the resolution of the Waterford 3 replacement steam generator prudence review proceeding.  See Note 2 to the financial statements for a discussion of the Waterford 3 replacement steam generator prudence review proceeding.

Entergy Wholesale Commodities

Following is an analysis of the change in net revenue comparing 2016 to 2015.
  
Amount
  
(In Millions)
 
 
2015 net revenue

$1,666

Nuclear realized price changes
(149
)
Rhode Island State Energy Center
(44
)
Nuclear volume
(36
)
FitzPatrick reimbursement agreement
41

Nuclear fuel expenses
68

Other
(4
)
2016 net revenue

$1,542


As shown in the table above, net revenue for Entergy Wholesale Commodities decreased by approximately $124 million in 2016 primarily due to:

•
lower realized wholesale energy prices and lower capacity prices, the amortization of the Palisades below-market PPA, and Vermont Yankee capacity revenue. The effect of the amortization of the Palisades below-market PPA and Vermont Yankee capacity revenue on the net revenue variance from 2015 to 2016 is minimal;
•
the sale of the Rhode Island State Energy Center in December 2015. See Note 14 to the financial statements for further discussion of the Rhode Island State Energy Center sale; and
•
lower volume in the Entergy Wholesale Commodities nuclear fleet resulting from more refueling outage days in 2016 as compared to 2015 and larger exercise of resupply options in 2016 as compared to 2015. See “ Nuclear Matters - Indian Point ” below for discussion of the extended Indian Point 2 outage in the second quarter 2016.


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The decrease was partially offset by:

•
an increase resulting from the reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy for specified out-of-pocket costs associated with preparing for the refueling and operation of FitzPatrick that otherwise would have been avoided had Entergy shut down FitzPatrick in January 2017. Revenues received from Exelon under the reimbursement agreement are offset in nuclear fuel expenses and other operation and maintenance expenses and have no material effect on net income. See “ Entergy Wholesale Commodities Exit from the Merchant Power Business - Sale of FitzPatrick ” below for further discussion of the reimbursement agreement; and
•
a decrease in nuclear fuel expenses primarily related to the impairments of the FitzPatrick, Pilgrim, and Palisades plants and related assets. See Note 14 to the financial statements for discussion of the impairments.

Following are key performance measures for Entergy Wholesale Commodities for 2016 and 2015.
 
2016
 
2015
Owned capacity (MW) (a)
4,800
 
4,880
GWh billed
35,881
 
39,745
 
 
 
 
Entergy Wholesale Commodities Nuclear Fleet
 
 
 
Capacity factor
87%
 
91%
GWh billed
33,551
 
35,859
Average energy and capacity revenue per MWh
$47.31
 
$50.29
Refueling Outage Days:
 
 
 
Indian Point 2
102
 
—
Indian Point 3
—
 
23
Palisades
—
 
32
Pilgrim
—
 
34

(a)
The reduction in owned capacity is due to Entergy’s sale of its 50% membership interest in Top Deer Wind Ventures, LLC in November 2016. See Note 14 to the financial statements for discussion of the sale.

Other Income Statement Items

Utility

Other operation and maintenance expenses decreased from $2,443 million for 2015 to $2,360 million for 2016 primarily due to:

•
a decrease of $78 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ Critical Accounting Estimates ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs;
•
the effects of recording in 2016 final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $19 million of spent nuclear fuel storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation;
•
the deferral in 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC in February 2016 as part of the Entergy Arkansas 2015 rate case settlement. These costs are being

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amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements for further discussion of the rate case settlement; and
•
a decrease of $13 million in energy efficiency costs, including the effects of true-ups to energy efficiency filings for fixed costs to be collected from customers and incentives recognized as a result of participation in energy efficiency programs.

The decrease was partially offset by an increase of $61 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, and an overall higher scope of work done during plant outages in 2016 as compared to prior year.

The asset write-offs, impairments, and related charges variance is due to the following activity:

•
the $45 million ($28 million net-of-tax) write-off in 2015 to recognize that a portion of the assets associated with the Waterford 3 replacement steam generator project was no longer probable of recovery; and
•
the $23.5 million ($15.3 million net-of-tax) write-off in 2015 of the regulatory asset associated with the Spindletop gas storage facility as a result of the approval of the System Agreement termination settlement agreement.

See Note 2 to the financial statements for further discussion of the asset write-offs.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the Union Power Station purchased in March 2016, partially offset by the effects of recording the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $11 million in 2016 of spent nuclear fuel storage costs previously recorded as depreciation. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

Other expenses increased primarily due to an increase in nuclear refueling outage expenses as a result of amortization of higher costs associated with refueling outages and increases in decommissioning expenses in 2016 primarily due to revised decommissioning cost studies in 2015 for Grand Gulf and Waterford 3.

Entergy Wholesale Commodities

Other operation and maintenance expenses increased from $899 million for 2015 to $915 million for 2016 primarily due to:

•
an increase of $60 million in severance and retention costs related to the planned shutdown or sale of the Pilgrim and FitzPatrick plants. See “ Entergy Wholesale Commodities Exit From the Merchant Power Business ” below for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet;
•
$41 million associated with preparing to refuel FitzPatrick in January 2017. Exelon reimbursed Entergy for these costs in accordance with the reimbursement agreement discussed in “ Entergy Wholesale Commodities Exit From the Merchant Power Business - Sale of FitzPatrick ” below; and
•
an increase of $26 million in costs related to Pilgrim’s response to a planned NRC enhanced inspection as a result of the NRC placing Pilgrim in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix in September 2015. See Note 8 to the financial statements for further discussion of the NRC’s decision and Pilgrim’s response.

The increase was partially offset by:

•
the effects of recording the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $60 million in 2016 compared to the reimbursement of approximately $2 million in 2015 of spent nuclear fuel storage costs

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previously recorded as other operation and maintenance expenses. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation;
•
a decrease of $32 million as a result of the sale of the Rhode Island State Energy Center in December 2015. See Note 14 to the financial statements for further discussion of the Rhode Island State Energy Center sale; and
•
a decrease of $21 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ Critical Accounting Estimates ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs.

The asset write-offs, impairments, and related charges variance is due to $2,836 million ($1,829 million net-of-tax) in 2016 of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values, partially offset by $2,036 million ($1,317 million net-of-tax) in 2015 of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ FitzPatrick, Pilgrim, and Palisades plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of these charges.

Depreciation and amortization expenses decreased primarily due to:

•
decreases in depreciable asset balances as a result of the impairments of the FitzPatrick, Pilgrim, and Palisades plants. See Note 14 to the financial statements for further discussion of the impairments;
•
the effects of recording the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $15 million in 2016 compared to the reimbursement of approximately $4 million in 2015 of spent nuclear fuel storage costs previously recorded as depreciation. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and
•
a decrease in depreciable asset balances as a result of the sale of the Rhode Island State Energy Center in December 2015. See Note 14 to the financial statements for further discussion of the Rhode Island State Energy Center sale.

The gain on sale of asset resulted from the sale in December 2015 of the 583 MW Rhode Island State Energy Center in Johnston, Rhode Island, a business wholly-owned by Entergy in the Entergy Wholesale Commodities segment. Entergy sold the Rhode Island State Energy Center for approximately $490 million and realized a pre-tax gain of $154 million on the sale. See Note 14 to the financial statements for further discussion of the Rhode Island State Energy Center sale.

Other expenses decreased primarily due to the reduction in deferred refueling outage amortization costs related to the impairments of the FitzPatrick, Pilgrim, and Palisades plants and related assets, partially offset by increases in decommissioning expenses primarily as a result of a trust transfer agreement Entergy entered into with NYPA in August 2016 to transfer the decommissioning trusts and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy and a revision to the estimated decommissioning cost liability for the Entergy Wholesale Commodities’ Pilgrim plant as a result of a revised decommissioning cost study in 2015. See Note 14 to the financial statements for further discussion of the impairments and related charges and Note 9 to the financial statements for further discussion of nuclear decommissioning costs.

Income Taxes

See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates, and for additional discussion regarding income taxes.


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The effective income tax rate for 2016 was 59.1%.  The difference in the effective income tax rate versus the statutory rate of 35% for 2016 was primarily due to a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants and the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit, partially offset by state income taxes and certain book and tax differences related to utility plant items. See Note 3 to the financial statements for additional discussion of the change in the tax classification and the tax settlement.

The effective income tax rate for 2015 was 80.4%.  The difference in the effective income tax rate versus the statutory rate of 35% for 2015 was primarily due to the tax effects of the Louisiana business combination. See Note 3 to the financial statements for further discussion of the tax effects of the Louisiana business combination.

Income Tax Legislation

On December 22, 2017, President Trump signed into law H.R. 1, also known as the Tax Cuts and Jobs Act (the Act). As a result of the Act, Entergy and the Registrant Subsidiaries re-measured their deferred tax assets and liabilities in December 2017 to reflect the reduction in the federal corporate income tax rate from 35% to 21% that is effective January 1, 2018. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.

On a going forward basis, after going through the appropriate regulatory processes Entergy expects the Act to reduce its operating cash flows because the lower federal corporate income tax rate will result in lower income tax expense collected in revenues and as excess deferred income taxes are returned to customers. In general, rate base is expected to increase over time as a consequence of the Act as the excess deferred income taxes are returned to customers. Entergy expects to finance its incremental cash requirements as a consequence of these changes through a combination of Registrant Subsidiary debt and Entergy Corporation debt and equity. Entergy Corporation expects the equity portion of this financing to be approximately $1 billion, and currently expects to issue all of this equity before the end of 2019. It is expected that certain credit metrics that incorporate operating cash flows or debt outstanding will be adversely affected by the effects of the Act.

The amount and timing of the earnings and cash effects of the Act and the financing of the incremental cash requirements will depend upon regulatory treatment of the effects of the Act. The Registrant Subsidiaries will work directly with their respective regulators to determine the appropriate path forward in each jurisdiction. Potential regulatory options that may be considered include:

•
determining the period over which certain income tax benefits are provided to customers;
•
accelerating depreciation or amortization for certain assets or asset classes; and
•
increasing or modifying capital investments.

Entergy Wholesale Commodities Exit from the Merchant Power Business

Entergy management has undertaken a strategy to manage and reduce the risk of the Entergy Wholesale Commodities business, which includes taking actions to reduce the size of the merchant fleet. Management evaluated the challenges for each of the plants based on a variety of factors such as their market for both energy and capacity, their size, their contracted positions, and the amount of investment required to continue to operate and maintain the safety and integrity of the plants, including the estimated asset retirement costs. Management continues to look for ways to mitigate the operational and decommissioning risks associated with the merchant power business. Assumptions regarding the operating life of the plants and the decommissioning timeline and process continue to be evaluated.  Changes to current assumptions could result in revisions to the asset retirement obligations and affect compliance with certain NRC minimum financial assurance requirements for meeting obligations to decommission the plants. Increases in the asset retirement obligations could result in an increase in operating expense in the period of a revision. 

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Assumptions regarding the possibility that a plant may have an operating life shorter than previously assumed will likely result in the need for additional contributions to decommissioning trust funds, or the posting of parent guarantees, letters of credit, or other surety mechanisms.

Entergy Wholesale Commodities includes the ownership of the following nuclear reactors:

 
 
Location
 
Market
 
Capacity
 
Planned Transaction
Vermont Yankee
 
Vernon, VT
 
ISO-NE
 
605 MW
 
Plant in decommissioning phase, planned sale in 2018
Pilgrim
 
Plymouth, MA
 
ISO-NE
 
688 MW
 
Planned shutdown in 2019
Indian Point 2
 
Buchanan, NY
 
NYISO
 
1,028 MW
 
Planned shutdown in 2020
Indian Point 3
 
Buchanan, NY
 
NYISO
 
1,041 MW
 
Planned shutdown in 2021
Palisades
 
Covert, MI
 
MISO
 
811 MW
 
Planned shutdown in 2022

As discussed below, Entergy sold the FitzPatrick nuclear power plant to Exelon in March 2017. Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point in Michigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants, respectively.  These facilities are in various stages of the decommissioning process. In addition, Entergy Wholesale Commodities provides operations and management services, including decommissioning services, to nuclear power plants owned by other utilities in the United States. A relatively minor portion of the Entergy Wholesale Commodities business is the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

Shutdown and Planned Sale of Vermont Yankee

On December 29, 2014, the Vermont Yankee plant ceased power production and entered its decommissioning phase. In November 2016, Entergy entered into an agreement to sell 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC to a subsidiary of NorthStar. Entergy Nuclear Vermont Yankee is the owner of the Vermont Yankee plant and is in the Entergy Wholesale Commodities segment. The sale of Entergy Nuclear Vermont Yankee to NorthStar will include the transfer of the nuclear decommissioning trust fund and the asset retirement obligation for the spent fuel management and decommissioning of the plant.

Entergy Nuclear Vermont Yankee has an outstanding credit facility with borrowing capacity of $145 million to pay for dry fuel storage costs. This credit facility is guaranteed by Entergy Corporation. At or before closing, a subsidiary of Entergy will assume the obligations under the existing credit facility or enter into a new credit facility, and Entergy will guarantee the credit facility. At the closing of the sale transaction, NorthStar will pay $1,000 for the membership interests in Entergy Nuclear Vermont Yankee, and NorthStar will cause Entergy Nuclear Vermont Yankee to issue a promissory note to an Entergy affiliate. The amount of the promissory note issued will be equal to the amount drawn under the credit facility or the amount drawn under the new credit facility, plus borrowing fees and costs incurred by Entergy in connection with such facility. The principal amount drawn under the outstanding credit facility was $104 million as of December 31, 2017, and the net book value of Entergy Nuclear Vermont Yankee, including unrealized gains on the decommissioning trust fund, as of December 31, 2017, was approximately $123 million.

Entergy plans to transfer all spent nuclear fuel to dry cask storage by the end of 2018 in advance of the planned transaction close. Under the sale agreement and related agreements to be entered into at the closing, NorthStar will commit to initiate decommissioning and site restoration by 2021 and complete those activities by 2030. The original planned completion date, as outlined in Entergy’s Post Shutdown Decommissioning Activities Report filed with the NRC, was 2075. Entergy Nuclear Vermont Yankee, under NorthStar ownership, will be required to repay the promissory note issued to Entergy with certain of the proceeds from the recovery of damages under its claims against the DOE related to spent nuclear fuel disposal, with any balance remaining due at partial site release, subject to extension not to exceed two years from partial site release.

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The transaction is subject to certain closing conditions, including approval by the NRC; approval by the State of Vermont Public Utility Commission, including approval of site restoration standards that have been proposed as part of the transaction; the transfer of all spent nuclear fuel to dry fuel storage on the independent spent fuel storage installation; and that the market value of the fund assets held in the decommissioning trust fund for the Vermont Yankee Nuclear Power Station, less the hypothetical income tax on the aggregate unrealized net gain of such fund assets at closing, is equal to or exceeds $451.95 million, subject to adjustments. Entergy has the option to contribute to the decommissioning trust fund if the value is less than $451.95 million, subject to adjustments. The transaction is planned to close by the end of 2018.

Sale of Rhode Island State Energy Center

In December 2015, Entergy sold the Rhode Island State Energy Center, a 583 MW natural gas-fired combined-cycle generating plant owned by Entergy in the Entergy Wholesale Commodities segment. Entergy sold the Rhode Island State Energy Center for approximately $490 million and realized a pre-tax gain of $154 million on the sale.

Sale of Top Deer Investment

In November 2016, Entergy sold its 50% membership interest in Top Deer Wind Ventures, LLC, a wind-powered electric generation joint venture owned by Entergy in the Entergy Wholesale Commodities segment and accounted for as an equity method investment. Entergy sold its 50% membership interest in Top Deer for approximately $0.5 million and realized a pre-tax loss of $0.2 million on the sale.

Sale of FitzPatrick

In October 2015, Entergy determined that it would close the FitzPatrick plant. The original expectation was to shut down the FitzPatrick plant at the end of its fuel cycle in January 2017. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to cease operations earlier than expected.

In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. When Entergy purchased Indian Point 3 and FitzPatrick in 2000 from NYPA, NYPA retained the decommissioning trust funds and the decommissioning liabilities.  NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations.  NYPA had the right to require the Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigned the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries.  Under the original agreements, if the decommissioning liabilities were retained by NYPA, the Entergy subsidiaries would perform the decommissioning of the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trust funds.  At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies.  The asset was increased by monthly accretion based on the applicable discount rate necessary to ultimately provide for the estimated future value of the decommissioning contract. The monthly accretion was recorded as interest income. As a result of the agreement with NYPA, in the third quarter 2016, Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for the decommissioning liabilities. The asset retirement obligations are accreted monthly through a charge to decommissioning expense. The decommissioning trust funds for the Indian Point 3 and FitzPatrick plants were transferred to Entergy by NYPA in January 2017. See Note 9 to the financial statements for further discussion of Indian Point 3 and FitzPatrick’s decommissioning liabilities and see Note 16 to the financial statements for further discussion of the receivables for the beneficial interests in Indian Point 3 and FitzPatrick’s decommissioning trust funds as of December 31, 2016.

In August 2016, Entergy entered into an agreement to sell the FitzPatrick plant to Exelon. NRC approval of the sale was received in March 2017. The transaction closed in March 2017 for a purchase price of $110 million, which

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included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million. At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid by Entergy. See Note 14 to the financial statements for further discussion of the sale of FitzPatrick. As discussed in Note 3 to the financial statements, as a result of the sale of FitzPatrick, Entergy re-determined the plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017 .

Planned Shutdown of Pilgrim

In October 2015, Entergy determined that it would close the Pilgrim plant. The decision came after management’s extensive analysis of the economics and operating life of the plant following the NRC’s decision in September 2015 to place the plant in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix. The Pilgrim plant is expected to cease operations on May 31, 2019, at the end of its current fuel cycle. See Note 14 to the financial statements for discussion of the impairment charges associated with the decision to cease operations earlier than expected and see Note 8 for further discussion on the placement of Pilgrim in Column 4.

Planned Shutdown of Indian Point 2 and Indian Point 3

Indian Point 2 and Indian Point 3 have been involved, and have faced opposition, in extensive licensing proceedings. In January 2017, Entergy announced that it reached a settlement with New York State to shut down Indian Point 2 by April 30, 2020 and Indian Point 3 by April 30, 2021. See further discussion of the licensing proceedings and the settlement reached with New York State in “ Entergy Wholesale Commodities Authorizations to Operate Indian Point ” below.

As discussed above, in August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust fund and decommissioning liability for the Indian Point 3 plant to Entergy. The decommissioning trust fund for the Indian Point 3 plant was transferred to Entergy by NYPA in January 2017.

See Note 14 to the financial statements for further discussion of the impairment charges associated with management’s evaluation of alternatives to the continued operation of the Indian Point plants.

Planned Shutdown of Palisades

Most of the Palisades output is sold under a power purchase agreement (PPA) with Consumers Energy, entered into when the plant was acquired in 2007, that is scheduled to expire in 2022. The PPA prices currently exceed market prices and escalate each year, up to $61.50/MWh in 2022. In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle.

In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but only granting Consumers Energy recovery of $136.6 million of the $172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently on May 31, 2022. As a result of the change in expected operating life of the plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceeded the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 are no longer charged to expense as incurred, but recorded as

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assets and depreciated or amortized, subject to the typical periodic impairment reviews prescribed in the accounting rules. See Note 9 to the financial statements for discussion of the associated asset retirement obligation revision. See Note 14 to the financial statements for discussion of the updated calculation of the liability amortization associated with the PPA and discussion of the impairment charges associated with the decision to cease operations earlier than expected.

Costs Associated with Entergy Wholesale Commodities Strategic Transactions

Entergy incurred approximately $113 million in costs in 2017 and $95 million in costs in 2016 associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet, primarily employee retention and severance expenses and other benefits-related costs, and contracted economic development contributions. Entergy expects to incur employee retention and severance expenses of approximately $165 million in 2018, and approximately $205 million from 2019 through mid-2022 associated with these strategic transactions. See Note 13 to the financial statements for further discussion of these costs.

In 2017, Entergy Wholesale Commodities incurred impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets of $0.5 billion. These costs were charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet. Entergy expects to continue to incur costs associated with nuclear fuel-related spending and expenditures for capital assets and, except for Palisades, expects to continue to charge these costs to expense as incurred because Entergy expects the value of the plants to continue to be impaired. In 2016, Entergy Wholesale Commodities incurred impairment charges of $2.8 billion primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values. See Note 14 to the financial statements for further discussion of these impairment charges.

Entergy Wholesale Commodities Authorizations to Operate Indian Point

In April 2007, Entergy submitted to the NRC a joint application to renew the operating licenses for Indian Point 2 and Indian Point 3 for an additional 20 years. The original expiration dates of the NRC operating licenses for Indian Point 2 and Indian Point 3 were in September 2013 and December 2015, respectively. While the NRC staff reviews the license renewal applications, Indian Point 2 and Indian Point 3’s initial license terms have expired and the plants are operating under “timely renewal,” which is a federal statutory rule of general applicability providing for extension of a license for which a renewal application has been timely filed with the licensing agency.

In January 2017, Entergy reached a settlement with New York State, several State agencies, and Riverkeeper, Inc., under which Indian Point 2 and Indian Point 3 will cease commercial operation by April 30, 2020 and April 30, 2021, respectively, subject to certain conditions, including New York State’s withdrawal of opposition to Indian Point’s license renewals and issuance of contested permits and similar authorizations. See Note 14 to the financial statements for a discussion of the impairment and related charges associated with the settlement with New York State.

The Indian Point settlement required New York State agencies to issue environmental certifications needed for license renewal and a renewed water discharge permit based on current plant configuration. It also required the New York State Attorney General and Riverkeeper to withdraw their contentions pending before the Atomic Safety and Licensing Board (ASLB). In exchange, Entergy commits to cease commercial operation of Indian Point 2 by April 30, 2020 and Indian Point 3 by April 30, 2021. These actions have been completed, all New York State approvals required for the NRC to issue renewed licenses have been granted, and the ASLB has terminated proceedings before it following the withdrawal of pending contentions. The NRC is not expected to issue renewed licenses earlier than third quarter 2018, as its staff must complete updates to the record on environmental and safety matters (a supplement to the final supplemental environmental impact statement and a supplement to the final safety evaluation report).

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Operations may be extended up to four additional years for each unit by mutual agreement of Entergy and New York State based on an exigent reliability need for Indian Point generation. In accordance with the FERC-approved tariff of the New York Independent System Operator (NYISO), Entergy submitted to the NYISO a notice of generator deactivation based on the dates in the settlement (no later than April 30, 2020 for Indian Point Unit 2 and April 30, 2021 for Indian Point Unit 3). In December 2017, NYISO issued a report stating there will not be a system reliability need following the deactivation of Indian Point. The NYISO also has advised that it will perform an analysis of the potential competitive impacts of the proposed retirement under provisions of its tariff. The deadline for the NYISO to make a withholding determination is in dispute and is pending before the FERC.

In addition to contractually agreeing to cease commercial operations early, in February 2017 Entergy filed with the NRC an amendment to its license renewal application changing the term of the requested licenses to coincide with the latest possible extension by mutual agreement based on exigent reliability needs: April 30, 2024 for Indian Point 2 and April 30, 2025 for Indian Point 3. If Entergy reasonably determines that the NRC will treat the amendment other than as a routine amendment, Entergy may withdraw the amendment.

Other provisions of the settlement include termination of all then-existing investigations of Indian Point by the agencies signing the agreement, which include the New York State Department of Environmental Conservation, the New York State Department of State, the New York State Department of Public Service, the New York State Department of Health, and the New York State Attorney General. The settlement recognizes the right of New York State agencies to pursue new investigations and enforcement actions with respect to new circumstances or existing conditions that become materially exacerbated.

Another provision of the settlement obligates Entergy to establish a $15 million fund for environmental projects and community support. Apportionment and allocation of funds to beneficiaries are to be determined by mutual agreement of New York State and Entergy. The settlement recognizes New York State’s right to perform an annual inspection of Indian Point, with scope and timing to be determined by mutual agreement.

In May 2017 a plaintiff filed two parallel state court appeals challenging New York State’s actions in signing and implementing the Indian Point settlement with Entergy on the basis that the State failed to perform sufficient environmental analysis of its actions. All signatories to the settlement agreement, including the Entergy affiliates that hold NRC licenses for Indian Point, were named. The appeals were voluntarily dismissed in November 2017.

Liquidity and Capital Resources

This section discusses Entergy’s capital structure, capital spending plans and other uses of capital, sources of capital, and the cash flow activity presented in the cash flow statement.

Capital Structure

Entergy’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy as of December 31, 2017 is primarily due to an increase in commercial paper outstanding in 2017 as compared to 2016.
 
2017
 
2016
Debt to capital
67.1%
 
64.8%
Effect of excluding securitization bonds
(0.8%)
 
(1.0%)
Debt to capital, excluding securitization bonds (a)
66.3%

63.8%
Effect of subtracting cash
(1.1%)
 
(2.0%)
Net debt to net capital, excluding securitization bonds (a)
65.2%

61.8%

(a)
Calculation excludes the Arkansas, Louisiana, New Orleans, and Texas securitization bonds, which are non-recourse to Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas, respectively.

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Net debt consists of debt less cash and cash equivalents. Debt consists of notes payable and commercial paper, capital lease obligations, and long-term debt, including the currently maturing portion. Capital consists of debt, common shareholders’ equity, and subsidiaries’ preferred stock without sinking fund. Net capital consists of capital less cash and cash equivalents. Entergy uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy’s financial condition because the securitization bonds are non-recourse to Entergy, as more fully described in Note 5 to the financial statements. Entergy also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy’s financial condition because net debt indicates Entergy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Long-term debt, including the currently maturing portion, makes up most of Entergy’s total debt outstanding. Following are Entergy’s long-term debt principal maturities and estimated interest payments as of December 31, 2017. To estimate future interest payments for variable rate debt, Entergy used the rate as of December 31, 2017. The amounts below include payments on System Energy’s Grand Gulf sale-leaseback transaction, which are included in long-term debt on the balance sheet.

Long-term debt maturities and estimated interest payments
 
2018
 
2019
 
2020
 
2021-2022
 
after 2022
 
 
(In Millions)
Utility
 

$1,427

 

$1,430

 

$927

 

$2,234

 

$15,102

Entergy Wholesale Commodities
 
3

 
3

 
106

 
—

 
—

Parent and Other
 
76

 
76

 
520

 
953

 
832

Total
 

$1,506

 

$1,509

 

$1,553

 

$3,187

 

$15,934


Note 5 to the financial statements provides more detail concerning long-term debt outstanding.

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2022. The facility permits the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility. The commitment fee is currently 0.225% of the undrawn commitment amount. Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation. The weighted average interest rate for the year ended December 31, 2017 was 2.55% on the drawn portion of the facility.

As of December 31, 2017, amounts outstanding and capacity available under the $3.5 billion credit facility are:
Capacity
 
Borrowings
 
Letters of Credit
 
Capacity Available
(In Millions)
$3,500
 
$210
 
$6
 
$3,284

A covenant in Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization.  The calculation of this debt ratio under Entergy Corporation’s credit facility is different than the calculation of the debt to capital ratio above. One such difference is that it excludes the effects, among other things, of certain impairments related to the Entergy Wholesale Commodities nuclear generation assets. Entergy is currently in compliance with the covenant and expects to remain in compliance with this covenant. If Entergy fails to meet this ratio, or if Entergy or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the Entergy Corporation credit facility’s maturity date may occur.


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Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion .  As of December 31, 2017 , Entergy Corporation had $1.467 billion of commercial paper outstanding.  The weighted-average interest rate for the year ended December 31, 2017 was 1.49% .

Capital lease obligations are a minimal part of Entergy’s overall capital structure. Following are Entergy’s payment obligations under those leases.
 
2018
 
2019
 
2020
 
2021-2022
 
after 2022
 
(In Millions)
Capital lease payments
$3
 
$3
 
$3
 
$6
 
$19

The capital leases are discussed in Note 10 to the financial statements.

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of December 31, 2017 as follows:
Company
 
Expiration Date
 
Amount of Facility
 
Interest Rate (a)
 
Amount Drawn
 as of December 31, 2017
 
Letters of Credit Outstanding as of December 31, 2017
Entergy Arkansas
 
April 2018
 
$20 million (b)
 
2.82%
 
—
 
—
Entergy Arkansas
 
August 2022
 
$150 million (c)
 
2.82%
 
—
 
—
Entergy Louisiana
 
August 2022
 
$350 million (c)
 
2.82%
 
—
 
$9.1 million
Entergy Mississippi
 
May 2018
 
$10 million (d)
 
3.07%
 
—
 
—
Entergy Mississippi
 
May 2018
 
$20 million (d)
 
3.07%
 
—
 
—
Entergy Mississippi
 
May 2018
 
$35 million (d)
 
3.07%
 
—
 
—
Entergy Mississippi
 
May 2018
 
$37.5 million (d)
 
3.07%
 
—
 
—
Entergy New Orleans
 
November 2018
 
$25 million (c)
 
3.04%
 
—
 
$0.8 million
Entergy Texas
 
August 2022
 
$150 million (c)
 
3.07%
 
—
 
$25.6 million

(a)
The interest rate is the estimated interest rate as of December 31, 2017 that would have been applied to outstanding borrowings under the facility.
(b)
Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)
The credit facility permits the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas. 
(d)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. 

Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.

In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2017 :

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Company
 
 
Amount of Uncommitted Facility
 
Letter of Credit Fee
 
Letters of Credit Issued as of December 31, 2017 (a)
Entergy Arkansas
 
 
$25 million
 
0.70%
 
$1.0 million
Entergy Louisiana
 
 
$125 million
 
0.70%
 
$29.7 million
Entergy Mississippi
 
 
$40 million
 
0.70%
 
$15.3 million
Entergy New Orleans
 
 
$15 million
 
1.00%
 
$1.4 million
Entergy Texas
 
 
$50 million
 
0.70%
 
$22.8 million
(a)
As of December 31, 2017 , letters of credit posted with MISO covered financial transmission right exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.05 million for Entergy Texas. See Note 15 to the financial statements for discussion of financial transmission rights.

Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $145 million that expires in November 2020. As of December 31, 2017 , $104 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the year ended December 31, 2017 was 2.64% on the drawn portion of the facility.  Entergy Nuclear Vermont Yankee also had an uncommitted credit facility guaranteed by Entergy Corporation with a borrowing capacity of $85 million that expired in January 2018. As of December 31, 2017 , there were no cash borrowings outstanding under the credit facility. See Note 4 to the financial statements for additional discussion of the Vermont Yankee credit facilities.
    
Operating Lease Obligations and Guarantees of Unconsolidated Obligations

Entergy has a minimal amount of operating lease obligations and guarantees in support of unconsolidated obligations. Entergy’s guarantees in support of unconsolidated obligations are not likely to have a material effect on Entergy’s financial condition, results of operations, or cash flows. Following are Entergy’s payment obligations as of December 31, 2017 on non-cancelable operating leases with a term over one year:
 
2018
 
2019
 
2020
 
2021-2022
 
after 2022
 
(In Millions)
Operating lease payments
$80
 
$83
 
$67
 
$102
 
$97

Operating leases are discussed in Note 10 to the financial statements.

Summary of Contractual Obligations of Consolidated Entities

Contractual Obligations
 
2018
 
2019-2020
 
2021-2022
 
after 2022
 
Total
 
 
(In Millions)
Long-term debt (a)
 

$1,506

 

$3,062

 

$3,187

 

$15,934

 

$23,689

Capital lease payments (b)
 

$3

 

$6

 

$6

 

$19

 

$34

Operating leases (b) (c)
 

$80

 

$150

 

$102

 

$97

 

$429

Purchase obligations (d)
 

$1,394

 

$2,485

 

$1,992

 

$4,728

 

$10,599


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Lease obligations are discussed in Note 10 to the financial statements.
(c)
Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations.
(d)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services.  Almost all of the total are fuel and purchased power obligations.


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In addition to the contractual obligations stated above, Entergy currently expects to contribute approximately $352.1 million to its pension plans and approximately $52.3 million to other postretirement plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018. See “ Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.

Also in addition to the contractual obligations, Entergy has $916 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.

Capital Funds Agreement

Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:
 
•
maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt);
•
permit the continued commercial operation of Grand Gulf;
•
pay in full all System Energy indebtedness for borrowed money when due; and
•
enable System Energy to make payments on specific System Energy debt, under supplements to the agreement assigning System Energy’s rights in the agreement as security for the specific debt.

Capital Expenditure Plans and Other Uses of Capital

Following are the amounts of Entergy’s planned construction and other capital investments by operating segment for 2018 through 2020.
Planned construction and capital investments
 
2018
 
2019
 
2020
 
 
(In Millions)
Utility:
 
 
 
 
 
 
Generation
 

$1,590

 

$1,410

 

$1,245

Transmission
 
990

 
865

 
735

Distribution
 
860

 
1,030

 
945

Utility Support
 
480

 
335

 
375

Total
 
3,920

 
3,640

 
3,300

Entergy Wholesale Commodities
 
245

 
75

 
35

Total
 

$4,165

 

$3,715

 

$3,335


Planned construction and capital investments refer to amounts Entergy plans to spend on routine capital projects that are necessary to support reliability of its service, equipment, or systems and to support normal customer growth, and includes spending for the nuclear and non-nuclear plants at Entergy Wholesale Commodities. In addition to routine capital projects, they also refer to amounts Entergy plans to spend on non-routine capital investments for which Entergy is either contractually obligated, has Board approval, or otherwise expects to make to satisfy regulatory or legal requirements. Amounts include the following types of construction and capital investments:

•
Investments, including the St. Charles Power Station, Lake Charles Power Station, New Orleans Power Station, and Montgomery County Power Station, each discussed below, and potential construction of additional generation.
•
Entergy Wholesale Commodities investments associated with specific investments such as component replacements, software and security, and dry cask storage.

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•
Investments in Entergy’s nuclear fleet.
•
Transmission spending to enhance reliability, reduce congestion, and enable economic growth.
•
Distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering.

For the next several years, the Utility’s owned generating capacity is projected to be adequate to meet MISO reserve requirements; however, in the longer-term additional supply resources will be needed, and its supply plan initiative will continue to seek to transform its generation portfolio with new generation resources.  Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. Estimated capital expenditures are also subject to periodic review and modification and may vary based on the ongoing effects of business restructuring, regulatory constraints and requirements, environmental regulations, business opportunities, market volatility, economic trends, changes in project plans, and the ability to access capital.

St. Charles Power Station

In August 2015, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by the construction of the St. Charles Power Station, a nominal 980 megawatt combined-cycle generating unit, on land adjacent to the existing Little Gypsy plant in St. Charles Parish, Louisiana. It is currently estimated to cost $869 million to construct, including transmission interconnection and other related costs. The LPSC issued an order approving certification of St. Charles Power Station in December 2016. Construction is in progress and commercial operation is estimated to occur by mid-2019.

Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 megawatt combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation and approved certification of the unit. Construction is in progress and commercial operation is expected to occur by mid-2020.

New Orleans Power Station

In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which was retired effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In testimony filed subsequent to Entergy New Orleans’s supplemental and amending application, several intervenors oppose City Council approval of either alternative, while the City Council advisors and one intervenor support the smaller alternative. A contested hearing was held in December 2017 and post-hearing briefs were filed in January 2018. In February 2018 the City Council Utility Committee adopted a resolution approving construction of the 128 MW unit. The full City Council is expected

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to vote on the resolution in March 2018. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals.

Montgomery County Power Station

In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including approximately $111 million of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017 parties to the proceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Transmission interconnection and network upgrades and other related costs are not subject to the $831 million cap. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.

Washington Parish Energy Center

In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 361 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa, Louisiana and, subject to permits and approvals, is expected to be completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with the deadlines recently extended and the hearing continued from March 2018 until June 2018 in order to allow the parties an opportunity to reach settlement.

Advanced Metering Infrastructure (AMI)

See Note 2 to the financial statements for discussion of filings made by the Utility operating companies regarding the deployment of AMI. The filings included estimates of implementation costs for AMI of $208 million for Entergy Arkansas, $330 million for Entergy Louisiana, $132 million for Entergy Mississippi, $75 million for Entergy New Orleans, and $132 million for Entergy Texas.

Dividends and Stock Repurchases

Declarations of dividends on Entergy’s common stock are made at the discretion of the Board. Among other things, the Board evaluates the level of Entergy’s common stock dividends based upon earnings per share from the Utility operating segment and the Parent and Other portion of the business, financial strength, and future investment opportunities. At its January 2018 meeting, the Board declared a dividend of $0.89 per share. Entergy paid $629 million in 2017 , $612 million in 2016 , and $599 million in 2015 in cash dividends on its common stock.

In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees, which may be exercised to obtain shares of Entergy’s common stock. According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market. Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.


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In addition to the authority to fund grant exercises, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. As of December 31, 2017 , $350 million of authority remains under the $500 million share repurchase program. The amount of repurchases may vary as a result of material changes in business results or capital spending or new investment opportunities, or if limitations in the credit markets continue for a prolonged period.

Sources of Capital

Entergy’s sources to meet its capital requirements and to fund potential investments include:

•
internally generated funds;
•
cash on hand ($781 million as of December 31, 2017);
•
securities issuances;
•
bank financing under new or existing facilities or commercial paper; and
•
sales of assets.

Circumstances such as weather patterns, fuel and purchased power price fluctuations, and unanticipated expenses, including unscheduled plant outages and storms, could affect the timing and level of internally generated funds in the future.

Provisions within the articles of incorporation relating to preferred stock of certain of Entergy Corporation’s subsidiaries could restrict the payment of cash dividends or other distributions on their common and preferred stock. All debt and common and preferred equity issuances by the Registrant Subsidiaries require prior regulatory approval and their preferred equity and debt issuances are also subject to issuance tests set forth in corporate charters, bond indentures, and other agreements. Entergy believes that the Registrant Subsidiaries have sufficient capacity under these tests to meet foreseeable capital needs.

The FERC has jurisdiction over securities issuances by the Utility operating companies and System Energy, except securities with maturities longer than one year issued by Entergy Arkansas, which is subject to the jurisdiction of the APSC. The City Council has concurrent jurisdiction over Entergy New Orleans’s securities issuances with maturities longer than one year. No regulatory approvals are necessary for Entergy Corporation to issue securities. The current FERC-authorized short-term borrowing limits are effective through October 2019. Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through October 2019. Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2018. Entergy New Orleans also has obtained long-term financing authorization from the City Council that extends through June 2018. Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained long-term financing authorizations from the FERC that extend through October 2019 for issuances by its respective nuclear fuel company variable interest entity. In addition to borrowings from commercial banks, the Registrant Subsidiaries may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements. The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce Entergy’s subsidiaries’ dependence on external short-term borrowings. Borrowings from internal and external short-term borrowings combined may not exceed the FERC-authorized limits. See Notes 4 and 5 to the financial statements for further discussion of Entergy’s borrowing limits, authorizations, and amounts outstanding.


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Cash Flow Activity

As shown in Entergy’s Consolidated Statements of Cash Flows, cash flows for the years ended December 31, 2017 , 2016 , and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Millions)
Cash and cash equivalents at beginning of period

$1,188

 

$1,351

 

$1,422

 


 
 
 
 
Net cash provided by (used in):
 

 
 

 
 

Operating activities
2,624

 
2,999

 
3,291

Investing activities
(3,841
)
 
(3,850
)
 
(2,609
)
Financing activities
810

 
688

 
(753
)
Net decrease in cash and cash equivalents
(407
)
 
(163
)
 
(71
)
 
 
 
 
 
 
Cash and cash equivalents at end of period

$781

 

$1,188

 

$1,351


Operating Activities

2017 Compared to 2016

Net cash flow provided by operating activities decreased by $375 million in 2017 primarily due to:

•
lower Entergy Wholesale Commodities net revenue, excluding the effect of revenues resulting from the FitzPatrick reimbursement agreement with Exelon, in 2017 as compared to prior year, as discussed above. See Note 14 to the financial statements for discussion of the reimbursement agreement;
•
an increase of $141 million in spending on nuclear refueling outages in 2017 as compared to the prior year;
•
an increase of $94 million in severance and retention payments in 2017 as compared to the prior year. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” above for a discussion of management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet;
•
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlement and refund;
•
proceeds of $23 million received in 2017 compared to proceeds of $102 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and
•
an increase of $20 million in pension contributions in 2017. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates ” below and Note 11 to the financial statements for discussion of qualified pension and other postretirement benefits funding.

The decrease was partially offset by:

•
income tax refunds of $13 million in 2017 compared to income tax payments of $95 million in 2016. Entergy received income tax refunds in 2017 resulting from the carryback of net operating losses. Entergy made income tax payments in 2016 related to the effect of the 2006-2007 IRS audit and for jurisdictions that do not have net operating loss carryovers or jurisdictions in which the utilization of net operating loss carryovers are limited. See Note 3 to the financial statements for a discussion of the income tax audit;
•
a decrease of $68 million in interest paid in 2017 as compared to the prior year primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford

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3 leased assets. See Note 10 to the financial statements for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets; and
•
an increase due to the timing of recovery of fuel and purchased power costs in 2017 as compared to the prior year. See Note 2 to the financial statements for a discussion of fuel and purchased power cost recovery.

2016 Compared to 2015

Net cash flow provided by operating activities decreased by $292 million in 2016 primarily due to:

•
a decrease due to the timing of recovery of fuel and purchased power costs in 2016 as compared to 2015. See Note 2 to the financial statements for a discussion of fuel and purchased power cost recovery;
•
lower Entergy Wholesale Commodities net revenue in 2016 as compared to 2015, as discussed previously; and
•
an increase of $83 million in interest paid in 2016 as compared to 2015 primarily due to an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets and an increase in interest expense primarily due to 2016 net debt issuances by various Utility operating companies, partially offset by a decrease in interest paid in 2016 on the Grand Gulf sale-leaseback obligation. See Note 10 to the financial statements for a discussion of Entergy Louisiana’s purchase of a beneficial interest in the Waterford 3 leased assets and for details of the Grand Gulf lease obligation. See Note 5 to the financial statements for a discussion of long-term debt.

The decrease was partially offset by:

•
higher Utility net revenues in 2016 as compared to 2015, as discussed above;
•
proceeds of $102 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation;
•
a decrease of $46 million in spending on nuclear refueling outages in 2016 as compared to 2015; and
•
a decrease of $19 million in spending related to the shutdown of Vermont Yankee, which ceased power production in December 2014.

Investing Activities

2017 Compared to 2016

Net cash flow used in investing activities decreased by $9 million in 2017 primarily due to the purchase of the Union Power Station for approximately $949 million in March 2016 and proceeds of $100 million from the sale in March 2017 of the FitzPatrick plant to Exelon. See Note 14 to the financial statements for discussion of the Union Power Station purchase and the sale of FitzPatrick. The decrease was partially offset by:

•
an increase of $827 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $452 million in fossil-fueled generation construction expenditures primarily due to higher spending in 2017 on the St. Charles Power Station project and the Lake Charles Power Station project and a higher scope of work performed on various other fossil projects in 2017 as compared to 2016; an increase of $133 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2017 as compared to 2016 and higher storm restoration spending in 2017; an increase of $102 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017 as compared to 2016; an increase of $101 million in transmission construction expenditures primarily due to a higher scope of work performed on transmission projects in 2017 as compared to 2016; and an increase of $51 million due to increased spending on advanced metering infrastructure in 2017;

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•
a decrease of $144 million in proceeds received from the DOE in 2017 as compared to the prior year resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and
•
a decrease of $63 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle.

2016 Compared to 2015

Net cash flow used in investing activities increased by $1,241 million in 2016 primarily due to:

•
the purchase of the Union Power Station for approximately $949 million in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase;
•
proceeds of approximately $490 million from the sale in December 2015 of Rhode Island State Energy Center. See Note 14 to the financial statements for further discussion of the sale; and
•
an increase of $279 million in construction expenditures, primarily in the Utility business. The increase in construction expenditures in the Utility business is primarily due to an increase of $114 million in transmission construction expenditures primarily due to an overall higher scope of work performed on transmission projects in 2016 as compared to 2015, an increase of $106 million in nuclear construction expenditures primarily due to a higher scope of work on various nuclear projects in 2016 as compared to 2015, an increase of $95 million in fossil-fueled generation construction expenditures primarily due to spending on the St. Charles Power Station project in 2016, an increase of $79 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2016 as compared to the same period in 2015 and higher storm restoration spending in 2016, and an increase of $65 million in information technology construction expenditures due to various information technology projects and upgrades in 2016. The increase was partially offset by a decrease of $148 million in spending related to compliance with NRC post-Fukushima requirements in the Utility and Entergy Wholesale Commodities businesses.

The increase was partially offset by:

•
a decrease of $179 million in nuclear fuel purchases due to variations from year to year in the timing and pricing of fuel reload requirements, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle;
•
an increase of $151 million in proceeds received from the DOE in 2016 as compared to the prior year resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation;
•
a $71 million NYPA value sharing payment in 2015. See Note 14 to the financial statements for further discussion of Entergy’s NYPA value sharing agreements; and
•
the deposit of $64 million into Entergy New Orleans’s storm reserve escrow accounts in 2015.

Financing Activities

2017 Compared to 2016

Net cash flow provided by financing activities increased by $122 million in 2017 primarily due to:

•
Entergy’s net issuances of $1,123 million of commercial paper in 2017 compared to net repayments of $78 million of commercial paper in 2016;
•
an increase of $95 million resulting from lower redemptions of preferred stock. In 2017, Entergy New Orleans redeemed its $7.8 million of 4.75% Series preferred stock, its $6 million of 5.56% Series preferred stock, and its $6 million of 4.36% Series preferred stock. In 2016, Entergy Arkansas redeemed its $75 million of 6.45%

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Series preferred stock and its $10 million of 6.08% Series preferred stock and Entergy Mississippi redeemed its $30 million of 6.25% Series preferred stock;
•
an increase of $48 million in treasury stock issuances in 2017 primarily due to a larger amount of previously repurchased Entergy Corporation common stock issued in 2017 to satisfy stock option exercises; and
•
net borrowings of $41 million by the nuclear fuel company variable interest entities in 2017 compared to net repayments of $1 million in 2016.

The increase was partially offset by long-term debt activity providing approximately $224 million of cash in 2017 compared to providing approximately $1,489 million of cash in 2016. Included in the long-term debt activity is $490 million in 2017 and $135 million in 2016 for the repayment of borrowings on the Entergy Corporation long-term credit facility.

2016 Compared to 2015

Entergy’s financing activities provided $688 million of cash for 2016 compared to using $753 million of cash for 2015 primarily due to the following activity:

•
long-term debt activity providing approximately $1,489 million of cash in 2016 compared to providing $41 million of cash in 2015.  Included in the long-term debt activity is net repayments of borrowings of $135 million in 2016 compared to net borrowings of $140 million in 2015 on the Entergy Corporation long-term credit facility;
•
the issuance of $110 million of preferred stock in 2015. See Note 6 to the financial statements for further discussion;
•
$100 million of common stock repurchased in 2015, as discussed above;
•
a net increase of $41 million in 2016 in short-term borrowings by the nuclear fuel company variable interest entities; and
•
a decrease of $21 million resulting from higher repurchase/redemptions of preferred stock. In September 2015, Entergy Louisiana redeemed its $100 million 6.95% Series preferred membership interests, of which $16 million was owned by Entergy Louisiana Holdings, an Entergy subsidiary, and Entergy Gulf States Louisiana repurchased its $10 million Series A 8.25% preferred membership interests as part of a multi-step process to effectuate the Entergy Louisiana and Entergy Gulf States Louisiana business combination.  See Note 2 to the financial statements for a discussion of the combination. In 2016, Entergy Arkansas redeemed its $75 million of 6.45% Series preferred stock and its $10 million of 6.08% Series preferred stock and Entergy Mississippi redeemed its $30 million of 6.25% Series preferred stock.

For the details of Entergy’s commercial paper program and the nuclear fuel company variable interest entities’ short-term borrowings, see Note 4 to the financial statements. See Note 5 to the financial statements for details of long-term debt.

Rate, Cost-recovery, and Other Regulation

State and Local Rate Regulation and Fuel-Cost Recovery

The rates that the Utility operating companies and System Energy charge for their services significantly influence Entergy’s financial position, results of operations, and liquidity. These companies are regulated and the rates charged to their customers are determined in regulatory proceedings. Governmental agencies, including the APSC, the LPSC, the MPSC, the City Council, the PUCT, and the FERC, are primarily responsible for approval of the rates charged to customers. Following is a summary of the Utility operating companies’ authorized returns on common equity:

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Company
 
Authorized Return on Common Equity
 
 
 
Entergy Arkansas
 
9.25% - 10.25%
Entergy Louisiana
 
9.15% - 10.75% Electric; 9.45% - 10.45% Gas
Entergy Mississippi
 
9.47% - 11.49%
Entergy New Orleans
 
10.7% - 11.5% Electric; 10.25% - 11.25% Gas
Entergy Texas
 
9.8%

The Utility operating companies’ base rate, fuel and purchased power cost recovery, and storm cost recovery proceedings are discussed in Note 2 to the financial statements.

Federal Regulation

The FERC regulates wholesale sales of electricity rates and interstate transmission of electricity, including rates for System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. The current return on equity under the Unit Power Sales Agreement is 10.94%. Prior to each operating company’s termination of participation in the System Agreement (Entergy Arkansas in December 2013, Entergy Mississippi in November 2015, and Entergy Louisiana, Entergy New Orleans, and Entergy Texas each in August 2016), the Utility operating companies engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which was a rate schedule approved by the FERC. Certain of the Utility operating companies’ retail regulators are pursuing litigation involving the System Agreement at the FERC and in federal courts. See Note 2 to the financial statements for discussion of the System Agreement proceedings, a complaint filed with the FERC challenging System Energy’s return on equity, and System Energy’s proposed amendments to the Unit Power Sales Agreement.

Market and Credit Risk Sensitive Instruments

Market risk is the risk of changes in the value of commodity and financial instruments, or in future net income or cash flows, in response to changing market conditions.  Entergy holds commodity and financial instruments that are exposed to the following significant market risks.

•
The commodity price risk associated with the sale of electricity by the Entergy Wholesale Commodities business.
•
The interest rate and equity price risk associated with Entergy’s investments in pension and other postretirement benefit trust funds.  See Note 11 to the financial statements for details regarding Entergy’s pension and other postretirement benefit trust funds.
•
The interest rate and equity price risk associated with Entergy’s investments in nuclear plant decommissioning trust funds, particularly in the Entergy Wholesale Commodities business.  See Note 16 to the financial statements for details regarding Entergy’s decommissioning trust funds.
•
The interest rate risk associated with changes in interest rates as a result of Entergy’s outstanding indebtedness.  Entergy manages its interest rate exposure by monitoring current interest rates and its debt outstanding in relation to total capitalization.  See Notes 4 and 5 to the financial statements for the details of Entergy’s debt outstanding.

The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation. To the extent approved by their retail regulators, the Utility operating companies use commodity and financial instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.


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Entergy’s commodity and financial instruments are also exposed to credit risk.  Credit risk is the risk of loss from nonperformance by suppliers, customers, or financial counterparties to a contract or agreement.  Entergy is also exposed to a potential demand on liquidity due to credit support requirements within its supply or sales agreements.
 
Commodity Price Risk

Power Generation

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets.  Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.   In addition to its forward physical power contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to manage forward commodity price risk.  Certain hedge volumes have price downside and upside relative to market price movement.  The contracted minimum, expected value, and sensitivities are provided in the table below to show potential variations.  The sensitivities may not reflect the total maximum upside potential from higher market prices.  The information contained in the following table represents projections at a point in time and will vary over time based on numerous factors, such as future market prices, contracting activities, and generation.  Following is a summary of Entergy Wholesale Commodities’ current forward capacity and generation contracts as well as total revenue projections based on market prices as of December 31, 2017.


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Entergy Wholesale Commodities Nuclear Portfolio

 
 
2018
 
2019
 
2020
 
2021
 
2022
Energy
 
 
 
 
 
 
 
 
 
 
Percent of planned generation under contract (a):
 
 
 
 
 
 
 
 
 
 
Unit-contingent (b)
 
98%
 
91%
 
51%
 
74%
 
67%
Firm LD (c)
 
9%
 
—%
 
—%
 
—%
 
—%
Offsetting positions (d)
 
(9%)
 
—%
 
—%
 
—%
 
—%
Total
 
98%
 
91%
 
51%
 
74%
 
67%
Planned generation (TWh) (e) (f)
 
27.9
 
25.5
 
17.9
 
9.7
 
2.8
Average revenue per MWh on contracted volumes:
 
 
 
 
 
 
 
 
 
 
Expected based on market prices as of December 31, 2017
 
$39.1
 
$40.6
 
$50.5
 
$59.2
 
$58.8
 
 
 
 
 
 
 
 
 
 
 
Capacity
 
 
 
 
 
 
 
 
 
 
Percent of capacity sold forward (g):
 
 
 
 
 
 
 
 
 
 
Bundled capacity and energy contracts (h)
 
22%
 
25%
 
36%
 
69%
 
99%
Capacity contracts (i)
 
36%
 
13%
 
—%
 
—%
 
—%
Total
 
58%
 
38%
 
36%
 
69%
 
99%
Planned net MW in operation (average) (f)
 
3,568
 
3,167
 
2,195
 
1,158
 
338
Average revenue under contract per kW per month (applies to capacity contracts only)
 
$7.1
 
$9.1
 
$—
 
$—
 
$—
 
 
 
 
 
 
 
 
 
 
 
Total Energy and Capacity Revenues (j)
 
 
 
 
 
 
 
 
 
 
Expected sold and market total revenue per MWh
 
$47.0
 
$46.9
 
$48.9
 
$56.1
 
$47.8
Sensitivity: -/+ $10 per MWh market price change
 
$46.9 - $47.2
 
$46.0 - $47.8
 
$44.3 - $53.5
 
$53.5 - $58.7
 
$44.5 - $51.1

(a)
Percent of planned generation output sold or purchased forward under contracts, forward physical contracts, forward financial contracts, or options that mitigate price uncertainty that may require regulatory approval or approval of transmission rights. Positions that are not classified as hedges are netted in the planned generation under contract.
(b)
Transaction under which power is supplied from a specific generation asset; if the asset is not operating, the seller is generally not liable to buyer for any damages. Certain unit-contingent sales include a guarantee of availability. Availability guarantees provide for the payment to the power purchaser of contract damages, if incurred, in the event the seller fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  All of Entergy’s outstanding guarantees of availability provide for dollar limits on Entergy’s maximum liability under such guarantees.
(c)
Transaction that requires receipt or delivery of energy at a specified delivery point (usually at a market hub not associated with a specific asset) or settles financially on notional quantities; if a party fails to deliver or receive energy, defaulting party must compensate the other party as specified in the contract, a portion of which may be capped through the use of risk management products. This also includes option transactions that may expire without being exercised.
(d)
Transactions for the purchase of energy, generally to offset a Firm LD transaction.
(e)
Amount of output expected to be generated by Entergy Wholesale Commodities resources considering plant operating characteristics, outage schedules, and expected market conditions that affect dispatch.
(f)
Assumes the planned shutdown of Pilgrim on May 31, 2019, planned shutdown of Indian Point 2 on April 30, 2020, planned shutdown of Indian Point 3 on April 30, 2021, and planned shutdown of Palisades on May 31,

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2022. Assumes NRC license renewals for two units, as follows (with current license expirations in parentheses): Indian Point 2 (September 2013 and now operating under its period of extended operations while its application is pending) and Indian Point 3 (December 2015 and now operating under its period of extended operations while its application is pending). For a discussion regarding the planned shutdown of the Pilgrim, Indian Point 2, Indian Point 3, and Palisades plants, see “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” above. For a discussion regarding the license renewals for Indian Point 2 and Indian Point 3, see “ Entergy Wholesale Commodities Authorizations to Operate Indian Point ” above.
(g)
Percent of planned qualified capacity sold to mitigate price uncertainty under physical or financial transactions.
(h)
A contract for the sale of installed capacity and related energy, priced per megawatt-hour sold.
(i)
A contract for the sale of an installed capacity product in a regional market.
(j)
Includes assumptions on converting a portion of the portfolio to contracted with fixed price cost or discount and excludes non-cash revenue from the amortization of the Palisades below-market purchased power agreement, mark-to-market activity, and service revenues.

Entergy estimates that a positive $10 per MWh change in the annual average energy price in the markets in which the Entergy Wholesale Commodities nuclear business sells power, based on the respective year-end market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of $3 million in 2018 and would have had a corresponding effect on pre-tax income of $37 million in 2017. A negative $10 per MWh change in the annual average energy price in the markets based on the respective year-end market conditions, planned generation volumes, and hedged positions, would have a corresponding effect on pre-tax income of ($3) million in 2018 and would have had a corresponding effect on pre-tax income of ($31) million in 2017.

Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA.  In October 2007, Entergy subsidiaries and NYPA amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms.  Under the amended value sharing agreements, Entergy subsidiaries made annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014.  Entergy subsidiaries paid NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million , and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million .  The annual payment for each year’s output was due by January 15 of the following year, and the final payment to NYPA was made in January 2015.  Entergy recorded the liability for payments to NYPA as power was generated and sold by Indian Point 3 and FitzPatrick.  An amount equal to the liability was recorded to the plant asset account as contingent purchase price consideration for the plants.

Some of the agreements to sell the power produced by Entergy Wholesale Commodities’ power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations under the agreements.  The Entergy subsidiary is required to provide credit support based upon the difference between the current market prices and contracted power prices in the regions where Entergy Wholesale Commodities sells power.  The primary form of credit support to satisfy these requirements is an Entergy Corporation guaranty.  Cash and letters of credit are also acceptable forms of credit support.  At December 31, 2017, based on power prices at that time, Entergy had liquidity exposure of $167 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $8 million of posted cash collateral.  In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2017, Entergy would have been required to provide approximately $98 million of additional cash or letters of credit under some of the agreements. As of December 31, 2017, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously posted collateral from counterparties, would increase by $372 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.  

As of December 31, 2017, substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants through 2022 is with counterparties or their guarantors that have public investment grade credit ratings.



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Nuclear Matters

Entergy’s Utility and Entergy Wholesale Commodities businesses include the ownership and operation of nuclear generating plants and are, therefore, subject to the risks related to such ownership and operation. These include risks related to: the use, storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushima event; the implementation of plans to cease merchant generation at all Entergy Wholesale Commodities nuclear plants by 2022 and the post-shutdown decommissioning of these plants; regulatory requirements and potential future regulatory changes, including changes affecting the regulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; the performance and capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete decommissioning of each site when required; and limitations on the amounts and types of insurance commercially available for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident.

ANO

See Note 8 to the financial statements for discussion of the NRC’s decision in March 2015 to move ANO into the “multiple/repetitive degraded cornerstone column,” or Column 4, of the NRC’s Reactor Oversight Process Action Matrix, and the resulting significant additional NRC inspection activities at the ANO site.

Pilgrim

See Note 8 to the financial statements for discussion of the NRC’s decision in September 2015 to place Pilgrim in Column 4 of its Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program that contributed to repeated unscheduled shutdowns and equipment failures.

Indian Point

During the scheduled refueling and maintenance outage at Indian Point 2 in the first quarter 2016, comprehensive inspections were done as part of the aging management program that calls for an in-depth inspection of the reactor vessel.  Inspections of more than 2,000 bolts in the reactor’s removable insert liner identified issues with roughly 11% of the bolts that required further analysis.  Entergy replaced bolts as appropriate, and the unit returned to service in June 2016. In 2016, Entergy evaluated the scope and duration of Indian Point 3’s scheduled refueling outage planned for 2017, which began in March 2017. Based on the results of the 2016 evaluation and analysis, Entergy extended Indian Point 3’s planned 2017 outage duration. Entergy performed the same in-depth inspection of the reactor vessel at Indian Point 3 during Indian Point 3’s spring 2017 refueling and maintenance outage that it performed for Indian Point 2. Based on inspection data, Entergy replaced approximately the same number of bolts at Indian Point 3 that it replaced at Indian Point 2 before returning the plant to service in May 2017.

Grand Gulf

Grand Gulf began a maintenance outage on September 8, 2016 to replace a residual heat removal pump. Although the pump had been replaced, on September 27, 2016 management decided to keep the plant in an outage for additional training and other steps to support management’s operational goals. Grand Gulf returned to service on January 31, 2017.

Based on the plant’s performance indicators, in November 2016 the NRC placed Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. Entergy is implementing a plan to restore Grand Gulf to Column 1, including addressing the issues related to the three very low safety significance non-

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cited violations identified in the NRC’s report on the results of its October 2016 special inspection. Depending on the success of implementing that plan and the plant’s performance indicators, there is risk that the NRC could move Grand Gulf into the “degraded cornerstone column,” or Column 3, of the NRC’s Reactor Oversight Process Action Matrix.

Critical Accounting Estimates

The preparation of Entergy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows.  Management has identified the following accounting estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in these assumptions and measurements could produce estimates that would have a material effect on the presentation of Entergy’s financial position, results of operations, or cash flows.

Nuclear Decommissioning Costs

Entergy subsidiaries own nuclear generation facilities in both the Utility and Entergy Wholesale Commodities operating segments. Regulations require Entergy subsidiaries to decommission the nuclear power plants after each facility is taken out of service, and cash is deposited in trust funds during the facilities’ operating lives in order to provide for this obligation. Entergy conducts periodic decommissioning cost studies to estimate the costs that will be incurred to decommission the facilities. The following key assumptions have a significant effect on these estimates.
 
•
Timing - In projecting decommissioning costs, two assumptions must be made to estimate the timing of plant decommissioning. First, the date of the plant’s retirement must be estimated for those plants that do not have an announced shutdown date. The estimate may include assumptions regarding the possibility that the plant may have an operating life shorter than the operating license expiration, as well as assumptions regarding the probability that the plant’s license will be renewed for those plants that have not yet received operating license renewal. Second, an assumption must be made whether all decommissioning activity will proceed immediately upon plant retirement, or whether the plant will be placed in SAFSTOR status. SAFSTOR is decommissioning a facility by placing it in a safe, stable condition that is maintained until it is subsequently decontaminated and dismantled to levels that permit license termination, normally within 60 years from permanent cessation of operations. A change of assumption regarding either the probability of license renewal, the period of continued operation, or the use of a SAFSTOR period can change the present value of the asset retirement obligation.
•
Cost Escalation Factors - Entergy’s current decommissioning cost studies include an assumption that decommissioning costs will escalate over present cost levels by factors ranging from approximately 2% to 3% annually. A 50-basis point change in this assumption could change the estimated present value of the decommissioning liabilities by approximately 3% to 18% . The timing assumption influences the significance of the effect of a change in the estimated inflation or cost escalation rate because the effect increases with the length of time assumed before decommissioning activity ends.
•
Spent Fuel Disposal - Federal law requires the DOE to provide for the permanent storage of spent nuclear fuel, and legislation has been passed by Congress to develop a repository at Yucca Mountain, Nevada. The DOE has not yet begun accepting spent nuclear fuel and is in non-compliance with federal law. The DOE continues to delay meeting its obligation and Entergy’s nuclear plant owners are continuing to pursue damage claims against the DOE for its failure to provide timely spent fuel storage. Until a federal site is available, however, nuclear plant operators must provide for interim spent fuel storage on the nuclear plant site, which can require the construction and maintenance of dry cask storage sites or other facilities. The costs of developing and maintaining these facilities during the decommissioning period can have a significant effect (as much as an average of 20% to 30% of total estimated decommissioning costs). Entergy’s decommissioning studies include cost estimates for spent fuel storage. These estimates could change in the future, however, based on the expected timing of when the DOE begins to fulfill its obligation to receive and store spent nuclear fuel. See Note 8 to the financial statements for further discussion of Entergy’s spent nuclear fuel litigation.

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•
Technology and Regulation - Over the past several years, more practical experience with the actual decommissioning of nuclear facilities has been gained and that experience has been incorporated into Entergy’s current decommissioning cost estimates. Given the long duration of decommissioning projects, additional experience, including technological advancements in decommissioning, could occur, however, and affect current cost estimates. In addition, if regulations regarding nuclear decommissioning were to change, this could significantly affect cost estimates.
•
Interest Rates - The estimated decommissioning costs that are the basis for the recorded decommissioning liability are discounted to present value using a credit-adjusted risk-free rate. When the decommissioning liability is revised, increases in cash flows are discounted using the current credit-adjusted risk-free rate. Decreases in estimated cash flows are discounted using the credit-adjusted risk-free rate used previously in estimating the decommissioning liability that is being revised. Therefore, to the extent that a revised cost study results in an increase in estimated cash flows, a change in interest rates from the time of the previous cost estimate will affect the calculation of the present value of the revised decommissioning liability.    

Revisions of estimated decommissioning costs that decrease the liability also result in a decrease in the asset retirement cost asset. For the non-rate-regulated portions of Entergy’s business for which the plant’s value is impaired, these reductions will immediately reduce operating expenses in the period of the revision if the reduction of the liability exceeds the amount of the undepreciated plant asset at the date of the revision. Revisions of estimated decommissioning costs that increase the liability result in an increase in the asset retirement cost asset, which is then depreciated over the asset’s remaining economic life. For a plant in the non-rate-regulated portions of Entergy’s business for which the plant’s value is impaired, however, including a plant that is shutdown, or is nearing its shutdown date, the increase in the liability is likely to immediately increase operating expense in the period of the revision and not increase the asset retirement cost asset. See Note 14 to the financial statements for further discussion of impairment of long-lived assets and Note 9 to the financial statements for further discussion of asset retirement obligations.

Utility Regulatory Accounting

Entergy’s Utility operating companies and System Energy are subject to retail regulation by their respective state and local regulators and to wholesale regulation by the FERC. Because these regulatory agencies set the rates the Utility operating companies and System Energy are allowed to charge customers based on allowable costs, including a reasonable return on equity, the Utility operating companies and System Energy apply accounting standards that require the financial statements to reflect the effects of rate regulation, including the recording of regulatory assets and liabilities. Regulatory assets represent incurred costs that have been deferred because they are probable of future recovery from customers through regulated rates. Regulatory liabilities represent the excess recovery of costs that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. See Note 2 to the financial statements for a discussion of rate and regulatory matters, including details of Entergy’s and the Registrant Subsidiaries’ regulatory assets and regulatory liabilities.

For each regulatory jurisdiction in which they conduct business, the Utility operating companies and System Energy assess whether the regulatory assets and regulatory liabilities continue to meet the criteria for probable future recovery or settlement at each balance sheet date and when regulatory events occur. This assessment includes consideration of recent rate orders, historical regulatory treatment for similar costs, and factors such as changes in applicable regulatory and political environments. If the assessments made by the Utility operating companies and System Energy are ultimately different than actual regulatory outcomes, it could materially affect the results of operations, financial position, and cash flows of Entergy or the Registrant Subsidiaries.

Unbilled Revenue

As discussed in Note 1 to the financial statements, Entergy records an estimate of the revenues earned for energy delivered since the latest customer billing. Each month the estimated unbilled revenue amounts are recorded as revenue and a receivable, and the prior month’s estimate is reversed. The difference between the estimate of the unbilled receivable at the beginning of the period and the end of the period is the amount of unbilled revenue recognized

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during the period. The estimate recorded is primarily based upon an estimate of customer usage during the unbilled period and the billed price to customers in that month. Therefore, revenue recognized may be affected by the estimated price and usage at the beginning and end of each period, in addition to changes in certain components of the calculation.

Impairment of Long-lived Assets and Trust Fund Investments

Entergy has significant investments in long-lived assets in both of its operating segments, and Entergy evaluates these assets against the market economics and under the accounting rules for impairment when there are indications that an impairment may exist.  This evaluation involves a significant degree of estimation and uncertainty.  In the Entergy Wholesale Commodities business, Entergy’s investments in merchant generation assets are subject to impairment if adverse market or regulatory conditions arise, particularly if it leads to a decision or an expectation that Entergy will operate a plant for a shorter period than previously expected; if there is a significant adverse change in the physical condition of a plant; if investment in a plant significantly exceeds previously-expected amounts; or, for Indian Point 2 and Indian Point 3, if their operating licenses are not renewed.

If an asset is considered held for use, and Entergy concludes that events and circumstances are present indicating that an impairment analysis should be performed under the accounting standards, the sum of the expected undiscounted future cash flows from the asset are compared to the asset’s carrying value.  The carrying value of the asset includes any capitalized asset retirement cost associated with the decommissioning liability; therefore, changes in assumptions that affect the decommissioning liability can increase or decrease the carrying value of the asset subject to impairment.  If the expected undiscounted future cash flows exceed the carrying value, no impairment is recorded. If the expected undiscounted future cash flows are less than the carrying value and the carrying value exceeds the fair value, Entergy is required to record an impairment charge to write the asset down to its fair value.  If an asset is considered held for sale, an impairment is required to be recognized if the fair value (less costs to sell) of the asset is less than its carrying value.

The expected future cash flows are based on a number of key assumptions, including:

•
Future power and fuel prices - Electricity and gas prices can be very volatile.  This volatility increases the imprecision inherent in the long-term forecasts of commodity prices that are a key determinant of estimated future cash flows.
•
Market value of generation assets - Valuing assets held for sale requires estimating the current market value of generation assets.  While market transactions provide evidence for this valuation, these transactions are relatively infrequent, the market for such assets is volatile, and the value of individual assets is affected by factors unique to those assets.
•
Future operating costs - Entergy assumes relatively minor annual increases in operating costs.  Technological or regulatory changes that have a significant effect on operations could cause a significant change in these assumptions.
•
Timing and the life of the asset - Entergy assumes an expected life of the asset.  A change in the timing assumption, whether due to management decisions regarding operation of the plant, the regulatory process, or operational or other factors, could have a significant effect on the expected future cash flows and result in a significant effect on operations.

See Note 14 to the financial statements for a discussion of the impairments of the Palisades, Indian Point, FitzPatrick, and Pilgrim plants.

Entergy evaluates investment securities in the Entergy Wholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  If Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary-impairment is considered to have occurred and it is measured by the

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present value of cash flows expected to be collected less the amortized cost basis (credit loss).  The assessment of whether an investment in an equity security has suffered an other than temporary impairment is based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time.  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  As discussed in Note 1 to the financial statements, unrealized losses on equity securities that are considered other-than-temporarily impaired are recorded in earnings for Entergy Wholesale Commodities.  Effective January 1, 2018 with the adoption of ASU 2016-01, unrealized losses and gains on investments in equity securities held by the Entergy Wholesale Commodities’ nuclear decommissioning trust funds will be recorded in earnings as they occur. See Note 16 to the financial statements for details on the decommissioning trust funds.

Taxation and Uncertain Tax Positions

Management exercises significant judgment in evaluating the potential tax effects of Entergy’s operations, transactions, and other events.  Entergy accounts for uncertain income tax positions using a recognition model under a two-step approach with a more likely-than-not recognition threshold and a measurement approach based on the largest amount of tax benefit that is greater than 50% likely of being realized upon settlement.  Management evaluates each tax position based on the technical merits and facts and circumstances of the position, assuming the position will be examined by a taxing authority having full knowledge of all relevant information. Significant judgment is required to determine whether available information supports the assertion that the recognition threshold has been met. Additionally, measurement of unrecognized tax benefits to be recorded in the consolidated financial statements is based on the probability of different potential outcomes. Income tax expense and tax positions recorded could be significantly affected by events such as additional transactions contemplated or consummated by Entergy as well as audits by taxing authorities of the tax positions taken in transactions. Management believes that the financial statement tax balances are accounted for and adjusted appropriately each quarter as necessary in accordance with applicable authoritative guidance; however, the ultimate outcome of tax matters could result in favorable or unfavorable effects on the consolidated financial statements. Entergy’s income taxes, including unrecognized tax benefits, open audits, and other significant tax matters are discussed in Note 3 to the financial statements.

See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Income Tax Legislation ” above and Note 3 to the financial statements for discussion of the effects of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017.

Qualified Pension and Other Postretirement Benefits

Entergy sponsors qualified, defined benefit pension plans that cover substantially all employees, including cash balance plans and final average pay plans.  Additionally, Entergy currently provides other postretirement health care and life insurance benefits for substantially all full-time employees whose most recent date of hire or rehire is before July 1, 2014 and who reach retirement age and meet certain eligibility requirements while still working for Entergy.

Entergy’s reported costs of providing these benefits, as described in Note 11 to the financial statements, are affected by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.  Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate for the Utility and Entergy Wholesale Commodities segments.


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Assumptions

Key actuarial assumptions utilized in determining qualified pension and other postretirement health care and life insurance costs include discount rates, projected healthcare cost rates, expected long-term rate of return on plan assets, rate of increase in future compensation levels, retirement rates and mortality rates.

Annually, Entergy reviews and, when necessary, adjusts the assumptions for the pension and other postretirement plans.  Every three-to-five years, a formal actuarial assumption experience study that compares assumptions to the actual experience of the pension and other postretirement health care and life insurance plans is conducted.  The falling interest rate environment over the past few years and volatility in the financial equity markets have affected Entergy’s funding and reported costs for these benefits.

Discount rates

In selecting an assumed discount rate to calculate benefit obligations, Entergy uses a yield curve based on high-quality corporate debt. Before 2016 the discount rates used to estimate the service cost and interest cost components of benefit costs were the same as the weighted-average discount rate used to measure the benefit obligation at the beginning of the year. In 2016, Entergy refined its approach to estimating the service cost and interest cost components. Under the refined approach, instead of using the weighted-average benefit obligation discount rate at the beginning of the year, the 2016 service and interest costs’ expected cash flows were discounted by the applicable spot rates. The refinement had the effect of lowering 2016 qualified pension costs by $61 million and 2016 other postretirement health care and life insurance benefit costs by $15 million.

Projected health care cost trend rates

Entergy’s health care cost trend is affected by both medical cost inflation, and with respect to capped costs under the plan, the effects of general inflation. Entergy reviews actual recent cost trends and projected future trends in establishing its health care cost trend rates.
Expected long-term rate of return on plan assets

In determining its expected long-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviews past performance, current and expected future asset allocations, and capital market assumptions of its investment consultant and some of its investment managers. Entergy conducts periodic asset/liability studies in order to set its target asset allocations.
Since 2003, Entergy has targeted an asset allocation for its qualified pension plan assets of roughly 65% equity securities and 35% fixed-income securities.  In 2017, Entergy confirmed the 2011 liability-driven investment strategy for its pension assets, which recommended that the target asset allocation adjust dynamically over time, based on the funded status of the plan, from its current allocation to an ultimate allocation. In 2017, Entergy adopted a new ultimate allocation for pension assets of 35% equity securities and 65% fixed income securities.  The ultimate asset allocation is expected to be attained when the plan is 105% funded.
In 2016, the target allocations for both Entergy’s non-taxable other postretirement assets and its taxable other postretirement assets were 65% equity securities and 35% fixed-income securities. During the first quarter of 2017, Entergy implemented a new asset allocation strategy, based on the funded status of each sub-account within each trust, which resulted in an overall shift to more fixed income in the non-taxable trusts and no material changes in asset allocation to the taxable trust. The new strategy no longer focuses on targeting an overall asset allocation for each trust, but rather a target asset allocation for each sub-account within each trust. See Note 11 to the financial statements for discussion of the current asset allocations for Entergy’s other postretirement assets.


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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

Retirement and mortality rates

In October 2017 the Internal Revenue Service issued updated mortality regulations for single employer plans for determining cash contribution requirements. The regulations, based on the Society of Actuaries’ 2014 mortality table, are effective for plan years beginning on or after January 1, 2018.

Costs and Sensitivities

The estimated 2018 and actual 2017 qualified pension and other postretirement costs and related underlying assumptions and sensitivities are shown below:
Costs
 
Estimated 2018
 
2017
 
 
(In Millions)
Qualified pension cost
 
$254.8
 
$214.2
Other postretirement cost
 
$13.1
 
$25.6
 
 
 
 
 
Assumptions
 
2018
 
2017
Discount rates
 
 
 
 
Qualified pension
 
 
 
 
Service cost
 
3.89%
 
4.75%
Interest cost
 
3.44%
 
3.73%
Other postretirement
 
 
 
 
Service cost
 
3.88%
 
4.60%
Interest cost
 
3.33%
 
3.61%
 
 
 
 
 
Expected long-term rates of return
 
 
 
 
Qualified pension assets
 
7.50%
 
7.50%
Other postretirement - non-taxable assets
 
6.50% - 7.50%
 
6.50% - 6.90%
Other postretirement - taxable assets - after tax rate
 
5.50%
 
5.75%
 
 
 
 
 
Weighted-average rate of future compensation
 
3.98%
 
3.98%
 
 
 
 
 
Assumed health care cost trend rates
 
 
 
 
Pre-65 retirees
 
6.95%
 
6.55%
Post-65 retirees
 
7.25%
 
7.25%
Ultimate rate
 
4.75%
 
4.75%
Year ultimate rate is reached and beyond
 
2027
 
2026

Actual asset returns have an effect on Entergy’s qualified pension and other postretirement costs. In 2017, Entergy’s actual average annual return on qualified pension assets was approximately 16% and for other postretirement assets was approximately 14%, as compared with the 2017 expected long-term rates of return discussed above.


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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


The following chart reflects the sensitivity of qualified pension cost and qualified pension projected benefit obligation to changes in certain actuarial assumptions (dollars in millions):
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Qualified Projected Benefit Obligation
 
 
Increase/(Decrease)
Discount rate
 
(0.25%)
 
$23
 
$250
Rate of return on plan assets
 
(0.25%)
 
$15
 
$—
Rate of increase in compensation
 
0.25%
 
$7
 
$34

The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in millions):
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated Postretirement Benefit Obligation
 
 
Increase/(Decrease)
Discount rate
 
(0.25%)
 
$3
 
$50
Health care cost trend
 
0.25%
 
$5
 
$39

Each fluctuation above assumes that the other components of the calculation are held constant.

Accounting Mechanisms

In accordance with pension accounting standards, Entergy utilizes a number of accounting mechanisms that reduce the volatility of reported pension costs.  Differences between actuarial assumptions and actual plan results are deferred and are amortized into expense only when the accumulated differences exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets.  If necessary, the excess is amortized over the average remaining service period of active employees. Additionally, accounting standards allow for the deferral of prior service costs/credits arising from plan amendments that attribute an increase or decrease in benefits to employee service in prior periods. Prior service costs/credits are then amortized into expense over the average future working life of active employees. Certain decisions, including workforce reductions, plan amendments, and plant shutdowns may significantly reduce the expense amortization period and result in immediate recognition of certain previously-deferred costs and gains/losses in the form of curtailment gains or losses. Similarly, payments made to settle benefit obligations can also result in recognition in the form of settlement losses or gains.

Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets.  Entergy determines the MRV of pension plan assets by calculating a value that uses a 20-quarter phase-in of the difference between actual and expected returns.  For other postretirement benefit plan assets Entergy uses fair value when determining MRV.

Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans.  See Note 11 to the financial statements for a further discussion of Entergy’s funded status.

Funding

 Entergy’s pension funding in 2017 was $410 million.  Entergy estimates pension contributions will be approximately $352.1 million in 2018; although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.


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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis

Minimum required funding calculations as determined under Pension Protection Act guidance are performed annually as of January 1 of each year and are based on measurements of the assets and funding liabilities as measured at that date.  Any excess of the funding liability over the calculated fair market value of assets results in a funding shortfall that, under the Pension Protection Act, must be funded over a seven-year rolling period.  The Pension Protection Act also imposes certain plan limitations if the funded percentage, which is based on calculated fair market values of assets divided by funding liabilities, does not meet certain thresholds. For funding purposes, asset gains and losses are smoothed in to the calculated fair market value of assets and the funding liability is based upon a weighted average 24-month corporate bond rate published by the U.S. Treasury; therefore, periodic changes in asset returns and interest rates can affect funding shortfalls and future cash contributions.

Moving Ahead for Progress in the 21st Century Act (MAP-21) became federal law in July 2012.  Under the law, the segment rates used to calculate funding liabilities must be within a corridor of the 25-year average of prior segment rates.  The interest rate corridor applies to the determination of minimum funding requirements and benefit restrictions.  These pension funding stabilization provisions provide for a near-term reduction in minimum funding requirements for single employer defined benefit plans in response to the historically low interest rates that existed when the law was enacted.  The law did not reduce contribution requirements over the long term. The interest rate stabilization periods of MAP-21 were extended by the Highway and Transportation Funding Act in 2014 and the Bipartisan Budget Act in 2015.

Entergy contributed $44.3 million to its postretirement plans in 2017 and plans to contribute $52.3 million in 2018.

Federal Healthcare Legislation

In 2010 the Patient Protection and Affordable Care Act (PPACA), as amended, imposed a 40% excise tax on per capita medical benefit costs that exceed certain thresholds. In January 2018 the effective date of the excise tax was delayed and is currently expected to take effect in 2022.  Entergy will continue to monitor developments to determine the possible effect on Entergy.

Other Contingencies

As a company with multi-state utility operations, Entergy is subject to a number of federal and state laws and regulations and other factors and conditions in the areas in which it operates, which potentially subject it to environmental, litigation, and other risks.  Entergy periodically evaluates its exposure for such risks and records a reserve for those matters which are considered probable and estimable in accordance with generally accepted accounting principles.

Environmental

Entergy must comply with environmental laws and regulations applicable to air emissions, water discharges, solid and hazardous waste, toxic substances, protected species, and other environmental matters.  Under these various laws and regulations, Entergy could incur substantial costs to comply or address any impacts to the environment.  Entergy conducts studies to determine the extent of any required remediation and has recorded liabilities based upon its evaluation of the likelihood of loss and expected dollar amount for each issue.  Additional sites or issues could be identified which require environmental remediation or corrective action for which Entergy could be liable.  The amounts of environmental liabilities recorded can be significantly affected by the following external events or conditions.

•
Changes to existing federal, state, or local regulation by governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters.

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Entergy Corporation and Subsidiaries
Management’s Financial Discussion and Analysis


•
The identification of additional impacts, sites, issues, or the filing of other complaints in which Entergy may be asserted to be a potentially responsible party.
•
The resolution or progression of existing matters through the court system or resolution by the EPA or relevant state or local authority.

Litigation

Entergy is regularly named as a defendant in a number of lawsuits involving employment, customers, and injuries and damages issues, among other matters.  Entergy periodically reviews the cases in which it has been named as defendant and assesses the likelihood of loss in each case as probable, reasonably possible, or remote and records liabilities for cases that have a probable likelihood of loss and the loss can be estimated.  Given the environment in which Entergy operates, and the unpredictable nature of many of the cases in which Entergy is named as a defendant, the ultimate outcome of the litigation to which Entergy is exposed has the potential to materially affect the results of operations, financial position, and cash flows of Entergy or the Registrant Subsidiaries.

New Accounting Pronouncements
 
See Note 1 to the financial statements for discussion of new accounting pronouncements.



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ENTERGY CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT

Management of Entergy Corporation and its subsidiaries has prepared and is responsible for the financial statements and related financial information included in this document.  To meet this responsibility, management establishes and maintains a system of internal controls over financial reporting designed to provide reasonable assurance regarding the preparation and fair presentation of financial statements in accordance with generally accepted accounting principles.  This system includes communication through written policies and procedures, an employee Code of Entegrity, and an organizational structure that provides for appropriate division of responsibility and training of personnel.  This system is also tested by a comprehensive internal audit program.

Entergy management assesses the design and effectiveness of Entergy’s internal control over financial reporting on an annual basis.  In making this assessment, management uses the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.  The 2013 COSO Framework was utilized for management’s assessment. Management acknowledges, however, that all internal control systems, no matter how well designed, have inherent limitations and can provide only reasonable assurance with respect to financial statement preparation and presentation.

Entergy Corporation’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the effectiveness of Entergy Corporation’s internal control over financial reporting as of December 31, 2017 .

In addition, the Audit Committee of the Board of Directors, composed solely of independent Directors, meets with the independent auditors, internal auditors, management, and internal accountants periodically to discuss internal controls, and auditing and financial reporting matters.  The Audit Committee appoints the independent auditors annually, seeks shareholder ratification of the appointment, and reviews with the independent auditors the scope and results of the audit effort.  The Audit Committee also meets periodically with the independent auditors and the chief internal auditor without management present, providing free access to the Audit Committee.

Based on management’s assessment of internal controls using the 2013 COSO criteria, management believes that Entergy and each of the Registrant Subsidiaries maintained effective internal control over financial reporting as of December 31, 2017 .  Management further believes that this assessment, combined with the policies and procedures noted above, provides reasonable assurance that Entergy’s and each of the Registrant Subsidiaries’ financial statements are fairly and accurately presented in accordance with generally accepted accounting principles.

LEO P. DENAULT
Chairman of the Board and Chief Executive Officer of Entergy Corporation
ANDREW S. MARSH
Executive Vice President and Chief Financial Officer of Entergy Corporation, Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.
 
RICHARD C. RILEY
Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc.
 
PHILLIP R. MAY, JR.
Chairman of the Board, President, and Chief Executive Officer of Entergy Louisiana, LLC

HALEY R. FISACKERLY
Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc.
 
CHARLES L. RICE, JR.
Chairman of the Board, President, and Chief Executive Officer of Entergy New Orleans, LLC
 
SALLIE T. RAINER
Chair of the Board, President, and Chief Executive Officer of Entergy Texas, Inc.
 
RODERICK K. WEST
Chairman of the Board, President, and Chief Executive Officer of System Energy Resources, Inc.

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ENTERGY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON










 
2017

2016

2015

2014

2013
 
(In Thousands, Except Percentages and Per Share Amounts)
 
 
 
 
 
 
 
 
 
 
Operating revenues

$11,074,481



$10,845,645

 

$11,513,251

 

$12,494,921



$11,390,947

Net income (loss)

$425,353



($564,503
)
 

($156,734
)
 

$960,257



$730,572

Earnings (loss) per share:
 

 
 
 
 
 


 

Basic

$2.29



($3.26
)
 

($0.99
)
 

$5.24



$3.99

Diluted

$2.28



($3.26
)
 

($0.99
)
 

$5.22



$3.99

Dividends declared per share

$3.50



$3.42

 

$3.34

 

$3.32



$3.32

Return on common equity
5.12
%

(6.73
%)
 
(1.83
)%
 
9.58
%

7.56
%
Book value per share, year-end

$44.28



$45.12

 

$51.89

 

$55.83



$54.00

Total assets

$46,707,149



$45,904,434

 

$44,647,681

 

$46,414,455



$43,290,290

Long-term obligations (a)

$14,535,077



$14,695,422

 

$13,456,742

 

$12,627,180



$12,265,971
















(a) Includes long-term debt (excluding currently maturing debt), non-current capital lease obligations, and subsidiary preferred stock without sinking fund that is not presented as equity on the balance sheet.










 
2017

2016

2015

2014

2013
 
(Dollars In Millions)
 
 
 
 
 
 
 
 
 
 
Utility electric operating revenues:
 


 


 


 


 

Residential

$3,355



$3,288



$3,518



$3,555



$3,396

Commercial
2,480


2,362


2,516


2,553


2,415

Industrial
2,584


2,327


2,462


2,623


2,405

Governmental
231


217


223


227


218

Total retail
8,650


8,194


8,719


8,958


8,434

Sales for resale
253


236


249


330


210

Other
376


437


341


304


298

Total

$9,279



$8,867



$9,309



$9,592



$8,942

 
 
 
 
 
 
 
 
 
 
Utility billed electric energy sales (GWh):





 


 


 

Residential
33,834


35,112


36,068


35,932


35,169

Commercial
28,745


29,197


29,348


28,827


28,547

Industrial
47,769


45,739


44,382


43,723


41,653

Governmental
2,511


2,547


2,514


2,428


2,412

Total retail
112,859


112,595


112,312


110,910


107,781

Sales for resale
11,550


11,054


9,274


9,462


3,020

Total
124,409


123,649


121,586


120,372


110,801

 
 
 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 


 


 


 


 

Operating revenues

$1,657

 

$1,850

 

$2,062

 

$2,719

 

$2,313

Billed electric energy sales (GWh)
30,501

 
35,881

 
39,745

 
44,424

 
45,127




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the shareholders and Board of Directors of
Entergy Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2017 and 2016, the related consolidated statements of operations, comprehensive income (loss), cash flows, and changes in equity, for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Corporation’s internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 26, 2018, expressed an unqualified opinion on the Corporation’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Corporation’s auditor since 2001.


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
  (In Thousands, Except Share Data)
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$9,278,895

 

$8,866,659

 

$9,308,678

Natural gas
 
138,856

 
129,348

 
142,746

Competitive businesses
 
1,656,730

 
1,849,638

 
2,061,827

TOTAL
 
11,074,481

 
10,845,645

 
11,513,251

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
1,991,589

 
1,809,200

 
2,452,171

Purchased power
 
1,427,950

 
1,220,527

 
1,390,805

Nuclear refueling outage expenses
 
168,151

 
208,678

 
251,316

Other operation and maintenance
 
3,423,689

 
3,296,711

 
3,354,981

Asset write-offs, impairments, and related charges
 
538,372

 
2,835,637

 
2,104,906

Decommissioning
 
405,685

 
327,425

 
280,272

Taxes other than income taxes
 
617,556

 
592,502

 
619,422

Depreciation and amortization
 
1,389,978

 
1,347,187

 
1,337,276

Other regulatory charges (credits) - net
 
(131,901
)
 
94,243

 
175,304

TOTAL
 
9,831,069

 
11,732,110

 
11,966,453

 
 
 
 
 
 
 
Gain on sale of asset
 
16,270

 
—

 
154,037

 
 
 
 
 
 
 
OPERATING INCOME (LOSS)
 
1,259,682

 
(886,465
)
 
(299,165
)
 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
95,088

 
67,563

 
51,908

Interest and investment income
 
288,197

 
145,127

 
187,062

Miscellaneous - net
 
(12,701
)
 
(41,617
)
 
(95,997
)
TOTAL
 
370,584

 
171,073

 
142,973

 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
707,212

 
700,545

 
670,096

Allowance for borrowed funds used during construction
 
(44,869
)
 
(34,175
)
 
(26,627
)
TOTAL
 
662,343

 
666,370

 
643,469

 
 
 
 
 
 
 
INCOME (LOSS) BEFORE INCOME TAXES
 
967,923

 
(1,381,762
)
 
(799,661
)
 
 
 
 
 
 
 
Income taxes
 
542,570

 
(817,259
)
 
(642,927
)
 
 
 
 
 
 
 
CONSOLIDATED NET INCOME (LOSS)
 
425,353

 
(564,503
)
 
(156,734
)
 
 
 
 
 
 
 
Preferred dividend requirements of subsidiaries
 
13,741

 
19,115

 
19,828

 
 
 
 
 
 
 
NET INCOME (LOSS) ATTRIBUTABLE TO ENTERGY CORPORATION
 

$411,612

 

($583,618
)
 

($176,562
)
 
 
 
 
 
 
 
Earnings (loss) per average common share:
 
 

 
 

 
 

Basic
 

$2.29

 

($3.26
)
 

($0.99
)
Diluted
 

$2.28

 

($3.26
)
 

($0.99
)
 
 
 
 
 
 
 
Basic average number of common shares outstanding
 
179,671,797

 
178,885,660

 
179,176,356

Diluted average number of common shares outstanding
 
180,535,893

 
178,885,660

 
179,176,356

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
 
 
For the Years Ended December 31,
 
2017
 
2016
 
2015
 
(In Thousands)
 
 
 
 
 
 
Net Income (Loss)

$425,353

 

($564,503
)
 

($156,734
)
 
 
 
 
 
 
Other comprehensive income (loss)
 

 
 

 
 

Cash flow hedges net unrealized gain (loss)
 

 
 

 
 

(net of tax expense (benefit) of ($22,570) , ($55,298), and $3,752)
(41,470
)
 
(101,977
)
 
7,852

Pension and other postretirement liabilities
 

 
 

 
 

(net of tax expense (benefit) of  ($4,057) , ($3,952), and $61,576)
(61,653
)
 
(2,842
)
 
103,185

Net unrealized investment gains (losses)
 

 
 

 
 

(net of tax expense (benefit) of  $80,069 , $57,277, and ($45,904))
115,311

 
62,177

 
(59,138
)
Foreign currency translation
 

 
 

 
 

(net of tax benefit of $403 , $689, and $345)
(748
)
 
(1,280
)
 
(641
)
Other comprehensive income (loss)
11,440

 
(43,922
)
 
51,258

 
 
 
 
 
 
Comprehensive Income (Loss)
436,793

 
(608,425
)
 
(105,476
)
Preferred dividend requirements of subsidiaries
13,741

 
19,115

 
19,828

Comprehensive Income (Loss) Attributable to Entergy Corporation

$423,052

 

($627,540
)
 

($125,304
)
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 



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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING ACTIVITIES
 
 
 
 
 
 
Consolidated net income (loss)
 

$425,353

 

($564,503
)
 

($156,734
)
Adjustments to reconcile consolidated net income (loss) to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
2,078,578

 
2,123,291

 
2,117,236

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
529,053

 
(836,257
)
 
(820,350
)
Asset write-offs, impairments, and related charges
 
357,251

 
2,835,637

 
2,104,906

Gain on sale of asset
 
(16,270
)
 
—

 
(154,037
)
Changes in working capital:
 
 

 
 

 
 

Receivables
 
(97,637
)
 
(96,975
)
 
38,152

Fuel inventory
 
(3,043
)
 
38,210

 
(12,376
)
Accounts payable
 
101,802

 
174,421

 
(135,211
)
Prepaid taxes and taxes accrued
 
33,853

 
(28,963
)
 
81,969

Interest accrued
 
742

 
(7,335
)
 
(11,445
)
Deferred fuel costs
 
56,290

 
(241,896
)
 
298,725

Other working capital accounts
 
(4,331
)
 
31,197

 
(113,701
)
Changes in provisions for estimated losses
 
(3,279
)
 
20,905

 
42,566

Changes in other regulatory assets
 
595,504

 
(48,469
)
 
262,317

Changes in other regulatory liabilities
 
2,915,795

 
158,031

 
61,241

Deferred tax rate change recognized as regulatory liability / asset
 
(3,665,498
)
 
—

 
—

Changes in pensions and other postretirement liabilities
 
(130,686
)
 
(136,919
)
 
(446,418
)
Other
 
(549,977
)
 
(421,676
)
 
134,344

Net cash flow provided by operating activities
 
2,623,500

 
2,998,699

 
3,291,184

 
 
 
 
 
 
 
INVESTING ACTIVITIES
 
 

 
 

 
 

Construction/capital expenditures
 
(3,607,532
)
 
(2,780,222
)
 
(2,500,860
)
Allowance for equity funds used during construction
 
96,000

 
68,345

 
53,635

Nuclear fuel purchases
 
(377,324
)
 
(314,706
)
 
(493,604
)
Payment for purchase of plant or assets
 
(16,762
)
 
(949,329
)
 
—

Proceeds from sale of assets
 
100,000

 
—

 
487,406

Insurance proceeds received for property damages
 
26,157

 
20,968

 
24,399

Changes in securitization account
 
1,323

 
4,007

 
(5,806
)
NYPA value sharing payment
 
—

 
—

 
(70,790
)
Payments to storm reserve escrow account
 
(2,878
)
 
(1,544
)
 
(69,163
)
Receipts from storm reserve escrow account
 
11,323

 
—

 
5,916

Decrease in other investments
 
1,078

 
9,055

 
571

Litigation proceeds for reimbursement of spent nuclear fuel storage costs
 
25,493

 
169,085

 
18,296

Proceeds from nuclear decommissioning trust fund sales
 
3,162,747

 
2,408,920

 
2,492,176

Investment in nuclear decommissioning trust funds
 
(3,260,674
)
 
(2,484,627
)
 
(2,550,958
)
Net cash flow used in investing activities
 
(3,841,049
)
 
(3,850,048
)
 
(2,608,782
)
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 


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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
FINANCING ACTIVITIES
 
 
 
 
 
 
Proceeds from the issuance of:
 
 
 
 
 
 
Long-term debt
 
1,809,390

 
6,800,558

 
3,502,189

Preferred stock of subsidiary
 
14,399

 
—

 
107,426

Treasury stock
 
80,729

 
33,114

 
24,366

Retirement of long-term debt
 
(1,585,681
)
 
(5,311,324
)
 
(3,461,518
)
Repurchase of common stock
 
—

 
—

 
(99,807
)
Repurchase / redemptions of preferred stock
 
(20,599
)
 
(115,283
)
 
(94,285
)
Changes in credit borrowings and commercial paper - net
 
1,163,296

 
(79,337
)
 
(104,047
)
Other
 
(7,731
)
 
(6,872
)
 
(9,136
)
Dividends paid:
 
 

 
 

 
 

Common stock
 
(628,885
)
 
(611,835
)
 
(598,897
)
Preferred stock
 
(13,940
)
 
(20,789
)
 
(19,758
)
Net cash flow provided by (used in) financing activities
 
810,978

 
688,232

 
(753,467
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net decrease in cash and cash equivalents
 
(406,571
)
 
(163,117
)
 
(71,065
)
 
 
 
 
 
 
 
Cash and cash equivalents at beginning of period
 
1,187,844

 
1,350,961

 
1,422,026

 
 
 
 
 
 
 
Cash and cash equivalents at end of period
 

$781,273

 

$1,187,844

 

$1,350,961

 
 
 
 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 

 
 

 
 

Cash paid  (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$678,371

 

$746,779

 

$663,630

Income taxes
 

($13,375
)
 

$95,317

 

$103,589

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$56,629

 

$129,579

Temporary cash investments
 
724,644

 
1,058,265

Total cash and cash equivalents
 
781,273

 
1,187,844

Accounts receivable:
 
 

 
 

Customer
 
673,347

 
654,995

Allowance for doubtful accounts
 
(13,587
)
 
(11,924
)
Other
 
169,377

 
158,419

Accrued unbilled revenues
 
383,813

 
368,677

Total accounts receivable
 
1,212,950

 
1,170,167

Deferred fuel costs
 
95,746

 
108,465

Fuel inventory - at average cost
 
182,643

 
179,600

Materials and supplies - at average cost
 
723,222

 
698,523

Deferred nuclear refueling outage costs
 
133,164

 
146,221

Prepayments and other
 
156,333

 
193,448

TOTAL
 
3,285,331

 
3,684,268

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Investment in affiliates - at equity
 
198

 
198

Decommissioning trust funds
 
7,211,993

 
5,723,897

Non-utility property - at cost (less accumulated depreciation)
 
260,980

 
233,641

Other
 
441,862

 
469,664

TOTAL
 
7,915,033

 
6,427,400

 
 
 
 
 
PROPERTY, PLANT, AND EQUIPMENT
 
 

 
 

Electric
 
47,287,370

 
45,191,216

Property under capital lease
 
620,544

 
619,527

Natural gas
 
453,162

 
413,224

Construction work in progress
 
1,980,508

 
1,378,180

Nuclear fuel
 
923,200

 
1,037,899

TOTAL PROPERTY, PLANT AND EQUIPMENT
 
51,264,784

 
48,640,046

Less - accumulated depreciation and amortization
 
21,600,424

 
20,718,639

PROPERTY, PLANT AND EQUIPMENT - NET
 
29,664,360

 
27,921,407

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
—

 
761,280

Other regulatory assets (includes securitization property of $485,031  as of December 31, 2017 and $600,996 as of December 31, 2016)
 
4,935,689

 
4,769,913

Deferred fuel costs
 
239,298

 
239,100

Goodwill
 
377,172

 
377,172

Accumulated deferred income taxes
 
178,204

 
117,885

Other
 
112,062

 
1,606,009

TOTAL
 
5,842,425

 
7,871,359

 
 
 
 
 
TOTAL ASSETS
 

$46,707,149

 

$45,904,434

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


52
Table of Contents

ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$760,007

 

$364,900

Notes payable and commercial paper
 
1,578,308

 
415,011

Accounts payable
 
1,452,216

 
1,285,577

Customer deposits
 
401,330

 
403,311

Taxes accrued
 
214,967

 
181,114

Interest accrued
 
187,972

 
187,229

Deferred fuel costs
 
146,522

 
102,753

Obligations under capital leases
 
1,502

 
2,423

Pension and other postretirement liabilities
 
71,612

 
76,942

Other
 
221,771

 
180,836

TOTAL
 
5,036,207

 
3,200,096

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
4,466,503

 
7,495,290

Accumulated deferred investment tax credits
 
219,634

 
227,147

Obligations under capital leases
 
22,015

 
24,582

Regulatory liability for income taxes-net
 
2,900,204

 
—

Other regulatory liabilities
 
1,588,520

 
1,572,929

Decommissioning and asset retirement cost liabilities
 
6,185,814

 
5,992,476

Accumulated provisions
 
478,273

 
481,636

Pension and other postretirement liabilities
 
2,910,654

 
3,036,010

Long-term debt (includes securitization bonds of $544,921  as of December 31, 2017 and $661,175 as of December 31, 2016)
 
14,315,259

 
14,467,655

Other
 
393,748

 
1,121,619

TOTAL
 
33,480,624

 
34,419,344

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
Subsidiaries’ preferred stock without sinking fund
 
197,803

 
203,185

 
 
 
 
 
 COMMON EQUITY
 
 

 
 

Common stock, $.01 par value, authorized 500,000,000 shares; issued 254,752,788  shares in 2017 and in 2016
 
2,548

 
2,548

Paid-in capital
 
5,433,433

 
5,417,245

Retained earnings
 
7,977,702

 
8,195,571

Accumulated other comprehensive loss
 
(23,531
)
 
(34,971
)
Less - treasury stock, at cost ( 74,235,135  shares in 2017 and 75,623,363 shares in 2016)
 
5,397,637

 
5,498,584

TOTAL
 
7,992,515

 
8,081,809

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$46,707,149

 

$45,904,434

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
 
 
 

Common Shareholders’ Equity

 
 
Subsidiaries’ Preferred Stock
 
Common Stock
 
Treasury Stock
 
Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$94,000

 

$2,548

 

($5,497,526
)
 

$5,375,353

 

$10,169,657

 

($42,307
)
 

$10,101,725

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (loss) (a)
19,828

 
—

 
—

 
—

 
(176,562
)
 
—

 
(156,734
)
Other comprehensive income
—

 
—

 
—

 
—

 
—

 
51,258

 
51,258

Common stock repurchases
—

 
—

 
(99,807
)
 
—

 
—

 
—

 
(99,807
)
Preferred stock repurchases / redemptions
(94,000
)
 
—

 
—

 
—

 
(285
)
 
—

 
(94,285
)
Common stock issuances related to stock plans
—

 
—

 
44,954

 
28,405

 
—

 
—

 
73,359

Common stock dividends declared
—

 
—

 
—

 
—

 
(598,897
)
 
—

 
(598,897
)
Preferred dividend requirements of subsidiaries (a)
(19,828
)
 
—

 
—

 
—

 
—

 
—

 
(19,828
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2015

$—

 

$2,548

 

($5,552,379
)
 

$5,403,758

 

$9,393,913

 

$8,951

 

$9,256,791

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (loss) (a)
19,115

 
—

 
—

 
—

 
(583,618
)
 
—

 
(564,503
)
Other comprehensive loss
—

 
—

 
—

 
—

 
—

 
(43,922
)
 
(43,922
)
Common stock issuances related to stock plans
—

 
—

 
53,795

 
13,487

 
—

 
—

 
67,282

Common stock dividends declared
—

 
—

 
—

 
—

 
(611,835
)
 
—

 
(611,835
)
Subsidiaries' capital stock redemptions
—

 
—

 
—

 
—

 
(2,889
)
 
—

 
(2,889
)
Preferred dividend requirements of subsidiaries (a)
(19,115
)
 
—

 
—

 
—

 
—

 
—

 
(19,115
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016

$—

 

$2,548

 

($5,498,584
)
 

$5,417,245

 

$8,195,571

 

($34,971
)
 

$8,081,809

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consolidated net income (a)
13,741

 
—

 
—

 
—

 
411,612

 
—

 
425,353

Other comprehensive income
—

 
—

 
—

 
—

 
—

 
11,440

 
11,440

Common stock issuances related to stock plans
—

 
—

 
100,947

 
16,188

 
—

 
—

 
117,135

Common stock dividends declared
—

 
—

 
—

 
—

 
(628,885
)
 
—

 
(628,885
)
Subsidiaries' capital stock redemptions
—

 
—

 
—

 
—

 
(596
)
 
—

 
(596
)
Preferred dividend requirements of subsidiaries (a)
(13,741
)
 
—

 
—

 
—

 
—

 
—

 
(13,741
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2017

$—

 

$2,548

 

($5,397,637
)
 

$5,433,433

 

$7,977,702

 

($23,531
)
 

$7,992,515

 
 
 
 
 
 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 

 
 

 
 

 
 

(a) Consolidated net income and preferred dividend requirements of subsidiaries include $13.7 million for 2017, $19.1 million for 2016, and $14.9 million for 2015 of preferred dividends on subsidiaries’ preferred stock without sinking fund that is not presented as equity.

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ENTERGY CORPORATION AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
  
The accompanying consolidated financial statements include the accounts of Entergy Corporation and its subsidiaries.  As required by generally accepted accounting principles in the United States of America, all intercompany transactions have been eliminated in the consolidated financial statements.  Entergy’s Registrant Subsidiaries (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy) also include their separate financial statements in this Form 10-K.  The Registrant Subsidiaries and many other Entergy subsidiaries also maintain accounts in accordance with FERC and other regulatory guidelines.  

Use of Estimates in the Preparation of Financial Statements

In conformity with generally accepted accounting principles in the United States of America, the preparation of Entergy Corporation’s consolidated financial statements and the separate financial statements of the Registrant Subsidiaries requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the disclosure of contingent assets and liabilities.  Adjustments to the reported amounts of assets and liabilities may be necessary in the future to the extent that future estimates or actual results are different from the estimates used.

Revenues and Fuel Costs

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas generate, transmit, and distribute electric power primarily to retail customers in Arkansas, Louisiana, Mississippi, and Texas, respectively.  Entergy Louisiana also distributes natural gas to retail customers in and around Baton Rouge, Louisiana.  Entergy New Orleans sells both electric power and natural gas to retail customers in the City of New Orleans, including Algiers. Prior to October 1, 2015, Entergy Louisiana was the electric power supplier for Algiers. The Entergy Wholesale Commodities segment derives almost all of its revenue from sales of electric power generated by plants owned by subsidiaries in that segment.

Entergy recognizes revenue from electric power and natural gas sales when power or gas is delivered to customers.  To the extent that deliveries have occurred but a bill has not been issued, Entergy’s Utility operating companies accrue an estimate of the revenues for energy delivered since the latest billings.  The Utility operating companies calculate the estimate based upon several factors including billings through the last billing cycle in a month, actual generation in the month, historical line loss factors, and prices in effect in Entergy’s Utility operating companies’ various jurisdictions.  Changes are made to the inputs in the estimate as needed to reflect changes in billing practices.  Each month the estimated unbilled revenue amounts are recorded as revenue and unbilled accounts receivable, and the prior month’s estimate is reversed.  Therefore, changes in price and volume differences resulting from factors such as weather affect the calculation of unbilled revenues from one period to the next, and may result in variability in reported revenues from one period to the next as prior estimates are reversed and new estimates recorded.

For sales under rates implemented subject to refund, Entergy reduces revenue by accruing estimated amounts for probable refunds when Entergy believes it is probable that revenues will be refunded to customers based upon the status of the rate proceeding.

Entergy’s Utility operating companies’ rate schedules include either fuel adjustment clauses or fixed fuel factors, which allow either current recovery in billings to customers or deferral of fuel costs until the costs are billed to customers.  Where the fuel component of revenues is billed based on a pre-determined fuel cost (fixed fuel factor), the fuel factor remains in effect until changed as part of a general rate case, fuel reconciliation, or fixed fuel factor filing. System Energy’s operating revenues are intended to recover from Entergy Arkansas, Entergy Louisiana, Entergy

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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Mississippi, and Entergy New Orleans operating expenses and capital costs attributable to Grand Gulf.  The capital costs are computed by allowing a return on System Energy’s common equity funds allocable to its net investment in Grand Gulf, plus System Energy’s effective interest cost for its debt allocable to its investment in Grand Gulf.

Accounting for MISO transactions

Entergy is a member of MISO, a regional transmission organization that maintains functional control over the combined transmission systems of its members and manages one of the largest energy markets in the U.S. In the MISO market, Entergy offers its generation and bids its load into the market on an hourly basis. MISO settles these hourly offers and bids based on locational marginal prices, which is pricing for energy at a given location based on a market clearing price that takes into account physical limitations on the transmission system, generation, and demand throughout the MISO region. MISO evaluates the market participants’ energy offers and demand bids to economically and reliably dispatch the entire MISO system. Entergy nets purchases and sales within the MISO market on an hourly basis and reports in operating revenues when in a net selling position for an hour period and in operating expenses when in a net purchasing position for an hour period.  

Property, Plant, and Equipment

Property, plant, and equipment is stated at original cost less regulatory disallowances and impairments.  Depreciation is computed on the straight-line basis at rates based on the applicable estimated service lives of the various classes of property.  For the Registrant Subsidiaries, the original cost of plant retired or removed, less salvage, is charged to accumulated depreciation.  Normal maintenance, repairs, and minor replacement costs are charged to operating expenses.  Substantially all of the Registrant Subsidiaries’ plant is subject to mortgage liens.

Electric plant includes the portions of Grand Gulf and Waterford 3 that were sold and leased back in prior periods.  For financial reporting purposes, these sale and leaseback arrangements are reflected as financing transactions. In March 2016, Entergy Louisiana completed the first step in a two-step transaction to purchase the undivided interests in Waterford 3 that were previously being leased by acquiring a beneficial interest in the Waterford 3 leased assets. In February 2017 the leases were terminated and the leased assets transferred to Entergy Louisiana. See Note 10 to the financial statements for further discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

Net property, plant, and equipment for Entergy (including property under capital lease and associated accumulated amortization) by business segment and functional category, as of December 31, 2017 and 2016 , is shown below:
2017
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,946

 

$6,694

 

$252

 

$—

Other
 
4,215

 
4,118

 
97

 
—

Transmission
 
5,844

 
5,842

 
2

 
—

Distribution
 
8,000

 
8,000

 
—

 
—

Other
 
1,755

 
1,748

 
3

 
4

Construction work in progress
 
1,981

 
1,951

 
30

 
—

Nuclear fuel
 
923

 
822

 
101

 
—

Property, plant, and equipment - net
 

$29,664

 

$29,175

 

$485

 

$4



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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


2016
 
Entergy
 
Utility
 
Entergy Wholesale Commodities
 
Parent & Other
 
 
(In Millions)
Production
 
 

 
 

 
 

 
 

Nuclear
 

$6,948

 

$6,524

 

$424

 

$—

Other
 
4,047

 
4,000

 
47

 
—

Transmission
 
5,226

 
5,223

 
3

 
—

Distribution
 
7,648

 
7,648

 
—

 
—

Other
 
1,636

 
1,521

 
111

 
4

Construction work in progress
 
1,378

 
1,334

 
44

 
—

Nuclear fuel
 
1,038

 
817

 
221

 
—

Property, plant, and equipment - net
 

$27,921

 

$27,067

 

$850

 

$4


Depreciation rates on average depreciable property for Entergy approximated 3.0% in 2017 , 2.8% in 2016 , and 2.9% in 2015 .  Included in these rates are the depreciation rates on average depreciable Utility property of 2.6% in 2017 , 2.6% in 2016 , and 2.7% 2015 , and the depreciation rates on average depreciable Entergy Wholesale Commodities property of 22.3% in 2017 , 5.2% in 2016 , and 5.4% in 2015 . The higher depreciation rate in 2017 for Entergy Wholesale Commodities reflects the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

Entergy amortizes nuclear fuel using a units-of-production method.  Nuclear fuel amortization is included in fuel expense in the income statements. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear fuel costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.

“Non-utility property - at cost (less accumulated depreciation)” for Entergy is reported net of accumulated depreciation of $167 million and $169 million as of December 31, 2017 and 2016 , respectively.

Construction expenditures included in accounts payable is $368 million and $253 million at December 31, 2017 and 2016 , respectively.

Net property, plant, and equipment for the Registrant Subsidiaries (including property under capital lease and associated accumulated amortization) by company and functional category, as of December 31, 2017 and 2016 , is shown below:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy
 New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,368

 

$3,664

 

$—

 

$—

 

$—

 

$1,660

Other
 
806

 
2,016

 
560

 
207

 
531

 
—

Transmission
 
1,650

 
2,148

 
900

 
81

 
1,021

 
42

Distribution
 
2,226

 
2,748

 
1,316

 
440

 
1,270

 
—

Other
 
247

 
592

 
203

 
204

 
168

 
39

Construction work in progress
 
281

 
1,281

 
149

 
47

 
102

 
70

Nuclear fuel
 
277

 
337

 
—

 
—

 
—

 
208

Property, plant, and equipment - net
 

$6,855

 

$12,786

 

$3,128

 

$979

 

$3,092

 

$2,019


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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Millions)
Production
 
 
 
 
 
 
 
 
 
 
 
 
Nuclear
 

$1,201

 

$3,540

 

$—

 

$—

 

$—

 

$1,783

Other
 
801

 
1,966

 
537

 
213

 
483

 
—

Transmission
 
1,491

 
1,925

 
740

 
79

 
943

 
45

Distribution
 
2,144

 
2,632

 
1,242

 
414

 
1,216

 
—

Other
 
216

 
517

 
201

 
188

 
106

 
25

Construction work in progress
 
304

 
670

 
118

 
25

 
111

 
44

Nuclear fuel
 
307

 
250

 
—

 
—

 
—

 
260

Property, plant, and equipment - net
 

$6,464

 

$11,500

 

$2,838

 

$919

 

$2,859

 

$2,157


Depreciation rates on average depreciable property for the Registrant Subsidiaries are shown below:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
2017
2.5%
 
2.3%
 
3.1%
 
3.5%
 
2.6%
 
2.8%
2016
2.5%
 
2.3%
 
3.1%
 
3.4%
 
2.5%
 
2.8%
2015
2.6%
 
2.3%
 
3.2%
 
3.0%
 
2.6%
 
2.8%

Non-utility property - at cost (less accumulated depreciation) for Entergy Louisiana is reported net of accumulated depreciation of $152.3 million and $154.4 million as of December 31, 2017 and 2016 , respectively. Non-utility property - at cost (less accumulated depreciation) for Entergy Mississippi is reported net of accumulated depreciation of $0.5 million and $0.5 million as of December 31, 2017 and 2016 , respectively.  Non-utility property - at cost (less accumulated depreciation) for Entergy Texas is reported net of accumulated depreciation of $4.9 million and $4.9 million as of December 31, 2017 and 2016 , respectively.

As of December 31, 2017 , construction expenditures included in accounts payable are $58.8 million for Entergy Arkansas, $160.4 million for Entergy Louisiana, $17.1 million for Entergy Mississippi, $2.5 million for Entergy New Orleans, $32.8 million for Entergy Texas, and $33.9 million for System Energy.  As of December 31, 2016 , construction expenditures included in accounts payable are $40.9 million for Entergy Arkansas, $114.8 million for Entergy Louisiana, $11.5 million for Entergy Mississippi, $2.3 million for Entergy New Orleans, $9.3 million for Entergy Texas, and $6.2 million for System Energy.

Jointly-Owned Generating Stations

Certain Entergy subsidiaries jointly own electric generating facilities with affiliates or third parties. All parties are required to provide their own financing.  The investments, fuel expenses, and other operation and maintenance expenses associated with these generating stations are recorded by the Entergy subsidiaries to the extent of their respective undivided ownership interests.  As of December 31, 2017 , the subsidiaries’ investment and accumulated depreciation in each of these generating stations were as follows:


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Generating Stations
 
Fuel Type
 
Total Megawatt Capability (a)
 
Ownership
 
Investment
 
Accumulated Depreciation
 
 
 
 
 
 
 
 
 
(In Millions)
Utility business:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas -
 
 
 
 
 
 
 
 
 
 
 
  Independence
Unit 1
 
Coal
 
836

 
31.50
%
 

$140

 

$103

  Independence
Common Facilities
 
Coal
 
 
 
15.75
%
 

$34

 

$27

  White Bluff
Units 1 and 2
 
Coal
 
1,636

 
57.00
%
 

$531

 

$364

  Ouachita (b)
Common Facilities
 
Gas
 


 
66.67
%
 

$172

 

$150

  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$28

 

$3

Entergy Louisiana -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
40.25
%
 

$280

 

$194

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
25.79
%
 

$15

 

$6

  Big Cajun 2
Unit 3
 
Coal
 
574

 
24.15
%
 

$150

 

$117

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
8.05
%
 

$5

 

$2

  Ouachita (b)
Common Facilities
 
Gas
 


 
33.33
%
 

$90

 

$75

  Acadia
Common Facilities
 
Gas
 


 
50.00
%
 

$20

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
50.00
%
 

$55

 

$3

Entergy Mississippi -
 
 
 
 
 
 
 

 
 
 
 
  Independence
Units 1 and 2 and Common Facilities
 
Coal
 
1,678

 
25.00
%
 

$266

 

$156

Entergy New Orleans -
 
 
 
 
 
 
 
 
 
 
 
  Union (c)
Units 1 and 2 Common Facilities
 
Gas
 


 
50.00
%
 

$1

 

$—

  Union (c)
Common Facilities
 
Gas
 
 
 
25.00
%
 

$28

 

$3

Entergy Texas -
 
 
 
 
 
 
 

 
 
 
 
  Roy S. Nelson
Unit 6
 
Coal
 
550

 
29.75
%
 

$200

 

$114

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
14.16
%
 

$6

 

$3

  Big Cajun 2
Unit 3
 
Coal
 
574

 
17.85
%
 

$113

 

$76

  Big Cajun 2
Unit 3 Common Facilities
 
Coal
 
 
 
5.95
%
 

$3

 

$1

System Energy -
 
 
 
 
 
 
 

 
 
 
 
  Grand Gulf (d)
Unit 1
 
Nuclear
 
1,414

 
90.00
%
 

$4,916

 

$3,175

Entergy Wholesale Commodities:
 
 
 
 
 
 
 

 
 
 
 
  Independence
Unit 2
 
Coal
 
842

 
14.37
%
 

$73

 

$50

  Independence
Common Facilities
 
Coal
 
 
 
7.18
%
 

$17

 

$12

  Roy S. Nelson
Unit 6
 
Coal
 
550

 
10.90
%
 

$113

 

$62

  Roy S. Nelson
Unit 6 Common Facilities
 
Coal
 
 
 
5.19
%
 

$2

 

$1


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(a)
“Total Megawatt Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.
(b)
Ouachita Units 1 and 2 are owned 100% by Entergy Arkansas and Ouachita Unit 3 is owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the common facilities and not for the generating units.
(c)
Union Unit 1 is owned 100% by Entergy New Orleans, Union Unit 2 is owned 100% by Entergy Arkansas, Union Units 3 and 4 are owned 100% by Entergy Louisiana.  The investment and accumulated depreciation numbers above are only for the specified common facilities and not for the generating units.
(d)
Includes a leasehold interest held by System Energy.  System Energy’s Grand Gulf lease obligations are discussed in Note 10 to the financial statements.

Nuclear Refueling Outage Costs

Nuclear refueling outage costs are deferred during the outage and amortized over the estimated period to the next outage because these refueling outage expenses are incurred to prepare the units to operate for the next operating cycle without having to be taken off line. Because the value of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, charge nuclear refueling outage costs directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these costs.

Allowance for Funds Used During Construction (AFUDC)

AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.

Income Taxes

Entergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Entergy Louisiana, LLC and Entergy New Orleans, LLC are not members of the Entergy Corporation consolidated federal income tax filing group but, rather, are included in the Entergy Utility Holding Company, LLC consolidated federal income tax filing group.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted. See the “ Other Tax Matters - Tax Cuts and Jobs Act ” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017.

The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.


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Earnings (Loss) per Share

The following table presents Entergy’s basic and diluted earnings per share calculation included on the consolidated statements of operations:
 
For the Years Ended December 31,
 
2017
 
2016
 
2015
 
(In Millions, Except Per Share Data)
 
 
 
$/share
 
 
 
$/share
 
 
 
$/share
Net income (loss) attributable to Entergy Corporation

$411.6

 
 

 

($583.6
)
 
 

 

($176.6
)
 
 

Basic earnings (loss) per average common share
179.7

 

$2.29

 
178.9

 

($3.26
)
 
179.2

 

($0.99
)
Average dilutive effect of:
 

 
 

 
 

 
 

 
 

 
 

Stock options
0.2

 
—

 
—

 
—

 
—

 
—

Other equity plans
0.6

 
(0.01
)
 
—

 
—

 
—

 
—

Diluted earnings (loss) per average common shares
180.5

 

$2.28

 
178.9

 

($3.26
)
 
179.2

 

($0.99
)

The calculation of diluted earnings (loss) per share excluded 2,927,512 options outstanding at December 31, 2017 , 7,137,210 options outstanding at December 31, 2016 , and 7,399,820 options outstanding at December 31, 2015 because they were antidilutive.

Stock-based Compensation Plans

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans, which are shareholder-approved stock-based compensation plans.  These plans are described more fully in Note 12 to the financial statements.  The cost of the stock-based compensation is charged to income over the vesting period.  Awards under Entergy’s plans generally vest over three years.

Effective January 1, 2017, Entergy adopted ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” The ASU permits the election of an accounting policy change to the method of recognizing forfeitures of stock-based compensation. Previously, Entergy recorded an estimate of the number of forfeitures expected to occur each period. Entergy elected to change this policy to account for forfeitures when they occur. This accounting change was applied retrospectively, but did not result in an adjustment to retained earnings as of January 1, 2017. As a result of adoption of the ASU, Entergy now prospectively recognizes all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets.

Accounting for the Effects of Regulation

Entergy’s Utility operating companies and System Energy are rate-regulated enterprises whose rates meet three criteria specified in accounting standards.  The Utility operating companies and System Energy have rates that (i) are approved by a body (its regulator) empowered to set rates that bind customers; (ii) are cost-based; and (iii) can be charged to and collected from customers.  These criteria may also be applied to separable portions of a utility’s business, such as the generation or transmission functions, or to specific classes of customers.  Because the Utility operating companies and System Energy meet these criteria, each of them capitalizes costs, which would otherwise be charged to expense, if the rate actions of its regulator make it probable that those costs will be recovered in future revenue.  Such capitalized costs are reflected as regulatory assets in the accompanying financial statements.  When an enterprise

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concludes that recovery of a regulatory asset is no longer probable, the regulatory asset must be removed from the entity’s balance sheet.

An enterprise that ceases to meet the three criteria for all or part of its operations should report that event in its financial statements.  In general, the enterprise no longer meeting the criteria should eliminate from its balance sheet all regulatory assets and liabilities related to the applicable operations.  Additionally, if it is determined that a regulated enterprise is no longer recovering all of its costs, it is possible that an impairment may exist that could require further write-offs of plant assets.

Entergy Louisiana does not apply regulatory accounting standards to the Louisiana retail deregulated portion of River Bend, the 30% interest in River Bend formerly owned by Cajun, and its steam business, unless specific cost recovery is provided for in tariff rates.  The Louisiana retail deregulated portion of River Bend is operated under a deregulated asset plan representing a portion (approximately 15% ) of River Bend plant costs, generation, revenues, and expenses established under a 1992 LPSC order.  The plan allows Entergy Louisiana to sell the electricity from the deregulated assets to Louisiana retail customers at 4.6 cents per kWh or off-system at higher prices, with certain provisions for sharing incremental revenue above 4.6 cents per kWh between customers and shareholders.

Regulatory Asset or Liability for Income Taxes

Accounting standards for income taxes provide that a regulatory asset or liability be recorded if it is probable that the currently determinable future increase or decrease in regulatory income tax expense will be recovered from or returned to customers through future rates. There are two main sources of Entergy’s regulatory asset or liability for income taxes. There is a regulatory asset related to the ratemaking treatment of the tax effects of book depreciation for the equity component of AFUDC that has been capitalized to property, plant, and equipment but for which there is no corresponding tax basis. Equity-AFUDC is a component of property, plant, and equipment that is included in rate base when the plant is placed in service. There is a regulatory liability related to the adjustment of Entergy’s net deferred income taxes that was required by the enactment in December 2017 of a change in the federal corporate income tax rate, which is discussed in Note 3 to the financial statements.

Cash and Cash Equivalents

Entergy considers all unrestricted highly liquid debt instruments with an original maturity of three months or less at date of purchase to be cash equivalents.

Securitization Recovery Trust Accounts

The funds that Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas hold in their securitization recovery trust accounts are not classified as cash and cash equivalents or restricted cash and cash equivalents because of their nature, uses, and restrictions. These funds are classified as part of other current assets and other investments, depending on the timeframe within which the Registrant Subsidiary expects to use the funds.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects Entergy’s best estimate of losses on the accounts receivable balances.  The allowance is based on accounts receivable agings, historical experience, and other currently available evidence.  Utility operating company customer accounts receivable are written off consistent with approved regulatory requirements.

Investments

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment

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for decommissioning trust funds, for unrealized gains/(losses) on investment securities the Registrant Subsidiaries record an offsetting amount in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the excess trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale.  Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment is based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time.  Effective January 1, 2018 with the adoption of ASU 2016-01, unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds will be recorded in earnings as they occur rather than in other comprehensive income. In accordance with the regulatory treatment of the decommissioning trust funds of the Registrant Subsidiaries, an offsetting amount of unrealized gains/losses will continue to be recorded in other regulatory liabilities/assets. Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  See Note 16 to the financial statements for details on the decommissioning trust funds.

Equity Method Investments

Entergy owns investments that are accounted for under the equity method of accounting because Entergy’s ownership level results in significant influence, but not control, over the investee and its operations.  Entergy records its share of the investee’s comprehensive earnings and losses in income and as an increase or decrease to the investment account. Any cash distributions are charged against the investment account. Entergy discontinues the recognition of losses on equity investments when its share of losses equals or exceeds its carrying amount for an investee plus any advances made or commitments to provide additional financial support.  

Derivative Financial Instruments and Commodity Derivatives

The accounting standards for derivative instruments and hedging activities require that all derivatives be recognized at fair value on the balance sheet, either as assets or liabilities, unless they meet various exceptions including the normal purchase/normal sale criteria.  The changes in the fair value of recognized derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and the type of hedge transaction. Due to regulatory treatment, an offsetting regulatory asset or liability is recorded for changes in fair value of recognized derivatives for the Registrant Subsidiaries.

Contracts for commodities that will be physically delivered in quantities expected to be used or sold in the ordinary course of business, including certain purchases and sales of power and fuel, meet the normal purchase, normal sales criteria and are not recognized on the balance sheet.  Revenues and expenses from these contracts are reported on a gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.

For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value of such derivative instruments are reported in other comprehensive income.  To qualify for hedge accounting, the

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relationship between the hedging instrument and the hedged item must be documented to include the risk management objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the changes in the cash flows of the item being hedged.  Gains or losses accumulated in other comprehensive income are reclassified to earnings in the periods when the underlying transactions actually occur.  The ineffective portions of all hedges are recognized in current-period earnings. Changes in the fair value of derivative instruments that are not designated as cash flow hedges are recorded in current-period earnings on a mark-to-market basis.

Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under the accounting standards for derivative instruments because they do not provide for net settlement and the uranium markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash.  If the uranium markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy’s other derivative instruments. See Note 15 to the financial statements for further details on Entergy’s derivative instruments and hedging activities.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not affect net income.  Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.  See Note 15 to the financial statements for further discussion of fair value.

Impairment of Long-lived Assets

Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets. Because the values of their long-lived assets are impaired, and their remaining estimated operating lives significantly reduced, the Entergy Wholesale Commodities nuclear plants, except for Palisades, are charging additional expenditures for capital assets directly to expense when incurred because their undiscounted cash flows are insufficient to recover the carrying amount of these capital additions.  See Note 14 to the financial statements for further discussions of the impairments of the Entergy Wholesale Commodities nuclear plants.

River Bend AFUDC

The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by the LPSC between the AFUDC actually recorded by Entergy Louisiana on a net-of-tax basis during the construction of River Bend and what the AFUDC would have been on a pre-tax basis.  The imputed amount was only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through August 2025.

Reacquired Debt

The premiums and costs associated with reacquired debt of Entergy’s Utility operating companies and System Energy (except that portion allocable to the deregulated operations of Entergy Louisiana) are included in regulatory assets and are being amortized over the life of the related new issuances, or over the life of the original debt issuance if the debt is not refinanced, in accordance with ratemaking treatment.


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Taxes Imposed on Revenue-Producing Transactions

Governmental authorities assess taxes that are both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including, but not limited to, sales, use, value added, and some excise taxes.  Entergy presents these taxes on a net basis, excluding them from revenues, unless required to report them differently by a regulatory authority.

Presentation of Preferred Stock without Sinking Fund

Accounting standards regarding non-controlling interests and the classification and measurement of redeemable securities require the classification of preferred securities between liabilities and shareholders’ equity on the balance sheet if the holders of those securities have protective rights that allow them to gain control of the board of directors in certain circumstances.  These rights would have the effect of giving the holders the ability to potentially redeem their securities, even if the likelihood of occurrence of these circumstances is considered remote.  The Entergy Arkansas, Entergy Mississippi, and, prior to December 1, 2017, Entergy New Orleans articles of incorporation provide, generally, that the holders of each company’s preferred securities may elect a majority of the respective company’s board of directors if dividends are not paid for a year, until such time as the dividends in arrears are paid.  Therefore, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans present their preferred securities outstanding between liabilities and shareholders’ equity on the balance sheet.  In November 2017, Entergy New Orleans redeemed its outstanding preferred securities as part of a multi-step process to undertake an internal restructuring. See Note 2 to the financial statements for a discussion of Entergy New Orleans’s internal restructuring.

The outstanding preferred securities of Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans, and Entergy Utility Holding Company (a Utility subsidiary) and Entergy Finance Holding (an Entergy Wholesale Commodities subsidiary), whose preferred holders also have protective rights, are similarly presented between liabilities and equity on Entergy’s consolidated balance sheets.  The preferred dividends or distributions paid by all subsidiaries are reflected for all periods presented outside of consolidated net income.

New Accounting Pronouncements

In May 2014 the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The ASU’s core principle is that “an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” The ASU details a five-step model that should be followed to achieve the core principle. With FASB issuance of ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” ASU 2014-09 is effective for Entergy for the first quarter 2018. Entergy has selected the modified retrospective transition method. Entergy’s evaluation of ASU 2014-09 has not identified any effects that it expects will affect materially its results of operations, financial position, or cash flows, other than changes in required financial statement disclosures. The adoption of the ASU did not result in an adjustment to retained earnings as of January 1, 2018.

In January 2016 the FASB issued ASU No. 2016-01 “Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The ASU requires investments in equity securities, excluding those accounted for under the equity method or resulting in consolidation of the investee, to be measured at fair value with changes recognized in net income. The ASU requires a qualitative assessment to identify impairments of investments in equity securities that do not have a readily determinable fair value. ASU 2016-01 is effective for Entergy for the first quarter 2018. Entergy expects that ASU 2016-01 will affect its results of operations by requiring unrealized gains and losses on investments in equity securities held by the nuclear decommissioning trust funds to be recorded in earnings rather than in other comprehensive income. In accordance with the regulatory treatment of the decommissioning trust funds of Entergy Arkansas, Entergy Louisiana, and System Energy, an offsetting amount of unrealized gains/losses will continue to be recorded in other regulatory liabilities/assets. Entergy recorded an adjustment to retained earnings of $633 million as of January 1, 2018 for the cumulative effect of the unrealized gains and losses

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on investments in equity securities held by the decommissioning trust funds that do not meet the criteria for regulatory accounting treatment.

In February 2016 the FASB issued ASU No. 2016-02, “Leases (Topic 842).”  The ASU’s core principle is that “a lessee should recognize the assets and liabilities that arise from leases.” The ASU considers that “all leases create an asset and a liability,” and accordingly requires recording the assets and liabilities related to all leases with a term greater than 12 months.  In January 2018 the FASB issued ASU No. 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842,” providing entities the option to elect not to evaluate existing land easements that are not currently accounted for under the previous lease standard. ASU 2016-02 is effective for Entergy for the first quarter 2019, and Entergy does not expect to early adopt the standard.  Entergy expects that ASU 2016-02 will affect its financial position by increasing the assets and liabilities recorded relating to its operating leases.  Entergy is evaluating ASU 2016-02 for other effects on its results of operations, financial position, cash flows, and financial statement disclosures, as well as the potential to elect various practical expedients permitted by the standards.
    
In June 2016 the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU requires entities to record a valuation allowance on financial instruments recorded at amortized cost or classified as available-for-sale debt securities for the total credit losses expected over the life of the instrument. Increases and decreases in the valuation allowance will be recognized immediately in earnings. ASU 2016-13 is effective for Entergy for the first quarter 2020. Entergy is evaluating ASU 2016-13 for the expected effects on its results of operations, financial position, and cash flows.

In October 2016 the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.” The ASU requires entities to recognize the income tax consequences of intra-entity asset transfers, other than inventory, at the time the transfer occurs. ASU 2016-16 is effective for Entergy for the first quarter 2018 and will affect its statement of financial position by requiring recognition of deferred tax assets or liabilities arising from intra-entity asset transfers. Entergy recorded an adjustment to retained earnings of $56 million as of January 1, 2018 for the cumulative-effect of the recognition of the deferred tax assets arising from intra-entity asset transfers.

In March 2017 the FASB issued ASU No. 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.” The ASU requires entities to report the service cost component of defined benefit pension cost and postretirement benefit cost (net benefit cost) in the same line item as other compensation costs arising from services rendered during the period.  The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations.  In addition, the ASU allows only the service cost component of net benefit cost to be eligible for capitalization.  ASU 2017-07 is effective for Entergy for the first quarter 2018.  Entergy does not expect ASU 2017-07 to affect materially its results of operations, financial position, or cash flows.

In August 2017 the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.”  The ASU makes a number of amendments to hedge accounting, most significantly changing the recognition and presentation of highly effective hedges.  Upon adoption of the standard there will no longer be separate recognition or presentation of the ineffective portion of highly effective hedges.  In addition, the ASU allows entities to designate a contractually-specified component as the hedged risk, simplifies the process for assessing the effectiveness of hedges, and adds additional disclosure requirements for hedges.  ASU 2017-12 is effective for Entergy for the first quarter 2019. Entergy does not expect to early adopt the standard.  Entergy expects that ASU 2017-12 will affect its net income by eliminating volatility in earnings related to the ineffective portion of designated hedges on nuclear power sales.  Entergy is evaluating ASU 2017-12 for other effects on its results of operations, financial position, or cash flows.

In February 2018 the FASB issued ASU No. 2018-02, “Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.”  The ASU

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allows reclassification from accumulated other comprehensive income to retained earnings for certain tax effects resulting from the Tax Cuts and Jobs Act that would otherwise be stranded in accumulated other comprehensive income .  ASU 2018-02 is effective for Entergy for the first quarter 2019, but may be early adopted. Entergy plans to adopt the ASU in the first quarter 2018.  Entergy expects that upon the adoption of ASU 2018-02 it will record to the statement of financial position a net reclassification reducing retained earnings and increasing accumulated other comprehensive income by approximately $15 million .  Entergy does not expect that ASU 2018-02 will have any other material effect on its results of operations, financial position, or cash flows.


NOTE 2.  RATE AND REGULATORY MATTERS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
 
Regulatory Assets and Regulatory Liabilities

Regulatory assets represent probable future revenues associated with costs that Entergy expects to recover from customers through the regulatory ratemaking process under which the Utility business operates. Regulatory liabilities represent probable future reductions in revenues associated with amounts that Entergy expects to benefit customers through the regulatory ratemaking process under which the Utility business operates. In addition to the regulatory assets and liabilities that are specifically disclosed on the face of the balance sheets, the tables below provide detail of “Other regulatory assets” and “Other regulatory liabilities” that are included on Entergy’s and the Registrant Subsidiaries’ balance sheets as of December 31, 2017 and 2016 :
 
Other Regulatory Assets

Entergy
 
2017
 
2016
 
(In Millions)
Pension & postretirement costs  (Note 11 – Qualified Pension Plans , Other Postretirement Benefits , and Non-Qualified Pension Plans ) (a)

$2,642.3

 

$2,635.5

Asset retirement obligation  - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (a)
746.0

 
677.2

Storm damage costs, including hurricane costs  - recovered through securitization and retail rates (Note 2 – Storm Cost Recovery Filings with Retail Regulators ) (Note 5)
558.9

 
637.0

Removal costs  - recovered through depreciation rates (Note 9) (a)
436.5

 
353.9

Opportunity Sales  - recovery will be determined after final order in proceeding (Note 2 - Entergy Arkansas Opportunity Sales Proceeding )
109.8

 
—

Retail rate deferrals - recovered through rate riders as rates are redetermined by retail regulators
86.4

 
22.1

Unamortized loss on reacquired debt  - recovered over term of debt
82.9

 
91.4

Little Gypsy costs  – recovered through securitization (Note 5 – Entergy Louisiana Securitization Bonds - Little Gypsy )
73.7

 
100.0

Transition to competition costs  - recovered over a 15-year period through February 2021
37.7

 
47.9

New nuclear generation development costs (Note 2 - New Nuclear Generation Development Costs ) (b)
36.4

 
43.7

Other
125.1

 
161.2

Entergy Total

$4,935.7

 

$4,769.9



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Entergy Arkansas
 
2017
 
2016
 
(In Millions)
Pension & postretirement costs  (Note 11 – Qualified Pension Plans , Other Postretirement Benefits , and Non-Qualified Pension Plans ) (a)

$757.0

 

$786.6

Asset retirement obligation - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (a)
345.2

 
322.9

Removal costs  - recovered through depreciation rates (Note 9) (a)
176.9

 
128.5

Opportunity sales - recovery will be determined after final order in proceeding (Note 2 - Entergy Arkansas Opportunity Sales Proceeding )
109.8

 
—

Storm damage costs - recovered either through securitization or retail rates (Note 5 - Entergy Arkansas Securitization Bonds)
76.2

 
88.9

Retail rate deferrals  - recovered through rate riders as rates are redetermined annually
28.2

 
10.1

Unamortized loss on reacquired debt  - recovered over term of debt
24.3

 
27.6

ANO Fukushima and Flood Barrier costs  - recovered through retail rates through February 2026 (Note 2 - Retail Rate Proceedings ) (b)
14.4

 
16.1

Lake Catherine 4 reliability and sustainability cost deferral - recovery through retail rates (b)
8.9

 
9.8

Incremental ice storm costs  - recovered through 2032
7.4

 
7.9

MISO costs  - recovery through retail rates through 2018 (Note 2 - Retail Rate Proceedings ) (b)
5.5

 
11.1

Human capital management costs - recovery through retail rates through August 2019 (Note 2 - Retail Rate Proceedings ) (b)
4.4

 
7.0

Other
9.2

 
11.5

Entergy Arkansas Total

$1,567.4

 

$1,428.0



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Entergy Louisiana
 
2017
 
2016
 
(In Millions)
Pension & postretirement costs (Note 11 – Qualified Pension Plans  and Non-Qualified Pension Plans ) (a)

$724.6

 

$715.7

Asset Retirement Obligation  - recovery dependent upon timing of decommissioning of nuclear units or dismantlement of non-nuclear power plants (Note 9) (a)
218.6

 
199.4

Little Gypsy costs – recovered through securitization (Note 5 – Entergy Louisiana Securitization Bonds - Little Gypsy )
71.4

 
97.8

New nuclear generation development costs - recovery through formula rate plan beginning December 2014 through November 2022 (Note 2 - New Nuclear Generation Development Costs ) (b)
35.8

 
43.1

Unamortized loss on reacquired debt  - recovered over term of debt
24.7

 
27.0

Storm damage costs  - recovered through retail rates (Note 2 - Storm Cost Recovery Filings with Retail Regulators )
14.3

 
—

Business combination external costs deferral - recovery through formula rate plan beginning December 2015 through November 2025 (b)
14.1

 
15.2

River Bend AFUDC - recovered through August 2025 (Note 1 – River Bend AFUDC )
12.9

 
14.8

Other
29.4

 
55.1

Entergy Louisiana Total

$1,145.8

 

$1,168.1


Entergy Mississippi
 
2017
 
2016
 
(In Millions)
Pension & postretirement costs (Note 11 – Qualified Pension Plans , Other Postretirement Benefits , and Non-Qualified Pension Plans ) (a)

$218.7

 

$217.2

Removal costs - recovered through depreciation rates (Note 9) (a)
91.6

 
82.0

Retail rate deferrals  - recovered through rate riders as rates are redetermined annually
49.4

 
9.3

Unamortized loss on reacquired debt  - recovered over term of debt
17.6

 
18.9

Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclear power plants (Note 9) (a)
7.6

 
7.2

Other
13.0

 
7.6

Entergy Mississippi Total

$397.9

 

$342.2



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Entergy New Orleans
 
2017
 
2016
 
(In Millions)
Pension & postretirement costs (Note 11 – Qualified Pension Plans , Other Postretirement Benefits , and Non-Qualified Pension Plans ) (a)

$102.8

 

$108.8

Storm damage costs, including hurricane costs - recovered through retail rates and securitization (Note 2 - Storm Cost Recovery Filings with Retail Regulators )
82.3

 
93.6

Removal costs - recovered through depreciation rates (Note 9) (a)
44.8

 
40.1

Retail rate deferrals - recovered through rate riders as rates are redetermined monthly or annually
4.4

 
4.3

Asset retirement obligation - recovery dependent upon timing of dismantlement of non-nuclear power plants (Note 9) (a)
4.3

 
4.2

Unamortized loss on reacquired debt  - recovered over term of debt
3.0

 
3.4

Rate case costs - recovered over a 6-year period through September 2021 (Note 2 - Retail Rate Proceedings )
2.6

 
3.0

Michoud plant maintenance  – recovered over a 7-year period through September 2018
1.4

 
3.3

Other
5.8

 
7.4

Entergy New Orleans Total

$251.4

 

$268.1


Entergy Texas
 
2017
 
2016
 
(In Millions)
Storm damage costs, including hurricane costs - recovered through securitization and retail rates (Note 5 - Entergy Texas Securitization Bonds )

$386.1

 

$442.4

Pension & postretirement costs (Note 11 – Qualified Pension Plans , Other Postretirement Benefits , and Non-Qualified Pension Plans ) (a)
169.2

 
201.7

Transition to competition costs - recovered over a 15-year period through February 2021
37.7

 
47.9

Removal costs - recovered through depreciation rates (Note 9) (a)
55.2

 
33.5

Unamortized loss on reacquired debt  - recovered over term of debt
8.7

 
9.0

Other
4.5

 
5.7

Entergy Texas Total

$661.4

 

$740.2


System Energy
 
2017
 
2016
 
(In Millions)
Pension & postretirement costs  (Note 11 – Qualified Pension Plans  and Other Postretirement Benefits ) (a)

$202.7

 

$193.5

Asset retirement obligation  - recovery dependent upon timing of decommissioning (Note 9) (a)
169.1

 
142.5

Removal costs  - recovered through depreciation rates (Note 9) (a)
67.9

 
69.7

Unamortized loss on reacquired debt  - recovered over term of debt
4.6

 
5.5

System Energy Total

$444.3

 

$411.2


(a)
Does not earn a return on investment, but is offset by related liabilities.
(b)
Does not earn a return on investment.

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Other Regulatory Liabilities

Entergy
 
2017
 
2016
 
(In Millions)
Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)

$989.3

 

$735.5

Vidalia purchased power agreement (Note 8) (b)
151.6

 
202.4

Louisiana Act 55 financing savings obligation (Note 2 - Storm Cost Recovery Filings with Retail Regulators ) (b)
124.8

 
165.5

Grand Gulf sale-leaseback  - (Note 10 - Sale and Leaseback Transactions )
67.9

 
67.9

Business combination guaranteed customer benefits  - returned to customers through retail rates and fuel rates beginning December 2015 through November 2024 (Note 2 - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination)
65.8

 
83.5

Entergy Arkansas ’ s accumulated accelerated Grand Gulf amortization - will be returned to customers when approved by the APSC and the FERC
44.4

 
44.4

Asset retirement obligation  - return to customers dependent upon timing of decommissioning (Note 9) (a)
36.7

 
32.7

Removal costs  - returned to customers through depreciation rates (Note 9) (a)
32.4

 
53.9

Entergy Mississippi ’ s accumulated accelerated Grand Gulf amortization - amortized and credited through the Unit Power Sales Agreement
32.1

 
39.3

Waterford 3 replacement steam generator provision (Note 2 - Retail Rate Proceedings )
—

 
68.0

Other
43.5

 
79.8

Entergy Total

$1,588.5

 

$1,572.9


Entergy Arkansas
 
2017
 
2016
 
(In Millions)
Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)

$354.0

 

$280.8

Other
9.6

 
25.1

Entergy Arkansas Total

$363.6

 

$305.9



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Entergy Louisiana
 
2017
 
2016
 
(In Millions)
Unrealized gains on nuclear decommissioning trust funds (Note 16) (a)

$323.7

 

$235.4

Vidalia purchased power agreement (Note 8) (b)
151.6

 
202.4

Louisiana Act 55 financing savings obligation (Note 2 - Storm Cost Recovery Filings with Retail Regulators ) (b)
124.8

 
165.5

Business combination guaranteed customer benefits  - returned to customers through retail rates and fuel rates beginning December 2015 through November 2024 (Note 2 - Entergy Louisiana and Entergy Gulf States Louisiana Business Combination)
65.8

 
83.5

Gas hedging costs -  refunded through fuel rates (Note 15 - Derivatives )
—

 
10.9

Asset Retirement Obligation - return to customers dependent upon timing of decommissioning (Note 9) (a)
36.7

 
32.7

Removal costs  - returned to customers through depreciation rates (Note 9) (a)
32.4

 
53.9

Waterford 3 replacement steam generator provision (Note 2 - Retail Rate Proceedings )
—

 
68.0

Other
26.1

 
28.7

Entergy Louisiana Total

$761.1

 

$881.0


Entergy Texas
 
2017
 
2016
 
(In Millions)
Transition to competition costs  - returned to customers through rate riders when rates are redetermined periodically

$4.8

 

$6.2

Other
2.1

 
2.3

Entergy Texas Total

$6.9

 

$8.5


System Energy
 
2017
 
2016
 
(In Millions)
Unrealized gains on nuclear decommissioning trust funds (Note 17) (a)

$311.6

 

$219.3

Grand Gulf sale-leaseback  - (Note 10 - Sale and Leaseback Transactions )
67.9

 
67.9

Entergy Arkansas ’ s accumulated accelerated Grand Gulf amortization  - will be returned to customers when approved by the APSC and the FERC
44.4

 
44.4

Entergy Mississippi ’ s accumulated accelerated Grand Gulf amortization  - amortized and credited through the Unit Power Sales Agreement
32.1

 
39.3

System Energy Total

$456.0

 

$370.9


(a)
Offset by related asset.
(b)
As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21% effective January 2018, the Vidalia purchased power agreement regulatory liability was reduced by $30.5 million and the Louisiana Act 55 financing savings obligation regulatory liabilities were reduced by $25.0 million , with corresponding increases to Other regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.


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Regulatory activity regarding the Tax Cuts and Jobs Act

See the “ Other Tax Matters - Tax Cuts and Jobs Act ” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act, in December 2017, including its effects on Entergy’s and the Registrant Subsidiaries’ regulatory asset/liability for income taxes.

After enactment of the Tax Cuts and Jobs Act the APSC issued an order that applies to investor-owned utilities in Arkansas, including Entergy Arkansas. The order requests information regarding certain effects of the Tax Cuts and Jobs Act and requires the utilities to begin, effective January 1, 2018, to record regulatory liabilities to record the effects of the Act, subject to review by the APSC, although the order acknowledges that the exact amount of tax savings and rate reductions cannot be determined at this time. Entergy Arkansas requested clarification or, in the alternative, rehearing regarding the requirement to record a regulatory liability, and also responded to the request for information. In its request for clarification Entergy Arkansas sought clarification that the amount of any regulatory liability would be determined only after the utilities are heard and present evidence on the issue, as this otherwise would be arbitrary and could implicate single-issue and retroactive ratemaking. The APSC has not responded to the request for clarification. In its response to the APSC’s request for information Entergy Arkansas states that its formula rate plan rider already provides the means for customers to realize the benefits of the Act, except for the return of unprotected excess accumulated deferred income taxes. Entergy Arkansas’s next formula rate plan filing is scheduled for July 2018. Entergy Arkansas intends to return unprotected excess accumulated deferred income taxes as expeditiously as possible, subject to a subsequent request to be made by Entergy Arkansas and approval by the APSC.

After enactment of the Tax Cuts and Jobs Act the LPSC passed an agenda item requiring utilities, including Entergy Louisiana, to file reports regarding certain effects of the Act. Entergy Louisiana responded to the directive and stated in its response that it is working with the LPSC staff and other interested parties to extend its formula rate plan such that its next base rate change will occur effective September 2018, or it would file a base rate case. Entergy Louisiana went on to state that if the formula rate plan is extended Entergy Louisiana’s next adjustment of rates will reflect the new 21% federal corporate income tax rate. Entergy Louisiana stated that it is working with the LPSC staff and interested parties to determine when the tax rate reduction will be reflected in rates, along with when and how the excess accumulated deferred income taxes will be reflected in rates, and how certain tax sharing agreement customer credits will be adjusted. On February 21, 2018, the LPSC issued a special order requiring that all LPSC-jurisdictional utilities, beginning as of January 1, 2018, record as a regulatory liability (deferred liability) the amount required to reflect the reduction in the federal corporate income tax rate from 35% to 21% and the associated savings in excess accumulated deferred income taxes until such time as its rates are changed by the LPSC to reflect these federal tax savings. In the same special order, the LPSC also initiated a new rulemaking docket to consider these issues and the appropriate manner in which to flow through the benefits to Louisiana customers and to provide an opportunity for discovery and comments of jurisdictional utilities and other interested stakeholders. The rulemaking further requires the LPSC staff to report back to the LPSC as soon as practicable and preferably by the March 21, 2018, LPSC Business and Executive Session with recommendations as to how the federal tax-related benefits will be flowed through to Louisiana customers.

After enactment of the Tax Cuts and Jobs Act the MPSC ordered utilities, including Entergy Mississippi, that operate under a formula rate plan to file a description by February 26, 2018, of how the Act will be reflected in the formula rate plan under which the utility operates. In addition to the description that is due February 26, 2018, Entergy Mississippi’s formula rate plan 2018 test year filing is scheduled to be filed by March 15, 2018.

After enactment of the Tax Cuts and Jobs Act the City Council passed a resolution ordering Entergy New Orleans to, effective January 1, 2018, record deferred regulatory liabilities to account for the Act’s effect on Entergy New Orleans’s revenue requirement and to make a filing by mid-March 2018 regarding the Act’s effects on Entergy New Orleans’s operating income and rate base and potential mechanisms for customers to receive benefits of the Act. The resolution also directed Entergy New Orleans to request that Entergy Services file with the FERC for revisions of the Unit Power Sales Agreement and MSS-4 replacement tariffs to address the return of excess accumulated deferred income taxes. Entergy plans to make such filings with the FERC by the end of March 2018.

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After enactment of the Tax Cuts and Jobs Act the PUCT issued an order requiring most utilities, including Entergy Texas, beginning January 25, 2018, to record a regulatory liability for the difference between revenues collected under existing rates and revenues that would have been collected had existing rates been set using the new federal income tax rates and also for the balance of excess accumulated deferred income taxes. The order also directs the PUCT staff to investigate each investor-owned utility on a case-by-case basis to determine the appropriate mechanism to adjust its rates to reflect the changes under the Act. In both a memorandum issued prior to the open meeting when the order was discussed and during the discussions at the open meeting discussing the order, the PUCT indicated that it would consider utility earnings in determining the treatment of the liability and the effects of the Act. Entergy Texas had previously provided information to the PUCT Staff in the docket and stated that it expects the PUCT to address the lower tax expense as part of Entergy Texas’s rate case expected to be filed in May 2018. Entergy Texas also stated that it would be inappropriate for the PUCT to require a refund of the reduction in income tax expense in 2018 resulting from the Act on a retroactive basis and without a comprehensive review of Entergy Texas’s cost of service and earned return on equity. In a subsequent order issued following the February 2018 open meeting, the PUCT clarified that carrying costs need not be recorded as part of the regulatory liability.

The Registrant Subsidiaries will continue to work with their respective regulators to determine the appropriate path forward in each jurisdiction regarding the effects of the Act.

Fuel and purchased power cost recovery

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas are allowed to recover fuel and purchased power costs through fuel mechanisms included in electric and gas rates that are recorded as fuel cost recovery revenues.  The difference between revenues collected and the current fuel and purchased power costs is generally recorded as “Deferred fuel costs” on the Utility operating companies’ financial statements.  The table below shows the amount of deferred fuel costs as of December 31, 2017 and 2016 that Entergy expects to recover (or return to customers) through fuel mechanisms, subject to subsequent regulatory review.
 
2017
 
2016
 
(In Millions)
Entergy Arkansas (a)

$130.4

 

$163.6

Entergy Louisiana (b)

$96.7

 

$119.9

Entergy Mississippi

$32.4

 

$7.0

Entergy New Orleans (b)

($3.7
)
 

$8.9

Entergy Texas

($67.3
)
 

($54.5
)

(a)
Includes $67.1 million in 2017 and $66.9 million in 2016 of fuel and purchased power costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months.
(b)
Includes $168.1 million in each year for Entergy Louisiana and $4.1 million in each year for Entergy New Orleans of fuel, purchased power, and capacity costs, which do not currently earn a return on investment and whose recovery periods are indeterminate but are expected to be recovered over a period greater than twelve months.

Entergy Arkansas

Production Cost Allocation Rider

The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “ System Agreement Cost Equalization Proceedings ” section below.  These costs cause an increase in Entergy

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Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects the costs from customers over twelve months.

In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $67.8 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In January 2015 the APSC issued an order approving Entergy Arkansas’s request for recovery of the $3 million under-recovered amount based on the true-up of the production cost allocation rider and the $67.8 million May 2014 System Agreement bandwidth remedy payment subject to refund with interest, with recovery of these payments concluding with the last billing cycle in December 2015. The APSC also found that Entergy Arkansas is entitled to carrying charges pursuant to the current terms of the production cost allocation rider. Entergy Arkansas made its compliance filing pursuant to the order in January 2015 and the APSC issued its approval order, also in January 2015. The redetermined rate went into effect with the first billing cycle of February 2015.

In May 2015, Entergy Arkansas filed its annual redetermination of the production cost allocation rider, which included a $38 million payment made by Entergy Arkansas as a result of the FERC’s February 2014 order related to the comprehensive bandwidth recalculation for calendar year 2006, 2007, and 2008 production costs. The redetermined rate for the 2015 production cost allocation rider update was added to the redetermined rate from the 2014 production cost allocation rider update and the combined rate was effective with the first billing cycle of July 2015. This combined rate was effective through December 2015. The collection of the remainder of the redetermined rate for the 2015 production cost allocation rider update continued through June 2016.

In May 2016, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflected recovery of the production cost allocation rider true-up adjustment of the 2014 and 2015 unrecovered retail balance in the amount of $1.9 million . Additionally, the redetermined rates reflected the recovery of a $1.9 million System Agreement bandwidth remedy payment resulting from a compliance filing pursuant to the FERC’s December 2015 order related to test year 2009 production costs. The rates for the 2016 production cost allocation rider update became effective with the first billing cycle of July 2016, and the rates were effective through June 2017.

In May 2017, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflected a credit amount of $0.3 million resulting from a compliance filing pursuant to the FERC’s September 2016 order. Additionally, the redetermined rate reflected recovery of the production cost allocation rider true-up adjustment of the 2016 unrecovered retail balance in the amount of $0.3 million . Because of the small effect of the 2017 production cost allocation rider update, Entergy Arkansas proposed to reduce the effective period of the update to one month, July 2017. After the one month collection period, rates were set to zero for all rate classes for the period August 2017 through June 2018.

Energy Cost Recovery Rider

Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly customer bills.  The rider utilizes the prior calendar-year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over- or under-recovery, including carrying charges, of the energy costs for the prior calendar year.  The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.

In January 2014, Entergy Arkansas filed a motion with the APSC relating to its redetermination of its energy cost rate that was subsequently filed in March 2014. In that motion, Entergy Arkansas requested that the APSC authorize Entergy Arkansas to exclude $65.9 million of deferred fuel and purchased energy costs incurred in 2013 from the redetermination of its 2014 energy cost rate. The $65.9 million is an estimate of the incremental fuel and replacement

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energy costs that Entergy Arkansas incurred as a result of the ANO stator incident. Entergy Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in its deferred fuel balance, with recovery to be reviewed in a later period after more information is available regarding various claims associated with the ANO stator incident. The APSC approved Entergy Arkansas’s request in February 2014. In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In that docket, the APSC approved a settlement agreement agreed upon by the parties, including a provision that requires Entergy Arkansas to initiate a docket for the purpose of recovering funds currently withheld from rates and related to the stator incident, including the $65.9 million of deferred fuel and purchased energy costs previously noted, subject to certain timelines and conditions set forth in the settlement agreement. See the “ ANO Damage, Outage, and NRC Reviews ” section in Note 8 to the financial statements for further discussion of the ANO stator incident.

In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March 2017 recommending that the redetermined rate be implemented with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.

Entergy Louisiana

Entergy Louisiana recovers electric fuel and purchased power costs for the billing month based upon the level of such costs incurred two months prior to the billing month. Entergy Louisiana’s purchased gas adjustments include estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.

In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings.  The audit included a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009.  The LPSC staff issued its audit report in January 2013.  The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million , plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates.  The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. In October 2016 the LPSC staff filed testimony affirming the recommendation in its audit report on the lone remaining issue that nuclear dry fuel storage costs should be realigned to base rates. The parties agreed to remove that remaining issue to a separate docket because the same issue was outstanding in the Entergy Gulf States Louisiana audit for the same time period. In November 2016 the LPSC approved the resolution of this audit and the creation of a new docket for the resolution of the proper method of recovery for nuclear dry fuel storage costs. In December 2016 the LPSC opened a new docket in order to resolve the issue regarding the proper methodology for the recovery of nuclear dry fuel storage costs. In October 2017 the LPSC approved the continued recovery of the nuclear dry fuel storage costs through the fuel adjustment clause, resolving the open issue in the audit.

In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates.  The audit included a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009.  In March 2016 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million , plus interest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustment clause to base rates. In September 2016 the LPSC staff filed testimony stating that it was no longer recommending a disallowance of $3.4 million of the $8.6 million discussed above, but otherwise maintained positions from its report. Subsequently, the parties entered into a settlement, which was approved by the LPSC in November 2016. The settlement recognized the dry cask storage recovery method issue, which was addressed in the separate proceeding approved by the LPSC in October 2017, provided for a refund of $5 million , which was made to legacy Entergy Gulf States Louisiana customers in December 2016, and resolved all other issues raised in the audit.

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In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery commenced in July 2015. No report of audit has been issued.

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery commenced in July 2015. No report of audit has been issued.

In June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. In recognition of the business combination that occurred in 2015, the audit notice was issued to Entergy Louisiana and will also include a review of charges to legacy Entergy Gulf States Louisiana customers prior to the business combination. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2014 through 2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the period from 2012 through 2015. Discovery commenced in March 2017. No report of audit has been issued.

Due to higher fuel costs for the operating month of January 2018 resulting in part from recent cold weather, higher Henry Hub prices, and an increase in total fuel and purchased power costs, Entergy Louisiana plans to cap the average fuel adjustment charge to be billed in March 2018 at $0.03060 per kWh and to defer billing of all fuel costs in excess of the capped amounts by including such costs in the over- or under-recovery account.

Entergy Mississippi

Entergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted annually to reflect accumulated over- or under-recoveries.  Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.

Entergy Mississippi had a deferred fuel over-recovery balance of $58.3 million as of May 31, 2015, along with an under-recovery balance of $12.3 million under the power management rider. Pursuant to those tariffs, in July 2015, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider to flow through to customers the approximately $46 million net over-recovery over a six-month period. In August 2015, the MPSC approved the interim adjustments effective with September 2015 bills. In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected through January 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC further ordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015 Entergy Mississippi should file a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order, Entergy Mississippi submitted a revised fuel factor. Additionally, because Entergy Mississippi’s projected over-recovery balance for the period ending January 31, 2016 was $68 million , in February 2016, Entergy Mississippi filed for another interim adjustment to the energy cost factor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC in February 2016 effective for April 2016 bills.

In November 2016, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included an over-recovery of less than $2 million as of September 30, 2016. In January 2017 the MPSC approved the annual factor effective with February 2017 bills. Also in January 2017 the MPSC certified to the Mississippi Legislature the audit reports of its independent auditors for the fuel year ending September 30, 2016. In its order, the MPSC expressly reserved the right to review and determine the recoverability of any and all purchased power expenditures made during fiscal year 2016. The MPSC hired independent auditors to conduct an annual operations audit and a financial audit. The independent auditors

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issued their audit reports in December 2017. The audit reports included several recommendations for action by Entergy Mississippi but did not recommend any cost disallowances. In January 2018 the MPSC certified the audit reports to the Mississippi Legislature. In November 2017 the Public Utilities Staff separately engaged a consultant to review the outage at the Grand Gulf Nuclear Station that began in 2016. The review is currently in progress.

In November 2017, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included an under-recovery of approximately $61.5 million as of September 30, 2017. Entergy Mississippi proposed a two-tiered energy cost factor designed to promote overall rate stability throughout 2018 particularly during the summer months. In January 2018 the MPSC approved the proposed energy cost factors effective for February 2018 bills.

Mississippi Attorney General Complaint

The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution.  The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand.  Entergy believes the complaint is unfounded.  In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S. District Court in Jackson, Mississippi.  The Mississippi attorney general moved to remand the matter to state court.  In August 2012 the District Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.

The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act.  In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the Attorney General’s complaint.  In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings.

In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not considered “mass actions” under the Class Action Fairness Act, so as to establish federal subject matter jurisdiction. One day later the Attorney General renewed his motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies responded to that motion reiterating the additional grounds asserted for federal question jurisdiction, and the District Court held oral argument on the renewed motion to remand in February 2014. In April 2015 the District Court entered an order denying the renewed motion to remand, holding that the District Court has federal question subject matter jurisdiction. The Attorney General appealed to the U.S. Fifth Circuit Court of Appeals the denial of the motion to remand. In July 2015 the Fifth Circuit issued an order denying the appeal, and the Attorney General subsequently filed a petition for rehearing of the request for interlocutory appeal, which was also denied. In December 2015 the District Court ordered that the parties submit to the court undisputed and disputed facts that are material to the Entergy defendants’ motion for judgment on the pleadings, as well as supplemental briefs regarding the same. Those filings were made in January 2016.

In September 2016 the Attorney General filed a mandamus petition with the U.S. Fifth Circuit Court of Appeals in which the Attorney General asked the Fifth Circuit to order the chief judge to reassign this case to another judge. In September 2016 the District Court denied the Entergy companies’ motion for judgment on the pleadings. The Entergy companies filed a motion seeking to amend the District Court’s order denying the Entergy companies’ motion for judgment on the pleadings and allowing an interlocutory appeal. In October 2016 the Fifth Circuit granted the Attorney General’s motion for writ of mandamus and directed the chief judge to assign the case to a new judge. The case was reassigned in October 2016. In January 2017 the District Court denied the Entergy companies’ motion to amend the order denying the motion for judgment on the pleadings. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery is currently in progress.

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Entergy New Orleans

Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges.
 
Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.

Due to higher fuel costs associated in part with the extended Grand Gulf outage and the partially simultaneous Union Power Block 1 planned outage, for the December 2016, January 2017, and February 2017 billing months, the City Council authorized Entergy New Orleans to cap the fuel adjustment charge billed to customers at $0.035 per kWh and to defer billing of all fuel costs in excess of the capped amount by including such costs in the over- or under-recovery account.

Due to higher fuel costs for the operating month of January 2018 resulting in part from recent cold weather, higher Henry Hub prices, and an increase in total fuel and purchased power costs associated in part with certain plant outages, Entergy New Orleans has proposed to cap the fuel adjustment charge to be billed in March 2018 to non-transmission Entergy New Orleans legacy customers and Entergy New Orleans Algiers customers at $0.035323 per kWh and $0.025446 per kWh, respectively. Entergy New Orleans has also proposed to cap the fuel adjustment charge to be billed in March 2018 for Entergy New Orleans legacy transmission customers at $0.034609 per kWh and to defer billing of all fuel costs in excess of the capped amount by including such costs in the over- or under-recovery account.

Entergy Texas

Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including interest, not recovered in base rates.   Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix.  The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.
        
In August 2014, Entergy Texas filed an application seeking PUCT approval to implement an interim fuel refund of approximately $24.6 million for over-collected fuel costs incurred during the months of November 2012 through April 2014. This refund resulted from (i) applying $48.6 million in bandwidth remedy payments that Entergy Texas received in May 2014 related to the June - December 2005 period to Entergy Texas’s $8.7 million under-recovered fuel balance as of April 30, 2014 and (ii) netting that fuel balance against the $15.3 million bandwidth remedy payment that Entergy Texas made related to calendar year 2013 production costs. Also in August 2014, Entergy Texas filed an unopposed motion for interim rates to implement these refunds for most customers over a two-month period commencing with September 2014. The PUCT issued its order approving the interim relief in August 2014 and Entergy Texas completed the refunds in October 2014. Parties intervened in this matter, and all parties agreed that the proceeding should be bifurcated such that the proposed interim refund would become final in a separate proceeding, which refund was approved by the PUCT in March 2015.   In July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers an additional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs.  In October 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments be refunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in Federal District Court for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. The pending appeals did not stay the PUCT’s decision. In April 2016, Entergy Texas filed with the PUCT an application to refund to customers approximately $56.2 million . The refund resulted from (i) $41.8 million of fuel cost recovery over-collections through February 2016, (ii) the $10.9 million in bandwidth remedy payments,

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discussed above, that Entergy Texas received related to calendar year 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 production costs. In June 2016, Entergy Texas filed an unopposed settlement agreement that added additional over-recovered fuel costs for the months of March and April 2016. The settlement resulted in a $68 million refund. The ALJ approved the refund on an interim basis to be made to most customers over a four-month period beginning with the first billing cycle of July 2016. In July 2016 the PUCT issued an order approving the interim refund. The federal appeal of the PUCT’s January 2016 decision was heard in December 2016, and the Federal District Court granted Entergy Texas’s requested relief. In January 2017 the PUCT and an intervenor filed petitions for appeal to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018, and a decision is pending. The State District Court appeal of the PUCT’s January 2016 decision also remains pending.

In July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013 through March 31, 2016. Under a recent PUCT rule change, a fuel reconciliation is required to be filed at least once every three years and outside of a base rate case filing. During the reconciliation period, Entergy Texas incurred approximately $1.77 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texas estimated an over-recovery balance of approximately $19.3 million , including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning Apri1 2016. Entergy Texas also noted, however, that the estimated $19.3 million over collection was being refunded to customers as a portion of the interim fuel refund beginning with the first billing cycle of July 2016, discussed above. Entergy Texas also requested a prudence finding for each of the fuel-related contracts and arrangements entered into or modified during the reconciliation period that have not been reviewed by the PUCT in a prior proceeding. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as of November 30, 2016, to most customers beginning April 2017 through June 2017. This settlement was developed concurrently with the stipulation and settlement agreement in the 2016 transmission cost recovery factor rider amendment discussed below, and the terms and conditions in both settlements are interdependent. The fuel reconciliation settlement was approved by the PUCT in March 2017 and the refunds were made.

In June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds flowed through bills for the months of July 2017 through September 2017. The fuel refund was approved by the PUCT in August 2017.

In December 2017, Entergy Texas filed an application for a fuel refund of approximately $30.5 million for the months of May 2017 through October 2017. Also in December 2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers, the refunds flowed through bills beginning January 2018 and will continue through March 2018. A final decision in this matter remains pending.
    
Retail Rate Proceedings

Filings with the APSC (Entergy Arkansas)

Retail Rates

2015 Base Rate Filing
 
In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notified the APSC of Entergy Arkansas’s intent to implement a forward test year formula rate plan pursuant to Arkansas legislation passed in 2015, and requested a retail rate increase of $268.4 million , with a net increase in revenue of $167 million . The filing requested a 10.2% return on common equity. In September 2015 the APSC staff and intervenors filed direct testimony, with the APSC staff recommending a revenue requirement of $217.9 million and a 9.65% return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors

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in the rate case filed with the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 million with a net increase in revenue of approximately $133 million ; an authorized return on common equity of 9.75% ; and a formula rate plan tariff that provides a +/- 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rate increase is related to Entergy Arkansas’s acquisition in March 2016 of Union Power Station Power Block 2 for a base purchase price of $237 million . The settlement agreement also provided for amortization over a 10-year period of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance. A settlement hearing was held in January 2016. In February 2016 the APSC approved the settlement with one exception that reduced the retail rate increase proposed in the settlement by $5 million . The settling parties agreed to the APSC modifications in February 2016. The new rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliance filing regarding the new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. The interim base rate adjustment surcharge was designed to recover a total of $21.1 million over the nine-month period from April 2016 through December 2016.

2016 Formula Rate Plan Filing
    
In July 2016, Entergy Arkansas filed with the APSC its 2016 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2017 test period to be below the formula rate plan bandwidth. The filing requested a $67.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75% . In October 2016, Entergy Arkansas filed with the APSC revised formula rate plan attachments with an updated request for a $54.4 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors, as well as three additional adjustments identified as appropriate by Entergy Arkansas. In November 2016 a hearing was held and the APSC issued an order directing the parties to brief certain issues. In December 2016 the APSC approved the settlement agreement and the $54.4 million revenue requirement increase with approximately $25 million of the $54.4 million revenue requirement subject to possible future adjustment and refund to customers with interest. The APSC requested supplemental information for some of Entergy Arkansas’s requested nuclear expenditures. In December 2016 the APSC approved Entergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle of January 2017. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit the supplemental information requested by the APSC in conjunction with its 2017 formula rate plan filing, which was subsequently made in July 2017 and is discussed below. In May 2017 the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplemental information on a concurrent schedule with the 2017 formula rate plan filing. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and recovery of the 2017 and 2018 nuclear costs.

2017 Formula Rate Plan Filing

In July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate plan bandwidth.  The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75% .  Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and the projected annual revenue requirement increase exceeded the four percent, resulting in a proposed increase for the 2017 formula rate plan of $70.9 million . In October 2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments that projected a $126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on a revision to the four percent constraint calculation. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and

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providing for recovery of the 2017 and 2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and the $71.1 million revenue requirement increase, as well as Entergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle of January 2018.
 
Internal Restructuring

In November 2017, Entergy Arkansas filed an application with the APSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval by the APSC, the FERC, and the NRC. Entergy Arkansas also filed a notice with the Missouri Public Service Commission in December 2017 out of an abundance of caution, although Entergy Arkansas does not serve any retail customers in Missouri. If the APSC approves the restructuring by September 1, 2018, and the restructuring closes on or before December 1, 2018, Entergy Arkansas proposed in its application to credit retail customers $66 million over six years, beginning in 2019. In February 2018, Entergy Arkansas filed supplemental testimony reducing the proposed retail customer credits to $39.6 million over six years. If the APSC, the FERC, and the NRC approvals are obtained, Entergy Arkansas expects the restructuring will be consummated on or before December 1, 2018.
It is currently contemplated that Entergy Arkansas would undertake a multi-step restructuring, which would include the following:
•
Entergy Arkansas would redeem its outstanding preferred stock at the aggregate redemption price of approximately $32.7 million , which includes call premiums, plus accumulated and unpaid dividends, if any.
•
Entergy Arkansas would convert from an Arkansas corporation to a Texas corporation.
•
Under the Texas Business Organizations Code (TXBOC), Entergy Arkansas will allocate substantially all of its assets to a new subsidiary, Entergy Arkansas Power, LLC, a Texas limited liability company (Entergy Arkansas Power), and Entergy Arkansas Power will assume substantially all of the liabilities of Entergy Arkansas, in a transaction regarded as a merger under the TXBOC. Entergy Arkansas will remain in existence and hold the membership interests in Entergy Arkansas Power.
•
Entergy Arkansas will contribute the membership interests in Entergy Arkansas Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy Arkansas Power will be a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
•
Entergy Arkansas will change its name to Entergy Utility Property, Inc., and Entergy Arkansas Power will then change its name to Entergy Arkansas, LLC.

Upon the completion of the restructuring, Entergy Arkansas, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy Arkansas. Entergy Arkansas may modify or supplement the steps to be taken to effectuate the restructuring.
Filings with the LPSC (Entergy Louisiana)

Retail Rates - Electric

2014 Formula Rate Plan Filing

In connection with the approval of the business combination of Entergy Gulf States Louisiana and Entergy Louisiana, the LPSC authorized the filing of a single, joint, formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. The joint evaluation report was filed in September 2015 and reflected an earned return on common equity of 9.09% . As such, no adjustment to base formula rate plan revenue was required. The following adjustments were required under the formula rate plan, however: a decrease in the additional capacity mechanism for Entergy Louisiana of $17.8 million ; an increase in the additional capacity mechanism for Entergy Gulf States Louisiana of $4.3 million ; and a reduction of $5.5 million to the MISO cost recovery

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mechanism to collect approximately $35.7 million on a combined-company basis. Under the order approving the business combination, following completion of the prescribed review period, rates were implemented with the first billing cycle of December 2015, subject to refund. See “ Entergy Louisiana and Entergy Gulf States Louisiana Business Combination ” below for further discussion of the business combination. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.

2015 Formula Rate Plan Filing

In May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. The evaluation report reflected an earned return on common equity of 9.07% . As such, no adjustment to base formula rate plan revenue was required. The following other adjustments, however, were required under the formula rate plan: an increase in the legacy Entergy Louisiana additional capacity mechanism of $14.2 million ; a separate increase in legacy Entergy Louisiana revenue of $10 million primarily to reflect the effects of the termination of the System Agreement; an increase in the legacy Entergy Gulf States Louisiana additional capacity mechanism of $0.5 million ; a decrease in legacy Entergy Gulf States Louisiana revenue of $58.7 million primarily to reflect the effects of the termination of the System Agreement; and an increase of $11 million to the MISO cost recovery mechanism. Rates were implemented with the first billing cycle of September 2016, subject to refund. Following implementation of the as-filed rates in September 2016, there were several interim updates to Entergy Louisiana’s formula rate plan, including the one submitted in December 2016, reflecting implementation of the settlement of the Waterford 3 replacement steam generator project prudence review described below. In June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of the May 2016 evaluation report, interim updates, and corresponding proceedings with no changes to rates already implemented.

Extension of MISO Cost Recovery Mechanism Rider

In November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding did not oppose an extension for this period of time. In July 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was approved.

2016 Formula Rate Plan Filing

In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflected an earned return on common equity of 9.84% . As such, no adjustment to base formula rate plan revenue was required. Adjustments, however, were required under the formula rate plan; the 2016 formula rate plan evaluation report showed a decrease in formula rate plan revenue of approximately $16.9 million , comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million , a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million , and a decrease in incremental formula rate plan revenue of $3.7 million . Additionally, the formula rate plan evaluation report called for a decrease of $40.5 million in the MISO cost recovery revenue requirement from the present level of $46.8 million to $6.3 million . Rates reflecting these adjustments were implemented with the first billing cycle of September 2017, subject to refund. In September 2017 the LPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report were required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.

Formula Rate Plan Extension Request

In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications to its terms.  Those modifications include: a one-time resetting of

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base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers.  Entergy Louisiana requested that the LPSC consider its request on an expedited basis, in an effort to maintain Entergy Louisiana’s current cycle for implementing rate adjustments, i.e., September 2018, without the need for filing a full base rate case proceeding. Several parties have intervened in the proceeding and all parties have been participating in settlement discussions.

Waterford 3 Replacement Steam Generator Project

Following the completion of the Waterford 3 replacement steam generator project, the LPSC undertook a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs. In July 2014 the LPSC staff filed testimony recommending potential project and replacement power cost disallowances of up to $71 million , citing a need for further explanation or documentation from Entergy Louisiana.  An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent.  Entergy Louisiana provided further documentation and explanation requested by the LPSC staff. An evidentiary hearing was held in December 2014. At the hearing the parties maintained the positions reflected in pre-filed testimony. Entergy Louisiana believed that the replacement steam generator costs were prudently incurred and applicable legal principles supported their recovery in rates.  Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty at the time associated with the resolution of the prudence review. In December 2015 the ALJ issued a proposed recommendation, which was subsequently finalized, concluding that Entergy Louisiana prudently managed the Waterford 3 replacement steam generator project, including the selection, use, and oversight of contractors, and could not reasonably have anticipated the damage to the steam generators. Nevertheless, the ALJ concluded that Entergy Louisiana was liable for the conduct of its contractor and subcontractor and, therefore, recommended a disallowance of $67 million in capital costs. Additionally, the ALJ concluded that Entergy Louisiana did not sufficiently justify the incurrence of $2 million in replacement power costs during the replacement outage. Although the ALJ’s recommendation had not yet been considered by the LPSC, after considering the progress of the proceeding in light of the ALJ recommendation, Entergy Louisiana recorded in the fourth quarter 2015 approximately $77 million in charges, including a $45 million asset write-off and a $32 million regulatory charge, to reflect that a portion of the assets associated with the Waterford 3 replacement steam generator project was no longer probable of recovery. Entergy Louisiana maintained that the ALJ’s recommendation contained significant factual and legal errors.

In October 2016 the parties reached a settlement in this matter. The settlement was approved by the LPSC in December 2016. The settlement effectively provided for an agreed-upon disallowance of $67 million of plant, which had been previously written off by Entergy Louisiana, as discussed above. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made to customers in January 2017. Of the $71 million of refunds, $68 million was credited to customers through Entergy Louisiana’s formula rate plan, outside of sharing, and $3 million through its fuel adjustment clause. Entergy Louisiana had previously recorded a provision of $48 million for this refund. The previously-recorded provision included the cumulative revenues recorded through December 2016 related to the $67 million of disallowed plant. An additional regulatory charge of $23 million was recorded in fourth quarter 2016 to reflect the effects of the settlement. The settlement also provided that Entergy Louisiana could retain the value associated with potential service credits agreed to by the project contractor, to the extent they are realized in the future. Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May 2017 and the LPSC accepted the joint report of proceedings resolving the matter.


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Ninemile 6

In July 2014, Entergy Gulf States Louisiana and Entergy Louisiana filed an unopposed stipulation with the LPSC, which was subsequently approved, that estimated a first year revenue requirement associated with Ninemile 6 and provided a mechanism to update the revenue requirement as the in-service date approached. In late-December 2014, roughly contemporaneous with the unit's placement in service, a final updated estimated revenue requirement of $26.8 million for Entergy Gulf States Louisiana and $51.1 million for Entergy Louisiana was filed. The December 2014 estimate formed the basis of rates implemented effective with the first billing cycle of January 2015. In July 2015, Entergy Louisiana submitted to the LPSC a compliance filing including an estimate at completion, inclusive of interconnection costs and transmission upgrades, of approximately $648 million , or $76 million less than originally estimated, along with other project details and supporting evidence, to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimony filed by the LPSC staff generally supported the prudence of the management of the project and recovery of the costs incurred to complete the project. The LPSC staff had questioned the warranty coverage for one element of the project. In October 2016 all parties agreed to a stipulation providing that 100% of Ninemile 6 construction costs was prudently incurred and is eligible for recovery from customers, but reserving the LPSC’s rights to review the prudence of Entergy Louisiana’s actions regarding one element of the project. This stipulation was approved by the LPSC in January 2017.

Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana Plants

In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC for approval of the acquisition and cost recovery of two power blocks of the Union Power Station for an expected base purchase price of approximately $237 million per power block, subject to adjustments. In September 2015, Entergy Gulf States Louisiana agreed to settlement terms with all parties for Entergy Gulf States Louisiana’s purchase of the two power blocks. In October 2015 the LPSC voted unanimously to approve the uncontested settlement which finds, among other things, that acquisition of Power Blocks 3 and 4 is in the public interest and, therefore, prudent. The business combination of Entergy Gulf States Louisiana and Entergy Louisiana received regulatory approval and closed in October 2015 making Entergy Louisiana the named purchaser of Power Blocks 3 and 4 of the Union Power Station. In March 2016, Entergy Louisiana acquired Power Blocks 3 and 4 of Union Power Station for an aggregate purchase price of approximately $474 million and implemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.

As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1.  In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4.  No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three-year term permitted by MISO. An evidentiary hearing was held in August 2017 and post-hearing briefs were submitted in October 2017. A decision is expected in 2018.

Retail Rates - Gas  

In accordance with the settlement of Entergy Gulf States Louisiana’s gas rate stabilization plan for the test year ended September 30, 2012, in August 2014, Entergy Gulf States Louisiana submitted for consideration a proposal for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment and relocation projects mandated by local governments. After review by the LPSC staff and inclusion of certain customer safeguards required by the LPSC staff, in December 2014, Entergy Gulf States Louisiana and the LPSC staff submitted

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a joint settlement for implementation of an accelerated gas pipe replacement program providing for the replacement of approximately 100 miles of pipe over the next ten years, as well as relocation of certain existing pipe resulting from local government-related infrastructure projects, and for a rider to recover the investment associated with these projects. The rider allows for recovery of approximately $65 million over ten years. The rider recovery will be adjusted on a quarterly basis to include actual investment incurred for the prior quarter and is subject to the following conditions, among others: a ten-year term; application of any earnings in excess of 10.45% as an offset to the revenue requirement of the infrastructure rider; adherence to a specified spending plan, within plus or minus 20% annually; annual filings comparing actual versus planned rider spending with actual spending and explanation of variances exceeding 10% ; and an annual true-up. The joint settlement was approved by the LPSC in January 2015. Implementation of the infrastructure rider commenced with bills rendered on and after the first billing cycle of April 2015.

2014 Rate Stabilization Plan Filing

In January 2015, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2014.  The filing showed an earned return on common equity of 7.20% , which resulted in a $706 thousand rate increase.  In April 2015 the LPSC issued findings recommending two adjustments to Entergy Gulf States Louisiana’s as-filed results, and an additional recommendation that did not affect the results. The LPSC staff’s recommended adjustments increase the earned return on equity for the test year to 7.24% . Entergy Gulf States Louisiana accepted the LPSC staff’s recommendations and a revenue increase of $688 thousand was implemented with the first billing cycle of May 2015.

2015 Rate Stabilization Plan Filing

In January 2016, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2015. The filing showed an earned return on common equity of 10.22% , which is within the authorized bandwidth, therefore requiring no change in rates. In March 2016 the LPSC staff issued its report stating that the 2015 gas rate stabilization plan filing was in compliance with the exception of several issues that required additional information, explanation, or clarification for which the LPSC staff had reserved the right to further review. In July 2016 the parties to the proceeding filed an unopposed joint report and motion for entry of order accepting the report that indicated no outstanding issues remained in the filing.

In February 2016, Entergy Louisiana filed a motion requesting to extend the term of the gas rate stabilization plan in substantially similar form for an additional three-year term and included a request for sharing of non-jurisdictional compressed natural gas revenues. Following discovery and the filing of testimony by the LPSC staff, Entergy Louisiana and the LPSC submitted a joint motion for hearing an uncontested stipulated settlement resolving the proceeding. A hearing on the stipulation was held in November 2016. The ALJ issued a report of proceedings that was presented with the parties’ stipulation to the LPSC for consideration. The stipulation approving Entergy Louisiana’s requested extension of the rate stabilization plan was approved by the LPSC in December 2016.

2016 Rate Stabilization Plan Filing

In January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37% . As part of the original filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in deferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million . Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff confirmed Entergy Louisiana’s filing was consistent with the principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization

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plan pending LPSC consideration in a separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the first billing cycle of May 2017.

In connection with the joint report of proceedings accepted by the LPSC, in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover through the extraordinary cost provision of the gas rate stabilization plan the deferred operation and maintenance expenses of $1.4 million incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. The LPSC staff submitted its direct testimony in the proceeding recommending recovery of $0.9 million . Entergy Louisiana filed rebuttal testimony responding to the LPSC staff’s recommendation. The procedural schedule was suspended to allow the parties to engage in settlement negotiations, and in February 2018 the LPSC staff and Entergy Louisiana filed an unopposed settlement. If approved by the LPSC, the settlement would provide for Entergy Louisiana to recover, over ten years, the approximately $1.4 million in deferred operation and maintenance expense and related carrying charges. The settlement further provides for recovery to commence in May 2018.

2017 Rate Stabilization Plan Filing

In January 2018, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for test year ended September 30, 2017.  The filing of the evaluation report for the test year 2017 reflected an earned return on common equity of 9.06% .  This earned return is below the earnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million .  Due to the enactment in late-December 2017 of the Tax Cuts and Jobs Act, Entergy Louisiana did not have adequate time to reflect the effects of this tax legislation in the rate stabilization plan.  As a result, Entergy Louisiana will file a supplement to the January 2018 evaluation report to reflect, among other things, a 21% federal corporate income tax rate.  Any rate change resulting from the revised rate stabilization plan will become effective in rates in May 2018.

Filings with the MPSC (Entergy Mississippi)

Formula Rate Plan Filings

In March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showing Entergy Mississippi’s projected earned return for the 2016 calendar year to be below the formula rate plan bandwidth. The filing showed a $32.6 million rate increase was necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96% , within the formula rate plan bandwidth. In June 2016 the MPSC approved Entergy Mississippi’s joint stipulation with the Mississippi Public Utilities Staff. The joint stipulation provided for a total revenue increase of $23.7 million . The revenue increase includes a $19.4 million increase through the formula rate plan, resulting in a return on common equity point of adjustment of 10.07% . The revenue increase also includes $4.3 million in incremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider. The revenue increase and ad valorem tax adjustment rider were effective with the July 2016 bills.

In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, which resulted in no change in rates.


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Filings with the City Council (Entergy New Orleans)

Retail Rates

See “ Algiers Asset Transfer ” below for discussion of the Algiers asset transfer. As a provision of the settlement agreement approved by the City Council in May 2015 providing for the Algiers asset transfer, it was agreed that, with limited exceptions, no action may be taken with respect to Entergy New Orleans’s base rates until rates are implemented from a base rate case that must be filed for its electric and gas operations in 2018. This provision eliminated the formula rate plan applicable to Algiers operations. The limited exceptions included continued implementation of the then-remaining two years of the four-year phased-in rate increase for the Algiers area and certain exceptional cost increases or decreases in the base revenue requirement. An additional provision of the settlement agreement allowed for continued recovery of the revenue requirement associated with the capacity and energy from Ninemile 6 received by Entergy New Orleans under a power purchase agreement with Entergy Louisiana (Algiers PPA). The settlement authorized Entergy New Orleans to recover the remaining revenue requirement related to the Algiers PPA through base rates charged to Algiers customers. The settlement also provided for continued implementation of the Algiers MISO recovery rider.

In addition to the Algiers PPA, Entergy New Orleans has a separate power purchase agreement with Entergy Louisiana for 20% of the capacity and energy from Ninemile 6 (Ninemile PPA), which commenced operation in December 2014. Initially, recovery of the non-fuel costs associated with the Ninemile PPA was authorized through a special Ninemile 6 rider billed only to Entergy New Orleans customers outside of Algiers.

In August 2015, Entergy New Orleans filed an application with the City Council seeking authorization to proceed with the purchase of Union Power Block 1, with an expected base purchase price of approximately $237 million , subject to adjustments, and seeking approval of the recovery of the associated costs. In November 2015 the City Council issued written resolutions and an order approving an agreement in principle between Entergy New Orleans and City Council advisors providing that the purchase of Union Power Block 1 and related assets by Entergy New Orleans is prudent and in the public interest. The City Council authorized expansion of the terms of the purchased power and capacity acquisition cost recovery rider to recover the non-fuel purchased power expense from Ninemile 6, the revenue requirement associated with the purchase of Power Block 1 of the Union Power Station, and a credit to customers of $400 thousand monthly beginning June 2016 in recognition of the decrease in other operation and maintenance expenses that would result with the deactivation of Michoud Units 2 and 3. In March 2016, Entergy New Orleans purchased Power Block 1 of the Union Power Station for approximately $237 million and initiated recovery of these costs with March 2016 bills. In July 2016, Entergy New Orleans and the City Council Utility Committee agreed to a temporary increase in the Michoud credit to customers to a total of $1.4 million monthly for August 2016 through December 2016.

A 2008 rate case settlement included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs.  The rate settlement provided an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provided a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs. In January 2015 the City Council approved funding for the Energy Smart program from April 2015 through March 2017 using the remainder of the approximately $12.8 million of 2014 rough production cost equalization funds, with any remaining costs being recovered through the fuel adjustment clause. This funding methodology was modified in November 2015 when the City Council directed Entergy New Orleans to use a combination of guaranteed customer savings related to a prior agreement with the City Council and rough production cost equalization funds to cover program costs prior to recovering any costs through the fuel adjustment clause. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. In September 2017, Entergy New Orleans filed a supplemental plan and proposed several options for an interim cost recovery mechanism necessary to recover program

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costs during the period between when existing funds directed to Energy Smart programs are depleted (estimated to be June 2018) and when new rates from the anticipated 2018 combined rate case, which will include a cost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). Entergy New Orleans requested that the City Council approve a cost recovery mechanism prior to June 2018. In December 2017 the City Council approved an energy efficiency cost recovery rider as an interim funding mechanism for Energy Smart, subject to verification that no additional funding sources exist.

Internal Restructuring

In July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New Orleans, Inc. to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring was subject to regulatory review and approval by the City Council and the FERC. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans would credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Entergy New Orleans began crediting retail customers in June 2017. In June 2017 the FERC approved the transaction and, pursuant to the agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020.

In November 2017, pursuant to the agreement in principle, Entergy New Orleans undertook a multi-step restructuring, including the following:

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Entergy New Orleans, Inc. redeemed its outstanding preferred stock at a price of approximately $21 million , which included a call premium of approximately $819,000 , plus any accumulated and unpaid dividends.
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Entergy New Orleans, Inc. converted from a Louisiana corporation to a Texas corporation.
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Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans, Inc. allocated substantially all of its assets to a new subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), and Entergy New Orleans Power assumed substantially all of the liabilities of Entergy New Orleans, Inc., in a transaction regarded as a merger under the TXBOC. Entergy New Orleans, Inc. remained in existence and held the membership interests in Entergy New Orleans Power.
•
Entergy New Orleans, Inc. contributed the membership interests in Entergy New Orleans Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy New Orleans Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.

In December 2017, Entergy New Orleans, Inc. changed its name to Entergy Utility Group, Inc., and Entergy New Orleans Power then changed its name to Entergy New Orleans, LLC. Entergy New Orleans, LLC holds substantially all of the assets, and has assumed substantially all of the liabilities, of Entergy New Orleans, Inc. The restructuring was accounted for as a transaction between entities under common control.

Filings with the PUCT and Texas Cities (Entergy Texas)

Retail Rates

2011 Rate Case

In November 2011, Entergy Texas filed a rate case requesting a $112 million base rate increase reflecting a 10.6% return on common equity based on an adjusted June 2011 test year.  The rate case also proposed a purchased power recovery rider.  On January 12, 2012, the PUCT voted not to address the purchased power recovery rider in the rate case, but the PUCT voted to set a baseline in the rate case proceeding that would be applicable if a purchased

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power capacity rider is approved in a separate proceeding.  In April 2012 the PUCT Staff filed direct testimony recommending a base rate increase of $66 million and a 9.6% return on common equity.  The PUCT Staff, however, subsequently filed a statement of position in the proceeding indicating that it was still evaluating the position it would ultimately take in the case regarding Entergy Texas’s recovery of purchased power capacity costs and Entergy Texas’s proposal to defer its MISO transition expenses.  In April 2012, Entergy Texas filed rebuttal testimony indicating a revised request for a $105 million base rate increase.  A hearing was held in late-April through early-May 2012.

In September 2012 the PUCT issued an order approving a $28 million rate increase, effective July 2012.  The order included a finding that “a return on common equity (ROE) of 9.80 percent will allow [Entergy Texas] a reasonable opportunity to earn a reasonable return on invested capital.”  The order also provided for increases in depreciation rates and the annual storm reserve accrual.  The order also reduced Entergy Texas’s proposed purchased power capacity costs, stating that they are not known and measurable; reduced Entergy Texas’s regulatory assets associated with Hurricane Rita; excluded from rate recovery capitalized financially-based incentive compensation; included $1.6 million of MISO transition expense in base rates; and reduced Entergy’s Texas’s fuel reconciliation recovery by $4 million because the PUCT disagreed with the line-loss factor used in the calculation.  After considering the progress of the proceeding in light of the PUCT order, Entergy Texas recorded in the third quarter 2012 an approximate $24 million charge to recognize that assets associated with Hurricane Rita, financially-based incentive compensation, and fuel recovery are no longer probable of recovery.  Entergy Texas believed that it was entitled to recover these prudently incurred costs, however, and it filed a motion for rehearing regarding these and several other issues in the PUCT’s order on October 4, 2012.  Several other parties also filed motions for rehearing of the PUCT’s order.  The PUCT subsequently denied rehearing of substantive issues.  Several parties, including Entergy Texas, appealed various aspects of the PUCT’s order to the Travis County District Court. A hearing was held in July 2014. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced above, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issued its opinion affirming the District Court’s decision on all points. Entergy Texas petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. In September 2017 the Texas Supreme Court denied the petitions for review. Entergy Texas filed a motion for rehearing of the Texas Supreme Court’s denial of the petition for review. In January 2018 the Texas Supreme Court denied Entergy Texas’s motion for rehearing.

Distribution cost recovery factor (DCRF) rider

In September 2015, Entergy Texas filed to amend its DCRF rider. Entergy Texas requested an increase in recovery under the rider of $6.5 million , for a total collection of $10.1 million annually from retail customers. In October 2015 intervenors and PUCT staff filed testimony opposing, in part, Entergy Texas’s request. In November 2015, Entergy Texas and the parties filed an unopposed settlement agreement and supporting documents. The settlement established an annual revenue requirement of $8.65 million for the amended DCRF rider, with the resulting rates effective for usage on and after January 1, 2016. The PUCT approved the settlement agreement in February 2016.

In June 2017, Entergy Texas filed an application to amend its DCRF rider by increasing the total collection from $8.65 million to approximately $19 million . In July 2017, Entergy Texas, the PUCT, and the two other parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million , with the resulting rates effective for usage no later than October 1, 2017. In September 2017 the PUCT issued its final order approving the unopposed stipulation and settlement agreement. The amended DCRF rider rates became effective for usage on and after September 1, 2017.
    
Transmission cost recovery factor (TCRF) rider

In September 2015, Entergy Texas filed for a TCRF rider requesting a $13 million increase, incremental to base rates. Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among other things, MISO charges, vegetation management costs, and bad debt expenses

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that would reduce the requested increase by approximately $2 million . In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request be reduced by an additional $3.4 million to account for load growth since base rates were last set. A hearing on the merits was held in December 2015. In February 2016 a State Office of Administrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 million from Entergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In June 2016 the PUCT indicated that it would take up in a future rulemaking project the issue of whether a load growth adjustment should apply to a TCRF. In July 2016 the PUCT issued an order generally accepting the proposal for decision but declining to adjust the TCRF baseline in two instances as recommended by the ALJ, which resulted in a total annual allowance of approximately $10.5 million . The PUCT also ordered its staff and Entergy Texas to track all spare autotransformer transfers going forward so that it could address the appropriate accounting treatment and prudence of such transfers in Entergy Texas’s next base rate case. Entergy Texas implemented the TCRF rider beginning with September 2016 bills.

In September 2016, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider, as discussed above. In December 2016, concurrent with the 2016 fuel reconciliation stipulation and settlement agreement discussed above, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million . As discussed above, the terms of the two settlements are interdependent. The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.

Advanced Metering Infrastructure (AMI) Filings

Entergy Arkansas

In September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’s deployment of AMI is in the public interest. Entergy Arkansas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Arkansas’s modernized power grid. The filing included an estimate of implementation costs for AMI of $208 million . The filing identified a number of quantified and unquantified benefits, and Entergy Arkansas provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominal net benefit to customers of $406 million . Entergy Arkansas also sought to continue to include in rate base the remaining book value of existing meters, which was approximately $57 million at December 31, 2015, that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Arkansas proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Deployment of the communications network is expected to begin in 2018. Entergy Arkansas proposed to include the AMI deployment costs and the quantified benefits in future formula rate plan filings, and the 2018 costs were approved in the 2017 formula rate plan filing. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas Attorney General’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas filed rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement. In October 2017 the APSC issued an order finding that Entergy Arkansas’s AMI deployment is in the public interest and approving the settlement agreement subject to a minor modification. Entergy Arkansas expects to recover the undepreciated balance of its existing meters through a regulatory asset to be amortized over 15 years. Entergy Arkansas has begun discussions with the other parties to implement the items in the settlement agreement including pre-pay and time of use programs.


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Entergy Louisiana

In November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. Entergy Louisiana proposed to deploy advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Louisiana’s modernized power grid. The filing included an estimate of implementation costs for AMI of $330 million . The filing identified a number of quantified and unquantified benefits, and Entergy Louisiana provided a cost/benefit analysis showing that its combined electric and gas AMI deployment is expected to produce a nominal net benefit to customers of $607 million . Entergy Louisiana also sought to continue to include in rate base the remaining book value, approximately $92 million at December 31, 2015, of the existing electric meters and also to depreciate those assets using current depreciation rates. Entergy Louisiana proposed a 15-year useful life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. The communications network deployment is expected to begin by late-2018, after the necessary information technology infrastructure is in place. Entergy Louisiana proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019 through 2022. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. In July 2017 the LPSC approved the stipulation. Entergy Louisiana expects to recover the undepreciated balance of its existing meters through a regulatory asset to be amortized at current depreciation rates.

Entergy Mississippi

In November 2016, Entergy Mississippi filed an application seeking an order from the MPSC granting a certificate of public convenience and necessity and finding that Entergy Mississippi’s deployment of AMI is in the public interest. Entergy Mississippi proposed to replace existing meters with advanced meters that enable two-way data communication; to design and build a secure and reliable network to support such communications; and to implement support systems. AMI is intended to serve as the foundation of Entergy Mississippi’s modernized power grid. The filing included an estimate of implementation costs for AMI of $132 million . The filing identified a number of quantified and unquantified benefits, and Entergy Mississippi provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominal benefit to customers of $496 million over a 15-year period, which when netted against the costs of AMI results in $183 million of net customer benefits. Entergy Mississippi also sought to continue to include in rate base the remaining book value, approximately $56 million at December 31, 2015, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Mississippi proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019, subject to approval by the MPSC, with deployment of the communications network expected to begin in 2018. Entergy Mississippi proposed to include the AMI deployment costs and the quantified benefits in existing rate mechanisms, primarily through future formula rate plan filings and/or future energy cost recovery rider schedule re-determinations, as applicable. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.

Entergy New Orleans

In October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest.  Entergy New Orleans proposed to deploy advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems.  AMI is intended to serve as the foundation of Entergy New Orleans’s modernized power grid.  The filing included an estimate of implementation costs for AMI of $75 million . The filing identified a number of quantified and unquantified benefits, and Entergy New

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Orleans provided a cost/benefit analysis showing that its combined electric and gas AMI deployment is expected to produce a nominal net benefit to customers of $101 million .  Entergy New Orleans also sought to continue to include in rate base the remaining book value, approximately $21 million at December 31, 2015, of the existing electric meters and also to depreciate those assets using current depreciation rates.  Entergy New Orleans proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019.  Deployment of the information technology infrastructure began in 2017 and deployment of the communications network is expected to begin in 2018.  Entergy New Orleans proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019 through 2022.  The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to certain modifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In January 2018 a settlement was reached between the City Council’s advisors and Entergy New Orleans. In February 2018 the City Council approved the settlement, which deferred cost recovery to the 2018 Entergy New Orleans rate case, but also stated that an adjustment for 2018-2019 AMI costs can be filed in the rate case and that, for all subsequent AMI costs, the mechanism to be approved in the 2018 rate case will allow for the timely recovery of such costs.

Entergy Texas

In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed an application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing included an estimate of implementation costs for AMI of $132 million . The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million . Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff to recover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters. Further, Entergy Texas sought approval of fees that would be charged to customers who choose to opt out of receiving service through an advanced meter and instead receive electric service with a non-standard meter. In October 2017, Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement, permitting deployment of AMI with limited modifications. The PUCT approved the stipulation and settlement agreement in December 2017. Consistent with the approval, deployment of the communications network is expected to begin in 2018. Entergy Texas expects to recover the remaining net book value of its existing meters through a regulatory asset to be amortized at current depreciation rates.

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

Entergy Louisiana and Entergy Gulf States Louisiana filed an application with the LPSC in September 2014 seeking authorization to undertake transactions that would result in the combination of Entergy Louisiana and Entergy Gulf States Louisiana into a single public utility. An uncontested stipulated settlement (stipulated settlement) was filed with the LPSC in July 2015. Through the stipulated settlement, the parties agreed to terms upon which to recommend that the LPSC find that the business combination was in the public interest. The stipulated settlement, which was either joined, or unopposed, by all parties to the LPSC proceeding, represented a compromise of stakeholder positions and was the result of an extensive period of analysis, discovery, and negotiation. The stipulated settlement provided $107 million in guaranteed customer benefits during the first nine years following the transaction’s close. Additionally, the combined company would honor the 2013 Entergy Louisiana and Entergy Gulf States Louisiana rate case settlements, including the commitments that (1) there would be no rate increase for legacy Entergy Gulf States Louisiana customers for the 2014 test year, and (2) through the 2016 test year formula rate plan, Entergy Louisiana (as a combined entity)

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would not raise rates by more than $30 million , net of the $10 million rate increase included in the Entergy Louisiana legacy formula rate plan. The stipulated settlement also provided that Entergy Gulf States Louisiana and Entergy Louisiana would be permitted to defer certain external costs that were incurred to achieve the business combination’s customer benefits. In 2015 deferrals of $16 million for these external costs were recorded, and they are being amortized over a 10-year period. The LPSC approved the business combination in August 2015.

On October 1, 2015, the businesses formerly conducted by Entergy Louisiana and Entergy Gulf States Louisiana were combined into a single public utility. With the completion of the business combination, Entergy Louisiana holds substantially all of the assets, and has assumed the liabilities, of Entergy Louisiana and Entergy Gulf States Louisiana. The combination was accounted for as a transaction between entities under common control. See Note 3 to the financial statements for further discussion of the customer credits resulting from the business combination.

Algiers Asset Transfer (Entergy Louisiana and Entergy New Orleans)

In October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that supported the provision of service to Entergy Louisiana’s customers in Algiers. In April 2015 the FERC issued an order approving the Algiers assets transfer. In May 2015 the parties filed a settlement agreement authorizing the Algiers assets transfer and the settlement agreement was approved by a City Council resolution in May 2015. On September 1, 2015, Entergy Louisiana transferred its Algiers assets to Entergy New Orleans for a purchase price of approximately $85 million . Entergy New Orleans paid Entergy Louisiana $59.6 million , including final true-ups, from available cash and issued a note payable to Entergy Louisiana in the amount of $25.5 million .

System Agreement Cost Equalization Proceedings

Prior to its final termination in 2016, the Utility operating companies historically engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement.  Entergy Arkansas terminated its participation in the System Agreement in December 2013. Entergy Mississippi terminated its participation in the System Agreement in November 2015. The System Agreement terminated with respect to its remaining participants in August 2016.

Although the System Agreement has terminated, certain of the Utility operating companies’ retail regulators continue to pursue litigation involving the System Agreement at the FERC and in federal courts.  The proceedings include challenges to the allocation of costs as defined by the System Agreement and other matters.

In June 2005 the FERC issued a decision in System Agreement litigation that had been commenced by the LPSC, and essentially affirmed its decision in a December 2005 order on rehearing.  The decision included, among other things:

•
The FERC’s conclusion that the System Agreement no longer roughly equalizes total production costs among the Utility operating companies.
•
In order to reach rough production cost equalization, the FERC imposed a bandwidth remedy by which each company’s total annual production costs will have to be within +/- 11% of Entergy System average total annual production costs.
•
In calculating the production costs for this purpose under the FERC’s order, output from the Vidalia hydroelectric power plant will not reflect the actual Vidalia price for the year but is priced at that year’s average price paid by Entergy Louisiana for the exchange of electric energy under Service Schedule MSS-3 of the System Agreement, thereby reducing the amount of Vidalia costs reflected in the comparison of the Utility operating companies’ total production costs.
•
The remedy ordered by the FERC in 2005 required no refunds and became effective based on calendar year 2006 production costs and the first reallocation payments were made in 2007.

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The FERC’s decision reallocated total production costs of the Utility operating companies whose relative total production costs expressed as a percentage of Entergy System average production costs are outside an upper or lower bandwidth.  This was accomplished by payments from Utility operating companies whose production costs were more than 11% below Entergy System average production costs to Utility operating companies whose production costs were more than the Entergy System average production cost, with payments going first to those Utility operating companies whose total production costs were farthest above the Entergy System average.

The LPSC, APSC, MPSC, and the Arkansas Electric Energy Consumers appealed the FERC’s December 2005 decision to the United States Court of Appeals for the D.C. Circuit.  Entergy and the City of New Orleans intervened in the various appeals.  The D.C. Circuit issued its decision in April 2008.  The D.C. Circuit concluded that the FERC’s orders had failed to adequately explain both its conclusion that it was prohibited from ordering refunds for the 20-month period from September 13, 2001 - May 2, 2003 and its determination to implement the bandwidth remedy commencing on January 1, 2006, rather than June 1, 2005.  The D.C. Circuit remanded the case to the FERC for further proceedings on those two issues.

In October 2011 the FERC issued an order addressing the D.C. Circuit remand on the two issues.  On the first issue, the FERC concluded that it did have the authority to order refunds, but decided that it would exercise its equitable discretion and not require refunds for the 20-month period from September 13, 2001 - May 2, 2003.  Because the ruling on refunds relied on findings in the interruptible load proceeding, which is discussed in a separate section below, the FERC concluded that this refund ruling will be held in abeyance pending the outcome of the rehearing requests in the interruptible load proceeding.  On the second issue, the FERC reversed its prior decision and ordered that the prospective bandwidth remedy begin on June 1, 2005 (the date of its initial order in the proceeding) rather than January 1, 2006, as it had previously ordered.  Pursuant to the October 2011 order, Entergy was required to calculate bandwidth payments for the period June - December 2005 utilizing the bandwidth formula tariff prescribed by the FERC that was filed in a December 2006 compliance filing and accepted by the FERC in an April 2007 order.  

In March 2015, in light of a December 2014 decision by the D.C. Circuit in the interruptible load proceeding, Entergy filed with the FERC a motion to establish a briefing schedule on refund issues and an initial brief addressing refund issues. The initial brief argued that the FERC, in response to the D.C. Circuit decision, should clarify its policy on refunds and find that refunds are not required in this proceeding. In October 2015 the FERC issued three orders related to the commencement of the remedy on June 1, 2005 and the inclusion of interest for the period June 1, 2005 through December 31, 2005. Specifically, the FERC rejected Entergy’s request for rehearing of its decision to include interest for the seven-month period. The FERC also rejected Entergy’s request for rehearing of the order rejecting the compliance filing with regard to the issue of interest. Finally, the FERC set for hearing and settlement procedures the 2014 compliance filing that included the bandwidth calculation for the seven months June 1, 2005 through December 31, 2005. In setting the compliance filing for hearing, the FERC rejected the APSC’s protest that Entergy Arkansas should not be subject to the filing because Entergy Arkansas would be making the payments during a period following its exit from the System Agreement. In January 2018 the D.C.Circuit affirmed the FERC decision that Entergy Arkansas was subject to the filing.

In December 2011, Entergy filed with the FERC its compliance filing that provides the payments and receipts among the Utility operating companies pursuant to the FERC’s October 2011 order.  The APSC, the LPSC, the PUCT, and other parties intervened in the December 2011 compliance filing proceeding, and the APSC and the LPSC also filed protests. The filing shows the following payments/receipts among the Utility operating companies:


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Payments (Receipts)
 
(In Millions)
Entergy Arkansas
$156
Entergy Louisiana
($75)
Entergy Mississippi
($33)
Entergy New Orleans
($5)
Entergy Texas
($43)

Entergy Arkansas made its payment in January 2012.  In February 2012, Entergy Arkansas filed for an interim adjustment to its production cost allocation rider requesting that the $156 million be collected from customers over the 22-month period from March 2012 through December 2013.  In March 2012 the APSC issued an order stating that the payment can be recovered from retail customers through the production cost allocation rider, subject to refund.  The LPSC and the APSC requested rehearing of the FERC’s October 2011 order.  

In February 2014 the FERC issued a rehearing order addressing its October 2011 order. The FERC denied the LPSC’s request for rehearing on the issues of whether the bandwidth remedy should be made effective earlier than June 1, 2005, and whether refunds should be ordered for the 20-month refund effective period. The FERC granted the LPSC’s rehearing request on the issue of interest on the bandwidth payments/receipts for the June - December 2005 period, requiring that interest be accrued from June 1, 2006 until the date those bandwidth payments/receipts are made. Also in February 2014 the FERC issued an order rejecting the December 2011 compliance filing that calculated the bandwidth payments/receipts for the June - December 2005 period. The FERC order required a new compliance filing that calculates the bandwidth payments/receipts for the June - December 2005 period based on monthly data for the seven individual months including interest pursuant to the February 2014 rehearing order. Entergy sought rehearing of the February 2014 order with respect to the FERC’s determinations regarding interest. In April 2014 the LPSC filed a petition for review of the FERC’s October 2011 and February 2014 orders with the U.S. Court of Appeals for the D.C. Circuit. In August 2017 the D.C. Circuit issued a decision addressing the LPSC’s appeal of the FERC’s October 2011 and February 2014 orders. On the issue of the FERC’s implementation of the prospective remedy as of June 2005 and whether the bandwidth remedy should be extended for an additional 17 months in years 2004-2005, the D.C. Circuit affirmed the FERC’s implementation of the remedy and denied the LPSC’s appeal. On the issue of whether the operating companies should be required to issue refunds for the 20-month period from September 2001 to May 2003, the D.C. Circuit granted the FERC’s request for agency reconsideration and remanded that issue back to the FERC for further proceedings as requested by all parties to the appeal.

In April and May 2014, Entergy filed with the FERC an updated compliance filing that provides the payments and receipts among the Utility operating companies pursuant to the FERC’s February 2014 orders.  The filing shows the following net payments and receipts, including interest, among the Utility operating companies:
 
Payments (Receipts)
 
(In Millions)
Entergy Arkansas
$68
Entergy Louisiana
($10)
Entergy Mississippi
($11)
Entergy New Orleans
$2
Entergy Texas
($49)

These payments were made in May 2014. The LPSC, City Council, and APSC filed protests.


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The hearing on the bandwidth calculation for the seven months June 1, 2005 through December 31, 2005 occurred in July 2016. The presiding judge issued an initial decision in November 2016. In the initial decision, the presiding judge agreed with the Utility operating companies’ position that: (1) interest on the bandwidth payments for the 2005 test period should be accrued from June 1, 2006 until the date that the bandwidth payments for that calculation are paid, which is consistent with how the Utility operating companies performed the calculation; and (2) a portion of Entergy Louisiana’s 2001-vintage Louisiana state net operating loss accumulated deferred income tax that results from the Vidalia tax deduction should be excluded from the 2005 test period bandwidth calculation. Various participants filed briefs on exceptions and/or briefs opposing exceptions related to the initial decision, including the LPSC, the APSC, the FERC trial staff, and Entergy Services. The initial decision is pending before the FERC.

Rough Production Cost Equalization Rates

Each May from 2007 through 2016 Entergy filed with the FERC the rates to implement the FERC’s orders in the System Agreement proceeding.  These filings showed the following payments/receipts among the Utility operating companies were necessary to achieve rough production cost equalization as defined by the FERC’s orders:
 
Payments (Receipts)
 
2007
 
2008
 
2009
 
2010
 
2011
 
2012
 
2013
 
2014
 
(In Millions)
Entergy Arkansas

$252

 

$252

 

$390

 

$41

 

$77

 

$41

 

$—

 

$—

Entergy Louisiana

($211
)
 

($160
)
 

($247
)
 

($22
)
 

($12
)
 

($41
)
 

$—

 

$—

Entergy Mississippi

($41
)
 

($20
)
 

($24
)
 

($19
)
 

($40
)
 

$—

 

$—

 

$—

Entergy New Orleans

$—

 

($7
)
 

$—

 

$—

 

($25
)
 

$—

 

($15
)
 

($15
)
Entergy Texas

($30
)
 

($65
)
 

($119
)
 

$—

 

$—

 

$—

 

$15

 

$15


The Utility operating companies recorded accounts payable or accounts receivable to reflect the rough production cost equalization payments and receipts required to implement the FERC’s remedy.  When accounts payable were recorded, a corresponding regulatory asset was recorded for the right to collect the payments from customers. When accounts receivable were recorded, a corresponding regulatory liability was recorded for the obligations to pass the receipts on to customers.  No payments were required in 2016 or 2015 to implement the FERC’s remedy based on calendar year 2015 production costs and 2014 production costs, respectively. The System Agreement terminated in August 2016.

The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas.  Entergy Texas recovered its 2013 rough production cost equalization payment over three years beginning April 2014. Entergy Texas included its 2014 rough production cost equalization payment as a component of an interim fuel refund made in 2014. Management believes that any changes in the allocation of production costs resulting from the FERC’s decision and related retail proceedings should result in similar rate changes for retail customers, subject to specific circumstances that have caused trapped costs.

The following rough production cost equalization rate proceedings are still ongoing.

2010 Rate Filing Based on Calendar Year 2009 Production Costs

In May 2010, Entergy filed with the FERC the 2010 rates in accordance with the FERC’s orders in the System Agreement proceeding, and supplemented the filing in September 2010.  Several parties intervened in the proceeding at the FERC, including the LPSC and the City Council, which also filed protests.  In July 2010 the FERC accepted Entergy’s proposed rates for filing, effective June 1, 2010, subject to refund.  After an abeyance of the proceeding schedule, a hearing was held in March 2014 and in December 2015 the FERC issued an order. Among other things, the December 2015 order directed Entergy to submit a compliance filing. In January 2016 the LPSC, the APSC, and Entergy filed requests for rehearing of the FERC’s December 2015 order. In February 2016, Entergy submitted the compliance filing ordered in the December 2015 order.  The result of the true-up payments and receipts for the recalculation of production costs resulted in the following payments/receipts among the Utility operating companies:

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Payments (Receipts)
 
(In Millions)
Entergy Arkansas
$2
Entergy Louisiana
$6
Entergy Mississippi
($4)
Entergy New Orleans
($1)
Entergy Texas
($3)
 
In September 2016 the FERC accepted the February 2016 compliance filing subject to a further compliance filing made in November 2016. The further compliance filing was required as a result of an order issued in September 2016 ruling on the January 2016 rehearing requests filed by the LPSC, the APSC, and Entergy. In the order addressing the rehearing requests, the FERC granted the LPSC’s rehearing request and directed that interest be calculated on the payment/receipt amounts. The FERC also granted the APSC’s and Entergy’s rehearing request and ordered the removal of both securitized asset accumulated deferred income taxes and contra-securitization accumulated deferred income taxes from the calculation. In November 2016, Entergy submitted its compliance filing in response to the FERC’s order on rehearing. The compliance filing included a revised refund calculation of the true-up payments and receipts based on 2009 test year data and interest calculations. The LPSC protested the interest calculations. I n November 2017 the FERC issued an order rejecting the November 2016 compliance filing. The FERC determined that the payments detailed in the November 2016 compliance filing did not include adequate interest for the payments from Entergy Arkansas to Entergy Louisiana because it did not include interest on the principal portion of the payment that was made in February 2016. In December 2017, Entergy recalculated the interest pursuant to the November 2017 order. As a result of the recalculations, Entergy Arkansas owed very minor payments to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.

2011 Rate Filing Based on Calendar Year 2010 Production Costs

In May 2011, Entergy filed with the FERC the 2011 rates in accordance with the FERC’s orders in the System Agreement proceeding.  Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest.  In July 2011 the FERC accepted Entergy’s proposed rates for filing, effective June 1, 2011, subject to refund. After an abeyance of the proceeding schedule, in December 2014 the FERC consolidated the 2011 rate filing with the 2012, 2013, and 2014 rate filings for settlement and hearing procedures. See discussion below regarding the consolidated settlement and hearing procedures in connection with this proceeding.

2012 Rate Filing Based on Calendar Year 2011 Production Costs

In May 2012, Entergy filed with the FERC the 2012 rates in accordance with the FERC’s orders in the System Agreement proceeding.  Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest.  In August 2012 the FERC accepted Entergy’s proposed rates for filing, effective June 2012, subject to refund. After an abeyance of the proceeding schedule, in December 2014 the FERC consolidated the 2012 rate filing with the 2011, 2013, and 2014 rate filings for settlement and hearing procedures. See discussion below regarding the consolidated settlement and hearing procedures in connection with this proceeding.

2013 Rate Filing Based on Calendar Year 2012 Production Costs

In May 2013, Entergy filed with the FERC the 2013 rates in accordance with the FERC’s orders in the System Agreement proceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. The City Council intervened and filed comments related to including the outcome of a related FERC proceeding in the 2013 cost equalization calculation. In August 2013 the FERC issued an order accepting the 2013 rates, effective June 1, 2013, subject to refund. After an abeyance of the proceeding schedule, in December 2014 the FERC consolidated the 2013 rate filing with the 2011, 2012, and 2014 rate filings for settlement and hearing procedures.

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See discussion below regarding the consolidated settlement and hearing procedures in connection with this proceeding.

2014 Rate Filing Based on Calendar Year 2013 Production Costs

In May 2014, Entergy filed with the FERC the 2014 rates in accordance with the FERC’s orders in the System Agreement proceeding. Several parties intervened in the proceeding at the FERC, including the LPSC, which also filed a protest. The City Council intervened and filed comments. In December 2014 the FERC issued an order accepting the 2014 rates, effective June 1, 2014, subject to refund, set the proceeding for hearing procedures, and consolidated the 2014 rate filing with the 2011, 2012, and 2013 rate filings for settlement and hearing procedures. See discussion below regarding the consolidated settlement and hearing procedures in connection with this proceeding.

Consolidated 2011, 2012, 2013, and 2014 Rate Filing Proceedings

As discussed above, in December 2014 the FERC consolidated the 2011, 2012, 2013, and 2014 rate filings for settlement and hearing procedures. In May 2015, Entergy filed direct testimony in the consolidated rate filings and the LPSC filed direct testimony concerning its complaint proceeding that is consolidated with the rate filings, challenging certain components of the pending bandwidth calculations for prior years. Hearings occurred in November 2015, and the ALJ issued an initial decision in July 2016. In the initial decision, the ALJ generally agreed with Entergy’s bandwidth calculations with one exception on the accounting related to the Waterford 3 sale/leaseback. Briefs were filed in September 2016 and the proceeding is pending.

Utility Operating Company Termination of System Agreement Participation

Entergy Arkansas and Entergy Mississippi ceased participating in the System Agreement effective December 18, 2013 and November 7, 2015, respectively. Entergy Louisiana, Entergy New Orleans, and Entergy Texas terminated participation in the System Agreement on August 31, 2016, which resulted in the termination of the System Agreement in its entirety pursuant to a settlement agreement approved by the FERC in December 2015.

In December 2013 the FERC set one issue for hearing involving whether and how the benefits associated with settlement with Union Pacific regarding certain coal delivery issues should be allocated among Entergy Arkansas and the other Utility operating companies post-termination of the System Agreement. In December 2014 a FERC ALJ issued an initial decision finding that Entergy Arkansas would realize benefits after December 18, 2013 from the 2008 settlement agreement between Entergy Services, Entergy Arkansas, and Union Pacific, related to certain coal delivery issues. The ALJ further found that all of the Utility operating companies should share in those benefits pursuant to a methodology proposed by the MPSC. The Utility operating companies and other parties to the proceeding filed briefs on exceptions and/or briefs opposing exceptions with the FERC challenging various aspects of the December 2014 initial decision. In March 2016 the FERC issued an opinion affirming the December 2014 initial decision with regard to the determination that there were benefits related to the Union Pacific settlement, which were realized post-Entergy Arkansas’s December 2013 withdrawal from the System Agreement, that should be shared with the other Utility operating companies utilizing the methodology proposed by the MPSC and trued-up to actual coal volumes purchased. In May 2016, Entergy made a compliance filing that provided the calculation of Union Pacific settlement benefits utilizing the methodology adopted by the initial decision, trued-up for the actual volumes of coal purchased. The payments were made in May 2016. In August 2016 the FERC issued an order accepting Entergy’s compliance filing. Also in August 2016 the APSC filed a petition for review of the FERC’s March 2016 and August 2016 orders with the U.S. Court of Appeals for the D.C. Circuit. Oral argument before the D.C. Circuit was held on the APSC’s petition in January 2018 and a decision is pending.

In connection with the System Agreement termination settlement agreement, the purchase power agreements, referred to as the jurisdictional separation plan PPAs, between Entergy Texas and Entergy Gulf States Louisiana that were put in place for certain legacy gas units at the time of Entergy Gulf States’s separation into Entergy Texas and Entergy Gulf States Louisiana terminated effective with the System Agreement termination. Similarly, the purchase power agreement between Entergy Gulf States Louisiana and Entergy Texas for the Calcasieu unit also terminated. In

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March 2016, Entergy Services filed with the FERC the notices of termination. The jurisdictional separation plan PPAs were the means by which Entergy Texas received payment for its receivable associated with Entergy Louisiana’s Spindletop gas storage facility regulatory asset. As a result of the System Agreement termination settlement agreement, effective with the termination date, Entergy Texas no longer receives payments from Entergy Louisiana related to the Spindletop storage facility, which resulted in a write-off recorded in 2015 by Entergy Texas of $23.5 million ( $15.3 million net-of-tax). Upon termination of the System Agreement, other purchase power agreements entered into under Service Schedule MSS-4 of the System Agreement were replaced with updated agreements under a FERC-jurisdictional tariff effective September 1, 2016.

Interruptible Load Proceeding

In April 2007 the U.S. Court of Appeals for the D.C. Circuit issued its opinion in the LPSC’s appeal of the FERC’s March 2004 and April 2005 orders related to the treatment under the System Agreement of the Utility operating companies’ interruptible loads.  In its opinion the D.C. Circuit concluded that the FERC: (1) acted arbitrarily and capriciously by allowing the Utility operating companies to phase-in the effects of the elimination of the interruptible load over a 12-month period of time; (2) failed to adequately explain why refunds could not be ordered under Section 206(c) of the Federal Power Act; and (3) exercised appropriately its discretion to defer addressing the cost of sulfur dioxide allowances until a later time.  The D.C. Circuit remanded the matter to the FERC for a more considered determination on the issue of refunds.  The FERC issued its order on remand in September 2007, in which it directed Entergy to make a compliance filing removing all interruptible load from the computation of peak load responsibility commencing April 1, 2004 and to issue any necessary refunds to reflect this change.  In addition, the order directed the Utility operating companies to make refunds for the period May 1995 through July 1996.  In November 2007 the Utility operating companies filed a refund report describing the refunds to be issued pursuant to the FERC’s orders.  The LPSC filed a protest to the refund report in December 2007, and the Utility operating companies filed an answer to the protest in January 2008.  The refunds were made in October 2008 by the Utility operating companies that owed refunds to the Utility operating companies that were due refunds under the decision.  The APSC and the Utility operating companies appealed the FERC decisions to the D.C. Circuit.

Following the filing of petitioners’ initial briefs, the FERC filed a motion requesting the D.C. Circuit hold the appeal of the FERC’s decisions ordering refunds in the interruptible load proceeding in abeyance and remand the record to the FERC.  The D.C. Circuit granted the FERC’s unopposed motion in June 2009.  In December 2009 the FERC established a paper hearing to determine whether the FERC had the authority and, if so, whether it would be appropriate to order refunds resulting from changes in the treatment of interruptible load in the allocation of capacity costs by the Utility operating companies.  In August 2010 the FERC issued an order stating that it has the authority and refunds are appropriate.  The APSC, the MPSC, and Entergy requested rehearing of the FERC’s decision.  In June 2011 the FERC issued an order granting rehearing in part and denying rehearing in part, in which the FERC determined to invoke its discretion to deny refunds.  The FERC held that in this case where “the Entergy system as a whole collected the proper level of revenue, but, as was later established, incorrectly allocated peak load responsibility among the various Entergy operating companies….the Commission will apply here our usual practice in such cases, invoking our equitable discretion to not order refunds, notwithstanding our authority to do so.”  The LPSC has requested rehearing of the FERC’s June 2011 decision.  In July 2011 the refunds made in the fourth quarter 2009 described above were reversed. In October 2011 the FERC issued an “Order Establishing Paper Hearing” inviting parties that oppose refunds to file briefs within 30 days addressing the LPSC’s argument that FERC precedent supports refunds under the circumstances present in this proceeding.  Parties that favor refunds were then invited to file reply briefs within 21 days of the date that the initial briefs were due.  

In September 2010 the FERC had issued an order setting the refund report filed in the proceeding in November 2007 for hearing and settlement judge procedures.  In May 2011, Entergy filed a settlement agreement that resolved all issues relating to the refund report set for hearing.  In June 2011 the settlement judge certified the settlement as uncontested.  The settlement agreement was approved by the FERC in September 2016.


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Prior to the FERC’s June 2011 order on rehearing, Entergy Arkansas filed an application in November 2010 with the APSC for recovery of the refund that it paid.  The APSC denied Entergy Arkansas’s application, and also denied Entergy Arkansas’s petition for rehearing.  If the FERC were to order Entergy Arkansas to pay refunds on rehearing in the interruptible load proceeding the APSC’s decision would trap FERC-approved costs at Entergy Arkansas with no regulatory-approved mechanism to recover them.  In August 2011, Entergy Arkansas filed a complaint in the United States District Court for the Eastern District of Arkansas asking for a declaratory judgment that the rejection of Entergy Arkansas’s application by the APSC is preempted by the Federal Power Act.  The APSC filed a motion to dismiss the complaint.  In April 2012 the United States district court dismissed Entergy Arkansas’s complaint without prejudice stating that Entergy Arkansas’s claim is not ripe for adjudication and that Entergy Arkansas did not have standing to bring suit at this time.

In March 2013 the FERC issued an order denying the LPSC’s request for rehearing of the FERC’s June 2011 order wherein the FERC concluded it would exercise its discretion and not order refunds in the interruptible load proceeding. Based on its review of the LPSC’s request for rehearing and the briefs filed as part of the paper hearing established in October 2011, the FERC affirmed its earlier ruling and declined to order refunds under the circumstances of the case. In May 2013 the LPSC filed a petition for review with the U.S. Court of Appeals for the D.C. Circuit seeking review of FERC prior orders in the interruptible load proceeding that concluded that the FERC would exercise its discretion and not order refunds in the proceeding. Oral argument was held on the appeal in the D.C. Circuit in September 2014. In December 2014 the D.C. Circuit issued an order on the LPSC’s appeal and remanded the case back to the FERC. The D.C. Circuit rejected the LPSC’s argument that there is a presumption in favor of refunds, but it held that the FERC had not adequately explained its decision to deny refunds and directed the FERC “to consider the relevant factors and weigh them against one another.” In March 2015, Entergy filed with the FERC a motion to establish a briefing schedule on remand and an initial brief on remand to address the December 2014 decision by the D.C. Circuit. The initial brief on remand argued that the FERC, in response to the D.C. Circuit decision, should clarify its policy on refunds and find that refunds are not required in the interruptible load proceeding.

In April 2016 the FERC issued an order on remand that addressed the December 2014 decision by the D.C. Circuit in the interruptible load proceeding. The order on remand affirmed the FERC’s denial of refunds for the 15-month refund effective period. The FERC explained and clarified its policies regarding refunds and concluded that the evidence in the record demonstrated that the relevant equitable factors favored not requiring refunds in this case. The FERC also noted that, under Section 206(c) of the Federal Power Act, in a Section 206 proceeding involving two or more electric utility companies of a registered holding company system, the FERC may order refunds only if it determines the refunds would not cause the registered holding company to experience any reduction in revenues resulting from an inability of an electric utility company in the system to recover the resulting increase in costs. The FERC stated it was not able to find that the Entergy system would not experience a reduction in revenues if refunds were awarded in this proceeding, which further supported the denial of refunds. In May 2016 the LPSC filed a request for rehearing of the FERC’s April 2016 order. In September 2016 the FERC issued an order denying the LPSC’s request for rehearing and reaffirming its denial of refunds for the 15-month refund effective period. The LPSC has appealed the April and September 2016 orders to the U.S. Court of Appeals for the D.C. Circuit. Oral argument before the D.C. Circuit was held before the D.C. Circuit in February 2018 and a decision is pending.
 
Entergy Arkansas Opportunity Sales Proceeding

In June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy System resources; (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity; and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies.   The LPSC’s complaint challenged sales made beginning in 2002 and requested refunds.  In July 2009 the Utility operating companies filed a response to the complaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System.  In their response,

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the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company.  The FERC subsequently ordered a hearing in the proceeding.

The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers and these customers should be compensated for this harm by Entergy.  In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills.  The Utility operating companies believe the LPSC’s allegations are without merit.  A hearing in the matter was held in August 2010.

In December 2010 the ALJ issued an initial decision.  The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales.  The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest.  Entergy disagreed with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision.

The FERC issued a decision in June 2012 and held that, while the System Agreement is ambiguous, it does provide authority for individual Utility operating companies to make opportunity sales for their own account and Entergy Arkansas made and priced these sales in good faith.  The FERC found, however, that the System Agreement does not provide authority for an individual Utility operating company to allocate the energy associated with such opportunity sales as part of its load, but provides a different allocation authority.  The FERC further found that the after-the-fact accounting methodology used to allocate the energy used to supply the sales was inconsistent with the System Agreement.  Quantifying the effect of the FERC’s decision requires re-running intra-system bills for a ten-year period, and the FERC in its decision established further hearing procedures to determine the calculation of the effects.  In July 2012, Entergy and the LPSC filed requests for rehearing of the FERC’s June 2012 decision. A hearing was held in May 2013 to quantify the effect of repricing the opportunity sales in accordance with the FERC’s June 2012 decision.

In August 2013 the presiding judge issued an initial decision in the calculation proceeding. The initial decision concluded that the methodology proposed by the LPSC, rather than the methodologies proposed by Entergy or the FERC Staff, should be used to calculate the payments that Entergy Arkansas is to make to the other Utility operating companies. The initial decision also concluded that the other System Agreement service schedules should not be adjusted and that payments by Entergy Arkansas should not be reflected in the rough production cost equalization bandwidth calculations for the applicable years. The initial decision recognized that the LPSC’s methodology would result in an inequitable windfall to the other Utility operating companies and, therefore, concluded that any payments by Entergy Arkansas should be reduced by 20% . The LPSC, the APSC, the City Council, and FERC staff filed briefs on exceptions and/or briefs opposing exceptions. Entergy filed a brief on exceptions requesting that the FERC reverse the initial decision and a brief opposing certain exceptions taken by the LPSC and FERC staff.

In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and the ALJ’s August 2013 initial decision. The first order denied Entergy’s request for rehearing and affirmed the FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20% . The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service

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schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.

In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that payments made by Entergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana. In November 2017 the FERC issued an order denying all of the remaining requests for rehearing of the April 2016 order. In November 2017, Entergy Services filed a petition for review in the D.C. Circuit of the FERC’s orders in the first two phases of the opportunity sales case. In December 2017 the D.C. Circuit granted Entergy Services’s request to hold the appeal in abeyance pending final resolution of the related proceeding still pending with the FERC. In January 2018 the APSC and the LPSC filed separate petitions for review in the D.C. Circuit, and the D.C. Circuit consolidated the appeals with Entergy Services’s appeal and held all of the appeals in abeyance.

Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations. A hearing was held in May 2017. In July 2017, the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individual briefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC, the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties. The case is pending before the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.

The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies. Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million , which includes interest, for its estimated increased costs and payment to the other Utility operating companies. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Entergy Arkansas, therefore, recorded a deferred fuel regulatory asset in the first quarter 2016 of approximately $75 million , which represents its estimate of the retail portion of the costs. Following its assessment of the course of the proceedings, including the FERC’s denial of rehearing in November 2017 described above, in the fourth quarter 2017, Entergy Arkansas recorded an additional liability of $35 million and a regulatory asset of $31 million . Because management currently expects to recover the retail portion of the costs through a base rate proceeding or newly proposed rider, the regulatory asset is reflected as Other regulatory assets as of December 31, 2017.
    
Complaint Against System Energy

In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana,

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Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94% . The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017 as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67% . System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint with the proceeding described in Unit Power Sales Agreement below, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.

Unit Power Sales Agreement

In August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017.

In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to further proceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, the FERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower than proposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of the further settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the rate decrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding described in Complaint Against System Energy above, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.

Storm Cost Recovery Filings with Retail Regulators

Entergy Louisiana

Hurricane Isaac

In August 2012, Hurricane Isaac caused extensive damage to Entergy Louisiana’s service area.  The storm resulted in widespread power outages, significant damage primarily to distribution infrastructure, and the loss of sales during the power outages.  In June 2014 the LPSC authorized Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs.  Entergy Louisiana committed to pass on to customers a minimum of $30.8 million of customer benefits through annual customer credits of approximately $6.2 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation (LURC) and the Louisiana State Bond Commission.


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In August 2014 the Louisiana Local Government Environmental Facilities and Community Development Authority (LCDA) issued $314.85 million in bonds under Louisiana Act 55.  From the $309 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $16 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $293 million directly to Entergy Louisiana.  Entergy Louisiana used the $293 million received from the LURC to acquire 2,935,152.69  Class C preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 7.5% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2014, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement. The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1.75 billion .

Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default.  To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee.  Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as the billing and collection agent for the state.

Hurricane Gustav and Hurricane Ike

In September 2008, Hurricane Gustav and Hurricane Ike caused catastrophic damage to Entergy Louisiana’s service territory.  In December 2009, Entergy Louisiana entered into a stipulation agreement with the LPSC staff regarding its storm costs.  In March and April 2010, Entergy Louisiana and other parties to the proceeding filed with the LPSC an uncontested stipulated settlement that included Entergy Louisiana’s proposal to utilize Act 55 financing, which included a commitment to pass on to customers a minimum of $43.3 million of customer benefits through a prospective annual rate reduction of $8.7 million for five years.  In April 2010 the LPSC approved the settlement and subsequently issued financing orders and a ratemaking order intended to facilitate the implementation of the Act 55 financings.  In June 2010 the Louisiana State Bond Commission approved the Act 55 financing. The settlement agreement allowed for an adjustment to the credits if there was a change in the applicable federal or state income tax rate. As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21% , the Louisiana Act 55 financing savings obligation regulatory liability related to Hurricane Gustav and Hurricane Ike was reduced by $2.7 million , with a corresponding increase to Other regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.

In July 2010, the LCDA issued two series of bonds totaling $713.0 million under Act 55.  From the $702.7 million of bond proceeds loaned by the LCDA to the LURC, the LURC deposited $290 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $412.7 million directly to Entergy Louisiana.  From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana used $412.7 million to acquire 4,126,940.15 Class B preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 9% annual distribution rate. Distributions are payable quarterly commencing on September 15, 2010, and the membership interests have a liquidation price of $100 per unit. The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement.  The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion .

Entergy and Entergy Louisiana do not report the bonds issued by the LCDA on their balance sheets because the bonds are the obligation of the LCDA, and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default.  To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee.  Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as the billing and collection agent for the state.

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Hurricane Katrina and Hurricane Rita

In August and September 2005, Hurricanes Katrina and Rita caused catastrophic damage to Entergy Louisiana’s service territory. In March 2008, Entergy Louisiana and the LURC filed at the LPSC an application requesting that the LPSC grant a financing order authorizing the financing of Entergy Louisiana storm costs, storm reserves, and issuance costs pursuant to Louisiana Act 55.  The Louisiana Act 55 financing is expected to produce additional customer benefits as compared to traditional securitization.  Entergy Louisiana also filed an application requesting LPSC approval for ancillary issues including the mechanism to flow charges and savings to customers via a storm cost offset rider.  In April 2008 the Louisiana Public Facilities Authority (LPFA), which is the issuer of the bonds pursuant to the Act 55 financing, approved requests for the Act 55 financing.  Also in April 2008, Entergy Louisiana and the LPSC staff filed with the LPSC an uncontested stipulated settlement that included Entergy Louisiana’s proposal under the Act 55 financing, which included a commitment to pass on to customers a minimum of $40 million of customer benefits through a prospective annual rate reduction of $8 million for five years.  The LPSC subsequently approved the settlement and issued two financing orders and one ratemaking order intended to facilitate implementation of the Act 55 financing.  In May 2008 the Louisiana State Bond Commission granted final approval of the Act 55 financing. The settlement agreement allowed for an adjustment to the credits if there was a change in the applicable federal or state income tax rate. As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21% , the Louisiana Act 55 financing savings obligation regulatory liability related to Hurricanes Katrina and Rita was reduced by $22.3 million , with a corresponding increase to Other regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.

In July 2008 the LPFA issued $687.7 million in bonds under the aforementioned Act 55.  From the $679 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $152 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $527 million directly to Entergy Louisiana.  From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $545 million , including $17.8 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 5,449,861.85 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC, a company wholly-owned and consolidated by Entergy, that carry a 10% annual distribution rate.  In August 2008, the LPFA issued $278.4 million in bonds under the aforementioned Act 55.  From the $274.7 million of bond proceeds loaned by the LPFA to the LURC, the LURC deposited $87 million in a restricted escrow account as a storm damage reserve for Entergy Louisiana and transferred $187.7 million directly to Entergy Louisiana.  From the bond proceeds received by Entergy Louisiana from the LURC, Entergy Louisiana invested $189.4 million , including $1.7 million that was withdrawn from the restricted escrow account as approved by the April 16, 2008 LPSC orders, in exchange for 1,893,918.39 Class A preferred, non-voting, membership interest units of Entergy Holdings Company LLC that carry a 10% annual distribution rate.  Distributions are payable quarterly commencing on September 15, 2008 and have a liquidation price of $100 per unit.  The preferred membership interests are callable at the option of Entergy Holdings Company LLC after ten years under the terms of the LLC agreement.  The terms of the membership interests include certain financial covenants to which Entergy Holdings Company LLC is subject, including the requirement to maintain a net worth of at least $1 billion .  In February 2012, Entergy Louisiana sold 500,000 of its Class A preferred membership units in Entergy Holdings Company LLC, a wholly-owned Entergy subsidiary, to a third party in exchange for $51 million plus accrued but unpaid distributions on the units.  The 500,000 preferred membership units are mandatorily redeemable in January 2112.

Entergy and Entergy Louisiana do not report the bonds issued by the LPFA on their balance sheets because the bonds are the obligation of the LPFA, and there is no recourse against Entergy or Entergy Louisiana in the event of a bond default.  To service the bonds, Entergy Louisiana collects a system restoration charge on behalf of the LURC, and remits the collections to the bond indenture trustee.  Entergy and Entergy Louisiana do not report the collections as revenue because Entergy Louisiana is merely acting as the billing and collection agent for the state.


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Entergy Mississippi

Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million , the collection of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less than $10 million . As of April 30, 2016, Entergy Mississippi’s storm damage provision balance was less than $10 million , therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with June 2016 bills. As of September 30, 2016, however, Entergy Mississippi’s storm damage provision balance again exceeded $15 million . Accordingly the storm damage provision was reset to zero beginning with November 2016 bills. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was again less than $10 million , therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with September 2017 bills.

Entergy New Orleans

In August 2012, Hurricane Isaac caused extensive damage to Entergy New Orleans’s service area. In January 2015 the City Council issued a resolution approving the terms of a joint agreement in principle filed by Entergy New Orleans, Entergy Louisiana, and the City Council Advisors determining, among other things, that Entergy New Orleans’s prudently-incurred storm recovery costs were $49.3 million , of which $31.7 million , net of reimbursements from the storm reserve escrow account, remained recoverable from Entergy New Orleans’s electric customers. The resolution also directed Entergy New Orleans to file an application to securitize the unrecovered City Council-approved storm recovery costs of $31.7 million pursuant to the Louisiana Electric Utility Storm Recovery Securitization Act (Louisiana Act 64). In addition, the resolution found that it was reasonable for Entergy New Orleans to include in the principal amount of its potential securitization the costs to fund and replenish Entergy New Orleans’s storm reserve in an amount that achieved the City Council-approved funding level of $75 million . In January 2015, in compliance with that directive, Entergy New Orleans filed with the City Council an application requesting that the City Council grant a financing order authorizing the financing of Entergy New Orleans’s storm costs, storm reserves, and issuance costs pursuant to Louisiana Act 64. In May 2015 the parties entered into an agreement in principle and the City Council issued a financing order authorizing Entergy New Orleans to issue storm recovery bonds in the aggregate amount of $98.7 million , including $31.8 million for recovery of Entergy New Orleans’s Hurricane Isaac storm recovery costs, including carrying costs, $63.9 million to fund and replenish Entergy New Orleans’s storm reserve, and approximately $3 million for estimated up-front financing costs associated with the securitization. See Note 5 to the financial statements for discussion of the issuance of the securitization bonds in July 2015.

New Nuclear Generation Development Costs

Entergy Louisiana

Entergy Louisiana and Entergy Gulf States Louisiana were developing a project option for new nuclear generation at River Bend.  In March 2010, Entergy Louisiana and Entergy Gulf States Louisiana filed with the LPSC seeking approval to continue the limited development activities necessary to preserve an option to construct a new unit at River Bend.  At its June 2012 meeting the LPSC voted to uphold an ALJ recommendation that the request of Entergy Louisiana and Entergy Gulf States Louisiana be declined on the basis that the LPSC’s rule on new nuclear development does not apply to activities to preserve an option to develop and on the further grounds that the companies improperly engaged in advanced preparation activities prior to certification.  The LPSC directed that Entergy Louisiana and Entergy Gulf States Louisiana be permitted to seek recovery of these costs in their upcoming rate case filings that were subsequently filed in February 2013. In the resolution of the rate case proceeding the LPSC provided for an eight-year amortization of costs incurred in connection with the potential development of new nuclear generation at River Bend, without carrying costs, beginning in December 2014, provided, however, that amortization of these costs shall not result in a future rate increase. As of December 31, 2017, Entergy Louisiana has a regulatory asset of $35.8 million on its balance sheet related to these new nuclear generation development costs.

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NOTE 3.    INCOME TAXES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Income taxes for 2017 , 2016 , and 2015 for Entergy Corporation and Subsidiaries consist of the following:
 
2017
 
2016
 
2015
 
(In Thousands)
Current:
 
 
 
 
 
Federal

$29,595

 

$45,249

 

$77,166

Foreign
—

 
68

 
97

State
15,478

 
(14,960
)
 
157,829

Total
45,073

 
30,357

 
235,092

Deferred and non-current - net
505,010

 
(840,465
)
 
(864,799
)
Investment tax credit adjustments - net
(7,513
)
 
(7,151
)
 
(13,220
)
Income taxes

$542,570

 

($817,259
)
 

($642,927
)
    
Income taxes for 2017 , 2016 , and 2015 for Entergy’s Registrant Subsidiaries consist of the following:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Current:
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 

$16,086

 

($84,250
)
 

($8,845
)
 

($30,635
)
 

$6,034

 

$47,674

State
 
9,191

 
1,480

 
(924
)
 
(728
)
 
310

 
5,314

Total
 
25,277

 
(82,770
)
 
(9,769
)
 
(31,363
)
 
6,344

 
52,988

Deferred and non-current - net
 
69,753

 
572,988

 
83,501

 
62,946

 
43,102

 
19,243

Investment tax credit adjustments - net
 
(1,226
)
 
(4,920
)
 
187

 
1,695

 
(965
)
 
(2,262
)
Income taxes
 

$93,804

 

$485,298

 

$73,919

 

$33,278

 

$48,481

 

$69,969


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Current:
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 

($14,748
)
 

($124,113
)
 

$10,603

 

($91,067
)
 

$19,656

 

$29,628

State
 
2,805

 
10,757

 
2,257

 
566

 
1,374

 
(25,825
)
Total
 
(11,943
)
 
(113,356
)
 
12,860

 
(90,501
)
 
21,030

 
3,803

Deferred and non-current - net
 
120,942

 
208,157

 
46,984

 
119,345

 
42,982

 
71,051

Investment tax credit adjustments - net
 
(1,226
)
 
(5,067
)
 
4,010

 
(139
)
 
(915
)
 
(3,793
)
Income taxes
 

$107,773

 

$89,734

 

$63,854

 

$28,705

 

$63,097

 

$71,061



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2015
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Current:
 
 
 
 
 
 
 
 
 
 
 
 
Federal
 

$66,966

 

$101,382

 

$25,628

 

($9,346
)
 

$53,313

 

($63,302
)
State
 
6,265

 
35,406

 
6,832

 
1,784

 
2,450

 
26,755

Total
 
73,231

 
136,788

 
32,460

 
(7,562
)
 
55,763

 
(36,547
)
Deferred and non-current - net
 
(31,463
)
 
47,220

 
31,149

 
32,890

 
(17,599
)
 
93,491

Investment tax credit adjustments - net
 
(1,227
)
 
(5,337
)
 
(1,737
)
 
(138
)
 
(914
)
 
(3,867
)
Income taxes
 

$40,541

 

$178,671

 

$61,872

 

$25,190

 

$37,250

 

$53,077


Total income taxes for Entergy Corporation and Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before income taxes.  The reasons for the differences for the years 2017 , 2016 , and 2015 are:
 
2017
 
2016
 
2015
 
(In Thousands)
Net income (loss) attributable to Entergy Corporation

$411,612

 

($583,618
)
 

($176,562
)
Preferred dividend requirements of subsidiaries
13,741

 
19,115

 
19,828

Consolidated net income (loss)
425,353

 
(564,503
)
 
(156,734
)
Income taxes
542,570

 
(817,259
)
 
(642,927
)
Income (loss) before income taxes

$967,923

 

($1,381,762
)
 

($799,661
)
Computed at statutory rate (35%)

$338,773

 

($483,617
)
 

($279,881
)
Increases (reductions) in tax resulting from:
 

 
 

 
 

State income taxes net of federal income tax effect
44,179

 
40,581

 
29,944

Regulatory differences - utility plant items
39,825

 
33,581

 
32,089

Equity component of AFUDC
(33,282
)
 
(23,647
)
 
(18,191
)
Amortization of investment tax credits
(10,204
)
 
(10,889
)
 
(11,136
)
Flow-through / permanent differences
8,727

 
(19,307
)
 
(7,872
)
Tax legislation enactment (a)
560,410

 
—

 
—

Louisiana business combination
—

 
—

 
(333,655
)
Entergy Wholesale Commodities restructuring (b)
(373,277
)
 
(237,760
)
 
—

Act 55 financing settlement (d)
—

 
(63,477
)
 
—

FitzPatrick disposition
(44,344
)
 
—

 
—

Provision for uncertain tax positions (c) (d)
8,756

 
(67,119
)
 
(56,683
)
Valuation allowance
—

 
11,411

 
—

Other - net
3,007

 
2,984

 
2,458

Total income taxes as reported

$542,570

 

($817,259
)
 

($642,927
)
Effective Income Tax Rate
56.1
%
 
59.1
%
 
80.4
%

(a)
See “ Other Tax Matters - Tax Cuts and Jobs Act ” below for discussion of the tax legislation enactment.
(b)
See “ Other Tax Matters - Entergy Wholesale Commodities Restructuring” below for discussion of the Entergy Wholesale Commodities restructuring.
(c)
See “ Income Tax Audits - 2008-2009 IRS Audit ” below for discussion of the most significant items for 2015.
(d)
See “ Income Tax Audits - 2010-2011 IRS Audit ” below for discussion of the most significant items for 2016.


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Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Total income taxes for the Registrant Subsidiaries differ from the amounts computed by applying the statutory income tax rate to income before taxes.  The reasons for the differences for the years 2017 , 2016 , and 2015 are:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Net income
 

$139,844

 

$316,347

 

$110,032

 

$44,553

 

$76,173

 

$78,596

Income taxes
 
93,804

 
485,298

 
73,919

 
33,278

 
48,481

 
69,969

Pretax income
 

$233,648

 

$801,645

 

$183,951

 

$77,831

 

$124,654

 

$148,565

Computed at statutory rate (35%)
 

$81,777

 

$280,576

 

$64,383

 

$27,241

 

$43,629

 

$51,998

Increases (reductions) in tax resulting from:
 
 
 
 

 
 

 
 

 
 

 
 

State income taxes net of federal income tax effect
 
11,586

 
31,927

 
6,202

 
2,842

 
527

 
5,635

Regulatory differences - utility plant items
 
7,220

 
12,168

 
1,356

 
619

 
5,581

 
12,880

Equity component of AFUDC
 
(6,458
)
 
(18,020
)
 
(3,383
)
 
(847
)
 
(2,353
)
 
(2,221
)
Amortization of investment tax credits
 
(1,201
)
 
(4,871
)
 
(160
)
 
(124
)
 
(951
)
 
(2,896
)
Flow-through / permanent differences
 
3,098

 
3,774

 
1,567

 
(3,352
)
 
1,428

 
(276
)
Tax legislation enactment (a)
 
(3,090
)
 
217,258

 
3,492

 
6,153

 
2,981

 
(69
)
Non-taxable dividend income
 
—

 
(44,658
)
 
—

 
—

 
—

 
—

Provision for uncertain tax positions
 
200

 
5,700

 
228

 
600

 
(2,617
)
 
4,800

Other - net
 
672

 
1,444

 
234

 
146

 
256

 
118

Total income taxes as reported
 

$93,804

 

$485,298

 

$73,919

 

$33,278

 

$48,481

 

$69,969

Effective Income Tax Rate
 
40.1
%
 
60.5
%
 
40.2
%
 
42.8
%
 
38.9
%
 
47.1
%

2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Net income
 

$167,212

 

$622,047

 

$109,184

 

$48,849

 

$107,538

 

$96,744

Income taxes
 
107,773

 
89,734

 
63,854

 
28,705

 
63,097

 
71,061

Pretax income
 

$274,985

 

$711,781

 

$173,038

 

$77,554

 

$170,635

 

$167,805

Computed at statutory rate (35%)
 

$96,245

 

$249,123

 

$60,563

 

$27,144

 

$59,722

 

$58,732

Increases (reductions) in tax resulting from:
 
 

 
 

 
 

 
 

 
 

 
 

State income taxes net of federal income tax effect
 
11,652

 
29,014

 
5,592

 
3,543

 
449

 
7,001

Regulatory differences - utility plant items
 
10,971

 
8,094

 
(1,154
)
 
2,329

 
4,140

 
9,201

Equity component of AFUDC
 
(5,985
)
 
(9,774
)
 
(2,030
)
 
(412
)
 
(2,666
)
 
(2,780
)
Amortization of investment tax credits
 
(1,201
)
 
(5,019
)
 
(160
)
 
(132
)
 
(900
)
 
(3,476
)
Flow-through / permanent differences
 
(3,848
)
 
(980
)
 
764

 
(3,609
)
 
634

 
(883
)
Act 55 financing settlement (b)
 
—

 
(61,620
)
 
—

 
—

 
(454
)
 
—

Non-taxable dividend income
 
—

 
(44,658
)
 
—

 
—

 
—

 
—

Provision for uncertain tax positions (b)
 
(717
)
 
(75,871
)
 
50

 
(300
)
 
1,926

 
3,151

Other - net
 
656

 
1,425

 
229

 
142

 
246

 
115

Total income taxes as reported
 

$107,773

 

$89,734

 

$63,854

 

$28,705

 

$63,097

 

$71,061

Effective Income Tax Rate
 
39.2
%
 
12.6
%
 
36.9
%
 
37.0
%
 
37.0
%
 
42.3
%


110
Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


2015
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Net income
 

$74,272

 

$446,639

 

$92,708

 

$44,925

 

$69,625

 

$111,318

Income taxes
 
40,541

 
178,671

 
61,872

 
25,190

 
37,250

 
53,077

Pretax income
 

$114,813

 

$625,310

 

$154,580

 

$70,115

 

$106,875

 

$164,395

Computed at statutory rate (35%)
 

$40,185

 

$218,859

 

$54,103

 

$24,540

 

$37,406

 

$57,538

Increases (reductions) in tax resulting from:
 
 

 
 

 
 

 
 

 
 

 
 

State income taxes net of federal income tax effect
 
6,643

 
23,650

 
5,219

 
2,887

 
1,621

 
6,403

Regulatory differences - utility plant items
 
7,299

 
3,013

 
2,383

 
2,201

 
3,703

 
12,167

Equity component of AFUDC
 
(4,979
)
 
(5,420
)
 
(1,083
)
 
(451
)
 
(1,987
)
 
(2,973
)
Amortization of investment tax credits
 
(1,201
)
 
(5,252
)
 
(160
)
 
(111
)
 
(900
)
 
(3,476
)
Flow-through / permanent differences
 
(4,062
)
 
2,460

 
431

 
(4,539
)
 
530

 
618

Non-taxable dividend income
 
—

 
(44,658
)
 
—

 
—

 
—

 
—

Provision for uncertain tax positions (c)
 
(3,978
)
 
(15,377
)
 
756

 
525

 
(3,365
)
 
(17,313
)
Other - net
 
634

 
1,396

 
223

 
138

 
242

 
113

Total income taxes as reported
 

$40,541

 

$178,671

 

$61,872

 

$25,190

 

$37,250

 

$53,077

Effective Income Tax Rate
 
35.3
%
 
28.6
%
 
40.0
%
 
35.9
%
 
34.9
%
 
32.3
%

(a)
See “ Other Tax Matters - Tax Cuts and Jobs Act ” below for discussion of the tax legislation enactment.
(b)
See “ Income Tax Audits - 2010-2011 IRS Audit ” below for discussion of the most significant items for Entergy Louisiana.
(c)
See “ Income Tax Audits - 2008-2009 IRS Audit ” below for discussion of the most significant items for Entergy Louisiana and System Energy.



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Entergy Corporation and Subsidiaries
Notes to Financial Statements


Significant components of accumulated deferred income taxes and taxes accrued for Entergy Corporation and Subsidiaries as of December 31, 2017 and 2016 are as follows:
 
 
2017
 
2016
 
(In Thousands)
Deferred tax liabilities:
 
 
 
Plant basis differences - net

($3,963,798
)
 

($6,362,905
)
Regulatory assets
—

 
(584,572
)
Nuclear decommissioning trusts/receivables
(1,657,808
)
 
(1,739,977
)
Pension, net funding
(350,743
)
 
(429,896
)
Combined unitary state taxes
(24,645
)
 
(33,063
)
Power purchase agreements
(19,621
)
 
(993
)
Other
(249,327
)
 
(251,719
)
Total
(6,265,942
)
 
(9,403,125
)
Deferred tax assets:
 

 
 

Nuclear decommissioning liabilities
964,945

 
1,399,468

Regulatory liabilities
841,370

 
255,272

Pension and other post-employment benefits
343,817

 
539,456

Sale and leaseback
122,397

 
135,866

Compensation
75,217

 
99,300

Accumulated deferred investment tax credit
59,285

 
92,375

Provision for allowances and contingencies
126,391

 
188,390

Net operating loss carryforwards
467,255

 
334,025

Capital losses and miscellaneous tax credits
16,738

 
18,470

Valuation allowance
(137,283
)
 
(104,277
)
Other
54,058

 
59,079

Total
2,934,190

 
3,017,424

Non-current accrued taxes (including unrecognized tax benefits)
(956,547
)
 
(991,704
)
Accumulated deferred income taxes and taxes accrued

($4,288,299
)
 

($7,377,405
)

Entergy’s estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:
Carryover Description
 
Carryover Amount
 
Year(s) of expiration
 
 
 
 
 
Federal net operating losses
 
$10.7 billion
 
2023-2037
State net operating losses
 
$9.6 billion
 
2018-2037
Miscellaneous federal and state credits
 
$96.6 million
 
2018-2036

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers, tax credit carryovers, and other tax attributes reflected on income tax returns. Because it is more likely than not that the benefit from certain state net operating loss and credit carryovers will not be utilized, valuation allowances of $106 million as of December 31, 2017 and $62 million as of December 31, 2016 have been provided on the deferred tax assets relating to these state net operating loss and credit carryovers. Additionally, valuation allowances totaling $31 million as of December 31, 2017 and $42.3 million as of December 31, 2016 have been provided on deferred tax assets related to federal and state jurisdictions in which Entergy does not currently expect to be able to utilize separate company tax return losses, preventing realization of such deferred tax assets.

112
Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


Significant components of accumulated deferred income taxes and taxes accrued for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Deferred tax liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Plant basis differences - net
 

($1,289,827
)
 

($1,583,100
)
 

($571,682
)
 

($85,515
)
 

($526,596
)
 

($359,931
)
Nuclear decommissioning trusts/receivables
 
(181,911
)
 
(164,395
)
 
—

 
—

 
—

 
(119,184
)
Pension, net funding
 
(99,971
)
 
(102,138
)
 
(26,413
)
 
(13,040
)
 
(20,700
)
 
(21,871
)
Deferred fuel
 
(16,530
)
 
(1,329
)
 
(19,005
)
 
(1,894
)
 
—

 
(272
)
Other
 
(23,079
)
 
(98,307
)
 
(11,306
)
 
(23,610
)
 
(8,236
)
 
(5,955
)
Total
 
(1,611,318
)
 
(1,949,269
)
 
(628,406
)
 
(124,059
)
 
(555,532
)
 
(507,213
)
Deferred tax assets:
 
 

 
 

 
 

 
 

 
 

 
 

Regulatory liabilities
 
227,489

 
368,156

 
102,676

 
23,526

 
25,428

 
91,271

Nuclear decommissioning liabilities
 
132,464

 
58,891

 
—

 
—

 
—

 
63,180

Pension and other post-employment benefits
 
(16,252
)
 
98,596

 
(4,865
)
 
(9,618
)
 
(12,044
)
 
(516
)
Sale and leaseback
 
—

 
19,915

 
—

 
—

 
—

 
102,482

Accumulated deferred investment tax credit
 
8,913

 
35,323

 
2,212

 
488

 
2,516

 
9,832

Provision for allowances and contingencies
 
4,367

 
80,516

 
11,898

 
24,234

 
4,383

 
—

Power purchase agreements
 
—

 
(6,924
)
 
1,129

 
—

 
—

 
—

Unbilled/deferred revenues
 
6,195

 
(18,263
)
 
4,847

 
1,811

 
7,736

 
—

Compensation
 
2,566

 
4,387

 
1,466

 
723

 
1,224

 
332

Net operating loss carryforwards
 
16,172

 
44

 
10,255

 
—

 
1,690

 
—

Capital losses and miscellaneous tax credits
 
2,678

 
—

 
5,736

 
—

 
—

 
—

Other
 
473

 
21,922

 
1,307

 
388

 
1,133

 
—

Total
 
385,065

 
662,563

 
136,661

 
41,552

 
32,066

 
266,581

Non-current accrued taxes (including unrecognized tax benefits)
 
35,584

 
(763,665
)
 
2,939

 
(200,795
)
 
(21,176
)
 
(535,788
)
Accumulated deferred income taxes and taxes accrued
 

($1,190,669
)
 

($2,050,371
)
 

($488,806
)
 

($283,302
)
 

($544,642
)
 

($776,420
)

113
Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Deferred tax liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Plant basis differences - net
 

($1,857,554
)
 

($2,357,599
)
 

($820,971
)
 

($177,242
)
 

($835,671
)
 

($651,394
)
Regulatory assets
 
(109,241
)
 
(219,750
)
 
(25,309
)
 
(36,301
)
 
(153,914
)
 
(39,879
)
Nuclear decommissioning trusts
 
(144,250
)
 
(119,544
)
 
—

 
—

 
—

 
(83,891
)
Pension, net funding
 
(123,889
)
 
(122,465
)
 
(34,284
)
 
(16,307
)
 
(28,371
)
 
(29,357
)
Deferred fuel
 
(14,774
)
 
(1,778
)
 
(12,770
)
 
(5,229
)
 
(2,808
)
 
(1,137
)
Power purchase agreements
 
—

 
—

 
—

 
—

 
—

 
—

Other
 
(47,785
)
 
(22,136
)
 
(12,474
)
 
(18,536
)
 
(8,812
)
 
(2,051
)
Total
 
(2,297,493
)
 
(2,843,272
)
 
(905,808
)
 
(253,615
)
 
(1,029,576
)
 
(807,709
)
Deferred tax assets:
 
 

 
 

 
 

 
 

 
 

 
 

Regulatory liabilities
 
5,768

 
175,973

 
18,833

 
25,240

 
15,814

 
13,644

Nuclear decommissioning liabilities
 
124,206

 
55,408

 
—

 
—

 
—

 
53,113

Pension and other post-employment benefits
 
(24,467
)
 
145,401

 
(8,042
)
 
(12,070
)
 
(19,096
)
 
(1,182
)
Sale and leaseback
 
—

 
33,383

 
—

 
—

 
—

 
102,483

Accumulated deferred investment tax credit
 
13,848

 
54,509

 
3,315

 
239

 
4,527

 
15,936

Provision for allowances and contingencies
 
(1,497
)
 
124,309

 
21,817

 
36,466

 
5,904

 
—

Power purchase agreements
 
(3,094
)
 
29,827

 
1,905

 
—

 
140

 
—

Unbilled/deferred revenues
 
6,799

 
(35,006
)
 
5,085

 
3,751

 
11,902

 
—

Compensation
 
2,787

 
5,309

 
1,492

 
685

 
1,587

 
360

Net operating loss carryforwards
 
69,524

 
17,125

 
—

 
—

 
—

 
—

Capital losses and miscellaneous tax credits
 
2,074

 
—

 
4,487

 
—

 
—

 
—

Other
 
174

 
17,110

 
1,152

 
496

 
2,955

 
—

Total
 
196,122

 
623,348

 
50,044

 
54,807

 
23,733

 
184,354

Non-current accrued taxes (including unrecognized tax benefits)
 
(85,252
)
 
(471,194
)
 
(5,567
)
 
(136,145
)
 
(21,804
)
 
(489,510
)
Accumulated deferred income taxes and taxes accrued
 

($2,186,623
)
 

($2,691,118
)
 

($861,331
)
 

($334,953
)
 

($1,027,647
)
 

($1,112,865
)


114
Table of Contents
Entergy Corporation and Subsidiaries
Notes to Financial Statements


The Registrant Subsidiaries’ estimated tax attributes carryovers and their expiration dates as of December 31, 2017 are as follows:
 
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
 
 
 
 
 
 
 
 
 
 
 
Federal net operating losses
 
$77 million
 
$4.3 billion
 
$86.6 million
 
$1.1 billion
 
—
 
—
Year(s) of expiration
 
2030-2037
 
2035-2037
 
2030-2037
 
2037
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
State net operating losses
 
—
 
$5 billion
 
—
 
$1.2 billion
 
—
 
—
Year(s) of expiration
 
N/A
 
2029-2037
 
N/A
 
2037
 
N/A
 
N/A
 
 
 
 
 
 
 
 
 
 
 
 
 
Misc. federal credits
 
$2.7 million
 
$1.7 million
 
$2.7 million
 
$2.1 million
 
$0.6 million
 
$2.5 million
Year(s) of expiration
 
2029-2036
 
2029-2036
 
2029-2036
 
2029-2036
 
2029-2036
 
2029-2036
 
 
 
 
 
 
 
 
 
 
 
 
 
State credits
 
—
 
—
 
$4.9 million
 
—
 
$3.2 million
 
$10 million
Year(s) of expiration
 
N/A
 
N/A
 
2018-2021
 
N/A
 
2026
 
2018-2021

As a result of the accounting for uncertain tax positions, the amount of the deferred tax assets reflected in the financial statements is less than the amount of the tax effect of the federal and state net operating loss carryovers and tax credit carryovers.

Unrecognized tax benefits

Accounting standards establish a “more-likely-than-not” recognition threshold that must be met before a tax benefit can be recognized in the financial statements.  If a tax deduction is taken on a tax return, but does not meet the more-likely-than-not recognition threshold, an increase in income tax liability, above what is payable on the tax return, is required to be recorded.  A reconciliation of Entergy’s beginning and ending amount of unrecognized tax benefits is as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Gross balance at January 1

$3,909,855

 

$2,611,585

 

$4,736,785

Additions based on tax positions related to the current year
1,120,687

 
1,532,782

 
1,850,705

Additions for tax positions of prior years
283,683

 
368,404

 
59,815

Reductions for tax positions of prior years (a)
(442,379
)
 
(265,653
)
 
(3,966,535
)
Settlements
—

 
(337,263
)
 
(68,227
)
Lapse of statute of limitations
—

 
—

 
(958
)
Gross balance at December 31
4,871,846

 
3,909,855

 
2,611,585

Offsets to gross unrecognized tax benefits:
 

 
 

 
 

Carryovers and refund claims
(3,945,524
)
 
(2,922,085
)
 
(1,264,483
)
Cash paid to taxing authorities
(10,000
)
 
(10,000
)
 
—

Unrecognized tax benefits net of unused tax attributes, refund claims and payments (b)

$916,322

 

$977,770

 

$1,347,102


(a)
The primary reduction for 2015 is related to the nuclear decommissioning costs treatment discussed in “ Income Tax Audits - 2008-2009 IRS Audit ” below.
(b)
Potential tax liability above what is payable on tax returns


115
Table of Contents
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Notes to Financial Statements


The balances of unrecognized tax benefits include $1,462 million , $1,240 million , and $955 million as of December 31, 2017 , 2016 , and 2015 , respectively, which, if recognized, would lower the effective income tax rates.  Because of the effect of deferred tax accounting, the remaining balances of unrecognized tax benefits of $3,410 million , $2,670 million , and $1,657 million as of December 31, 2017 , 2016 , and 2015 , respectively, if disallowed, would not affect the annual effective income tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

Entergy accrues interest expense, if any, related to unrecognized tax benefits in income tax expense.  Entergy’s December 31, 2017 , 2016 , and 2015 accrued balance for the possible payment of interest is approximately $38 million , $30 million , and $27 million , respectively.

A reconciliation of the Registrant Subsidiaries’ beginning and ending amount of unrecognized tax benefits for 2017 , 2016 , and 2015 is as follows:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Gross balance at January 1, 2017
 

$2,503

 

$2,440,339

 

$12,206

 

$166,230

 

$15,946

 

$472,372

Additions based on tax positions related to the current year (a)
 
8,974

 
32,843

 
2,105

 
509,183

 
1,747

 
909

Additions for tax positions of prior years
 
3,682

 
235,331

 
1,267

 
13,364

 
3,115

 
1,432

Reductions for tax positions of prior years
 
(132,875
)
 
(190,056
)
 
(456
)
 
(9,233
)
 
(4,409
)
 
(29,202
)
Gross balance at December 31, 2017
 
(117,716
)
 
2,518,457

 
15,122

 
679,544

 
16,399

 
445,511

Offsets to gross unrecognized tax benefits:
 
 

 
 

 
 

 
 

 
 

 
 

Loss carryovers
 
—

 
(1,591,907
)
 
(15,122
)
 
(441,374
)
 
(638
)
 
(12,536
)
Unrecognized tax benefits net of unused tax attributes and payments
 

($117,716
)
 

$926,550

 

$—

 

$238,170

 

$15,761

 

$432,975


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Gross balance at January 1, 2016
 

$25,445

 

$1,690,661

 

$19,482

 

$53,897

 

$13,462

 

$478,318

Additions based on tax positions related to the current year (a)
 
16,868

 
931,720

 
2,662

 
33,912

 
2,002

 
5,318

Additions for tax positions of prior years
 
2,463

 
157,586

 
336

 
129,784

 
2,888

 
601

Reductions for tax positions of prior years
 
(41,957
)
 
(144,068
)
 
(10,219
)
 
(29,821
)
 
(1,849
)
 
(10,266
)
Settlements
 
(316
)
 
(195,560
)
 
(55
)
 
(21,542
)
 
(557
)
 
(1,599
)
Gross balance at December 31, 2016
 
2,503

 
2,440,339

 
12,206

 
166,230

 
15,946

 
472,372

Offsets to gross unrecognized tax benefits:
 
 

 
 

 
 

 
 

 
 

 
 

Loss carryovers
 
—

 
(1,783,093
)
 
(2,373
)
 
(27,320
)
 
(376
)
 
(90,028
)
Unrecognized tax benefits net of unused tax attributes and payments
 

$2,503

 

$657,246

 

$9,833

 

$138,910

 

$15,570

 

$382,344



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2015
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Gross balance at January 1, 2015
 

$362,912

 

$1,205,929

 

$20,144

 

$53,763

 

$17,264

 

$258,242

Additions based on tax positions related to the current year (b)
 
2,196

 
1,367,058

 
566

 
472

 
657

 
472,304

Additions for tax positions of prior years
 
1,057

 
7,992

 
8,140

 
48

 
2,914

 
913

Reductions for tax positions of prior years
 
(340,720
)
 
(859,430
)
 
—

 
(386
)
 
(3,981
)
 
(253,141
)
Settlements
 
—

 
(30,888
)
 
(9,368
)
 
—

 
(3,392
)
 
—

Gross balance at December 31, 2015
 
25,445

 
1,690,661

 
19,482

 
53,897

 
13,462

 
478,318

Offsets to gross unrecognized tax benefits:
 
 

 
 

 
 

 
 

 
 

 
 

Loss carryovers
 
(3,613
)
 
(893,764
)
 
(1,016
)
 
(506
)
 
(276
)
 
(133,611
)
Unrecognized tax benefits net of unused tax attributes and payments
 

$21,832

 

$796,897

 

$18,466

 

$53,391

 

$13,186

 

$344,707


(a)
The primary additions for Entergy Louisiana in 2016 and for Entergy New Orleans in 2017 are related to the mark-to-market treatment discussed in “ Other Tax Matters - Tax Accounting Methods ” below.
(b)
The primary addition for Entergy Louisiana and System Energy is related to the nuclear decommissioning costs treatment discussed in “ Other Tax Matters - Tax Accounting Methods ” below.

The Registrant Subsidiaries’ balances of unrecognized tax benefits included amounts which, if recognized, would have reduced income tax expense as follows:
 
December 31,
 
2017
 
2016
 
2015
 
(In Millions)
Entergy Arkansas

$2.6

 

$3.6

 

$4.5

Entergy Louisiana

$575.8

 

$473.3

 

$692.7

Entergy Mississippi

$—

 

$—

 

$8.1

Entergy New Orleans

$31.7

 

$33.6

 

$50.7

Entergy Texas

$4.4

 

$7.0

 

$5.2

System Energy

$—

 

$—

 

$0.7


The Registrant Subsidiaries accrue interest and penalties related to unrecognized tax benefits in income tax expense.  Penalties have not been accrued.  Accrued balances for the possible payment of interest are as follows:
 
December 31,
 
2017
 
2016
 
2015
 
(In Millions)
Entergy Arkansas

$1.6

 

$1.4

 

$1.3

Entergy Louisiana

$14.1

 

$8.4

 

$9.3

Entergy Mississippi

$1.0

 

$0.8

 

$0.4

Entergy New Orleans

$2.1

 

$1.5

 

$1.8

Entergy Texas

$0.4

 

$1.2

 

$1.2

System Energy

$8.5

 

$3.7

 

$0.7



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Income Tax Audits

Entergy and its subsidiaries file U.S. federal and various state and foreign income tax returns.  IRS examinations are complete for years before 2012. All state taxing authorities’ examinations are complete for years before 2010. Entergy regularly negotiates with the IRS to achieve settlements.  The resolution of audit issues could result in significant changes to the amounts of unrecognized tax benefits in the next twelve months.

2006-2007 IRS Audit

In the first quarter 2015, the IRS finalized tax and interest computations from the 2006-2007 audit that resulted in a reversal of Entergy’s provision for uncertain tax positions related to accrued interest of approximately $20 million , including decreases of approximately $4 million for Entergy Arkansas, $11 million for Entergy Louisiana, and $1 million for System Energy.

2008-2009 IRS Audit

In the fourth quarter 2009, Entergy filed Applications for Change in Accounting Method (the “2009 CAM”) for tax purposes with the IRS for certain costs under Section 263A of the Internal Revenue Code.  In the Applications, Entergy proposed to treat the nuclear decommissioning liability associated with the operation of its nuclear power plants as a production cost properly includable in cost of goods sold.  The effect of the 2009 CAM was a $5.7 billion reduction in 2009 taxable income.  The 2009 CAM was adjusted to $9.3 billion in 2012.

In the fourth quarter 2012, the IRS disallowed the reduction to 2009 taxable income related to the 2009 CAM.  In the third quarter 2013, the Internal Revenue Service issued its Revenue Agent Report (RAR) for the tax years 2008-2009. As a result of the issuance of this RAR, Entergy and the IRS resolved all of the 2008-2009 issues described above except for the 2009 CAM. Entergy disagreed with the IRS’s disallowance of the 2009 CAM and filed a protest with the IRS Appeals Division in October 2013.

In August 2015, Entergy and the IRS agreed on the treatment of the 2009 position regarding nuclear decommissioning liabilities from the 2008-2009 audit. The agreement provides that Entergy is entitled to deduct approximately $118 million of the $9.3 billion claimed in 2009. The agreement effectively settled all matters pertaining to the 2009 tax year and increased Entergy’s 2009 federal income tax liability by $2.4 million .

2010-2011 IRS Audit

The IRS completed its examination of the 2010 and 2011 tax years and issued its 2010-2011 RAR in June 2016. Entergy agreed to all proposed adjustments contained in the RAR. As a result of the issuance of the RAR, Entergy Louisiana was able to recognize previously unrecognized tax benefits as follows:

•
Entergy and the IRS agreed that $148.6 million of the proceeds received by Entergy Louisiana in 2010 from the Louisiana Utilities Restoration Corporation (LURC), an instrumentality of the State of Louisiana, for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Act 55 of the Louisiana Regular Session of 2007 (Louisiana Act 55) were not taxable. Because the treatment of the financing is settled, Entergy recognized previously unrecognized tax benefits totaling $63.5 million , of which Entergy Louisiana recorded $61.6 million . Entergy Louisiana also accrued a regulatory liability of $16.1 million ( $9.9 million net-of-tax) in accordance with the terms of Entergy Louisiana’s previous settlement agreement approved by the LPSC regarding Entergy Louisiana’s obligation to pay to customers savings associated with the Act 55 financing.

•
Entergy and the IRS agreed upon the tax treatment of Entergy Louisiana’s regulatory liability related to the Vidalia purchased power agreement. As a result, Entergy Louisiana recognized a previously unrecognized tax benefit of $74.5 million .

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Other Tax Matters

Tax Cuts and Jobs Act

Deferred tax liabilities and assets have been adjusted for the effect of the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act (the Act), signed by President Trump on December 22, 2017. The most significant effect of the Act for Entergy and the Registrant Subsidiaries is the change in the federal corporate income tax rate from 35% to 21% , effective January 1, 2018. Other significant provisions and their effect on Entergy and the Registrant Subsidiaries are summarized below.
The Act limits the deduction for net business interest expense in certain circumstances. The new limitation does not apply to interest expense, however, that is properly allocable to a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transports gas or steam by pipeline if the rates for such furnishing or sale are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the potential interest expense disallowance is not expected to have a material effect on Entergy’s or the Registrant Subsidiaries’ interest deductions.
The Act extends and modifies the additional first-year depreciation deduction (bonus depreciation). The Act excludes from bonus-eligible qualified property, however, any property used in a trade or business that furnishes or sells electrical energy, gas, or steam through a local distribution system, or transportation of gas or steam by pipeline if the rates for furnishing those services are subject to ratemaking by a government entity or instrumentality or by a public utility commission. Accordingly, the extension of bonus depreciation and modifications generally do not apply to Entergy or the Registrant Subsidiaries.
The Act limits the net operating loss (NOL) deduction for a given year to 80% of taxable income, effective with respect to losses arising in tax years beginning after December 31, 2017. Only NOLs generated after December 31, 2017 are subject to the 80% limitation. Prior law generally provided a two-year carryback and 20-year carryforward for NOLs. The Act provides for the indefinite carryforward of NOLs arising in tax years ending after December 31, 2017, as opposed to the current 20-year carryforward. Because of the indefinite carryforward, the new limitations on NOL utilization are not expected to have a material effect on Entergy or the Registrant Subsidiaries.
The Act also modified Internal Revenue Code section 162(m), which limits the deduction for compensation with respect to certain covered employees to no more than $1 million per year.  The Act includes performance-based compensation in the annual computation of the section 162 limitation.  The changes are expected to result in an increase in disallowed compensation expense, but this limitation is not expected to have a material effect on Entergy or the Registrant Subsidiaries.
Other provisions that are not expected to have a material effect on Entergy or the Registrant Subsidiaries include the following:
•
repeal of the corporate alternative minimum tax (AMT),
•
modification to the capital contribution rules under Internal Revenue Code section 118,
•
repeal of domestic production activities deduction, and
•
fundamental changes to the taxation of multinational entities.

With respect to the federal corporate income tax rate change from 35% to 21% , Entergy and the Registrant Subsidiaries believe it is probable that a significant portion of the decrease in the net accumulated deferred income tax liability, which is often referred to as “excess ADIT,” will be returned to customers. Accordingly, it is appropriate for Entergy and the Registrant Subsidiaries to establish a regulatory liability for the probable reduction in future revenue. Entergy’s December 31, 2017 balance sheet reflects a regulatory liability of $2.9 billion due to a re-measurement of deferred tax assets and liabilities resulting from the income tax rate change. Entergy’s regulatory liability for income taxes includes a gross-up at the applicable tax rate because of the effect that excess ADIT has on the ratemaking formula. The regulatory liability for income taxes includes the effect of a) the reduction of the net deferred tax liability resulting

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in excess ADIT, b) the tax gross-up of excess ADIT, and c) the effect of the new tax rate on the previous net regulatory asset for income taxes. For the same reasons, the Registrant Subsidiaries’ December 31, 2017 balance sheets reflect net regulatory liabilities for income taxes as follows: Entergy Arkansas, $986 million ; Entergy Louisiana, $725 million ; Entergy Mississippi, $411 million ; Entergy New Orleans, $119 million ; Entergy Texas, $413 million ; and System Energy, $246 million .
Excess ADIT is generally classified into two categories: 1) the portion that is subject to the normalization requirements of the Act, i.e., “protected”, and 2) the portion that is not subject to such normalization provisions, referred to as “unprotected”. The Act provides that the normalization method of accounting for income taxes is required for excess ADIT associated with public utility property. The Act provides for the use of the average rate assumption method (ARAM) for the determination of the timing of the return of excess ADIT associated with such property. Under ARAM, the excess ADIT is reduced over the remaining life of the asset. Remaining asset lives vary for each Registrant Subsidiary, but the average life of public utility property is typically 30 years or longer. Entergy will return the protected portion of the excess ADIT in conformity with the normalization requirements. The Registrant Subsidiaries’ net regulatory liability for income taxes includes protected excess ADIT as follows: Entergy Arkansas, $554 million ; Entergy Louisiana, $782 million ; Entergy Mississippi, $274 million ; Entergy New Orleans, $71 million ; Entergy Texas, $276 million ; and System Energy, $217 million .
The return period of the unprotected excess ADIT is subject to the regulatory process in each jurisdiction and has yet to be determined. Further, a portion of the unprotected excess ADIT amount is associated with amounts previously securitized and may be treated differently than other unprotected excess ADIT consistent with applicable agreements and/or not be subject to the same schedule for the return to customers as the remaining unprotected excess ADIT. The Registrant Subsidiaries’ net regulatory liability for income taxes includes unprotected excess ADIT as follows: Entergy Arkansas, $467 million ; Entergy Louisiana, $410 million ; Entergy Mississippi, $162 million ; Entergy New Orleans, $37 million ; Entergy Texas, $198 million ; and System Energy, $76 million . In addition to the protected and unprotected excess ADIT amounts, the net regulatory liability for income taxes includes other regulatory assets and liabilities for income taxes associated with AFUDC, which is described in Note 1 to the financial statements.
For a discussion of the proceedings commenced or other responses by Entergy’s regulators to the Act, see Note 2 to the financial statements.
Not all of Entergy’s excess ADIT is included in ratemaking. Consequently, Entergy recorded a net decrease in deferred tax assets of $560 million for which there is a corresponding charge to income tax expense for the year ended December 31, 2017. The corresponding income tax expense (or benefit) recorded by the Registrant Subsidiaries is as follows: Entergy Arkansas, ( $3 million ); Entergy Louisiana, $217 million ; Entergy Mississippi, $3 million ; Entergy New Orleans, $6 million ; Entergy Texas, $3 million ; and System Energy, $0 .
Included in the effect of the computation of the changes in deferred tax assets and liabilities is the recognition threshold and measurement of uncertain tax positions resulting in unrecognized tax benefits. The final economic outcome of such unrecognized tax benefits is generally the result of a negotiated settlement with the IRS that often differs from the amount that is recorded as realizable under GAAP. The intrinsic uncertainty with respect to all such tax positions means that the difference between current estimates of such amounts likely to be realized and actual amounts realized upon settlement may have an effect on income tax expense and the regulatory liability for income taxes in future periods.

Entergy’s accounting for the effects of the Act is complete using the best estimates and information available to it at this time. Entergy anticipates that the Act, including the federal corporate income tax rate change, however, will continue to have ramifications that require adjustments in the future as certain events occur. These events include: 1) the evaluation by regulators in all of Entergy’s jurisdictions regarding the ratemaking treatment of the Act and excess ADIT; 2) the filing of all applicable federal and state income tax returns that include any tax elections that may change estimates accrued in the year-end recording process; and 3) additional guidance, interpretations, or rulings by the U.S. Department of the Treasury or the IRS. The potential exists for these types of events to result in future adjustments

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because of the difference in the federal corporate income tax rate between past and future periods and the effect of the tax rate change on ratemaking. In turn, these items also will potentially affect the regulatory liability for income taxes.
Louisiana Business Combination

In October 2015 two of Entergy’s Louisiana utilities, Entergy Gulf States Louisiana and Entergy Louisiana, combined their businesses into a legal entity which is identified as Entergy Louisiana herein. The structure of the business combination generated both a permanent difference and a temporary difference under FASB ASC Topic 740. The permanent difference resulted from recognition of the Waterford 3 and River Bend decommissioning liabilities as part of the business combination. Recognition of such decommissioning liabilities required Entergy to also recognize a taxable gain. The taxable gain resulted in a temporary difference because the gain provided for an increase in tax basis. Entergy Louisiana maintained a carryover tax basis in the assets received; and, to the extent that the increase in tax basis will provide additional tax depreciation, Entergy recorded a deferred tax asset. Entergy Louisiana obtained the corresponding deferred tax asset in the business combination. The permanent tax benefit net of ancillary tax charges was approximately $334 million . Consistent with the terms of the stipulated settlement in the business combination proceeding, electric customers of Entergy Louisiana will realize customer credits associated with the business combination. Accordingly, in October 2015, Entergy recorded a regulatory liability of $107 million ( $66 million net-of-tax) which partially offsets the effect of the aforementioned deferred tax asset. The deferred tax asset and the regulatory liability, net-of-tax, increased Entergy Louisiana’s member’s equity by $268 million . See Note 2 to the financial statements for further discussion of the business combination.

Entergy Wholesale Commodities Restructuring

The tax classification of the entity that owned FitzPatrick changed in the second quarter 2016.  The change in tax classification required Entergy to recognize the plant’s nuclear decommissioning liability for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $238 million . The accrual of the nuclear decommissioning liability also required Entergy to recognize a gain for income tax purposes, a significant portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference. Entergy sold FitzPatrick on March 31, 2017. The removal of the contingencies regarding the sale of the plant and the receipt of NRC approval for the sale allowed Entergy to re-determine the plant’s tax basis. The re-determined basis resulted in a $44 million income tax benefit in the first quarter 2017.

In the second quarter 2017, Entergy changed the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. The change in tax classification required Entergy to recognize the plants’ nuclear decommissioning liabilities for income tax purposes resulting in a tax accounting permanent difference that reduced income tax expense, net of unrecognized tax benefits, by $373 million . The accrual of the nuclear decommissioning liabilities also required Entergy to recognize a gain for income tax purposes, a portion of which resulted in an increase in tax basis of the assets. Recognition of the gain and the increase in tax basis of the assets represents a tax accounting temporary difference.

Tax Accounting Methods

In the fourth quarter 2015, System Energy and Entergy Louisiana adopted a new method of accounting for income tax return purposes in which the companies’ nuclear decommissioning costs will be treated as production costs of electricity includable in cost of goods sold. The new method results in a reduction of taxable income of $1.2 billion for System Energy and $2.2 billion for Entergy Louisiana.

In 2016, Entergy Louisiana elected mark-to-market income tax treatment for various wholesale electric power purchase and sale agreements, including Entergy Louisiana’s contract to purchase electricity from the Vidalia hydroelectric facility and from System Energy under the Unit Power Sales Agreement. The election resulted in a $2.2

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billion deductible temporary difference. In 2017, Entergy New Orleans also elected mark-to-market income tax treatment with respect to the Unit Power Sales Agreement resulting in a $1.1 billion deductible temporary difference.

Accounting Pronouncements

In the first quarter 2017, Entergy implemented ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Entergy will now prospectively recognize all income tax effects related to share-based payments through the income statement. In the first quarter 2017, stock option expirations, along with other stock compensation activity, resulted in the write-off of $11.5 million of deferred tax assets. Entergy’s stock-based compensation plans are discussed in Note 12 to the financial statements.


NOTE 4.  REVOLVING CREDIT FACILITIES, LINES OF CREDIT, AND SHORT-TERM BORROWINGS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy Corporation has in place a credit facility that has a borrowing capacity of $3.5 billion and expires in August 2022.  The facility permits the issuance of letters of credit against $20 million of the total borrowing capacity of the credit facility.  The commitment fee is currently 0.225% of the undrawn commitment amount.  Commitment fees and interest rates on loans under the credit facility can fluctuate depending on the senior unsecured debt ratings of Entergy Corporation.  The weighted average interest rate for the year ended December 31, 2017 was 2.55% on the drawn portion of the facility.  Following is a summary of the borrowings outstanding and capacity available under the facility as of December 31, 2017 .
Capacity
 
Borrowings
 
Letters of Credit
 
Capacity Available
(In Millions)
$3,500
 
$210
 
$6
 
$3,284

Entergy Corporation’s credit facility requires Entergy to maintain a consolidated debt ratio, as defined, of 65% or less of its total capitalization.  Entergy is in compliance with this covenant.  If Entergy fails to meet this ratio, or if Entergy Corporation or one of the Utility operating companies (except Entergy New Orleans) defaults on other indebtedness or is in bankruptcy or insolvency proceedings, an acceleration of the facility maturity date may occur.

Entergy Corporation has a commercial paper program with a Board-approved program limit of up to $2 billion .  As of December 31, 2017 , Entergy Corporation had $1.467 billion of commercial paper outstanding.  The weighted-average interest rate for the year ended December 31, 2017 was 1.49% .


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Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each had credit facilities available as of December 31, 2017 as follows:
Company
 
Expiration Date
 
Amount of Facility
 
Interest Rate (a)
 
 Amount Drawn as of December 31, 2017
 
Letters of Credit Outstanding as of December 31, 2017
Entergy Arkansas
 
April 2018
 
$20 million (b)
 
2.82%
 
—
 
—
Entergy Arkansas
 
August 2022
 
$150 million (c)
 
2.82%
 
—
 
—
Entergy Louisiana
 
August 2022
 
$350 million (c)
 
2.82%
 
—
 
$9.1 million
Entergy Mississippi
 
May 2018
 
$10 million (d)
 
3.07%
 
—
 
—
Entergy Mississippi
 
May 2018
 
$20 million (d)
 
3.07%
 
—
 
—
Entergy Mississippi
 
May 2018
 
$35 million (d)
 
3.07%
 
—
 
—
Entergy Mississippi
 
May 2018
 
$37.5 million (d)
 
3.07%
 
—
 
—
Entergy New Orleans
 
November 2018
 
$25 million (c)
 
3.04%
 
—
 
$0.8 million
Entergy Texas
 
August 2022
 
$150 million (c)
 
3.07%
 
—
 
$25.6 million

(a)
The interest rate is the estimated interest rate as of December 31, 2017 that would have been applied to outstanding borrowings under the facility.
(b)
Borrowings under this Entergy Arkansas credit facility may be secured by a security interest in its accounts receivable at Entergy Arkansas’s option.
(c)
The credit facility permits the issuance of letters of credit against a portion of the borrowing capacity of the facility as follows: $5 million for Entergy Arkansas; $15 million for Entergy Louisiana; $10 million for Entergy New Orleans; and $30 million for Entergy Texas.  
(d)
Borrowings under the Entergy Mississippi credit facilities may be secured by a security interest in its accounts receivable at Entergy Mississippi’s option. 

The commitment fees on the credit facilities range from 0.075% to 0.275% of the undrawn commitment amount. Each of the credit facilities requires the Registrant Subsidiary borrower to maintain a debt ratio, as defined, of 65% or less of its total capitalization. Each Registrant Subsidiary is in compliance with this covenant.

In addition, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas each entered into one or more uncommitted standby letter of credit facilities as a means to post collateral to support its obligations to MISO. Following is a summary of the uncommitted standby letter of credit facilities as of December 31, 2017 :
Company
 
Amount of Uncommitted Facility
 
Letter of Credit Fee
 
Letters of Credit Issued as of December 31, 2017 (a)
Entergy Arkansas
 
$25 million
 
0.70%
 
$1.0 million
Entergy Louisiana
 
$125 million
 
0.70%
 
$29.7 million
Entergy Mississippi
 
$40 million
 
0.70%
 
$15.3 million
Entergy New Orleans
 
$15 million
 
1.00%
 
$1.4 million
Entergy Texas
 
$50 million
 
0.70%
 
$22.8 million

(a)
As of December 31, 2017, letters of credit posted with MISO covered financial transmission right exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.05 million for Entergy Texas. See Note 15 to the financial statements for discussion of financial transmission rights.

The short-term borrowings of the Registrant Subsidiaries are limited to amounts authorized by the FERC.  The current FERC-authorized limits are effective through October 31, 2019. In addition to borrowings from commercial

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banks, these companies may also borrow from the Entergy System money pool and from other internal short-term borrowing arrangements.  The money pool and the other internal borrowing arrangements are inter-company borrowing arrangements designed to reduce the Utility subsidiaries’ dependence on external short-term borrowings.  Borrowings from internal and external short term borrowings combined may not exceed the FERC-authorized limits.  The following are the FERC-authorized limits for short-term borrowings and the outstanding short-term borrowings as of December 31, 2017 (aggregating both internal and external short-term borrowings) for the Registrant Subsidiaries:

 
Authorized
 
Borrowings
 
(In Millions)
Entergy Arkansas
$250
 
$166
Entergy Louisiana
$450
 
—
Entergy Mississippi
$175
 
—
Entergy New Orleans
$150
 
—
Entergy Texas
$200
 
—
System Energy
$200
 
—

Entergy Nuclear Vermont Yankee Credit Facilities

Entergy Nuclear Vermont Yankee has a credit facility guaranteed by Entergy Corporation with a borrowing capacity of $145 million that expires in November 2020. Entergy Nuclear Vermont Yankee does not have the ability to issue letters of credit against the credit facility. This facility provides working capital to Entergy Nuclear Vermont Yankee for general business purposes including, without limitation, the decommissioning of Vermont Yankee. The commitment fee is currently 0.20% of the undrawn commitment amount.  As of December 31, 2017 , $104 million in cash borrowings were outstanding under the credit facility.  The weighted average interest rate for the year ended December 31, 2017 was 2.64% on the drawn portion of the facility. 

Entergy Nuclear Vermont Yankee also had an uncommitted credit facility guaranteed by Entergy Corporation
with a borrowing capacity of $85 million that expired in January 2018.  As of December 31, 2017 , there were no cash borrowings outstanding under the credit facility. The estimated interest rate for the year ended December 31, 2017 would have been 3.07% on the drawn portion of the facility.

Variable Interest Entities (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

See Note 17 to the financial statements for a discussion of the consolidation of the nuclear fuel company variable interest entities (VIE).  To finance the acquisition and ownership of nuclear fuel, the nuclear fuel company VIEs have credit facilities and three of the four VIEs also issue commercial paper, details of which follow as of December 31, 2017 :
Company
 
Expiration Date
 
Amount of Facility
 
Weighted Average Interest Rate on Borrowings (a)
 
Amount Outstanding as of December 31, 2017
 
 
(Dollars in Millions)
Entergy Arkansas VIE
 
May 2019
 
$80
 
2.87%
 

$74.9
 (b)
Entergy Louisiana River Bend VIE
 
May 2019
 
$105
 
2.38%
 

$65.7

Entergy Louisiana Waterford VIE
 
May 2019
 
$85
 
2.64%
 

$79.9
 (c)
System Energy VIE
 
May 2019
 
$120
 
2.52%
 

$67.8
 (d)

(a)
Includes letter of credit fees and bank fronting fees on commercial paper issuances by the nuclear fuel company variable interest entities for Entergy Arkansas, Entergy Louisiana, and System Energy. The nuclear fuel

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company variable interest entity for Entergy Louisiana River Bend does not issue commercial paper, but borrows directly on its bank credit facility.
(b)
Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Arkansas VIE as of December 31, 2017 was $50 million .
(c)
Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for Entergy Louisiana Waterford VIE as of December 31, 2017 was $43.5 million .
(d)
Includes borrowings on the credit facility and commercial paper. Commercial paper is classified as a current liability and the amount outstanding for System Energy VIE as of December 31, 2017 was $17.8 million .

The commitment fees on the credit facilities are 0.10% of the undrawn commitment amount for the Entergy Arkansas, Entergy Louisiana, and System Energy VIEs. Each credit facility requires the respective lessee of nuclear fuel (Entergy Arkansas, Entergy Louisiana, or Entergy Corporation as guarantor for System Energy) to maintain a consolidated debt ratio, as defined, of 70% or less of its total capitalization.

The nuclear fuel company variable interest entities had notes payable that are included in debt on the respective balance sheets as of December 31, 2017 as follows:
Company
 
Description
 
Amount
Entergy Arkansas VIE
 
3.65% Series L due July 2021
 
$90 million
Entergy Arkansas VIE
 
3.17% Series M due December 2023
 
$40 million
Entergy Louisiana River Bend VIE
 
3.38% Series R due August 2020
 
$70 million
Entergy Louisiana Waterford VIE
 
3.92% Series H due February 2021
 
$40 million
Entergy Louisiana Waterford VIE
 
3.22% Series I due December 2023
 
$20 million
System Energy VIE
 
3.78% Series I due October 2018
 
$85 million

In accordance with regulatory treatment, interest on the nuclear fuel company variable interest entities’ credit facilities, commercial paper, and long-term notes payable is reported in fuel expense.

Entergy Arkansas, Entergy Louisiana, and System Energy each have obtained long-term financing authorizations from the FERC that extend through October 2019 for issuances by its nuclear fuel company variable interest entities.



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NOTE 5.  LONG - TERM DEBT (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Long-term debt for Entergy Corporation and subsidiaries as of December 31, 2017 and 2016 consisted of:
Type of Debt and Maturity
 
Weighted Average Interest Rate December 31, 2017
 
Interest Rate Ranges at December 31,
 
Outstanding at December 31,
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
(In Thousands)
Mortgage Bonds
 
 
 
 
 
 
 
 
 
 
2018-2022
 
4.39%
 
2.55%-7.125%
 
2.55%-7.125%
 

$2,550,000

 

$2,550,000

2023-2027
 
3.72%
 
2.40%-5.59%
 
2.40%-5.59%
 
4,735,000

 
3,765,000

2028-2031
 
3.06%
 
2.85%-3.25%
 
2.85%-3.25%
 
1,125,000

 
1,125,000

2044-2066
 
5.00%
 
4.70%-5.625%
 
4.70%-5.625%
 
2,960,000

 
2,960,000

Governmental Bonds (a)
 
 
 
 
 
 
 
 
 
 
2017-2022
 
5.20%
 
2.375%-5.875%
 
1.55%-5.875%
 
179,000

 
233,700

2028-2030
 
3.45%
 
3.375%-3.50%
 
3.375%-3.50%
 
198,680

 
198,680

Securitization Bonds
 
 
 
 
 
 
 
 
 
 
2018-2027
 
3.79%
 
2.04%-5.93%
 
2.04%-5.93%
 
551,499

 
669,310

Variable Interest Entities Notes Payable (Note 4)
 
 
 
 
 
 
 
 
 
 
2017-2023
 
3.48%
 
3.17%-3.92%
 
2.62%-4.02%
 
345,000

 
555,000

Entergy Corporation Notes
 
 
 
 
 
 
 
 
 
 
due September 2020
 
n/a
 
5.125%
 
5.125%
 
450,000

 
450,000

due July 2022
 
n/a
 
4.00%
 
4.00%
 
650,000

 
650,000

due September 2026
 
n/a
 
2.95%
 
2.95%
 
750,000

 
750,000

5 Year Credit Facility (Note 4)
 
n/a
 
2.55%
 
2.23%
 
210,000

 
700,000

Vermont Yankee Credit Facility (Note 4)
 
n/a
 
2.64%
 
2.17%
 
103,500

 
44,500

Entergy Arkansas VIE Credit Facility (Note 4)
 
n/a
 
2.87%
 
—
 
24,900

 
—

Entergy Louisiana River Bend VIE Credit Facility (Note 4)
 
n/a
 
2.38%
 
—
 
65,650

 
—

Entergy Louisiana Waterford VIE Credit Facility (Note 4)
 
n/a
 
2.64%
 
—
 
36,360

 
—

System Energy VIE Credit Facility (Note 4)
 
n/a
 
2.52%
 
—
 
50,000

 
—

Long-term DOE Obligation (b)
 
—
 
—
 
—
 
183,435

 
181,853

Waterford 3 Lease Obligation (c)
 
n/a
 
—
 
8.09%
 
—

 
57,492

Waterford Series Collateral Trust Mortgage Notes due 2017 (c)
 
n/a
 
—
 
(d)
 
—

 
42,703

Grand Gulf Lease Obligation (c)
 
n/a
 
5.13%
 
5.13%
 
34,356

 
34,359

Unamortized Premium and Discount - Net
 
 
 
 
 
 
 
(13,911
)
 
(19,397
)
Unamortized Debt Issuance Costs
 
 
 
 
 
 
 
(126,033
)
 
(128,849
)
Other
 
 
 
 
 
 
 
12,830

 
13,204

Total Long-Term Debt
 
 
 
 
 
 
 
15,075,266

 
14,832,555

Less Amount Due Within One Year
 
 
 
 
 
 
 
760,007

 
364,900

Long-Term Debt Excluding Amount Due Within One Year
 
 
 
 
 
 
 

$14,315,259

 

$14,467,655

Fair Value of Long-Term Debt (e)
 
 
 
 
 
 
 

$15,367,453

 

$14,815,535



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(a)
Consists of pollution control revenue bonds and environmental revenue bonds, some of which are secured by collateral mortgage bonds.
(b)
Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service.  The contracts include a one-time fee for generation prior to April 7, 1983.  Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt.
(c)
See Note 10 to the financial statements for further discussion of the Waterford 3 lease obligation and Entergy Louisiana’s acquisition of the equity participant’s beneficial interest in the Waterford 3 leased assets and for further discussion of the Grand Gulf lease obligation.
(d)
This note did not have a stated interest rate, but had an implicit interest rate of 7.458% .
(e)
The fair value excludes lease obligations of $34 million at System Energy and long-term DOE obligations of $183 million at Entergy Arkansas, and includes debt due within one year.  Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 15 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades.

The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as of December 31, 2017 , for the next five years are as follows:
 
Amount
 
(In Thousands)
2018

$760,000

2019

$857,679

2020

$898,500

2021

$960,764

2022

$1,304,431


In November 2000, Entergy’s non-utility nuclear business purchased the FitzPatrick and Indian Point 3 power plants in a seller-financed transaction. As part of the purchase agreement with NYPA, Entergy recorded a liability representing the net present value of the payments Entergy would be liable to NYPA for each year that the FitzPatrick and Indian Point 3 power plants would run beyond their respective original NRC license expiration date. In October 2015, Entergy announced a planned shutdown of FitzPatrick at the end of its fuel cycle. As a result of the announcement, Entergy reduced this liability by $26.4 million pursuant to the terms of the purchase agreement. In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. As part of the trust transfer agreement, the original decommissioning agreements were amended, and the Entergy subsidiaries’ obligation to make additional license extension payments to NYPA was eliminated. In the third quarter 2016, Entergy removed the note payable of $35.1 million from the consolidated balance sheet.

Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy have obtained long-term financing authorizations from the FERC that extend through October 2019.  Entergy Arkansas has obtained long-term financing authorization from the APSC that extends through December 2018. Entergy New Orleans has also obtained long-term financing authorization from the City Council that extends through June 2018, as the City Council has concurrent jurisdiction with the FERC over such issuances.

Capital Funds Agreement

Pursuant to an agreement with certain creditors, Entergy Corporation has agreed to supply System Energy with sufficient capital to:

•
maintain System Energy’s equity capital at a minimum of 35% of its total capitalization (excluding short-term debt);

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•
permit the continued commercial operation of Grand Gulf;
•
pay in full all System Energy indebtedness for borrowed money when due; and
•
enable System Energy to make payments on specific System Energy debt, under a supplement to the agreement assigning System Energy’s rights in the agreement as security for the specific debt.

Long-term debt for the Registrant Subsidiaries as of December 31, 2017 and 2016 consisted of:
 
 
2017
 
2016
 
 
(In Thousands)
Entergy Arkansas
 
 
 
 
Mortgage Bonds:
 
 
 
 
3.75% Series due February 2021
 

$350,000

 

$350,000

3.05% Series due June 2023
 
250,000

 
250,000

3.7% Series due June 2024
 
375,000

 
375,000

3.5% Series due April 2026
 
600,000

 
380,000

4.95% Series due December 2044
 
250,000

 
250,000

4.90% Series due December 2052
 
200,000

 
200,000

4.75% Series due June 2063
 
125,000

 
125,000

4.875% Series due September 2066
 
410,000

 
410,000

Total mortgage bonds
 
2,560,000

 
2,340,000

Governmental Bonds (a):
 
 
 
 
1.55% Series due 2017, Jefferson County (d)
 
—

 
54,700

2.375% Series due 2021, Independence County (d)
 
45,000

 
45,000

Total governmental bonds
 
45,000

 
99,700

Variable Interest Entity Notes Payable and Credit Facility (Note 4):
 
 
 
 
2.62% Series K due December 2017
 
—

 
60,000

3.65% Series L due July 2021
 
90,000

 
90,000

3.17% Series M due December 2023
 
40,000

 
40,000

Credit Facility due May 2019, weighted avg rate 2.87%
 
24,900

 
—

Total variable interest entity notes payable and credit facility
 
154,900

 
190,000

Securitization Bonds:
 
 
 
 
2.30% Series Senior Secured due August 2021
 
35,764

 
49,548

Total securitization bonds
 
35,764

 
49,548

Other:
 
 
 
 
Long-term DOE Obligation (b)
 
183,435

 
181,853

Unamortized Premium and Discount – Net
 
5,307

 
984

Unamortized Debt Issuance Costs
 
(34,049
)
 
(34,357
)
Other
 
2,042

 
2,057

Total Long-Term Debt
 
2,952,399

 
2,829,785

Less Amount Due Within One Year
 
—

 
114,700

Long-Term Debt Excluding Amount Due Within One Year
 

$2,952,399

 

$2,715,085

Fair Value of Long-Term Debt (c)
 

$2,865,844

 

$2,623,910



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2017
 
2016
 
 
(In Thousands)
Entergy Louisiana
 
 
 
 
Mortgage Bonds:
 
 
 
 
6.0% Series due May 2018
 

$375,000

 

$375,000

6.50% Series due September 2018
 
300,000

 
300,000

3.95% Series due October 2020
 
250,000

 
250,000

4.8% Series due May 2021
 
200,000

 
200,000

3.3% Series due December 2022
 
200,000

 
200,000

4.05% Series due September 2023
 
325,000

 
325,000

5.59% Series due October 2024
 
300,000

 
300,000

5.40% Series due November 2024
 
400,000

 
400,000

3.78% Series due April 2025
 
110,000

 
110,000

3.78% Series due April 2025
 
190,000

 
190,000

4.44% Series due January 2026
 
250,000

 
250,000

2.40% Series due October 2026
 
400,000

 
400,000

3.12% Series due September 2027
 
450,000

 
—

3.25% Series due April 2028
 
425,000

 
425,000

3.05% Series due June 2031
 
325,000

 
325,000

5.0% Series due July 2044
 
170,000

 
170,000

4.95% Series due January 2045
 
450,000

 
450,000

5.25% Series due July 2052
 
200,000

 
200,000

4.70% Series due June 2063
 
100,000

 
100,000

4.875% Series due September 2066
 
270,000

 
270,000

Total mortgage bonds
 
5,690,000

 
5,240,000

Governmental Bonds (a):
 
 
 
 
3.375 % Series due 2028, Louisiana Public Facilities Authority (d)
 
83,680

 
83,680

3.50% Series due 2030, Louisiana Public Facilities Authority (d)
 
115,000

 
115,000

Total governmental bonds
 
198,680

 
198,680

Variable Interest Entity Notes Payable and Credit Facilities (Note 4):
 
 
 
 
3.25% Series G due July 2017
 
—

 
25,000

3.25% Series Q due July 2017
 
—

 
75,000

3.38% Series R due August 2020
 
70,000

 
70,000

3.92% Series H due February 2021
 
40,000

 
40,000

3.22% Series I due December 2023
 
20,000

 
20,000

Credit Facility due May 2019, weighted avg rate 2.38%
 
65,650

 
—

Credit Facility due May 2019, weighted avg rate 2.64%
 
36,360

 
—

Total variable interest entity notes payable and credit facilities
 
232,010

 
230,000

Securitization Bonds:
 
 
 
 
2.04% Series Senior Secured due September 2023
 
79,228

 
100,972

Total securitization bonds
 
79,228

 
100,972

Other:
 
 
 
 
Waterford 3 Lease Obligation (Note 10) (e)
 
—

 
57,492

Waterford Series Collateral Trust Mortgage Notes due 2017 (Note 10) (f)
 
—

 
42,703

Unamortized Premium and Discount - Net
 
(13,877
)
 
(14,917
)
Unamortized Debt Issuance Costs
 
(48,540
)
 
(48,972
)
Other
 
6,570

 
6,833

Total Long-Term Debt
 
6,144,071

 
5,812,791

Less Amount Due Within One Year
 
675,002

 
200,198

Long-Term Debt Excluding Amount Due Within One Year
 

$5,469,069

 

$5,612,593

Fair Value of Long-Term Debt (c)
 

$6,389,774

 

$5,929,488



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2017
 
2016
 
 
(In Thousands)
Entergy Mississippi
 
 
 
 
Mortgage Bonds:
 
 
 
 
6.64% Series due July 2019
 

$150,000

 

$150,000

3.1% Series due July 2023
 
250,000

 
250,000

3.75% Series due July 2024
 
100,000

 
100,000

3.25% Series due December 2027
 
150,000

 
—

2.85% Series due June 2028
 
375,000

 
375,000

4.90% Series due October 2066
 
260,000

 
260,000

Total mortgage bonds
 
1,285,000

 
1,135,000

Other:
 
 
 
 
Unamortized Premium and Discount – Net
 
(1,155
)
 
(766
)
Unamortized Debt Issuance Costs
 
(13,723
)
 
(13,318
)
Total Long-Term Debt
 
1,270,122

 
1,120,916

Less Amount Due Within One Year
 
—

 
—

Long-Term Debt Excluding Amount Due Within One Year
 

$1,270,122

 

$1,120,916

Fair Value of Long-Term Debt (c)
 

$1,285,741

 

$1,086,203


 
 
2017
 
2016
 
 
(In Thousands)
Entergy New Orleans
 
 
 
 
Mortgage Bonds:
 
 
 
 
5.10% Series due December 2020
 

$25,000

 

$25,000

3.9% Series due July 2023
 
100,000

 
100,000

4.0% Series due June 2026
 
85,000

 
85,000

5.0% Series due December 2052
 
30,000

 
30,000

5.50% Series due April 2066
 
110,000

 
110,000

Total mortgage bonds
 
350,000

 
350,000

Securitization Bonds:
 
 
 
 
       2.67% Series Senior Secured due June 2027
 
76,707

 
87,307

Total securitization bonds
 
76,707


87,307

Other:
 
 
 
 
Payable to Entergy Louisiana due November 2035
 
18,423

 
20,527

Unamortized Premium and Discount – Net
 
(206
)
 
(245
)
Unamortized Debt Issuance Costs
 
(8,054
)
 
(8,595
)
Total Long-Term Debt
 
436,870

 
448,994

Less Amount Due Within One Year
 
2,077

 
2,104

Long-Term Debt Excluding Amount Due Within One Year
 

$434,793

 

$446,890

Fair Value of Long-Term Debt (c)
 

$455,968

 

$455,459


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2017
 
2016
 
 
(In Thousands)
Entergy Texas
 
 
 
 
Mortgage Bonds:
 
 
 
 
7.125% Series due February 2019
 

$500,000

 

$500,000

2.55% Series due June 2021
 
125,000

 
125,000

4.1% Series due September 2021
 
75,000

 
75,000

3.45% Series due December 2027
 
150,000

 
—

5.15% Series due June 2045
 
250,000

 
250,000

5.625% Series due June 2064
 
135,000

 
135,000

Total mortgage bonds
 
1,235,000

 
1,085,000

Securitization Bonds:
 
 
 
 
5.79% Series Senior Secured, Series A due October 2018
 
—

 
23,584

3.65% Series Senior Secured, Series A due August 2019
 
30,769

 
74,899

5.93% Series Senior Secured, Series A due June 2022
 
110,431

 
114,400

4.38% Series Senior Secured, Series A due November 2023
 
218,600

 
218,600

Total securitization bonds
 
359,800

 
431,483

Other:
 
 
 
 
Unamortized Premium and Discount - Net
 
(1,498
)
 
(1,579
)
Unamortized Debt Issuance Costs
 
(10,366
)
 
(10,809
)
Other
 
4,214

 
4,312

Total Long-Term Debt
 
1,587,150

 
1,508,407

Less Amount Due Within One Year
 
—

 
—

Long-Term Debt Excluding Amount Due Within One Year
 

$1,587,150

 

$1,508,407

Fair Value of Long-Term Debt (c)
 

$1,661,902

 

$1,600,156



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2017
 
2016
 
 
(In Thousands)
System Energy
 
 
 
 
Mortgage Bonds:
 
 
 
 
4.1% Series due April 2023
 

$250,000

 

$250,000

Total mortgage bonds
 
250,000

 
250,000

Governmental Bonds (a):
 
 
 
 
5.875% Series due 2022, Mississippi Business Finance Corp.
 
134,000

 
134,000

Total governmental bonds
 
134,000

 
134,000

Variable Interest Entity Notes Payable and Credit Facility (Note 4):
 
 
 
 
4.02% Series H due February 2017
 
—

 
50,000

3.78% Series I due October 2018
 
85,000

 
85,000

Credit Facility due May 2019, weighted avg rate 2.52%
 
50,000

 
—

Total variable interest entity notes payable and credit facility
 
135,000

 
135,000

Other:
 
 
 
 
Grand Gulf Lease Obligation 5.13% (Note 10)
 
34,356

 
34,359

Unamortized Premium and Discount – Net
 
(415
)
 
(503
)
Unamortized Debt Issuance Costs
 
(1,455
)
 
(1,727
)
Other
 
2

 
3

Total Long-Term Debt
 
551,488

 
551,132

Less Amount Due Within One Year
 
85,004

 
50,003

Long-Term Debt Excluding Amount Due Within One Year
 

$466,484

 

$501,129

Fair Value of Long-Term Debt (c)
 

$529,119

 

$529,520


(a)
Consists of pollution control revenue bonds and environmental revenue bonds.
(b)
Pursuant to the Nuclear Waste Policy Act of 1982, Entergy’s nuclear owner/licensee subsidiaries have contracts with the DOE for spent nuclear fuel disposal service.  The contracts include a one-time fee for generation prior to April 7, 1983.  Entergy Arkansas is the only Entergy company that generated electric power with nuclear fuel prior to that date and includes the one-time fee, plus accrued interest, in long-term debt.
(c)
The fair value excludes lease obligations of $34 million at System Energy and long-term DOE obligations of $183 million at Entergy Arkansas, and includes debt due within one year.  Fair values are classified as Level 2 in the fair value hierarchy discussed in Note 15 to the financial statements and are based on prices derived from inputs such as benchmark yields and reported trades.
(d)
The bonds are secured by a series of collateral mortgage bonds.
(e)
The interest rate as of December 31, 2016 was 8.09% . See Note 10 to the financial statements for further discussion of Entergy Louisiana’s acquisition of the equity participant’s beneficial interest in the Waterford 3 leased assets in March 2016.
(f)
This note did not have a stated interest rate, but had an implicit interest rate of 7.458% .

The annual long-term debt maturities (excluding lease obligations and long-term DOE obligations) for debt outstanding as of December 31, 2017 , for the next five years are as follows:
 
Entergy
Arkansas
 
Entergy
Louisiana
 
Entergy
Mississippi
 
Entergy
New Orleans
 
Entergy
Texas
 
System
Energy
 
(In Thousands)
2018

$—

 

$675,000

 

$—

 

$2,077

 

$—

 

$85,000

2019

$24,900

 

$102,010

 

$150,000

 

$1,979

 

$530,769

 

$50,000

2020

$—

 

$320,000

 

$—

 

$26,838

 

$—

 

$—

2021

$520,764

 

$240,000

 

$—

 

$1,618

 

$200,000

 

$—

2022

$—

 

$200,000

 

$—

 

$1,326

 

$110,431

 

$134,000


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Notes to Financial Statements


Entergy Arkansas Securitization Bonds

In June 2010 the APSC issued a financing order authorizing the issuance of bonds to recover Entergy Arkansas’s January 2009 ice storm damage restoration costs, including carrying costs of $11.5 million and $4.6 million of up-front financing costs.  In August 2010, Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, issued $124.1 million of storm cost recovery bonds.  The bonds have a coupon of 2.30% .  Although the principal amount is not due until August 2021, Entergy Arkansas Restoration Funding expects to make principal payments on the bonds over the next three years in the amount of $14.1 million for 2018 , $14.4 million for 2019 , and $7.3 million for 2020 . With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds.  The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet.  The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Entergy Arkansas Restoration Funding, including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas.  Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections.

Entergy Louisiana Securitization Bonds – Little Gypsy

In August 2011 the LPSC issued a financing order authorizing the issuance of bonds to recover Entergy Louisiana’s investment recovery costs associated with the canceled Little Gypsy repowering project.  In September 2011, Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy Louisiana, issued $207.2 million of senior secured investment recovery bonds.  The bonds have an interest rate of 2.04% .  Although the principal amount is not due until September 2023, Entergy Louisiana Investment Recovery Funding expects to make principal payments on the bonds over the next four years in the amounts of $22.3 million for 2018 , $22.7 million for 2019 , $23.2 million for 2020 , and $11 million for 2021 .  With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana the investment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficient to service the bonds.  In accordance with the financing order, Entergy Louisiana will apply the proceeds it received from the sale of the investment recovery property as a reimbursement for previously-incurred investment recovery costs.  The investment recovery property is reflected as a regulatory asset on the consolidated Entergy Louisiana balance sheet.  The creditors of Entergy Louisiana do not have recourse to the assets or revenues of Entergy Louisiana Investment Recovery Funding, including the investment recovery property, and the creditors of Entergy Louisiana Investment Recovery Funding do not have recourse to the assets or revenues of Entergy Louisiana.  Entergy Louisiana has no payment obligations to Entergy Louisiana Investment Recovery Funding except to remit investment recovery charge collections.

Entergy New Orleans Securitization Bonds - Hurricane Isaac

In May 2015 the City Council issued a financing order authorizing the issuance of securitization bonds to recover Entergy New Orleans’s Hurricane Isaac storm restoration costs of $31.8 million , including carrying costs, the costs of funding and replenishing the storm recovery reserve in the amount of $63.9 million , and approximately $3 million of up-front financing costs associated with the securitization. In July 2015, Entergy New Orleans Storm Recovery Funding I, L.L.C., a company wholly owned and consolidated by Entergy New Orleans, issued $98.7 million of storm cost recovery bonds. The bonds have a coupon of 2.67% . Although the principal amount is not due until June 2027, Entergy New Orleans Storm Recovery Funding expects to make principal payments on the bonds over the next five years in the amounts of $11 million for 2018 , $11.2 million for 2019 , $11.6 million for 2020 , $11.9 million for 2021 , and $12.2 million for 2022 . With the proceeds, Entergy New Orleans Storm Recovery Funding purchased from Entergy New Orleans the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy New Orleans balance sheet. The creditors of Entergy New Orleans do not have recourse to the assets or revenues of Entergy New Orleans Storm Recovery Funding, including the storm recovery property, and the creditors of Entergy New Orleans Storm Recovery Funding do not have recourse to the

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assets or revenues of Entergy New Orleans. Entergy New Orleans has no payment obligations to Entergy New Orleans Storm Recovery Funding except to remit storm recovery charge collections.

Entergy Texas Securitization Bonds - Hurricane Rita

In April 2007 the PUCT issued a financing order authorizing the issuance of securitization bonds to recover $353 million of Entergy Texas’s Hurricane Rita reconstruction costs and up to $6 million of transaction costs, offset by $32 million of related deferred income tax benefits.  In June 2007, Entergy Gulf States Reconstruction Funding I, LLC, a company that is now wholly-owned and consolidated by Entergy Texas, issued $329.5 million of senior secured transition bonds (securitization bonds) as follows:
 
Amount
 
(In Thousands)
Senior Secured Transition Bonds, Series A:
 

Tranche A-1 (5.51%) due October 2013

$93,500

Tranche A-2 (5.79%) due October 2018
121,600

Tranche A-3 (5.93%) due June 2022 (a)
114,400

Total senior secured transition bonds

$329,500


(a)     As of December 31, 2017 the remaining amount outstanding on Tranche A-3 was $110.4 million .

Although the principal amount of each tranche is not due until the dates given above, Entergy Gulf States Reconstruction Funding expects to make principal payments on the bonds over the next four years in the amounts of $29.2 million for 2018 , $30.9 million for 2019 , $32.8 million for 2020 , and $17.5 million for 2021 . All of the scheduled principal payments for 2018-2021 are for Tranche A-3. Tranche A-1 and Tranche A-2 have been paid.

With the proceeds, Entergy Gulf States Reconstruction Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds.  The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet.  The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Gulf States Reconstruction Funding, including the transition property, and the creditors of Entergy Gulf States Reconstruction Funding do not have recourse to the assets or revenues of Entergy Texas.  Entergy Texas has no payment obligations to Entergy Gulf States Reconstruction Funding except to remit transition charge collections.

Entergy Texas Securitization Bonds - Hurricane Ike and Hurricane Gustav

In September 2009 the PUCT authorized the issuance of securitization bonds to recover $566.4 million of Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs, plus carrying costs and transaction costs, offset by insurance proceeds.  In November 2009, Entergy Texas Restoration Funding, LLC (Entergy Texas Restoration Funding), a company wholly-owned and consolidated by Entergy Texas, issued $545.9 million of senior secured transition bonds (securitization bonds), as follows:
 
Amount
 
(In Thousands)
Senior Secured Transition Bonds:
 

Tranche A-1 (2.12%) due February 2016

$182,500

Tranche A-2 (3.65%) due August 2019 (a)
144,800

Tranche A-3 (4.38%) due November 2023
218,600

Total senior secured transition bonds

$545,900


(a)     As of December 31, 2017 the remaining amount outstanding on Tranche A-2 was $30.8 million .

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Although the principal amount of each tranche is not due until the dates given above, Entergy Texas Restoration Funding expects to make principal payments on the bonds over the next five years in the amount of $45.8 million for 2018 , $47.6 million for 2019 , $49.8 million for 2020 , $52 million for 2021 , and $54.3 million for 2022 . Of the scheduled principal payments for 2018, $30.8 million are for Tranche A-2 and $15 million are for Tranche A-3. All of the scheduled principle payments for 2019-2022 are for Tranche A-3. Tranche A-1 has been paid.

With the proceeds, Entergy Texas Restoration Funding purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds.  The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet.  The creditors of Entergy Texas do not have recourse to the assets or revenues of Entergy Texas Restoration Funding, including the transition property, and the creditors of Entergy Texas Restoration Funding do not have recourse to the assets or revenues of Entergy Texas.  Entergy Texas has no payment obligations to Entergy Texas Restoration Funding except to remit transition charge collections.


NOTE 6.   PREFERRED EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans)

The number of shares and units authorized and outstanding and dollar value of preferred stock, preferred membership interests, and non-controlling interest for Entergy Corporation subsidiaries as of December 31, 2017 and 2016 are presented below.  All series of the Utility preferred stock are redeemable at the option of the related company.
 
 
Shares/Units
Authorized
 
Shares/Units
Outstanding
 
 
 
 
 
 
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Entergy Corporation
 
 
 
 
 
 
 
(Dollars in Thousands)
Utility:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock or Preferred Membership Interests without sinking fund:
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas, 4.32%-4.72% Series
 
313,500

 
313,500

 
313,500

 
313,500

 

$31,350

 

$31,350

Entergy Utility Holding Company, LLC, 7.5% Series (a)
 
110,000

 
110,000

 
110,000

 
110,000

 
107,425

 
107,425

Entergy Utility Holding Company, LLC, 6.25% Series (b)
 
15,000

 
—

 
15,000

 
—

 
14,398

 
—

Entergy Mississippi, 4.36%-4.92% Series
 
203,807

 
203,807

 
203,807

 
203,807

 
20,381

 
20,381

Entergy New Orleans, 4.36%-5.56% Series
 
—

 
197,798

 
—

 
197,798

 
—

 
19,780

Total Utility Preferred Stock or Preferred Membership Interests without sinking fund
 
642,307

 
825,105

 
642,307

 
825,105

 
173,554

 
178,936

Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
 
 
 
 
Preferred Stock without sinking fund:
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Finance Holding, Inc. 8.75% (c)
 
250,000

 
250,000

 
250,000

 
250,000

 
24,249

 
24,249

Total Subsidiaries’ Preferred Stock without sinking fund
 
892,307

 
1,075,105

 
892,307

 
1,075,105

 

$197,803

 

$203,185


(a)
Dollar amount outstanding is net of $2,575 thousand of preferred stock issuance costs.
(b)
Dollar amount outstanding is net of $602 thousand of preferred stock issuance costs.
(c)
Dollar amount outstanding is net of $751 thousand of preferred stock issuance costs.

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In November 2017, Entergy Utility Holding Company, LLC issued 15,000 shares of $1,000 par value 6.25% Series B Preferred Membership Interests, all of which are outstanding as of December 31, 2017. The distributions are cumulative and payable quarterly. These units are redeemable on or after February 28, 2038, at Entergy Utility Holding Company, LLC’s option, at the fixed redemption price of $1,000 per share.

In October 2015, Entergy Utility Holding Company, LLC issued 110,000 shares of $1,000 par value 7.5% Series A Preferred Membership Interests, all of which are outstanding as of December 31, 2017. The distributions are cumulative and payable quarterly. These units are redeemable on or after January 1, 2036, at Entergy Utility Holding Company, LLC’s option, at the fixed redemption price of $1,000 per share.

In December 2013, Entergy Finance Holding, Inc. issued 250,000 shares of $100 par value 8.75% Series Preferred Stock, all of which are outstanding as of December 31, 2017. The dividends are cumulative and payable quarterly. The preferred stock is redeemable on or after December 16, 2023, at Entergy Finance Holding, Inc.’s option, at the fixed redemption price of $100 per share.
 
The number of shares and units authorized and outstanding and dollar value of preferred stock for Entergy Arkansas, Entergy Mississippi, and Entergy New Orleans as of December 31, 2017 and 2016 are presented below.  All series of the Utility operating companies’ preferred stock are redeemable at the respective company’s option at the call prices presented.  Dividends and distributions paid on all of Entergy’s preferred stock and membership interests series are eligible for the dividends received deduction.  
 
 
Shares
Authorized
and Outstanding
 
 
 
Call Price per
Share as of
December 31,
 
 
2017
 
2016
 
2017
 
2016
 
2017
Entergy Arkansas Preferred Stock
 
 
 
 
 
(Dollars in Thousands)
 
 
Without sinking fund:
 
 
 
 
 
 
 
 
 
 
Cumulative, $100 par value:
 
 
 
 
 
 
 
 
 
 
4.32% Series
 
70,000

 
70,000

 

$7,000

 

$7,000

 

$103.65

4.72% Series
 
93,500

 
93,500

 
9,350

 
9,350

 

$107.00

4.56% Series
 
75,000

 
75,000

 
7,500

 
7,500

 

$102.83

4.56% 1965 Series
 
75,000

 
75,000

 
7,500

 
7,500

 

$102.50

Total without sinking fund
 
313,500

 
313,500

 

$31,350

 

$31,350

 
 

 
 
Shares
Authorized
and Outstanding
 
 
 
Call Price per
Share as of
December 31,
 
 
2017
 
2016
 
2017
 
2016
 
2017
Entergy Mississippi Preferred Stock
 
 
 
 
 
(Dollars in Thousands)
 
 
Without sinking fund:
 
 
 
 
 
 
 
 
 
 
Cumulative, $100 par value:
 
 
 
 
 
 
 
 
 
 
4.36% Series
 
59,920

 
59,920

 

$5,992

 

$5,992

 

$103.86

4.56% Series
 
43,887

 
43,887

 
4,389

 
4,389

 

$107.00

4.92% Series
 
100,000

 
100,000

 
10,000

 
10,000

 

$102.88

Total without sinking fund
 
203,807

 
203,807

 

$20,381

 

$20,381

 
 


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Notes to Financial Statements


 
 
Shares
Authorized
and Outstanding
 
 
 
 
 
Call Price per
Share as of
December 31,
 
 
2017
 
2016
 
2017
 
2016
 
2017
Entergy New Orleans Preferred Stock
 
 
 
 
(Dollars in Thousands)
 
 
Without sinking fund:
 
 
 
 
 
 
 
 
 
 
Cumulative, $100 par value:
 
 
 
 
 
 
 
 
 
 
4.36% Series (a)
 
—

 
60,000

 

$—

 

$6,000

 

$—

4.75% Series (a)
 
—

 
77,798

 
—

 
7,780

 

$—

5.56% Series (a)
 
—

 
60,000

 
—

 
6,000

 

$—

Total without sinking fund
 
—

 
197,798

 

$—

 

$19,780

 
 

(a)
In November 2017, Entergy New Orleans redeemed its $6 million of 4.36% Series, $7.8 million of 4.75% Series, and $6 million of 5.56% Series of preferred membership interests as part of a multi-step internal restructuring.


NOTE 7.   COMMON EQUITY (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Common Stock

Common stock and treasury stock shares activity for Entergy for 2017 , 2016 , and 2015 is as follows:
 
2017
 
2016
 
2015
 
Common
Shares
Issued
 

Treasury
Shares
 
Common
Shares
Issued
 
 
Treasury
Shares
 
Common
Shares
Issued
 
 
Treasury
Shares
Beginning Balance, January 1
254,752,788

 
75,623,363

 
254,752,788

 
76,363,763

 
254,752,788

 
75,512,079

Repurchases
—

 
—

 
—

 
—

 
—

 
1,468,984

Issuances:
 

 
 

 
 

 
 

 
 

 
 

Employee Stock-Based Compensation Plans
—

 
(1,377,363
)
 
—

 
(729,073
)
 
—

 
(610,409
)
Directors’ Plan
—

 
(10,865
)
 
—

 
(11,327
)
 
—

 
(6,891
)
Ending Balance, December 31
254,752,788

 
74,235,135

 
254,752,788

 
75,623,363

 
254,752,788

 
76,363,763


Entergy Corporation reissues treasury shares to meet the requirements of the Stock Plan for Outside Directors (Directors’ Plan), three Equity Ownership Plans of Entergy Corporation and Subsidiaries, and certain other stock benefit plans.  The Directors’ Plan awards to non-employee directors a portion of their compensation in the form of a fixed dollar value of shares of Entergy Corporation common stock.

In October 2010 the Board granted authority for a $500 million share repurchase program.  As of December 31, 2017 , $350 million of authority remains under the $500 million share repurchase program.

Dividends declared per common share were $3.50 in 2017 , $3.42 in 2016 , and $3.34 in 2015 .

System Energy paid its parent, Entergy Corporation, distributions out of its common stock of $21 million in 2017 and $40 million in 2016.

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Notes to Financial Statements


Retained Earnings and Dividend Restrictions

Provisions within the articles of incorporation relating to preferred stock of each of Entergy Arkansas and Entergy Mississippi could restrict the payment of cash dividends or other distributions on their common and preferred equity if such payment were to occur when, or result in, a ratio of common stock equity to total capitalization of 25% or less.  Entergy Corporation received dividend payments and distributions from subsidiaries totaling $201 million in 2017 , $165 million in 2016 , and $615 million in 2015 .

Comprehensive Income

Accumulated other comprehensive income (loss) is included in the equity section of the balance sheets of Entergy and Entergy Louisiana. The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the year ended December 31, 2017 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 

Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Beginning balance, January 1, 2017

$3,993

 

($469,446
)
 

$429,734

 

$748

 

($34,971
)
Other comprehensive income (loss) before reclassifications
28,602

 
(104,029
)
 
171,099

 
(748
)
 
94,924

Amounts reclassified from accumulated other comprehensive income (loss)
(70,072
)
 
42,376

 
(55,788
)
 
—

 
(83,484
)
Net other comprehensive income (loss) for the period
(41,470
)
 
(61,653
)
 
115,311

 
(748
)
 
11,440

Ending balance, December 31, 2017

($37,477
)
 

($531,099
)
 

$545,045

 

$—

 

($23,531
)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy for the year ended December 31, 2016 by component:
 
Cash flow
hedges
net
unrealized
gain (loss)
 
Pension
and
other
postretirement
liabilities
 

Net
unrealized
investment
gain (loss)
 
Foreign
currency
translation
 
Total
Accumulated
Other
Comprehensive
Income (Loss)
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Beginning balance, January 1, 2016

$105,970



($466,604
)


$367,557



$2,028

 

$8,951

Other comprehensive income (loss) before reclassifications
87,740

 
(26,997
)
 
68,465

 
(1,280
)
 
127,928

Amounts reclassified from
accumulated other comprehensive income (loss)
(189,717
)
 
24,155

 
(6,288
)
 
—

 
(171,850
)
Net other comprehensive income (loss) for the period
(101,977
)
 
(2,842
)
 
62,177

 
(1,280
)
 
(43,922
)
Ending balance, December 31, 2016

$3,993

 

($469,446
)
 

$429,734

 

$748

 

($34,971
)


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Notes to Financial Statements


The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the year ended December 31, 2017:
 
 
Pension and Other
Postretirement Liabilities
 
 
(In Thousands)
 
 
 
Beginning balance, January 1, 2017
 

($48,442
)
Other comprehensive income (loss) before reclassifications
 
3,462

Amounts reclassified from accumulated other comprehensive income (loss)
 
(1,420
)
Net other comprehensive income (loss) for the period
 
2,042

Ending balance, December 31, 2017
 

($46,400
)

The following table presents changes in accumulated other comprehensive income (loss) for Entergy Louisiana for the year ended December 31, 2016:

 
Pension and Other
Postretirement Liabilities

 
(In Thousands)
 
 
 
Beginning balance, January 1, 2016
 

($56,412
)
Other comprehensive income (loss) before reclassifications
 
8,926

Amounts reclassified from accumulated other comprehensive income (loss)
 
(956
)
Net other comprehensive income (loss) for the period
 
7,970

Ending balance, December 31, 2016
 

($48,442
)


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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy for the years ended December 31, 2017 and 2016 are as follows:
 
 
Amounts reclassified from AOCI
 
Income Statement Location
 
 
2017
 
2016
 
 
 
 
(In Thousands)
 
 
Cash flow hedges net unrealized gain (loss)
 
 
 
 
 
 
Power contracts
 

$108,606

 

$293,268

 
Competitive business operating revenues
Interest rate swaps
 
(803
)
 
(1,395
)
 
Miscellaneous - net
Total realized gain (loss) on cash flow hedges
 
107,803

 
291,873

 
 
 
 
(37,731
)
 
(102,156
)
 
Income taxes
Total realized gain (loss) on cash flow hedges (net of tax)
 

$70,072

 

$189,717

 
 
 
 
 
 

 
 
Pension and other postretirement liabilities
 
 

 
 

 
 
Amortization of prior-service costs
 

$26,251

 

$29,414

 
(a)
Acceleration of prior-service cost due to curtailment
 
—

 
(1,045
)
 
(a)
Amortization of loss
 
(86,002
)
 
(60,693
)
 
(a)
Settlement loss
 
(7,544
)
 
(2,007
)
 
(a)
Total amortization
 
(67,295
)
 
(34,331
)
 
 
 
 
24,919

 
10,176

 
Income taxes
Total amortization (net of tax)
 

($42,376
)
 

($24,155
)
 
 
 
 
 
 

 
 
Net unrealized investment gain (loss)
 
 
 

 
 
Realized gain (loss)
 

$109,388

 

$12,329

 
Interest and investment income
 
 
(53,600
)
 
(6,041
)
 
Income taxes
Total realized investment gain (loss) (net of tax)
 

$55,788

 

$6,288

 
 
 
 
 
 

 
 
Total reclassifications for the period (net of tax)
 

$83,484

 

$171,850

 
 

(a)
These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 11 to the financial statements for additional details.
    


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Total reclassifications out of accumulated other comprehensive income (loss) (AOCI) for Entergy Louisiana for the years ended December 31, 2017 and 2016 are as follows:
 
 
Amounts reclassified from AOCI
 
Income Statement Location
 
 
2017
 
2016
 
 
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
Pension and other postretirement liabilities
 
 
 
 
 
 
Amortization of prior-service costs
 

$7,734

 

$7,786

 
(a)
Amortization of loss
 
(5,327
)
 
(6,281
)
 
(a)
Total amortization
 
2,407

 
1,505

 
 
 
 
(987
)
 
(549
)
 
Income taxes
Total amortization (net of tax)
 
1,420

 
956

 
 
 
 
 
 

 
 
Total reclassifications for the period (net of tax)
 

$1,420

 

$956

 
 
(a)
These accumulated other comprehensive income (loss) components are included in the computation of net periodic pension and other postretirement cost. See Note 11 to the financial statements for additional details.
    

NOTE 8.    COMMITMENTS AND CONTINGENCIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Entergy and the Registrant Subsidiaries are involved in a number of legal, regulatory, and tax proceedings before various courts, regulatory commissions, and governmental agencies in the ordinary course of business.  While management is unable to predict the outcome of such proceedings, management does not believe that the ultimate resolution of these matters will have a material effect on Entergy’s results of operations, cash flows, or financial condition.  Entergy discusses regulatory proceedings in Note 2 to the financial statements and discusses tax proceedings in Note 3 to the financial statements.

Vidalia Purchased Power Agreement

Entergy Louisiana has an agreement extending through the year 2031 to purchase energy generated by a hydroelectric facility known as the Vidalia project.  Entergy Louisiana made payments under the contract of approximately $122.9 million in 2017 , $158.7 million in 2016 , and $146 million in 2015 .  If the maximum percentage ( 94% ) of the energy is made available to Entergy Louisiana, current production projections would require estimated payments of approximately $129 million in 2018 , and a total of $1.68 billion for the years 2019 through 2031.  Entergy Louisiana currently recovers the costs of the purchased energy through its fuel adjustment clause.

In an LPSC-approved settlement related to tax benefits from the tax treatment of the Vidalia contract, Entergy Louisiana agreed to credit rates by $11 million each year for up to 10 years, beginning in October 2002.  In October 2011 the LPSC approved a settlement under which Entergy Louisiana agreed to provide credits to customers by crediting billings an additional $20.235 million per year for 15 years beginning January 2012.  Entergy Louisiana recorded a regulatory charge and a corresponding regulatory liability to reflect this obligation.  The settlement agreement allowed for an adjustment to the credits if, among other things, there was a change in the applicable federal or state income tax rate. As a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, and the lowering of the federal corporate income tax rate from 35% to 21% , the Vidalia purchased power regulatory liability was reduced by $30.5 million , with a corresponding increase to Other regulatory credits on the income statement. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.

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ANO Damage, Outage, and NRC Reviews

In March 2013, during a scheduled refueling outage at ANO 1, a contractor-owned and operated heavy-lifting apparatus collapsed while moving the generator stator out of the turbine building.  The collapse resulted in the death of an ironworker and injuries to several other contract workers, caused ANO 2 to shut down, and damaged the ANO turbine building.  The total cost of assessment, restoration of off-site power, site restoration, debris removal, and replacement of damaged property and equipment was approximately $ 95 million .  Entergy Arkansas is pursuing its options for recovering damages that resulted from the stator drop, including its insurance coverage and legal action. During 2014, Entergy Arkansas collected $50 million from Nuclear Electric Insurance Limited (NEIL), a mutual insurance company that provides property damage coverage to the members’ nuclear generating plants. Litigation remains pending.

In addition, Entergy Arkansas incurred replacement power costs for ANO 2 power during its outage and incurred incremental replacement power costs for ANO 1 power because the outage extended beyond the originally-planned duration of the refueling outage.  In February 2014 the APSC approved Entergy Arkansas’s request to exclude from the calculation of its revised energy cost rate $65.9 million of deferred fuel and purchased energy costs incurred in 2013 as a result of the ANO stator incident. The APSC authorized Entergy Arkansas to retain the $65.9 million in its deferred fuel balance with recovery to be reviewed in a later period after more information regarding various claims associated with the ANO stator incident is available. In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In that proceeding, the APSC approved a settlement agreement agreed upon by the parties, including a provision that requires Entergy Arkansas to initiate a proceeding for the purpose of recovering funds currently withheld from rates and related to the stator incident, including the $65.9 million of deferred fuel and purchased energy costs previously noted, subject to certain timelines and conditions set forth in the settlement agreement.

Shortly after the stator incident, the NRC deployed an augmented inspection team to review the plant’s response.  In July 2013 a second team of NRC inspectors visited ANO to evaluate certain items that were identified as requiring follow-up inspection to determine whether performance deficiencies existed. In March 2014 the NRC issued an inspection report on the follow-up inspection that discussed two preliminary findings, one that was preliminarily determined to be “red with high safety significance” for Unit 1 and one that was preliminarily determined to be “yellow with substantial safety significance” for Unit 2, with the NRC indicating further that these preliminary findings may warrant additional regulatory oversight. This report also noted that one additional item related to flood barrier effectiveness was still under review. In June 2014 the NRC classified both findings as “yellow with substantial safety significance.”

In March 2015, after several NRC inspections and regulatory conferences, the NRC issued a letter notifying Entergy of its decision to move ANO into the “multiple/repetitive degraded cornerstone column,” or Column 4, of the NRC’s Reactor Oversight Process Action Matrix. Placement into Column 4 requires significant additional NRC inspection activities at the ANO site, including a review of the site’s root cause evaluation associated with flood barrier effectiveness and stator issues, an assessment of the effectiveness of the site’s corrective action program, an additional design basis inspection, a safety culture assessment, and possibly other inspection activities consistent with the NRC’s Inspection Procedure. Entergy Arkansas incurred incremental costs of approximately $53 million in 2015 to prepare for the NRC inspection that began in early 2016. Excluding remediation and response costs that may result from the additional NRC inspection activities, Entergy Arkansas also incurred approximately $44 million in 2016 in support of NRC inspection activities and to implement Entergy Arkansas’s performance improvement initiatives developed in 2015. A lesser amount of incremental expense is expected to be ongoing annually after 2016, until ANO transitions out of Column 4.

The NRC completed the supplemental inspection required for ANO’s Column 4 designation in February 2016, and published its inspection report in June 2016. In its inspection report, the NRC concluded that the ANO site is being operated safely and that Entergy understands the depth and breadth of performance concerns associated with ANO’s performance decline. Also in June 2016, the NRC issued a confirmatory action letter to confirm the actions Entergy Arkansas has taken and will continue to take to improve performance at ANO. The NRC will verify the

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completion of those actions through quarterly follow-up inspections, the results of which will determine when ANO should transition out of Column 4. There have been no significant issues arising from the follow-up inspections.
 
Pilgrim NRC Oversight and Planned Shutdown

In September 2015 the NRC placed Pilgrim in its “multiple/repetitive degraded cornerstone column,” or Column 4, of its Reactor Oversight Process Action Matrix due to its finding of continuing weaknesses in Pilgrim’s corrective action program that contributed to repeated unscheduled shutdowns and equipment failures. The preliminary estimate of direct costs of Pilgrim’s response to a planned NRC enhanced inspection ranges from $45 million to $60 million , of which $50 million has been incurred through the end of 2017 in operation and maintenance expense. The estimate does not include potential capital expenditures, which will be charged directly to expense when incurred, or other costs to address issues that may arise in the inspection.

Entergy determined in October 2015 that it would close Pilgrim no later than June 1, 2019 because of poor market conditions that led to reduced revenues, a poor market design that failed to properly compensate nuclear generators for the benefits they provide, and increased operational costs. The decision came after management’s extensive analysis of the economics and operating life of the plant following the NRC’s decision to place the plant in Column 4. Entergy determined in April 2016 that it intends to refuel Pilgrim in 2017 and then cease operations May 31, 2019. Pilgrim currently has approximately 677 MW of Capacity Supply Obligations in ISO New England through May 2019.

See Note 14 to the financial statements for discussion of the impairment of the Pilgrim plant and related long-lived assets.

Spent Nuclear Fuel Litigation

Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage facilities for, and to dispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors.  Entergy’s nuclear owner/licensee subsidiaries have been charged fees for the estimated future disposal costs of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982.  The affected Entergy companies entered into contracts with the DOE, whereby the DOE is to furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generation prior to that date.  Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be proper components of nuclear fuel expense.  Provisions to recover such costs have been or will be made in applications to regulatory authorities for the Utility plants.  Following the defunding of the Yucca Mountain spent fuel repository program, the National Association of Regulatory Utility Commissioners and others sued the government seeking cessation of collection of the one mill per net kWh generated and sold after April 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset the fee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January 2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C. Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014. Management cannot predict the potential timing or magnitude of future spent fuel fee revisions that may occur.

Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts. As a result of the DOE’s failure to begin disposal of spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts, Entergy’s nuclear owner/licensee subsidiaries have incurred and will continue to incur damages. Beginning in November 2003 these subsidiaries have pursued litigation to recover the damages caused by the DOE’s delay in performance. Following are details of final judgments recorded by Entergy in 2016 related to Entergy’s nuclear owner licensee subsidiaries’ litigation with the DOE.


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In December 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $81 million in favor of Entergy Nuclear Indian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case, and Entergy received the payment from the U.S. Treasury in June 2016. The effect of recording the Indian Point 3 proceeds was a reduction to plant, other operation and maintenance expense, and depreciation expense. The Indian Point 3 damages awarded included $45 million related to costs previously capitalized and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $45 million, Entergy recorded $8 million as a reduction to previously-recorded depreciation expense. Entergy reduced its Indian Point 3 plant asset balance by the remaining $37 million . The effect of recording the FitzPatrick proceeds was a reduction to plant and other operation and maintenance expense. The FitzPatrick damages awarded included $32 million related to costs previously capitalized and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $32 million, Entergy recorded $1 million as a reduction to previously-recorded depreciation expense, a $10 million reduction to bring its remaining FitzPatrick plant asset balance to zero , and the excess was recorded as a reduction to other operations and maintenance expense. See Note 14 for further discussion on the fair value analysis performed for FitzPatrick and the related impairment charge.

In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of Entergy Louisiana and against the DOE in the first round River Bend damages case. Entergy Louisiana received payment from the U.S. Treasury in August 2016. The effects of recording the final judgment in the third quarter 2016 were reductions to plant, nuclear fuel expense, other operation and maintenance expense, and depreciation expense. The River Bend damages awarded included $17 million related to costs previously capitalized, $23 million related to costs previously recorded as nuclear fuel expense, and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $17 million, Entergy Louisiana recorded $3 million as a reduction to previously-recorded depreciation expense. Entergy Louisiana reduced its River Bend plant asset balance by the remaining $14 million . In September 2016 the U.S. Court of Federal Claims issued a further judgment in the River Bend case in the amount of $5 million . Entergy Louisiana recorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017. The River Bend damages awarded included $2 million related to costs previously recorded as nuclear fuel expense and $3 million related to costs previously recorded as other operation and maintenance expense. In May 2017 the U.S. Court of Federal Claims issued a final judgment in the first round River Bend damages case for $0.6 million , awarding certain cask loading costs that had not previously been adjudicated by the court.

In May 2016, Entergy Nuclear Vermont Yankee and the DOE entered into a stipulation agreement and the U.S. Court of Federal Claims issued a judgment in the amount of $19 million in favor of Entergy Nuclear Vermont Yankee and against the DOE in the second round Vermont Yankee damages case. Entergy received payment from the U.S. Treasury in June 2016. The effect of recording the proceeds was a reduction to other operation and maintenance expense and depreciation expense. The damages awarded included $15 million related to costs previously capitalized and $4 million related to costs previously recorded as other operation and maintenance expense. Of the $15 million, Entergy recorded $2 million as a reduction to previously-recorded depreciation expense. The remaining $13 million would have been recorded as a reduction to Vermont Yankee’s plant asset balance, but was recorded as a reduction to other operation and maintenance expense because Vermont Yankee’s plant asset balance is fully impaired.

In June 2016 the U.S. Court of Federal Claims issued a final judgment in the amount of $49 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case. System Energy received payment from the U.S. Treasury in August 2016. The effects of recording the judgment in the third quarter 2016 were reductions to plant, nuclear fuel expense, other operation and maintenance expense, and depreciation expense. The amounts of Grand Gulf damages awarded related to System Energy’s 90% ownership of Grand Gulf included $16 million related to costs previously capitalized, $19 million related to costs previously recorded as nuclear fuel expense, and $9 million related to costs previously recorded as other operation and maintenance expense. Of the $16 million, System Energy recorded $5 million as a reduction to previously-recorded depreciation expense. System Energy reduced its Grand Gulf plant asset balance by the remaining $11 million .


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In July 2016 the U.S. Court of Federal Claims issued a final judgment in the amount of $31 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case. Entergy Arkansas received payment from the U.S. Treasury in October 2016. The effects of recording the judgment were reductions to plant, nuclear fuel expense, and other operation and maintenance expense. The ANO damages awarded included $6 million related to costs previously capitalized, $19 million related to costs previously recorded as nuclear fuel expense, $5 million related to costs previously recorded as other operation and maintenance expense, and $1 million related to costs previously recorded as taxes other than income taxes.

In August 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $53 million in favor of Entergy Louisiana and against the DOE in the first round Waterford 3 damages case. Entergy Louisiana received payment from the U.S. Treasury in November 2016. The effects of recording the judgment were reductions to plant, nuclear fuel expense, other operation and maintenance expense, and depreciation expense. The Waterford 3 damages awarded included $41 million related to costs previously capitalized, $10 million related to costs previously recorded as nuclear fuel expense, and $2 million related to costs previously recorded as other operation and maintenance expense. Of the $41 million, Entergy Louisiana recorded $3 million as a reduction to previously-recorded depreciation expense.

In September 2016 the U.S. Court of Federal Claims issued a judgment in the Entergy Nuclear Palisades case in the amount of $14 million . Entergy Nuclear Palisades recorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017. The effects of recording the judgment were reductions to plant and other operation and maintenance expenses. The Palisades damages awarded included $11 million related to costs previously capitalized and $3 million related to costs previously recorded as other operation and maintenance expense. Of the $11 million, Entergy recorded $1 million as a reduction to previously-recorded depreciation expense. Entergy reduced its Palisades plant asset balance by the remaining $10 million . The Court previously issued a partial judgment in the case in the amount of $21 million , which was paid by the U.S. Treasury in October 2015.

In October 2016 the U.S. Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case in the amount of $34 million . Entergy Nuclear Indian Point 2 recorded a receivable for that amount, and subsequently received payment from the U.S. Treasury in January 2017. The effects of recording the judgment were reductions to plant and other operation and maintenance expenses. The Indian Point 2 damages awarded included $14 million related to costs previously capitalized, $15 million related to costs previously recorded as other operation and maintenance expense, $3 million related to previously recorded decommissioning expense, and $2 million related to costs previously recorded as taxes other than income taxes. Of the $14 million, Entergy recorded $3 million as a reduction to previously-recorded depreciation expense. Entergy reduced its Indian Point 2 plant asset balance by the remaining $11 million .

Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.

Nuclear Insurance

Third Party Liability Insurance

The Price-Anderson Act requires that reactor licensees purchase insurance and participate in a secondary insurance pool that provides insurance coverage for the public in the event of a nuclear power plant accident.  The costs of this insurance are borne by the nuclear power industry.  Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025.  The Price-Anderson Act requires nuclear power plants to show evidence of financial protection in the event of a nuclear accident.  This protection must consist of two layers of coverage:

1.
The primary level is private insurance underwritten by American Nuclear Insurers (ANI) and provides public liability insurance coverage of $450 million for each operating reactor (prior to January 1, 2017, the primary level of insurance was $375 million ).  If this amount is not sufficient to cover claims arising from an accident,

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the second level, Secondary Financial Protection, applies. In 2016 the NRC approved Vermont Yankee’s exemption request to lower their limits from $375 million to $100 million effective April 15, 2016.
2.
Within the Secondary Financial Protection level, each nuclear reactor has a contingent obligation to pay a retrospective premium, equal to its proportionate share of the loss in excess of the primary level, regardless of proximity to the incident or fault, up to a maximum of approximately $127.3 million per reactor per incident (Entergy’s maximum total contingent obligation per incident is $1.146 billion ).  This retrospective premium is payable at a rate currently set at approximately $19 million per year per incident per nuclear power reactor.
3.
In the event that one or more acts of terrorism cause a nuclear power plant accident, which results in third-party damages – off-site property and environmental damage, off-site bodily injury, and on-site third-party bodily injury (i.e. contractors), the primary level provided by ANI combined with the Secondary Financial Protection would provide approximately $13 billion in coverage.  The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess of existing coverage for a terrorist event. Under current law, the Terrorism Risk Insurance Act extends through 2020.

Currently, 102 nuclear reactors are participating in the Secondary Financial Protection program.  Effective April 15, 2016 the NRC granted Vermont Yankee’s exemption request and it was allowed to withdraw from participation in this layer of financial protection. The Secondary Financial Protection program provides approximately $13 billion in secondary layer insurance coverage to compensate the public in the event of a nuclear power reactor accident.  The Price-Anderson Act provides that all potential liability for a nuclear accident is limited to the amounts of insurance coverage available under the primary and secondary layers.

Entergy Arkansas and Entergy Louisiana each have two licensed reactors. System Energy has one licensed reactor ( 10% of Grand Gulf is owned by a non-affiliated company (Cooperative Energy) that would share on a pro-rata basis in any retrospective premium assessment to System Energy under the Price-Anderson Act).  The Entergy Wholesale Commodities segment includes the ownership, operation, and decommissioning of nuclear power reactors and the ownership of the shutdown Indian Point 1 reactor and Big Rock Point facility.

Property Insurance

Entergy’s nuclear owner/licensee subsidiaries are members of NEIL, a mutual insurance company that provides property damage coverage, including decontamination and premature decommissioning expense, to the members’ nuclear generating plants.  The property damage insurance limits procured by Entergy for its Utility plants and Entergy Wholesale Commodity plants are in compliance with the financial protection requirements of the NRC.

The Utility plants’ (ANO 1 and 2, Grand Gulf, River Bend, and Waterford 3) property damage insurance limits are $1.5 billion per occurrence at each plant with an additional $100 million per occurrence that is shared among the plants. Property damage from earthquake and volcanic eruption is excluded from the first $500 million in coverage for all Utility plants. Property damage from flood is excluded from the first $500 million in coverage at ANO 1 and 2 and Grand Gulf. Property damage from flood is included in the first $500 million for Waterford 3 and River Bend. Property damage from wind for all of the Utility nuclear plants includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a total maximum deductible of $50 million .

The Entergy Wholesale Commodities’ plants (Pilgrim, Palisades, Indian Point, Vermont Yankee, and Big Rock Point) have property damage insurance limits as follows: Vermont Yankee - $50 million per occurrence; Big Rock Point - $500 million per occurrence; Pilgrim and Palisades - $1.115 billion per occurrence; and Indian Point - $1.6 billion per occurrence. For losses that are considered non-nuclear in nature, the property damage insurance limit at Pilgrim, Palisades, and Indian Point is $500 million and at Vermont Yankee is $50 million . Property damage from wind and flood at Indian Point includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximum deductible of $50 million , but property damage from earthquake and volcanic eruption at Indian Point is excluded from the first $500 million . Property damage from wind at Pilgrim includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximum

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deductible of $50 million , but property damage from flood, earthquake, and volcanic eruption at Pilgrim is excluded from the first $500 million . Property damage from wind, flood, earthquake, and volcanic eruption at Vermont Yankee and Palisades includes a deductible of $10 million plus an additional 10% of the amount of the loss in excess of $10 million, up to a maximum deductible of $50 million .

The value of the insured property at the time of an accident at Pilgrim, Palisades, and Vermont Yankee has been changed from replacement cost to actual cash value.

In addition, Waterford 3 and Grand Gulf are also covered under NEIL’s Accidental Outage Coverage program.  Due to Entergy’s gradual exit from the merchant/wholesale power business, Entergy no longer purchases Accidental Outage Coverage for its non-regulated, non-generation assets. Accidental outage coverage provides indemnification for the actual cost incurred in the event of an unplanned outage resulting from property damage covered under the NEIL Primary Property Insurance policy, subject to a deductible period.  The indemnification for the actual cost incurred is based on market power prices at the time of the loss. For non-nuclear events, the maximum indemnity, under this policy, is limited to $ 327.6 million per occurrence. After the deductible period has passed, weekly indemnities for an unplanned outage, covered under NEIL’s Accidental Outage Coverage program, would be paid according to the amounts listed below:

•
100% of the weekly indemnity for each week for the first payment period of 52 weeks; then
•
80% of the weekly indemnity for each week for the second payment period of 52 weeks; and thereafter
•
80% of the weekly indemnity for an additional 58 weeks for the third and final payment period.
    
Under the property damage and accidental outage insurance programs, all NEIL insured plants could be subject to assessments should losses exceed the accumulated funds available from NEIL.  Effective April 1, 2017, the maximum amounts of such possible assessments per occurrence were as follows:
 
Assessments
 
(In Millions)
Utility:
 
Entergy Arkansas
$40.3
Entergy Louisiana
$49.4
Entergy Mississippi
$0.11
Entergy New Orleans
$0.11
Entergy Texas
N/A
System Energy
$22.3
 
 
Entergy Wholesale Commodities
$—

Potential assessments for the Entergy Wholesale Commodities plants are covered by insurance obtained through NEIL’s reinsurers.

NRC regulations provide that the proceeds of this insurance must be used, first, to render the reactor safe and stable, and second, to complete decontamination operations.  Only after proceeds are dedicated for such use and regulatory approval is secured would any remaining proceeds be made available for the benefit of plant owners or their creditors.

In the event that one or more acts of terrorism causes property damage under one or more or all nuclear insurance policies issued by NEIL (including, but not limited to, those described above) within 12 months from the date the first property damage occurs, the maximum recovery under all such nuclear insurance policies shall be an aggregate not exceeding $3.24 billion plus the additional amounts recovered for such losses from reinsurance, indemnity, and any other sources applicable to such losses.  

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Non-Nuclear Property Insurance

Entergy’s non-nuclear property insurance program provides coverage on a system-wide basis for Entergy’s non-nuclear assets. The insurance program provides coverage up to $400 million per occurrence, “each and every loss” basis in excess of a $20 million self-insured retention with the exception of the following: earthquake shock, flood, and named windstorm, including associated storm surge. For earthquake shock and flood, the insurance program provides coverage up to $400 million on an annual aggregate basis in excess of a $40 million self-insured retention. For named windstorm and associated storm surge, the insurance program provides coverage up to $125 million on an annual aggregate basis in excess of a $40 million self-insured retention.  The coverage provided by the insurance program for the Entergy New Orleans gas distribution system is limited to $50 million per occurrence and is subject to the same annual aggregate limits and retentions listed above for earthquake shock, flood, and named windstorm, including associated storm surge.

Covered property generally includes power plants, substations, facilities, inventories, and gas distribution-related properties.  Excluded property generally includes transmission and distribution lines, poles, and towers. For substations valued at $5 million or less, coverage for named windstorm and associated storm surge is excluded.  This coverage is in place for Entergy Corporation, the Registrant Subsidiaries, and certain other Entergy subsidiaries, including the owners of the nuclear power plants in the Entergy Wholesale Commodities segment.  Entergy also purchases $300 million in terrorism insurance coverage for its conventional property.  The Terrorism Risk Insurance Reauthorization Act of 2007 created a government program that provides for up to $100 billion in coverage in excess of existing coverage for a terrorist event. Under current law, the Terrorism Risk Insurance Act extends through 2020.

Prior to June 1, 2017, Entergy purchased additional coverage for some of its non-regulated, non-generation assets in addition to the insurance procured via the conventional property insurance program. The policy served to buy-down the conventional property insurance policy’s $20 million deductible and was placed on a scheduled location basis.  Due to Entergy’s gradual exit from the merchant/wholesale power business, effective June 1, 2017, Entergy no longer purchases this additional coverage ( $20 million per occurrence) for some of its non-regulated, non-generation assets.

Employment and Labor-related Proceedings

The Registrant Subsidiaries and other Entergy subsidiaries are responding to various lawsuits in both state and federal courts and to other labor-related proceedings filed by current and former employees, recognized bargaining representatives, and third parties not selected for open positions or providing services directly or indirectly to one or more of the Registrant Subsidiaries and other Entergy subsidiaries.  Generally, the amount of damages being sought is not specified in these proceedings.  These actions include, but are not limited to, allegations of wrongful employment actions; wage disputes and other claims under the Fair Labor Standards Act or its state counterparts; claims of race, gender, age, and disability discrimination; disputes arising under collective bargaining agreements; unfair labor practice proceedings and other administrative proceedings before the National Labor Relations Board or concerning the National Labor Relations Act; claims of retaliation; claims of harassment and hostile work environment; and claims for or regarding benefits under various Entergy Corporation-sponsored plans. Entergy and the Registrant Subsidiaries are responding to these lawsuits and proceedings and deny liability to the claimants.  Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of Entergy or the Utility operating companies.

Asbestos Litigation (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)

Numerous lawsuits have been filed in federal and state courts, primarily by contractor employees who worked in the 1940-1980s timeframe, primarily against Entergy Texas, and to a lesser extent the other Utility operating companies, as premises owners of power plants, for damages caused by alleged exposure to asbestos.  Many other defendants are named in these lawsuits as well.  Currently, there are approximately 200 lawsuits involving

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approximately 500 claimants.  Management believes that adequate provisions have been established to cover any exposure.  Additionally, negotiations continue with insurers to recover reimbursements.  Management believes that loss exposure has been and will continue to be handled so that the ultimate resolution of these matters will not be material, in the aggregate, to the financial position, results of operation, or cash flows of the Utility operating companies.

Grand Gulf - Related Agreements

Capital Funds Agreement (Entergy Corporation and System Energy)

System Energy has entered into agreements with Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans whereby they are obligated to purchase their respective entitlements of capacity and energy from System Energy’s interest in Grand Gulf, and to make payments that, together with other available funds, are adequate to cover System Energy’s operating expenses.  System Energy would have to secure funds from other sources, including Entergy Corporation’s obligations under the Capital Funds Agreement, to cover any shortfalls from payments received from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under these agreements.

Unit Power Sales Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

System Energy has agreed to sell all of its share of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans in accordance with specified percentages (Entergy Arkansas- 36% , Entergy Louisiana- 14% , Entergy Mississippi- 33% , and Entergy New Orleans- 17% ) as ordered by the FERC.  Charges under this agreement are paid in consideration for the purchasing companies’ respective entitlement to receive capacity and energy and are payable irrespective of the quantity of energy delivered.  The agreement will remain in effect until terminated by the parties and the termination is approved by the FERC, most likely upon Grand Gulf’s retirement from service.  In December 2016 the NRC granted the extension of Grand Gulf’s operating license to 2044. Monthly obligations are based on actual capacity and energy costs.  The average monthly payments for 2017 under the agreement are approximately $19.5 million for Entergy Arkansas, $7.8 million for Entergy Louisiana, $17 million for Entergy Mississippi, and $9.4 million for Entergy New Orleans. See Note 2 to the financial statements for discussion of the complaint filed with the FERC against System Energy seeking a reduction in the return on equity component of the Unit Power Sales Agreement.

Availability Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans are individually obligated to make payments or subordinated advances to System Energy in accordance with stated percentages (Entergy Arkansas- 17.1% , Entergy Louisiana- 26.9% , Entergy Mississippi- 31.3% , and Entergy New Orleans- 24.7% ) in amounts that, when added to amounts received under the Unit Power Sales Agreement or otherwise, are adequate to cover all of System Energy’s operating expenses as defined, including an amount sufficient to amortize the cost of Grand Gulf 2 over 27 years (See Reallocation Agreement terms below) and expenses incurred in connection with a permanent shutdown of Grand Gulf.  System Energy has assigned its rights to payments and advances to certain creditors as security for certain obligations.  Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement have exceeded the amounts payable under the Availability Agreement.  Accordingly, no payments under the Availability Agreement have ever been required.  If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments.


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Reallocation Agreement (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and System Energy)

System Energy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans entered into the Reallocation Agreement relating to the sale of capacity and energy from Grand Gulf and the related costs, in which Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans agreed to assume all of Entergy Arkansas’s responsibilities and obligations with respect to Grand Gulf under the Availability Agreement.  The FERC’s decision allocating a portion of Grand Gulf capacity and energy to Entergy Arkansas supersedes the Reallocation Agreement as it relates to Grand Gulf.  Responsibility for any Grand Gulf 2 amortization amounts has been individually allocated (Entergy Louisiana- 26.23% , Entergy Mississippi- 43.97% , and Entergy New Orleans- 29.80% ) under the terms of the Reallocation Agreement.  However, the Reallocation Agreement does not affect Entergy Arkansas’s obligation to System Energy’s lenders under the assignments referred to in the preceding paragraph.  Entergy Arkansas would be liable for its share of such amounts if Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans were unable to meet their contractual obligations.  No payments of any amortization amounts will be required so long as amounts paid to System Energy under the Unit Power Sales Agreement, including other funds available to System Energy, exceed amounts required under the Availability Agreement, which is expected to be the case for the foreseeable future.


NOTE 9. ASSET RETIREMENT OBLIGATIONS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Accounting standards require companies to record liabilities for all legal obligations associated with the retirement of long-lived assets that result from the normal operation of the assets.  For Entergy, substantially all of its asset retirement obligations consist of its liability for decommissioning its nuclear power plants.  In addition, an insignificant amount of removal costs associated with non-nuclear power plants is also included in the decommissioning line item on the balance sheets.
 
These liabilities are recorded at their fair values (which are the present values of the estimated future cash outflows) in the period in which they are incurred, with an accompanying addition to the recorded cost of the long-lived asset.  The asset retirement obligation is accreted each year through a charge to expense, to reflect the time value of money for this present value obligation.  The accretion will continue through the completion of the asset retirement activity.  The amounts added to the carrying amounts of the long-lived assets will be depreciated over the useful lives of the assets.  The application of accounting standards related to asset retirement obligations is earnings neutral to the rate-regulated business of the Registrant Subsidiaries.

In accordance with ratemaking treatment and as required by regulatory accounting standards, the depreciation provisions for the Registrant Subsidiaries include a component for removal costs that are not asset retirement obligations under accounting standards.  In accordance with regulatory accounting principles, the Registrant Subsidiaries have recorded regulatory assets (liabilities) in the following amounts to reflect their estimates of the difference between estimated incurred removal costs and estimated removal costs recovered in rates:
 
December 31,
 
2017
 
2016
 
(In Millions)
Entergy Arkansas
$176.9
 
$128.5
Entergy Louisiana
($32.4)
 
($53.9)
Entergy Mississippi
$91.6
 
$82.0
Entergy New Orleans
$44.8
 
$40.1
Entergy Texas
$55.2
 
$33.5
System Energy
$67.9
 
$69.7


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The cumulative decommissioning and retirement cost liabilities and expenses recorded in 2017 and 2016 by Entergy were as follows:
 
Liabilities as
of December 31,
2016
 
 
 
Accretion
 
Change in
Cash Flow
Estimate
 
 
 
Spending
 
Dispositions
 
Liabilities as
of December 31,
2017
 
(In Millions)
Utility:
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas

$924.4

 

$56.8

 

$—

 

$—

 

$—

 

$981.2

Entergy Louisiana
1,082.7

 
57.8

 
—

 
—

 
—

 
1,140.5

Entergy Mississippi
8.7

 
0.5

 
—

 
—

 
—

 
9.2

Entergy New Orleans
2.9

 
0.2

 
—

 
—

 
—

 
3.1

Entergy Texas
6.5

 
0.3

 
—

 
—

 
—

 
6.8

System Energy
854.2

 
43.4

 
(35.9
)
 
—

 
—

 
861.7

Total
2,879.4

 
159.0

 
(35.9
)
 
—

 
—

 
3,002.5

 
 
 
 
 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 
 
 
 
 
 
 
 
 
Big Rock Point
37.9

 
3.1

 
—

 
(2.1
)
 
—

 
38.9

FitzPatrick
714.3

(a)
13.9

 
—

 
(0.9
)
 
(727.3
)
(b)
—

Indian Point 1
207.6

 
17.7

 
—

 
(7.7
)
 
—

 
217.6

Indian Point 2
653.1

 
55.8

 
—

 
(0.2
)
 
—

 
708.7

Indian Point 3
641.1

 
53.5

 
—

 
(0.1
)
 
—

 
694.5

Palisades
500.3

 
41.3

 
(68.7
)
 
(2.5
)
 
—

 
470.4

Pilgrim
602.3

 
52.8

 
—

 
(3.7
)
 
—

 
651.4

Vermont Yankee
470.5

 
34.4

 
—

 
(103.4
)
 
—

 
401.5

Other (c)
0.3

 
—

 
—

 
—

 
—

 
0.3

Total
3,827.4

 
272.5

 
(68.7
)
 
(120.6
)
 
(727.3
)
 
3,183.3

 
 
 
 
 
 
 
 
 
 
 
 
Entergy Total

$6,706.8

 

$431.5

 

($104.6
)
 

($120.6
)
 

($727.3
)
 

$6,185.8






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Liabilities as
of December 31,
2015
 
Liabilities Incurred
 
 
 
Accretion
 
Change in
Cash Flow
Estimate
 
 
 
Spending
 
Liabilities as
of December 31,
2016
 
 
(In Millions)
 
Utility:
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas

$872.3

 

$—

 

$53.6

 

$—

 

($1.5
)
 

$924.4

 
Entergy Louisiana
1,027.9

 
—

 
54.8

 
—

 
—

 
1,082.7

 
Entergy Mississippi
8.3

 
—

 
0.4

 
—

 
—

 
8.7

 
Entergy New Orleans
2.7

 
—

 
0.2

 
—

 
—

 
2.9

 
Entergy Texas
6.1

 
—

 
0.4

 
—

 
—

 
6.5

 
System Energy
803.4

 
—

 
50.8

 
—

 
—

 
854.2

 
Total
2,720.7

 
—

 
160.2

 
—

 
(1.5
)
 
2,879.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Wholesale Commodities:
 


 


 


 


 
Big Rock Point
28.0

 
—

 
2.2

 
10.1

 
(2.4
)
 
37.9

 
FitzPatrick
—

(d)
696.2

 
18.1

 
—

 
—

 
714.3

(a)
Indian Point 1
197.9

 
—

 
17.1

 
(0.3
)
 
(7.1
)
 
207.6

 
Indian Point 2
390.1

 
—

 
33.0

 
230.0

 
—

 
653.1

 
Indian Point 3
—

(d)
466.3

 
12.1

 
162.7

 
—

 
641.1

 
Palisades
342.0

 
—

 
29.5

 
128.8

 
—

 
500.3

 
Pilgrim
551.2

 
—

 
48.4

 
3.2

 
(0.5
)
 
602.3

 
Vermont Yankee
560.0

 
—

 
39.3

 
—

 
(128.8
)
 
470.5

 
Other (c)
0.3

 
—

 
—

 
—

 
—

 
0.3

 
Total
2,069.5

 
1,162.5

 
199.7

 
534.5

 
(138.8
)
 
3,827.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Total

$4,790.2

 

$1,162.5

 

$359.9

 

$534.5

 

($140.3
)
 

$6,706.8

 

(a)
The FitzPatrick asset retirement obligation was classified as held for sale within other non-current liabilities on the consolidated balance sheet as of December 31, 2016. See Note 14 to the financial statements for discussion of the sale of the FitzPatrick plant to Exelon in March 2017.
(b)
See Note 14 to the financial statements for discussion of the sale of the FitzPatrick plant to Exelon in March 2017.
(c)
See “ Coal Combustion Residuals ” below for additional discussion regarding the asset retirement obligations related to coal combustion residuals management.
(d)
See “ Entergy Wholesale Commodities ” in “ Nuclear Plant Decommissioning ” below for additional discussion regarding the decommissioning agreements with NYPA and the associated asset retirement obligations.

Nuclear Plant Decommissioning

Entergy periodically reviews and updates estimated decommissioning costs.  The actual decommissioning costs may vary from the estimates because of the timing of plant decommissioning, regulatory requirements, changes in technology, and increased costs of labor, materials, and equipment.  As described below, during 2017 and 2016 , Entergy updated decommissioning cost estimates for certain nuclear power plants.

Utility

In the second quarter 2017, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $35.9 million

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reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.    

Entergy Wholesale Commodities

In August 2013 the Board approved a plan to close and decommission Vermont Yankee at the end of 2014. Vermont Yankee submitted notification of permanent cessation of operations and permanent removal of fuel from the reactor in January 2015 after final shutdown in December 2014. Vermont Yankee’s future certifications to satisfy the NRC’s financial assurance requirements will now be based on the site specific cost estimate, including the estimated cost of managing spent fuel, rather than the NRC minimum formula for estimating decommissioning costs. Filings with the NRC for planned shutdown activities will determine whether any other financial assurance may be required and will specifically address funding for spent fuel management, which will be required until the federal government takes possession of the fuel and removes it from the site, per its current obligation.

Entergy expects that amounts available in Vermont Yankee’s decommissioning trust fund, including expected earnings, together with borrowings under its credit facility that are expected to be repaid with recoveries from DOE litigation related to spent fuel storage, and the site restoration trust, will be sufficient to cover Vermont Yankee’s expected costs of decommissioning, spent fuel management costs, and site restoration. See Note 4 to the financial statements for discussion of the credit facility and Note 16 to the financial statements for discussion of the decommissioning trust fund.  In June 2015 the NRC staff issued an exemption from its regulations to allow Vermont Yankee to use its decommissioning trust fund to pay for approximately $225 million of estimated future spent fuel management costs that will not be paid for using funds from its credit facility.  In August 2015, Vermont and two Vermont utilities filed a petition in the U.S. Court of Appeals for the D.C. Circuit challenging the NRC’s issuance of that exemption.  In February 2016 the court dismissed the petition as premature because Vermont and the utilities had requested the NRC to reconsider a number of issues related to Vermont Yankee's use of the decommissioning trust fund including its use to pay for spent fuel management expenses pursuant to the exemption granted in June 2015. In October 2016 the NRC denied Vermont's and the utilities' request for a hearing and other relief but directed the NRC staff to conduct an assessment of any environmental impacts associated with the exemption. In December 2017 the NRC issued its final environmental assessment, concluding that the exemption did not, and will not, have a significant effect on the environment.
    
In the fourth quarter 2016, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Palisades as a result of a revised decommissioning cost study. The revised estimate resulted in a $129 million increase in the decommissioning cost liability, along with a corresponding increase in the related asset retirement cost asset. The increase in the estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to cease operations of the plant on October 1, 2018, subject to regulatory approval. The asset retirement cost asset was included in the Palisades carrying value that was written down to fair value in the fourth quarter 2016. See Note 14 to the financial statements for discussion of the impairment of the value and planned shutdown of the Palisades plant.

In the third quarter 2017, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liability for Palisades. The revised estimate resulted in a $68.7 million reduction in its decommissioning cost liability, along with a corresponding reduction in the plant asset. The reduction in its estimated decommissioning cost liability resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to continue to operate the plant until May 31, 2022.

For the Indian Point 3 and FitzPatrick plants purchased in 2000 from NYPA, NYPA retained the decommissioning trust funds and the decommissioning liabilities.  NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations.  NYPA had the right to require the Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigned the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries.  Under the original agreements, if the decommissioning liabilities were retained by NYPA, the Entergy subsidiaries would perform the decommissioning of

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the plants at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trust funds. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies. The asset was increased by monthly accretion based on the applicable discount rate necessary to ultimately provide for the estimated future value of the decommissioning contract.  The monthly accretion was recorded as interest income.

In the third quarter 2015, Entergy Wholesale Commodities recorded a revision to the contract asset for the FitzPatrick plant. Due to a change in expectation regarding the timing of decommissioning cash flows, the result was a write down of the contract asset from $335 million to $131 million , for a charge of $204 million .

In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. As a result of the agreement with NYPA, in the third quarter 2016 Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and asset retirement obligations for the decommissioning liabilities. The transaction was contingent upon receiving approval from the NRC, which was received in January 2017.  The decommissioning trust funds for the Indian Point 3 and FitzPatrick plants were transferred to Entergy by NYPA in January 2017. In March 2017, Entergy sold the FitzPatrick plant to Exelon, and as part of the transaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to Exelon. See Note 14 to the financial statements for discussion of the sale of FitzPatrick.

In the fourth quarter 2016, Entergy Wholesale Commodities recorded a revision to its estimated decommissioning cost liabilities for Indian Point 1, Indian Point 2, and Indian Point 3 as a result of revised decommissioning cost studies. The revised estimates resulted in a $392 million increase in the decommissioning cost liabilities, along with a corresponding increase in the related asset retirement cost assets. The increase in the estimated decommissioning cost liabilities resulted from the change in expectation regarding the timing of decommissioning cash flows due to the decision to cease operations of the Indian Point 2 plant no later than April 2020 and the Indian Point 3 plant no later than April 2021. The asset retirement cost assets were included in the carrying value that was written down to fair value in the fourth quarter 2016. See Note 14 to the financial statements for discussion of the impairment of the value and planned shutdown of Indian Point Energy Center.

As the Entergy Wholesale Commodities nuclear plants individually approach and begin decommissioning, the Entergy Wholesale Commodities plant owners will submit filings with the NRC for planned shutdown activities. These filings with the NRC will determine whether any other financial assurance may be required. The plants’ owners are required to provide the NRC with a biennial report (annually for units that have shut down or will shut down within five years), based on values as of December 31, addressing the owners’ ability to meet the NRC minimum funding levels. Depending on the value of the trust funds, the Entergy Wholesale Commodities plant owners may be required to take steps, such as providing financial guarantees through letters of credit or parent company guarantees or making additional contributions to the trusts, which could be significant, to ensure that the trusts are adequately funded and that NRC minimum funding requirements are met.


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Entergy maintains decommissioning trust funds that are committed to meeting its obligations for the costs of decommissioning the nuclear power plants.  The fair values of the decommissioning trust funds and the related asset retirement obligation regulatory assets (liabilities) of Entergy as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
Decommissioning
Trust Fair Values
 
Regulatory
Asset (Liability)
 
Decommissioning
Trust Fair Values
 
Regulatory
Asset (Liability)
 
(In Millions)
 
(In Millions)
Utility:
 
 
 
 
 
 
 
ANO 1 and ANO 2

$944.9

 
$337.9
 

$834.7

 

$316.3

River Bend

$818.2

 
($30.6)
 

$712.8

 

($28.4
)
Waterford 3

$493.9

 
$188.9
 

$427.9

 

$172.8

Grand Gulf

$905.7

 
$169.1
 

$780.5

 

$142.5

Entergy Wholesale Commodities

$4,049.3

 
$—
 

$2,968.0

 

$—


As a result of the agreement with NYPA discussed above, in the third quarter 2016, Entergy removed the contract asset from its balance sheet, and recorded receivables of $1.5 billion for the beneficial interests in the decommissioning trust funds for Indian Point 3 and FitzPatrick. At December 31, 2016, the fair values of the decommissioning trust funds held by NYPA were $719 million for the Indian Point 3 plant and $785 million for the FitzPatrick plant. See Note 16 to the financial statements for further discussion of the transfer of the decommissioning trust funds held by NYPA to Entergy.

Coal Combustion Residuals

In June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contained two primary regulatory options: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called “special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes under Subtitle D of RCRA.  Under both options, CCRs that are beneficially reused in certain processes would remain excluded from hazardous waste regulation. In April 2015 the EPA published the final CCR rule with the material being regulated under the second scenario presented above - as non-hazardous wastes regulated under RCRA Subtitle D. The final regulations create new compliance requirements including modified storage, new notification and reporting practices, product disposal considerations, and CCR unit closure criteria.  Entergy believes that on-site disposal options will be available at its facilities, to the extent needed for CCR that cannot be transferred for beneficial reuse. In December 2016, the Water Infrastructure Improvements for the Nation Act (WIIN Act) was signed into law, which authorizes states to regulate coal ash rather than leaving primary enforcement to citizen suit actions. States may submit to the EPA proposals for permit programs. In September 2017 the EPA agreed to reconsider certain provisions of the CCR rule in light of the WIIN Act. The EPA has not yet initiated a new round of rulemaking and has not extended the existing mid-October 2017 groundwater monitoring deadline. Entergy met the existing monitoring deadline, is monitoring state agency actions, and will participate in the regulatory development process.



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NOTE 10.   LEASES  (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

General

As of December 31, 2017 , Entergy had capital leases and non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf sale and leaseback transaction, all of which are discussed elsewhere):
 
Year
 
Operating
Leases
 
Capital
Leases
 
 
(In Thousands)
2018
 

$80,368

 

$3,018

2019
 
82,516

 
2,887

2020
 
67,385

 
2,887

2021
 
58,507

 
2,887

2022
 
43,760

 
2,887

Years thereafter
 
96,550

 
19,004

Minimum lease payments
 
429,086

 
33,570

Less:  Amount representing interest
 
—

 
10,051

Present value of net minimum lease payments
 

$429,086

 

$23,519


Total rental expenses for all leases (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf and Waterford 3 sale and leaseback transactions) amounted to $53.1 million in 2017 , $44.4 million in 2016 , and $63.9 million in 2015 .

As of December 31, 2017 the Registrant Subsidiaries had non-cancelable operating leases for equipment, buildings, vehicles, and fuel storage facilities with minimum lease payments as follows (excluding power purchase agreement operating leases, nuclear fuel leases, and the Grand Gulf lease obligation, all of which are discussed elsewhere):

Operating Leases
 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
(In Thousands)
2018
 

$17,009

 

$21,814

 

$11,771

 

$1,646

 

$3,469

2019
 
17,665

 
22,875

 
10,611

 
1,579

 
2,893

2020
 
11,483

 
17,790

 
8,969

 
1,382

 
1,934

2021
 
9,363

 
13,762

 
7,059

 
1,033

 
1,299

2022
 
6,834

 
10,067

 
5,007

 
662

 
862

Years thereafter
 
23,598

 
19,443

 
5,817

 
1,797

 
2,173

Minimum lease payments
 

$85,952

 

$105,751

 

$49,234

 

$8,099

 

$12,630



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Rental Expenses
 
 
Year
 
 
Entergy
Arkansas
 
 
Entergy
Louisiana
 
 
Entergy
Mississippi
 
Entergy
New Orleans
 
 
Entergy
Texas
 
 
System
Energy
 
 
(In Millions)
2017
 

$7.5

 

$23.0

 

$5.6

 

$2.5

 

$3.4

 

$2.2

2016
 

$8.0

 

$17.8

 

$4.0

 

$0.9

 

$2.8

 

$1.6

2015
 

$13.6

 

$21.8

 

$5.4

 

$1.6

 

$4.0

 

$2.9


In addition to the above rental expense, railcar operating lease payments and oil tank facilities lease payments are recorded in fuel expense in accordance with regulatory treatment.  Railcar operating lease payments were $4.0 million in 2017 , $3.4 million in 2016 , and $4.7 million in 2015 for Entergy Arkansas and $0.3 million in 2017 , $0.3 million in 2016 , and $1.1 million in 2015 for Entergy Louisiana.  Oil tank facilities lease payments for Entergy Mississippi were $1.6 million in 2017 , $1.6 million in 2016 , and $1.6 million in 2015 .

Power Purchase Agreements

As of December 31, 2017 , Entergy Texas had a power purchase agreement that is accounted for as an operating lease under the accounting standards. The lease payments are recovered in fuel expense in accordance with regulatory treatment. The minimum lease payments under the power purchase agreement are as follows:

Year
 
Entergy Texas (a)
 
Entergy
 
 
(In Thousands)
2018
 

$30,458

 

$30,458

2019
 
31,159

 
31,159

2020
 
31,876

 
31,876

2021
 
32,609

 
32,609

2022
 
10,180

 
10,180

Years thereafter
 
—

 
—

Minimum lease payments
 

$136,282

 

$136,282


(a)
Amounts reflect 100% of minimum payments. Under a separate contract, which expires May 31, 2022, Entergy Louisiana purchases 50% of the capacity and energy from the power purchase agreement from Entergy Texas.

Total capacity expense under the power purchase agreement accounted for as an operating lease at Entergy Texas was $34.1 million in 2017, $26.1 million in 2016, and $29.9 million in 2015.

Sales and Leaseback Transactions

Waterford 3 Lease Obligation

In 1989, in three separate but substantially identical transactions, Entergy Louisiana sold and leased back undivided interests in Waterford 3 for the aggregate sum of $353.6 million .  The leases were scheduled to expire in July 2017.  Entergy Louisiana was required to report the sale-leaseback as a financing transaction in its financial statements.

In December 2015, Entergy Louisiana agreed to purchase the undivided interests in Waterford 3 that were previously being leased. The purchase was accomplished in a two-step transaction in which Entergy Louisiana first

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acquired the equity participant’s beneficial interest in the leased assets, followed by a termination of the leases and transfer of the leased assets to Entergy Louisiana when the outstanding lessor debt is paid.

In March 2016, Entergy Louisiana completed the first step in the two-step transaction by acquiring the equity participant’s beneficial interest in the leased assets. Entergy Louisiana paid $60 million in cash and $52 million through the issuance of a non-interest bearing collateral trust mortgage note, payable in installments through July 2017. Entergy Louisiana continued to make payments on the lessor debt that remained outstanding and which matured in January 2017. The combination of payments on the $52 million collateral trust mortgage note issued and the debt service on the lessor debt was equal in timing and amount to the remaining lease payments due from the closing of the transaction through the end of the lease term in July 2017.

Throughout the term of the lease, Entergy Louisiana had accrued a liability for the amount it expected to pay to retain the use of the undivided interests in Waterford 3 at the end of the lease term. Since the sale-leaseback transaction was accounted for as a financing transaction, the accrual of this liability was accounted for as additional interest expense. As of December 2015, the balance of this liability was $62.7 million . Upon entering into the agreement to purchase the equity participant’s beneficial interest in the undivided interests, Entergy Louisiana reduced the balance of the liability to $60 million, and recorded the $2.7 million difference as a credit to interest expense. The $60 million remaining liability was eliminated upon payment of the cash portion of the purchase price in 2016.

As of December 31, 2016, Entergy Louisiana, in connection with the Waterford 3 lease obligation, had a future minimum lease payment (reflecting an interest rate of 8.09% ) of $57.5 million , including $2.3 million in interest, due January 2017 that was recorded as long-term debt.

In February 2017 the leases were terminated and the leased assets were conveyed to Entergy Louisiana.

Grand Gulf Lease Obligations

In 1988, in two separate but substantially identical transactions, System Energy sold and leased back undivided ownership interests in Grand Gulf for the aggregate sum of $500 million .  The initial term of the leases expired in July 2015.  System Energy renewed the leases for fair market value with renewal terms expiring in July 2036. At the end of the new lease renewal terms, System Energy has the option to repurchase the leased interests in Grand Gulf or renew the leases at fair market value.  In the event that System Energy does not renew or purchase the interests, System Energy would surrender such interests and their associated entitlement of Grand Gulf’s capacity and energy.

System Energy is required to report the sale-leaseback as a financing transaction in its financial statements.  For financial reporting purposes, System Energy expenses the interest portion of the lease obligation and the plant depreciation.  However, operating revenues include the recovery of the lease payments because the transactions are accounted for as a sale and leaseback for ratemaking purposes.  Consistent with a recommendation contained in a FERC audit report, System Energy initially recorded as a net regulatory asset the difference between the recovery of the lease payments and the amounts expensed for interest and depreciation and continues to record this difference as a regulatory asset or liability on an ongoing basis, resulting in a zero net balance for the regulatory asset at the end of the lease term.  The amount was a net regulatory liability of $55.6 million as of December 31, 2017 and 2016 .


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As of December 31, 2017 , System Energy, in connection with the Grand Gulf sale and leaseback transactions, had future minimum lease payments (reflecting an implicit rate of 5.13% ) that are recorded as long-term debt, as follows:
 
Amount
 
(In Thousands)
 
 
2018

$17,188

2019
17,188

2020
17,188

2021
17,188

2022
17,188

Years thereafter
240,625

Total
326,565

Less: Amount representing interest
292,209

Present value of net minimum lease payments

$34,356



NOTE 11.  RETIREMENT, OTHER POSTRETIREMENT BENEFITS, AND DEFINED CONTRIBUTION PLANS  (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Qualified Pension Plans

Entergy has eight qualified pension plans covering substantially all employees. The Entergy Corporation Retirement Plan for Non-Bargaining Employees (Non-Bargaining Plan I), the Entergy Corporation Retirement Plan for Bargaining Employees (Bargaining Plan I), the Entergy Corporation Retirement Plan II for Non-Bargaining Employees (Non-Bargaining Plan II), the Entergy Corporation Retirement Plan II for Bargaining Employees, the Entergy Corporation Retirement Plan III, and the Entergy Corporation Retirement Plan IV for Bargaining Employees are non-contributory final average pay plans and provide pension benefits that are based on employees’ credited service and compensation during employment.  Effective as of the close of business on December 31, 2016, the Entergy Corporation Retirement Plan IV for Non-Bargaining Employees (Non-Bargaining Plan IV) was merged with and into Non-Bargaining Plan II. At the close of business on December 31, 2016, the liabilities for the accrued benefits and the assets attributable to such liabilities of all participants in Non-Bargaining Plan IV were assumed by and transferred to Non-Bargaining Plan II. There was no loss of vesting or benefit options or reduction of accrued benefits to affected participants as a result of this plan merger. Non-bargaining employees whose most recent date of hire is after June 30, 2014 participate in the Entergy Corporation Cash Balance Plan for Non-Bargaining Employees (Non-Bargaining Cash Balance Plan). Certain bargaining employees hired or rehired after June 30, 2014, or such later date provided for in their applicable collective bargaining agreements, participate in the Entergy Corporation Cash Balance Plan for Bargaining Employees (Bargaining Cash Balance Plan). The Registrant Subsidiaries participate in these four plans: Non-Bargaining Plan I, Bargaining Plan I, Non-Bargaining Cash Balance Plan, and Bargaining Cash Balance Plan.

The assets of the six final average pay qualified pension plans are held in a master trust established by Entergy, and the assets of the two cash balance pension plans are held in a second master trust established by Entergy.  Each pension plan has an undivided beneficial interest in each of the investment accounts in its respective master trust that is maintained by a trustee.  Use of the master trusts permits the commingling of the trust assets of the pension plans of Entergy Corporation and its Registrant Subsidiaries for investment and administrative purposes.  Although assets in the master trusts are commingled, the trustee maintains supporting records for the purpose of allocating the trust level equity in net earnings (loss) and the administrative expenses of the investment accounts in each trust to the various participating pension plans in that particular trust.  The fair value of the trusts’ assets is determined by the trustee and certain investment managers.  For each trust, the trustee calculates a daily earnings factor, including realized and

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unrealized gains or losses, collected and accrued income, and administrative expenses, and allocates earnings to each plan in the master trusts on a pro rata basis.

Within each pension plan, the record of each Registrant Subsidiary’s beneficial interest in the plan assets is maintained by the plan’s actuary and is updated quarterly.  Assets for each Registrant Subsidiary are increased for investment net income and contributions, and are decreased for benefit payments.  A plan’s investment net income/loss (i.e. interest and dividends, realized and unrealized gains and losses and expenses) is allocated to the Registrant Subsidiaries participating in that plan based on the value of assets for each Registrant Subsidiary at the beginning of the quarter adjusted for contributions and benefit payments made during the quarter.

Entergy Corporation and its subsidiaries fund pension plans in an amount not less than the minimum required contribution under the Employee Retirement Income Security Act of 1974, as amended, and the Internal Revenue Code of 1986, as amended.  The assets of the plans include common and preferred stocks, fixed-income securities, interest in a money market fund, and insurance contracts.  The Registrant Subsidiaries’ pension costs are recovered from customers as a component of cost of service in each of their respective jurisdictions.

Components of Qualified Net Pension Cost and Other Amounts Recognized as a Regulatory Asset and/or Accumulated Other Comprehensive Income (AOCI)

Entergy Corporation and its subsidiaries’ total 2017 , 2016 , and 2015 qualified pension costs and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, included the following components:
 
2017
 
2016
 
2015
 
(In Thousands)
Net periodic pension cost:
 

 
 

 
 

Service cost - benefits earned during the period

$133,641

 

$143,244

 

$175,046

Interest cost on projected benefit obligation
260,824

 
261,613

 
302,777

Expected return on assets
(408,225
)
 
(389,465
)
 
(394,618
)
Amortization of prior service cost
261

 
1,079

 
1,561

Recognized net loss
227,720

 
195,298

 
235,922

Curtailment loss
—

 
3,084

 
374

Special termination benefit
—

 
—

 
76

Net periodic pension costs

$214,221

 

$214,853

 

$321,138

Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
Arising this period:
 
 
 
 
 
Net loss

$368,067

 

$203,229

 

$50,762

Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 
 
 
 
 
Amortization of prior service cost
(261
)
 
(1,079
)
 
(1,561
)
Acceleration of prior service cost to curtailment
—

 
(1,045
)
 
(374
)
Amortization of net loss
(227,720
)
 
(195,298
)
 
(235,922
)
Total

$140,086

 

$5,807

 

($187,095
)
Total recognized as net periodic pension cost, regulatory asset, and/or AOCI (before tax)

$354,307

 

$220,660

 

$134,043

Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year:
 
 
 
 
 
Prior service cost

$398

 

$261

 

$1,079

Net loss

$274,104

 

$227,720

 

$195,321


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Notes to Financial Statements


The Registrant Subsidiaries’ total 2017 , 2016 , and 2015 qualified pension costs and amounts recognized as a regulatory asset and/or other comprehensive income, including amounts capitalized, for their employees included the following components:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Net periodic pension cost:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost - benefits earned during the period
 

$20,358

 

$27,698

 

$5,890

 

$2,500

 

$5,455

 

$6,145

Interest cost on projected benefit obligation
 
51,776

 
59,235

 
14,927

 
7,163

 
13,569

 
12,364

Expected return on assets
 
(81,707
)
 
(92,067
)
 
(24,526
)
 
(11,199
)
 
(24,722
)
 
(18,650
)
Recognized net loss
 
46,560

 
49,417

 
12,213

 
6,632

 
9,241

 
11,857

Net pension cost
 

$36,987

 

$44,283

 

$8,504

 

$5,096

 

$3,543

 

$11,716

Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Arising this period:
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$51,569

 

$57,510

 

$14,681

 

$8,601

 

$1,109

 

$27,733

Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of net loss
 
(46,560
)
 
(49,417
)
 
(12,213
)
 
(6,632
)
 
(9,241
)
 
(11,857
)
Total
 

$5,009

 

$8,093

 

$2,468

 

$1,969

 

($8,132
)
 

$15,876

Total recognized as net periodic pension (income)/cost, regulatory asset, and/or AOCI (before tax)
 

$41,996

 

$52,376

 

$10,972

 

$7,065

 

($4,589
)
 

$27,592

Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$53,650

 

$57,800

 

$14,438

 

$7,816

 

$10,503

 

$14,859



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2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Net periodic pension cost:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost - benefits earned during the period
 

$20,724

 

$28,194

 

$6,250

 

$2,625

 

$5,664

 

$6,263

Interest cost on projected benefit obligation
 
52,219

 
59,478

 
15,245

 
7,256

 
14,228

 
11,966

Expected return on assets
 
(79,087
)
 
(88,383
)
 
(23,923
)
 
(10,748
)
 
(24,248
)
 
(17,836
)
Recognized net loss
 
43,745

 
47,783

 
11,938

 
6,460

 
9,358

 
10,415

Net pension cost
 

$37,601

 

$47,072

 

$9,510

 

$5,593

 

$5,002

 

$10,808

Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Arising this period:
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$60,968

 

$46,742

 

$10,942

 

$5,463

 

$3,816

 

$20,805

Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of net loss
 
(43,745
)
 
(47,783
)
 
(11,938
)
 
(6,460
)
 
(9,358
)
 
(10,415
)
Total
 

$17,223

 

($1,041
)
 

($996
)
 

($997
)
 

($5,542
)
 

$10,390

Total recognized as net periodic pension (income)/ cost, regulatory asset, and/or AOCI (before tax)
 

$54,824

 

$46,031

 

$8,514

 

$4,596

 

($540
)
 

$21,198

Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$46,560

 

$49,417

 

$12,213

 

$6,632

 

$9,241

 

$11,857



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2015
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Net periodic pension cost:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost - benefits earned during the period
 

$26,646

 

$34,396

 

$7,929

 

$3,395

 

$6,582

 

$7,827

Interest cost on projected benefit obligation
 
61,885

 
69,465

 
18,007

 
8,432

 
17,414

 
13,970

Expected return on assets
 
(80,102
)
 
(90,803
)
 
(24,420
)
 
(10,899
)
 
(24,887
)
 
(18,271
)
Recognized net loss
 
54,254

 
59,802

 
14,896

 
8,053

 
12,950

 
13,055

Net pension cost
 

$62,683

 

$72,860

 

$16,412

 

$8,981

 

$12,059

 

$16,581

Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Arising this period:
 
 
 
 
 
 
 
 
 
 
 
 
Net (gain)/loss
 

$16,687

 

$16,618

 

$6,329

 

$1,853

 

($4,488
)
 

$101

Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of net loss
 
(54,254
)
 
(59,802
)
 
(14,896
)
 
(8,053
)
 
(12,950
)
 
(13,055
)
Total
 

($37,567
)
 

($43,184
)
 

($8,567
)
 

($6,200
)
 

($17,438
)
 

($12,954
)
Total recognized as net periodic pension (income)/cost, regulatory asset, and/or AOCI (before tax)
 

$25,116

 

$29,676

 

$7,845

 

$2,781

 

($5,379
)
 

$3,627

Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost in the following year
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$43,747

 

$47,809

 

$11,938

 

$6,460

 

$9,358

 

$10,414



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Qualified Pension Obligations, Plan Assets, Funded Status, Amounts Recognized in the Balance Sheet

Qualified pension obligations, plan assets, funded status, amounts recognized in the Consolidated Balance Sheets for Entergy Corporation and its Subsidiaries as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
(In Thousands)
Change in Projected Benefit Obligation (PBO)
 

 
 

Balance at January 1

$7,142,567

 

$6,848,238

Service cost
133,641

 
143,244

Interest cost
260,824

 
261,613

Curtailment
—

 
2,039

Actuarial loss
767,849

 
209,360

Employee contributions
40

 
23

Benefits paid
(317,834
)
 
(321,950
)
Balance at December 31

$7,987,087

 

$7,142,567

Change in Plan Assets
 

 
 

Fair value of assets at January 1

$5,171,202

 

$4,707,433

Actual return on plan assets
808,007

 
395,596

Employer contributions
409,901

 
390,100

Employee contributions
40

 
23

Benefits paid
(317,834
)
 
(321,950
)
Fair value of assets at December 31

$6,071,316

 

$5,171,202

Funded status

($1,915,771
)
 

($1,971,365
)
Amount recognized in the balance sheet
 
 
 
Non-current liabilities

($1,915,771
)
 

($1,971,365
)
Amount recognized as a regulatory asset
 
 
 
Net loss

$2,418,206

 

$2,326,349

Amount recognized as AOCI (before tax)
 
 
 
Prior service cost

$398

 

$659

Net loss
667,766

 
619,276

 

$668,164

 

$619,935



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Qualified pension obligations, plan assets, funded status, amounts recognized in the Balance Sheets for the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Change in Projected Benefit Obligation (PBO)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1
 

$1,454,310

 

$1,624,233

 

$419,201

 

$197,464

 

$386,366

 

$335,381

Service cost
 
20,358

 
27,698

 
5,890

 
2,500

 
5,455

 
6,145

Interest cost
 
51,776

 
59,235

 
14,927

 
7,163

 
13,569

 
12,364

Actuarial loss
 
131,729

 
147,704

 
38,726

 
19,507

 
25,339

 
45,471

Benefits paid
 
(77,417
)
 
(73,170
)
 
(21,195
)
 
(8,738
)
 
(20,009
)
 
(15,312
)
Balance at December 31
 

$1,580,756

 

$1,785,700

 

$457,549

 

$217,896

 

$410,720

 

$384,049

Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of assets at
January 1
 

$1,041,592

 

$1,169,147

 

$314,349

 

$142,488

 

$317,576

 

$235,144

Actual return on plan assets
 
161,868

 
182,261

 
48,572

 
22,104

 
48,952

 
36,387

Employer contributions
 
79,625

 
87,503

 
19,116

 
9,893

 
17,004

 
18,213

Benefits paid
 
(77,417
)
 
(73,170
)
 
(21,195
)
 
(8,738
)
 
(20,009
)
 
(15,312
)
Fair value of assets at December 31
 

$1,205,668

 

$1,365,741

 

$360,842

 

$165,747

 

$363,523

 

$274,432

Funded status
 

($375,088
)
 

($419,959
)
 

($96,707
)
 

($52,149
)
 

($47,197
)
 

($109,617
)
Amounts recognized in the balance sheet (funded status)
 
 
 
 
 
 
 
 
 
 
 
 
Non-current liabilities
 

($375,088
)
 

($419,959
)
 

($96,707
)
 

($52,149
)
 

($47,197
)
 

($109,617
)
Amounts recognized as regulatory asset
 
 
 
 
 
 
 
 
 
 
 
 

Net loss
 

$706,783

 

$701,324

 

$191,877

 

$96,913

 

$145,412

 

$185,774

Amounts recognized as AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$—

 

$44,765

 

$—

 

$—

 

$—

 

$—



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Notes to Financial Statements


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Change in Projected Benefit Obligation (PBO)
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1
 

$1,400,511

 

$1,564,710

 

$408,604

 

$191,064

 

$383,627

 

$311,542

Service cost
 
20,724

 
28,194

 
6,250

 
2,625

 
5,664

 
6,263

Interest cost
 
52,219

 
59,478

 
15,245

 
7,256

 
14,228

 
11,966

Actuarial loss
 
62,187

 
48,357

 
11,343

 
5,573

 
4,274

 
20,661

Benefits paid
 
(81,331
)
 
(76,506
)
 
(22,241
)
 
(9,054
)
 
(21,427
)
 
(15,051
)
Balance at December 31
 

$1,454,310

 

$1,624,233

 

$419,201

 

$197,464

 

$386,366

 

$335,381

Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of assets at January 1
 

$959,618

 

$1,071,234

 

$292,297

 

$129,975

 

$298,378

 

$212,006

Actual return on plan assets
 
80,306

 
89,998

 
24,325

 
10,858

 
24,705

 
17,692

Employer contributions
 
82,999

 
84,421

 
19,968

 
10,709

 
15,920

 
20,497

Benefits paid
 
(81,331
)
 
(76,506
)
 
(22,241
)
 
(9,054
)
 
(21,427
)
 
(15,051
)
Fair value of assets at December 31
 

$1,041,592

 

$1,169,147

 

$314,349

 

$142,488

 

$317,576

 

$235,144

Funded status
 

($412,718
)
 

($455,086
)
 

($104,852
)
 

($54,976
)
 

($68,790
)
 

($100,237
)
Amounts recognized in the balance sheet (funded status)
 
 
 
 
 
 
 
 
 
 
 
 
Non-current liabilities
 

($412,718
)
 

($455,086
)
 

($104,852
)
 

($54,976
)
 

($68,790
)
 

($100,237
)
Amounts recognized as regulatory asset
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 

$701,774

 

$686,337

 

$189,409

 

$94,944

 

$153,544

 

$169,897

Amounts recognized as AOCI  (before tax)
 
 

 
 
 
 
 
 
 
 
 
 
Net loss
 

$—

 

$51,660

 

$—

 

$—

 

$—

 

$—


Accumulated Pension Benefit Obligation

The accumulated benefit obligation for Entergy’s qualified pension plans was $7.4 billion and $6.7 billion at December 31, 2017 and 2016 , respectively.

The qualified pension accumulated benefit obligation for each of the Registrant Subsidiaries for their employees as of December 31, 2017 and 2016 was as follows:
 
December 31,
 
2017
 
2016
 
(In Thousands)
Entergy Arkansas

$1,492,876

 

$1,379,265

Entergy Louisiana

$1,652,939

 

$1,513,884

Entergy Mississippi

$430,268

 

$396,081

Entergy New Orleans

$205,316

 

$186,247

Entergy Texas

$387,083

 

$365,251

System Energy

$359,258

 

$315,131



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Other Postretirement Benefits

Entergy also currently offers retiree medical, dental, vision, and life insurance benefits (other postretirement benefits) for eligible retired employees.  Employees who commenced employment before July 1, 2014 and who satisfy certain eligibility requirements (including retiring from Entergy after a certain age and/or years of service with Entergy and immediately commencing their Entergy pension benefit), may become eligible for other postretirement benefits.

Entergy uses a December 31 measurement date for its postretirement benefit plans.

Effective January 1, 1993, Entergy adopted an accounting standard requiring a change from a cash method to an accrual method of accounting for postretirement benefits other than pensions.  Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, and Entergy Texas have received regulatory approval to recover accrued other postretirement benefit costs through rates.  The LPSC ordered Entergy Louisiana to continue the use of the pay-as-you-go method for ratemaking purposes for postretirement benefits other than pensions.  However, the LPSC retains the flexibility to examine individual companies’ accounting for other postretirement benefits to determine if special exceptions to this order are warranted. Pursuant to regulatory directives, Entergy Arkansas, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy contribute the other postretirement benefit costs collected in rates into external trusts.  System Energy is funding, on behalf of Entergy Operations, other postretirement benefits associated with Grand Gulf.

Trust assets contributed by participating Registrant Subsidiaries are in master trusts, established by Entergy Corporation and maintained by a trustee.  Each participating Registrant Subsidiary holds a beneficial interest in the trusts’ assets.  The assets in the master trusts are commingled for investment and administrative purposes.  Although assets are commingled, supporting records are maintained for the purpose of allocating the beneficial interest in net earnings/(losses) and the administrative expenses of the investment accounts to the various participating plans and participating Registrant Subsidiaries. Beneficial interest in an investment account’s net income/(loss) is comprised of interest and dividends, realized and unrealized gains and losses, and expenses.  Beneficial interest from these investments is allocated to the plans and participating Registrant Subsidiary based on their portion of net assets in the pooled accounts.


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Components of Net Other Postretirement Benefit Cost and Other Amounts Recognized as a Regulatory Asset and/or AOCI

Entergy Corporation’s and its subsidiaries’ total 2017 , 2016 , and 2015 other postretirement benefit costs, including amounts capitalized and amounts recognized as a regulatory asset and/or other comprehensive income, included the following components:
 
2017
 
2016
 
2015
 
(In Thousands)
Other postretirement costs:
 
 
 
 
 
Service cost - benefits earned during the period

$26,915

 

$32,291

 

$45,305

Interest cost on accumulated postretirement benefit obligation (APBO)
55,838

 
56,331

 
71,934

Expected return on assets
(37,630
)
 
(41,820
)
 
(45,375
)
Amortization of prior service credit
(41,425
)
 
(45,490
)
 
(37,280
)
Recognized net loss
21,905

 
18,214

 
31,573

Net other postretirement benefit cost

$25,603

 

$19,526

 

$66,157

Other changes in plan assets and benefit obligations recognized as a regulatory asset and /or AOCI (before tax)
 
 
 
 
 
Arising this period:
 
 
 
 
 
Prior service credit for period

($2,564
)
 

($20,353
)
 

($48,192
)
Net (gain)/loss
(66,922
)
 
49,805

 
(154,339
)
Amounts reclassified from regulatory asset and /or AOCI to net periodic benefit cost in the current year:
 
 
 
 
 
Amortization of prior service credit
41,425

 
45,490

 
37,280

Amortization of net loss
(21,905
)
 
(18,214
)
 
(31,573
)
Total

($49,966
)
 

$56,728

 

($196,824
)
Total recognized as net periodic benefit income/(cost), regulatory asset, and/or AOCI (before tax)

($24,363
)
 

$76,254

 

($130,667
)
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic benefit cost in the following year
 
 
 
 
 
Prior service credit

($37,002
)
 

($41,425
)
 

($45,485
)
Net loss

$13,729

 

$21,905

 

$18,214



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Entergy Corporation and Subsidiaries
Notes to Financial Statements


Total 2017 , 2016 , and 2015 other postretirement benefit costs of the Registrant Subsidiaries, including amounts capitalized and deferred, for their employees included the following components:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
 
Other postretirement costs:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost - benefits earned during the period
 

$3,451

 

$6,373

 

$1,160

 

$567

 

$1,488

 

$1,278

Interest cost on APBO
 
9,020

 
12,101

 
2,759

 
1,874

 
4,494

 
2,236

Expected return on assets
 
(15,836
)
 
—

 
(4,801
)
 
(4,635
)
 
(8,720
)
 
(2,869
)
Amortization of prior service credit
 
(5,110
)
 
(7,735
)
 
(1,823
)
 
(745
)
 
(2,316
)
 
(1,513
)
Recognized net loss
 
4,460

 
1,859

 
1,675

 
418

 
3,303

 
1,560

Net other postretirement benefit (income)/cost
 

($4,015
)
 

$12,598

 

($1,030
)
 

($2,521
)
 

($1,751
)
 

$692

Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Arising this period:
 
 
 
 
 
 
 
 
 
 
 
 
Net (gain)/loss
 
(29,534
)
 
(1,256
)
 
506

 
(7,342
)
 
(22,255
)
 
(5,459
)
Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 

 
 
 
 
 
 
 
 
 
 
Amortization of prior service credit
 
5,110

 
7,735

 
1,823

 
745

 
2,316

 
1,513

Amortization of net loss
 
(4,460
)
 
(1,859
)
 
(1,675
)
 
(418
)
 
(3,303
)
 
(1,560
)
Total
 

($28,884
)
 

$4,620

 

$654

 

($7,015
)
 

($23,242
)
 

($5,506
)
Total recognized as net periodic other postretirement income/(cost), regulatory asset, and/or AOCI (before tax)
 

($32,899
)
 

$17,218

 

($376
)
 

($9,536
)
 

($24,993
)
 

($4,814
)
Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost  in the following year
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

($5,110
)
 

($7,735
)
 

($1,823
)
 

($745
)
 

($2,316
)
 

($1,513
)
Net loss
 

$1,154

 

$1,550

 

$1,508

 

$137

 

$823

 

$932



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Entergy Corporation and Subsidiaries
Notes to Financial Statements


2016
 
Entergy Arkansas

Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Other postretirement costs:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost - benefits earned during the period
 

$3,913

 

$7,476

 

$1,543

 

$622

 

$1,590

 

$1,337

Interest cost on APBO
 
9,297

 
13,041

 
2,835

 
1,791

 
4,154

 
2,117

Expected return on assets
 
(17,855
)
 
—

 
(5,517
)
 
(4,617
)
 
(9,575
)
 
(3,257
)
Amortization of prior service credit
 
(5,472
)
 
(7,787
)
 
(934
)
 
(745
)
 
(2,722
)
 
(1,570
)
Recognized net loss
 
4,256

 
2,926

 
893

 
146

 
2,148

 
1,149

Net other postretirement benefit (income)/cost
 

($5,861
)
 

$15,656

 

($1,180
)
 

($2,803
)
 

($4,405
)
 

($224
)
Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Arising this period:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit for the period
 

($1,007
)
 

($4,647
)
 

($6,219
)
 

$—

 

$—

 

$—

Net (gain)/loss
 
3,331

 
(13,117
)
 
8,715

 
5,717

 
13,378

 
4,997

Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service credit
 
5,472

 
7,787

 
934

 
745

 
2,722

 
1,570

Amortization of net loss
 
(4,256
)
 
(2,926
)
 
(893
)
 
(146
)
 
(2,148
)
 
(1,149
)
Total
 

$3,540

 

($12,903
)
 

$2,537

 

$6,316

 

$13,952

 

$5,418

Total recognized as net periodic other postretirement income/(cost), regulatory asset, and/or AOCI (before tax)
 

($2,321
)
 

$2,753

 

$1,357

 

$3,513

 

$9,547

 

$5,194

Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost  in the following year
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

($5,110
)
 

($7,739
)
 

($1,824
)
 

($745
)
 

($2,316
)
 

($1,513
)
Net loss
 

$4,460

 

$1,859

 

$1,675

 

$418

 

$3,303

 

$1,560



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Entergy Corporation and Subsidiaries
Notes to Financial Statements


2015
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Other postretirement costs:
 
 
 
 
 
 
 
 
 
 
 
 
Service cost - benefits earned during the period
 

$6,957

 

$9,893

 

$2,028

 

$818

 

$2,000

 

$1,881

Interest cost on APBO
 
12,518

 
16,311

 
3,436

 
2,608

 
5,366

 
2,511

Expected return on assets
 
(19,190
)
 
—

 
(6,166
)
 
(4,804
)
 
(10,351
)
 
(3,644
)
Amortization of prior service credit
 
(2,441
)
 
(7,467
)
 
(916
)
 
(709
)
 
(2,723
)
 
(1,465
)
Recognized net loss
 
5,356

 
7,118

 
860

 
470

 
2,740

 
1,198

Net other postretirement benefit (income)/cost
 

$3,200

 

$25,855

 

($758
)
 

($1,617
)
 

($2,968
)
 

$481

Other changes in plan assets and benefit obligations recognized as a regulatory asset and/or AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Arising this period:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit for the period
 

($18,035
)
 

($1,361
)
 

$—

 

$—

 

$—

 

($644
)
Net (gain)/loss
 
(11,978
)
 
(47,043
)
 
774

 
(5,810
)
 
(4,907
)
 
305

Amounts reclassified from regulatory asset and/or AOCI to net periodic pension cost in the current year:
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of prior service credit
 
2,441

 
7,467

 
916

 
709

 
2,723

 
1,465

Amortization of net loss
 
(5,356
)
 
(7,118
)
 
(860
)
 
(470
)
 
(2,740
)
 
(1,198
)
Total
 

($32,928
)
 

($48,055
)
 

$830

 

($5,571
)
 

($4,924
)
 

($72
)
Total recognized as net periodic other postretirement income/(cost), regulatory asset, and/or AOCI (before tax)
 

($29,728
)
 

($22,200
)
 

$72

 

($7,188
)
 

($7,892
)
 

$409

Estimated amortization amounts from regulatory asset and/or AOCI to net periodic cost  in the following year
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

($5,472
)
 

($7,783
)
 

($933
)
 

($745
)
 

($2,722
)
 

($1,570
)
Net loss
 

$4,256

 

$2,926

 

$893

 

$146

 

$2,148

 

$1,149



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Entergy Corporation and Subsidiaries
Notes to Financial Statements


Other Postretirement Benefit Obligations, Plan Assets, Funded Status, and Amounts Not Yet Recognized and Recognized in the Balance Sheet

Other postretirement benefit obligations, plan assets, funded status, and amounts not yet recognized and recognized in the Consolidated Balance Sheets of Entergy Corporation and its Subsidiaries as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
(In Thousands)
Change in APBO
 

 
 

Balance at January 1

$1,568,963

 

$1,530,829

Service cost
26,915

 
32,291

Interest cost
55,838

 
56,331

Plan amendments
(2,564
)
 
(20,353
)
Plan participant contributions
35,080

 
27,686

Actuarial (gain)/loss
(23,409
)
 
46,201

Benefits paid
(97,829
)
 
(104,477
)
Medicare Part D subsidy received
493

 
455

Balance at December 31

$1,563,487

 

$1,568,963

Change in Plan Assets
 

 
 

Fair value of assets at January 1

$596,660

 

$579,069

Actual return on plan assets
81,143

 
38,216

Employer contributions
44,273

 
56,166

Plan participant contributions
35,080

 
27,686

Benefits paid
(97,829
)
 
(104,477
)
Fair value of assets at December 31

$659,327

 

$596,660

Funded status

($904,160
)
 

($972,303
)
Amounts recognized in the balance sheet
 
 
 
Current liabilities

($45,237
)
 

($45,255
)
Non-current liabilities
(858,923
)
 
(927,048
)
Total funded status

($904,160
)
 

($972,303
)
Amounts recognized as a regulatory asset
 
 
 
Prior service credit

($40,461
)
 

($54,896
)
Net loss
144,966

 
222,540

 

$104,505

 

$167,644

Amounts recognized as AOCI (before tax)
 
 
 
Prior service credit

($65,047
)
 

($89,474
)
Net loss
161,322

 
172,575

 

$96,275

 

$83,101



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Notes to Financial Statements


Other postretirement benefit obligations, plan assets, funded status, and amounts not yet recognized and recognized in the Balance Sheets of the Registrant Subsidiaries as of December 31, 2017 and 2016 are as follows:
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Change in APBO
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1
 

$258,787

 

$342,500

 

$78,485

 

$55,515

 

$127,700

 

$62,498

Service cost
 
3,451

 
6,373

 
1,160

 
567

 
1,488

 
1,278

Interest cost
 
9,020

 
12,101

 
2,759

 
1,874

 
4,494

 
2,236

Plan participant contributions
 
7,875

 
7,855

 
2,160

 
1,151

 
2,453

 
1,779

Actuarial (gain)/loss
 
(11,691
)
 
(1,256
)
 
5,858

 
(899
)
 
(12,469
)
 
(2,233
)
Benefits paid
 
(18,497
)
 
(22,273
)
 
(5,823
)
 
(4,670
)
 
(6,980
)
 
(4,205
)
Medicare Part D subsidy received
 
74

 
89

 
22

 
10

 
16

 
28

Balance at December 31
 

$249,019

 

$345,389

 

$84,621

 

$53,548

 

$116,702

 

$61,381

Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of assets at January 1
 

$250,926

 

$—

 

$75,945

 

$74,236

 

$137,069

 

$44,885

Actual return on plan assets
 
33,679

 
—

 
10,153

 
11,078

 
18,506

 
6,095

Employer contributions
 
695

 
14,418

 
(2
)
 
3,709

 
3,123

 
570

Plan participant contributions
 
7,875

 
7,855

 
2,160

 
1,151

 
2,453

 
1,779

Benefits paid
 
(18,497
)
 
(22,273
)
 
(5,823
)
 
(4,670
)
 
(6,980
)
 
(4,205
)
Fair value of assets at December 31
 

$274,678

 

$—

 

$82,433

 

$85,504

 

$154,171

 

$49,124

Funded status
 

$25,659

 

($345,389
)
 

($2,188
)
 

$31,956

 

$37,469

 

($12,257
)
Amounts recognized in the balance sheet
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 

$—

 

($18,794
)
 

$—

 

$—

 

$—

 

$—

Non-current liabilities
 
25,659

 
(326,595
)
 
(2,188
)
 
31,956

 
37,469

 
(12,257
)
Total funded status
 

$25,659

 

($345,389
)
 

($2,188
)
 

$31,956

 

$37,469

 

($12,257
)
Amounts recognized in regulatory asset
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

($16,574
)
 

$—

 

($6,687
)
 

($1,427
)
 

($5,980
)
 

($3,819
)
Net loss
 
42,394

 
—

 
25,247

 
4,269

 
24,478

 
16,386

 
 

$25,820

 

$—

 

$18,560

 

$2,842

 

$18,498

 

$12,567

Amounts recognized in AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

$—

 

($19,999
)
 

$—

 

$—

 

$—

 

$—

Net loss
 
—

 
51,585

 
—

 
—

 
—

 
—

 
 

$—

 

$31,586

 

$—

 

$—

 

$—

 

$—




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Entergy Corporation and Subsidiaries
Notes to Financial Statements


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Change in APBO
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1
 

$258,900

 

$356,253

 

$77,382

 

$51,951

 

$114,582

 

$57,645

Service cost
 
3,913

 
7,476

 
1,543

 
622

 
1,590

 
1,337

Interest cost
 
9,297

 
13,041

 
2,835

 
1,791

 
4,154

 
2,117

Plan amendments
 
(1,007
)
 
(4,647
)
 
(6,219
)
 
—

 
—

 
—

Plan participant contributions
 
6,330

 
6,273

 
1,721

 
1,213

 
1,927

 
1,390

Actuarial (gain)/loss
 
2,453

 
(13,117
)
 
8,230

 
4,774

 
12,389

 
4,806

Benefits paid
 
(21,178
)
 
(22,893
)
 
(7,031
)
 
(4,852
)
 
(6,977
)
 
(4,818
)
Medicare Part D subsidy received
 
79

 
114

 
24

 
16

 
35

 
21

Balance at December 31
 

$258,787

 

$342,500

 

$78,485

 

$55,515

 

$127,700

 

$62,498

Change in Plan Assets
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of assets at January 1
 

$243,206

 

$—

 

$75,538

 

$69,881

 

$130,374

 

$44,917

Actual return on plan assets
 
16,977

 
—

 
5,032

 
3,674

 
8,586

 
3,066

Employer contributions
 
5,591

 
16,620

 
685

 
4,320

 
3,159

 
330

Plan participant contributions
 
6,330

 
6,273

 
1,721

 
1,213

 
1,927

 
1,390

Benefits paid
 
(21,178
)
 
(22,893
)
 
(7,031
)
 
(4,852
)
 
(6,977
)
 
(4,818
)
Fair value of assets at December 31
 

$250,926

 

$—

 

$75,945

 

$74,236

 

$137,069

 

$44,885

Funded status
 

($7,861
)
 

($342,500
)
 

($2,540
)
 

$18,721

 

$9,369

 

($17,613
)
Amounts recognized in the balance sheet
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 

$—

 

($19,209
)
 

$—

 

$—

 

$—

 

$—

Non-current liabilities
 
(7,861
)
 
(323,291
)
 
(2,540
)
 
18,721

 
9,369

 
(17,613
)
Total funded status
 

($7,861
)
 

($342,500
)
 

($2,540
)
 

$18,721

 

$9,369

 

($17,613
)
Amounts recognized in regulatory asset
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

($21,684
)
 

$—

 

($8,511
)
 

($2,172
)
 

($8,296
)
 

($5,332
)
Net loss
 
76,388

 
—

 
26,416

 
12,029

 
50,036

 
23,405

 
 

$54,704

 

$—

 

$17,905

 

$9,857

 

$41,740

 

$18,073

Amounts recognized in AOCI (before tax)
 
 
 
 
 
 
 
 
 
 
 
 
Prior service credit
 

$—

 

($27,735
)
 

$—

 

$—

 

$—

 

$—

Net loss
 
—

 
54,700

 
—

 
—

 
—

 
—

 
 

$—

 

$26,965

 

$—

 

$—

 

$—

 

$—



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Notes to Financial Statements


Non-Qualified Pension Plans

Entergy also sponsors non-qualified, non-contributory defined benefit pension plans that provide benefits to certain key employees.  Entergy recognized net periodic pension cost related to these plans of $37.6 million in 2017 , $24.9 million in 2016 , and $22.8 million in 2015 .  In 2017 , 2016 , and 2015 Entergy recognized $20.3 million , $8.1 million , and $5.1 million , respectively in settlement charges related to the payment of lump sum benefits out of the plan that is included in the non-qualified pension plan cost above.  The projected benefit obligation was $162.3 million and $169.3 million as of December 31, 2017 and 2016 , respectively.  The accumulated benefit obligation was $144.7 million and $151.0 million as of December 31, 2017 and 2016 , respectively.

Entergy’s non-qualified, non-current pension liability at December 31, 2017 and 2016 was $136 million and $137.6 million , respectively; and its current liability was $26.4 million and $31.7 million , respectively.  The unamortized prior service cost and net loss are recognized in regulatory assets ( $55.2 million at December 31, 2017 and $59.8 million at December 31, 2016 ) and accumulated other comprehensive income before taxes ( $35.9 million at December 31, 2017 and $31.6 million at December 31, 2016 ).

The following Registrant Subsidiaries participate in Entergy’s non-qualified, non-contributory defined benefit pension plans that provide benefits to certain key employees.  The net periodic pension cost for their employees for the non-qualified plans for 2017 , 2016 , and 2015 , was as follows:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
(In Thousands)
2017

$679

 

$185

 

$251

 

$73

 

$499

2016

$1,819

 

$231

 

$236

 

$65

 

$504

2015

$446

 

$377

 

$235

 

$64

 

$595


Included in the 2017 net periodic pension cost above are settlement charges of $269 thousand for Entergy Arkansas related to the lump sum benefits paid out of the plan. Included in the 2016 net periodic pension cost above are settlement charges of $1.4 million and $1 thousand for Entergy Arkansas and Entergy Mississippi, respectively, related to the lump sum benefits paid out of the plan. Included in the 2015 net periodic pension cost above are settlement charges of $108 thousand and $2 thousand for Entergy Louisiana and Entergy Mississippi, respectively, related to the lump sum benefits paid out of the plan.

The projected benefit obligation for their employees for the non-qualified plans as of December 31, 2017 and 2016 was as follows:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
(In Thousands)
2017

$4,221

 

$2,061

 

$2,737

 

$583

 

$8,913

2016

$3,897

 

$2,134

 

$2,296

 

$514

 

$8,665



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Notes to Financial Statements


The accumulated benefit obligation for their employees for the non-qualified plans as of December 31, 2017 and 2016 was as follows:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
(In Thousands)
2017

$3,825

 

$2,061

 

$2,250

 

$519

 

$8,602

2016

$3,439

 

$2,134

 

$1,961

 

$452

 

$8,333


The following amounts were recorded on the balance sheet as of December 31, 2017 and 2016 :
2017
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
(In Thousands)
Current liabilities
 

($376
)
 

($231
)
 

($135
)
 

($21
)
 

($788
)
Non-current liabilities
 
(3,845
)
 
(1,830
)
 
(2,603
)
 
(562
)
 
(8,125
)
Total funded status
 

($4,221
)
 

($2,061
)
 

($2,738
)
 

($583
)
 

($8,913
)
Regulatory asset/(liability)
 

$2,995

 

$166

 

$1,186

 

($140
)
 

$133

Accumulated other comprehensive income (before taxes)
 

$—

 

$11

 

$—

 

$—

 

$—


2016
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
(In Thousands)
Current liabilities
 

($242
)
 

($233
)
 

($137
)
 

($20
)
 

($773
)
Non-current liabilities
 
(3,655
)
 
(1,901
)
 
(2,159
)
 
(495
)
 
(7,892
)
Total funded status
 

($3,897
)
 

($2,134
)
 

($2,296
)
 

($515
)
 

($8,665
)
Regulatory asset/(liability)
 

$2,914

 

$175

 

$876

 

($148
)
 

($316
)
Accumulated other comprehensive income (before taxes)
 

$—

 

$13

 

$—

 

$—

 

$—



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Reclassification out of Accumulated Other Comprehensive Income (Loss)

Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) as of December 31, 2017:
 
Qualified Pension Costs
 
Other Postretirement Costs
 
Non-Qualified Pension Costs
 
Total
 
(In Thousands)
Entergy
 
 
 
 
 
 
 
Amortization of prior service cost

($261
)
 

$26,867

 

($355
)
 

$26,251

Amortization of loss
(73,800
)
 
(8,805
)
 
(3,397
)
 
(86,002
)
Settlement loss
—

 
—

 
(7,544
)
 
(7,544
)
 

($74,061
)
 

$18,062

 

($11,296
)
 

($67,295
)
Entergy Louisiana
 
 
 
 
 
 
 
Amortization of prior service cost

$—

 

$7,735

 

($1
)
 

$7,734

Amortization of loss
(3,459
)
 
(1,859
)
 
(9
)
 
(5,327
)
 

($3,459
)
 

$5,876

 

($10
)
 

$2,407


Entergy and Entergy Louisiana reclassified the following costs out of accumulated other comprehensive income (loss) (before taxes and including amounts capitalized) as of December 31, 2016:
 
Qualified Pension Costs
 
Other Postretirement Costs
 
Non-Qualified Pension Costs
 
Total
 
(In Thousands)
Entergy
 
 
 
 
 
 
 
Amortization of prior service cost

($1,079
)


$30,949

 

($456
)
 

$29,414

Acceleration of prior service cost due to curtailment
(1,045
)
 
—

 
—

 
(1,045
)
Amortization of loss
(49,930
)
 
(8,248
)
 
(2,515
)
 
(60,693
)
Settlement loss
—

 
—

 
(2,007
)
 
(2,007
)
 

($52,054
)
 

$22,701

 

($4,978
)
 

($34,331
)
Entergy Louisiana
 
 
 
 
 
 
 
Amortization of prior service cost

$—



$7,787

 

($1
)
 

$7,786

Amortization of loss
(3,345
)
 
(2,926
)
 
(10
)
 
(6,281
)
 

($3,345
)
 

$4,861

 

($11
)
 

$1,505


Accounting for Pension and Other Postretirement Benefits

Accounting standards require an employer to recognize in its balance sheet the funded status of its benefit plans.  This is measured as the difference between plan assets at fair value and the benefit obligation.  Entergy uses a December 31 measurement date for its pension and other postretirement plans.  Employers are to record previously unrecognized gains and losses, prior service costs, and any remaining transition asset or obligation (that resulted from adopting prior pension and other postretirement benefits accounting standards) as comprehensive income and/or as a regulatory asset reflective of the recovery mechanism for pension and other postretirement benefit costs in the Registrant Subsidiaries’ respective regulatory jurisdictions.  For the portion of Entergy Louisiana that is not regulated, the unrecognized prior service cost, gains and losses, and transition asset/obligation for its pension and other postretirement benefit obligations are recorded as other comprehensive income.  Entergy Louisiana recovers other postretirement benefit costs on a pay-as-you-go basis and records the unrecognized prior service cost, gains and losses, and transition obligation for its other postretirement benefit obligation as other comprehensive income.  Accounting standards also

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require that changes in the funded status be recorded as other comprehensive income and/or a regulatory asset in the period in which the changes occur.

With regard to pension and other postretirement costs, Entergy calculates the expected return on pension and other postretirement benefit plan assets by multiplying the long-term expected rate of return on assets by the market-related value (MRV) of plan assets.  Entergy determines the MRV of pension plan assets by calculating a value that uses a 20 -quarter phase-in of the difference between actual and expected returns.  For other postretirement benefit plan assets Entergy uses fair value when determining MRV.

Qualified Pension and Other Postretirement Plans’ Assets

The Plan Administrator’s trust asset investment strategy is to invest the assets in a manner whereby long-term earnings on the assets (plus cash contributions) provide adequate funding for retiree benefit payments.  The mix of assets is based on an optimization study that identifies asset allocation targets in order to achieve the maximum return for an acceptable level of risk, while minimizing the expected contributions and pension and postretirement expense.

In the optimization studies, the Plan Administrator formulates assumptions about characteristics, such as expected asset class investment returns, volatility (risk), and correlation coefficients among the various asset classes.  The future market assumptions used in the optimization study are determined by examining historical market characteristics of the various asset classes and making adjustments to reflect future conditions expected to prevail over the study period.

The target asset allocation for pension adjusts dynamically based on the pension plans’ funded status. The current targets are shown below. The expectation is that the allocation to fixed income securities will increase as the pension plans’ funded status increases.  The following ranges were established to produce an acceptable, economically efficient plan to manage around the targets.

For postretirement assets the target and range asset allocations (as shown below) reflect recommendations made in the latest optimization study. The target asset allocations for postretirement assets adjust dynamically based on the funded status of each sub-account within each trust. The current weighted average targets shown below represent the aggregate of all targets for all sub-accounts within all trusts.

Entergy’s qualified pension and postretirement weighted-average asset allocations by asset category at December 31, 2017 and 2016 and the target asset allocation and ranges for 2017 are as follows:
Pension Asset Allocation
 
Target
 
Range
 
Actual 2017
 
Actual 2016
Domestic Equity Securities
 
45%
 
37%
to
53%
 
45%
 
46%
International Equity Securities
 
20%
 
16%
to
24%
 
20%
 
20%
Fixed Income Securities
 
35%
 
32%
to
38%
 
34%
 
33%
Other
 
0%
 
0%
to
10%
 
1%
 
1%

Postretirement Asset Allocation
 
Non-Taxable and Taxable
 
 
Target
 
Range
 
Actual 2017
 
Actual 2016
Domestic Equity Securities
 
27%
 
22%
to
32%
 
30%
 
40%
International Equity Securities
 
18%
 
13%
to
23%
 
20%
 
27%
Fixed Income Securities
 
55%
 
50%
to
60%
 
50%
 
33%
Other
 
0%
 
0%
to
5%
 
0%
 
0%



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In determining its expected long-term rate of return on plan assets used in the calculation of benefit plan costs, Entergy reviews past performance, current and expected future asset allocations, and capital market assumptions of its investment consultant and some investment managers.

The expected long-term rate of return for the qualified pension plans’ assets is based primarily on the geometric average of the historical annual performance of a representative portfolio weighted by the target asset allocation defined in the table above, along with other indications of expected return on assets. The time period reflected is a long dated period spanning several decades.

The expected long-term rate of return for the non-taxable postretirement trust assets is determined using the same methodology described above for pension assets, but the aggregate asset allocation specific to the non-taxable postretirement assets is used.

For the taxable postretirement trust assets, the investment allocation includes tax-exempt fixed income securities.  This asset allocation, in combination with the same methodology employed to determine the expected return for other postretirement assets (as described above), and with a modification to reflect applicable taxes, is used to produce the expected long-term rate of return for taxable postretirement trust assets.

Concentrations of Credit Risk

Entergy’s investment guidelines mandate the avoidance of risk concentrations.  Types of concentrations specified to be avoided include, but are not limited to, investment concentrations in a single entity, type of industry, foreign country, geographic area and individual security issuance.  As of December 31, 2017 , all investment managers and assets were materially in compliance with the approved investment guidelines, therefore there were no significant concentrations (defined as greater than 10 percent of plan assets) of credit risk in Entergy’s pension and other postretirement benefit plan assets.

Fair Value Measurements

Accounting standards provide the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).

The three levels of the fair value hierarchy are described below:

•
Level 1 - Level 1 inputs are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

•
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date.  Assets are valued based on prices derived by an independent party that uses inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads.  Prices are reviewed and can be challenged with the independent parties and/or overridden if it is believed such would be more reflective of fair value.  Level 2 inputs include the following:

-     quoted prices for similar assets or liabilities in active markets;
-     quoted prices for identical assets or liabilities in inactive markets;
-     inputs other than quoted prices that are observable for the asset or liability; or
-     inputs that are derived principally from or corroborated by observable market data by correlation or other means.

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If an asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

•
Level 3 - Level 3 refers to securities valued based on significant unobservable inputs.
    
Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  The following tables set forth by level within the fair value hierarchy, measured at fair value on a recurring basis at December 31, 2017 , and December 31, 2016 , a summary of the investments held in the master trusts for Entergy’s qualified pension and other postretirement plans in which the Registrant Subsidiaries participate.

Qualified Defined Benefit Pension Plan Trusts
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Thousands)
Equity securities:
 
 
 
 
 
 
 
 
Corporate stocks:
 
 
 
 
 
 
 
 
Preferred
 

$11,461

(b)

$—

 

$—

 

$11,461

Common
 
663,923

(b)
34

(b)
—

 
663,957

Common collective trusts (c)
 


 


 


 
3,198,799

Registered investment companies
 
125,174

(d)
—

 
—

 
125,174

Fixed income securities:
 
 
 
 
 
 
 
 
U.S. Government securities
 
—

(b)
638,832

(a)
—

 
638,832

Corporate debt instruments
 
—

 
619,735

(a)
—

 
619,735

Registered investment companies (e)
 
45,768

(d)
2,735

(d)
—

 
764,251

Other
 
46

(f)
62,559

(f)
—

 
62,605

Other:
 
 
 
 
 
 
 
 
Insurance company general account (unallocated contracts)
 
—

 
37,994

(g)
—

 
37,994

Total investments
 

$846,372

 

$1,361,889

 

$—

 

$6,122,808

Cash
 
 
 
 
 
 
 
1,508

Other pending transactions
 
 
 
 
 
 
 
5,179

Less: Other postretirement assets included in total investments
 
 
 
 
 
 
 
(58,179
)
Total fair value of qualified pension assets
 
 
 
 
 
 
 

$6,071,316



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Notes to Financial Statements


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Thousands)
Short-term investments
 

$—

 

$3,610

(a)

$—

 

$3,610

Equity securities:
 
 
 
 
 
 
 
 
Corporate stocks:
 
 
 
 
 
 
 
 
Preferred
 
6,423

(b)
—

 
—

 
6,423

Common
 
745,715

(b)
39

(b)
—

 
745,754

Common collective trusts (c)
 


 


 


 
2,072,743

103-12 investment entities (h)
 

 

 

 
335,818

Registered investment companies
 
258,879

(d)
—

 
—

 
258,879

Fixed income securities:
 
 
 
 
 
 
 
 
U.S. Government securities
 
136

(b)
370,545

(a)
—

 
370,681

Corporate debt instruments
 
—

 
630,726

(a)
—

 
630,726

Registered investment companies (e)
 
35,216

(d)
2,695

(d)
—

 
640,836

Other
 
34

(f)
105,613

(f)
—

 
105,647

Other:
 
 
 
 
 
 
 
 
Insurance company general account (unallocated contracts)
 
—

 
37,111

(g)
—

 
37,111

Total investments
 

$1,046,403

 

$1,150,339

 

$—

 

$5,208,228

Cash
 
 
 
 
 
 
 
929

Other pending transactions
 
 
 
 
 
 
 
8,869

Less: Other postretirement assets included in total investments
 
 
 
 
 
 
 
(46,824
)
Total fair value of qualified pension assets
 
 
 
 
 
 
 

$5,171,202


Other Postretirement Trusts
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Thousands)
Equity securities:
 
 
 
 
 
 
 
 
Common collective trust (c)
 
 
 
 
 
 
 

$300,139

Fixed income securities:
 
 
 
 
 
 
 
 

U.S. Government securities
 
81,602

(b)
76,790

(a)
—

 
158,392

Corporate debt instruments
 
—

 
92,869

(a)
—

 
92,869

Registered investment companies
 
3,127

(d)
—

 
—

 
3,127

Other
 
—

 
45,627

(f)
—

 
45,627

Total investments
 

$84,729

 

$215,286

 

$—

 

$600,154

Other pending transactions
 
 
 
 
 
 
 
994

Plus:  Other postretirement assets included in the investments of the qualified pension trust
 
 
 
 
 
 
 
58,179

Total fair value of other postretirement assets
 
 
 
 
 
 
 

$659,327



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Notes to Financial Statements


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Thousands)
Equity securities:
 
 
 
 
 
 
 
 
Common collective trust (c)
 
 
 
 
 
 
 

$368,704

Fixed income securities:
 
 
 
 
 
 
 
 

U.S. Government securities
 
30,632

(b)
43,097

(a)
—

 
73,729

Corporate debt instruments
 
—

 
58,787

(a)
—

 
58,787

Registered investment companies
 
3,123

(d)
—

 
—

 
3,123

Other
 
—

 
45,389

(f)
—

 
45,389

Total investments
 

$33,755

 

$147,273

 

$—

 

$549,732

Other pending transactions
 
 
 
 
 
 
 
104

Plus:  Other postretirement assets included in the investments of the qualified pension trust
 
 
 
 
 
 
 
46,824

Total fair value of other postretirement assets
 
 
 
 
 
 
 

$596,660


(a)
Certain preferred stocks and certain fixed income debt securities (corporate, government, and securitized) are stated at fair value as determined by broker quotes.
(b)
Common stocks, certain preferred stocks, and certain fixed income debt securities (government) are stated at fair value determined by quoted market prices.
(c)
The common collective trusts hold investments in accordance with stated objectives.  The investment strategy of the trusts is to capture the growth potential of equity markets by replicating the performance of a specified index.  Net asset value per share of common collective trusts estimate fair value. Certain of these common collective trusts are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table.
(d)
Registered investment companies are money market mutual funds with a stable net asset value of one dollar per share. Registered investment companies may hold investments in domestic and international bond markets or domestic equities and estimate fair value using net asset value per share.
(e)
Certain of these registered investment companies are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table.
(f)
The other remaining assets are U.S. municipal and foreign government bonds stated at fair value as determined by broker quotes.
(g)
The unallocated insurance contract investments are recorded at contract value, which approximates fair value.  The contract value represents contributions made under the contract, plus interest, less funds used to pay benefits and contract expenses, and less distributions to the master trust.
(h)
103-12 investment entities hold investments in accordance with stated objectives. The investment strategy of the investment entities is to capture the growth potential of international equity markets by replicating the performance of a specified index. 103-12 investment entities estimate fair value using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table.


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Notes to Financial Statements


Estimated Future Benefit Payments

Based upon the assumptions used to measure Entergy’s qualified pension and other postretirement benefit obligations at December 31, 2017 , and including pension and other postretirement benefits attributable to estimated future employee service, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for Entergy Corporation and its subsidiaries will be as follows:
 
Estimated Future Benefits Payments
 
 
 
Qualified Pension
 
Non-Qualified Pension
 
Other Postretirement (before Medicare Subsidy)
 
Estimated Future Medicare Subsidy Receipts
 
(In Thousands)
Year(s)
 
 
 
 
 
 
 
2018

$412,057

 

$26,375

 

$82,087

 

$745

2019

$435,880

 

$10,108

 

$86,685

 

$842

2020

$447,224

 

$13,364

 

$89,508

 

$956

2021

$462,624

 

$10,765

 

$92,087

 

$1,071

2022

$470,846

 

$17,425

 

$94,427

 

$1,195

2023 - 2027

$2,478,959

 

$72,181

 

$475,991

 

$8,109


Based upon the same assumptions, Entergy expects that benefits to be paid and the Medicare Part D subsidies to be received over the next ten years for the Registrant Subsidiaries for their employees will be as follows:
Estimated Future Qualified Pension Benefits Payments
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Year(s)
 
 
 
 
 
 
 
 
 
 
 
 
2018
 

$87,295

 

$93,155

 

$25,833

 

$11,484

 

$25,333

 

$17,780

2019
 

$87,832

 

$96,060

 

$25,977

 

$12,202

 

$25,656

 

$18,566

2020
 

$88,905

 

$100,179

 

$27,198

 

$12,463

 

$26,399

 

$19,398

2021
 

$90,278

 

$103,810

 

$27,508

 

$13,087

 

$26,756

 

$20,279

2022
 

$92,061

 

$107,609

 

$27,389

 

$13,207

 

$26,310

 

$21,714

2023 - 2027
 

$479,160

 

$571,926

 

$141,912

 

$69,595

 

$130,905

 

$117,835

Estimated Future Non-Qualified Pension Benefits Payments
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
(In Thousands)
Year(s)
 
 
 
 
 
 
 
 
 
 
2018
 

$376

 

$231

 

$135

 

$21

 

$788

2019
 

$300

 

$219

 

$137

 

$55

 

$764

2020
 

$355

 

$208

 

$290

 

$36

 

$895

2021
 

$310

 

$196

 

$192

 

$39

 

$723

2022
 

$506

 

$186

 

$201

 

$41

 

$662

2023 - 2027
 

$2,196

 

$749

 

$1,462

 

$459

 

$3,762



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Notes to Financial Statements


Estimated Future Other Postretirement Benefits Payments (before Medicare Part D Subsidy)
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Year(s)
 
 
 
 
 
 
 
 
 
 
 
 
2018
 

$15,282

 

$18,962

 

$4,677

 

$3,954

 

$6,485

 

$3,246

2019
 

$15,398

 

$19,767

 

$4,818

 

$4,000

 

$6,842

 

$3,363

2020
 

$15,349

 

$20,287

 

$5,043

 

$3,952

 

$7,101

 

$3,381

2021
 

$15,483

 

$20,756

 

$5,218

 

$3,899

 

$7,369

 

$3,537

2022
 

$15,419

 

$21,250

 

$5,331

 

$3,800

 

$7,519

 

$3,595

2023 - 2027
 

$75,293

 

$108,290

 

$26,723

 

$17,698

 

$36,897

 

$17,677


Estimated Future Medicare Part D Subsidy
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
 
(In Thousands)
Year(s)
 
 
 
 
 
 
 
 
 
 
 
 
2018
 

$164

 

$168

 

$58

 

$38

 

$64

 

$23

2019
 

$185

 

$187

 

$65

 

$39

 

$69

 

$27

2020
 

$209

 

$210

 

$70

 

$41

 

$75

 

$33

2021
 

$230

 

$234

 

$76

 

$43

 

$81

 

$38

2022
 

$254

 

$257

 

$82

 

$46

 

$88

 

$46

2023 - 2027
 

$1,646

 

$1,720

 

$514

 

$259

 

$552

 

$346


Contributions

Entergy currently expects to contribute approximately $352.1 million to its qualified pension plans and approximately $52.3 million to other postretirement plans in 2018.  The expected 2018 pension and other postretirement plan contributions of the Registrant Subsidiaries for their employees are shown below.  The 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

The Registrant Subsidiaries expect to contribute approximately the following to the qualified pension and other postretirement plans for their employees in 2018:
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
(In Thousands)
Pension Contributions

$64,062

 

$71,917

 

$14,933

 

$7,250

 

$10,883

 

$13,786

Other Postretirement Contributions

$472

 

$18,962

 

$110

 

$3,669

 

$3,231

 

$16



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Notes to Financial Statements


Actuarial Assumptions

The significant actuarial assumptions used in determining the pension PBO and the other postretirement benefit APBO as of December 31, 2017 and 2016 were as follows:
 
2017
 
2016
Weighted-average discount rate:
 
 
 
Qualified pension
3.70% - 3.82% Blended 3.78%
 
4.30% - 4.49% Blended 4.39%
Other postretirement
3.72%
 
4.30%
Non-qualified pension
3.34%
 
3.63%
Weighted-average rate of increase in future compensation levels
3.98%
 
3.98%
Assumed health care trend rate:
 
 
 
Pre-65
6.95%
 
6.55%
Post-65
7.25%
 
7.25%
Ultimate rate
4.75%
 
4.75%
Year ultimate rate is reached and beyond:

 
 
    Pre-65
2027
 
2026
    Post-65
2027
 
2026

The significant actuarial assumptions used in determining the net periodic pension and other postretirement benefit costs for 2017 ,  2016 , and 2015 were as follows:
 
2017
 
2016
 
2015
Weighted-average discount rate:
 
 
 
 
 
Qualified pension:
 
 
 
 
 
    Service cost
4.75%
 
5.00%
 
4.27%
    Interest cost
3.73%
 
3.90%
 
4.27%
Other postretirement:
 
 
 
 
 
    Service cost
4.60%
 
4.92%
 
4.23%
    Interest cost
3.61%
 
3.78%
 
4.23%
Non-qualified pension:
 
 
 
 
 
    Service cost
3.65%
 
3.65%
 
3.61%
    Interest cost
3.10%
 
3.10%
 
3.61%
Weighted-average rate of increase in future compensation levels
3.98%
 
4.23%
 
4.23%
Expected long-term rate of return on plan assets:
 
 
 
 
 
Pension assets
7.50%
 
7.75%
 
8.25%
Other postretirement non-taxable assets
6.50% - 7.50%
 
7.75%
 
8.05%
Other postretirement taxable assets
5.75%
 
6.00%
 
6.25%
Assumed health care trend rate:
 
 
 
 
 
Pre-65
6.55%
 
6.75%
 
7.10%
Post-65
7.25%
 
7.55%
 
7.70%
Ultimate rate
4.75%
 
4.75%
 
4.75%
Year ultimate rate is reached and beyond:

 

 

    Pre-65
2026
 
2024
 
2023
    Post-65
2026
 
2024
 
2023
    

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In 2016, Entergy refined its approach to estimating the service cost and interest cost components of qualified pension, other postretirement, and non-qualified pension costs. Under the refined approach, instead of using the weighted-average obligation discount rates at the beginning of the year, 2016 service cost and interest costs’ expected cash flows were discounted by the applicable spot rates. The refinement in approach was a change in accounting estimate and, accordingly, the effect was reflected prospectively. The measurement of the benefit obligation was not affected.
    
With respect to the mortality assumptions, Entergy used the RP-2014 Employee and Healthy Annuitant Tables (adjusted to base year 2006) with a fully generational MP-2017 projection scale, in determining its December 31, 2017 pension plans’ PBOs and other postretirement benefit APBO. Entergy used the RP-2014 Employee and Healthy Annuitant Tables (adjusted to base year 2006) with a fully generational MP-2016 projection scale, in determining its December 31, 2016 pension plans’ PBOs and other postretirement benefit APBO. 

Entergy’s health care cost trend is affected by both medical cost inflation, and with respect to capped costs, the effects of general inflation. A one percentage point change in Entergy’s assumed health care cost trend rate for 2017 would have the following effects:
 
 
1 Percentage Point Increase
 
1 Percentage Point Decrease
2017
 
Impact on the APBO
 
Impact on the sum of service costs and interest cost
 
Impact on the APBO
 
Impact on the sum of service costs and interest cost
 
 
Increase /(Decrease)
(In Thousands)
Entergy Corporation and its subsidiaries
 

$166,814

 

$10,221

 

($139,648
)
 

($8,385
)

The Registrant Subsidiaries’ health care cost trend is affected by both medical cost inflation, and with respect to capped costs, the effects of general inflation. A one percentage point change in the assumed health care cost trend rate for 2017 would have the following effects for the Registrant Subsidiaries for their employees:
 
 
1 Percentage Point Increase
 
1 Percentage Point Decrease
2017
 
Impact on the APBO
 
Impact on the sum of service costs and interest cost
 
Impact on the APBO
 
Impact on the sum of service costs and interest cost
 
 
Increase/(Decrease)
(In Thousands)
Entergy Arkansas
 

$23,612

 

$1,369

 

($19,810
)
 

($1,133
)
Entergy Louisiana
 

$37,240

 

$2,333

 

($31,063
)
 

($1,909
)
Entergy Mississippi
 

$8,666

 

$448

 

($7,276
)
 

($370
)
Entergy New Orleans
 

$4,585

 

$251

 

($3,895
)
 

($208
)
Entergy Texas
 

$12,444

 

$751

 

($10,452
)
 

($618
)
System Energy
 

$7,334

 

$475

 

($6,074
)
 

($387
)

Defined Contribution Plans

Entergy sponsors the Savings Plan of Entergy Corporation and Subsidiaries (System Savings Plan).  The System Savings Plan is a defined contribution plan covering eligible employees of Entergy and certain of its subsidiaries. The participating Entergy subsidiary makes matching contributions to the System Savings Plan for all eligible participating employees in an amount equal to either 70% or 100% of the participants’ basic contributions, up to 6% of their eligible earnings per pay period.  The matching contribution is allocated to investments as directed by the employee.


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Entergy also sponsors the Savings Plan of Entergy Corporation and Subsidiaries IV (established in March 2002), the Savings Plan of Entergy Corporation and Subsidiaries VI (established in April 2007), and the Savings Plan of Entergy Corporation and Subsidiaries VII (established in April 2007) to which matching contributions are also made.  The plans are defined contribution plans that cover eligible employees, as defined by each plan, of Entergy and certain of its subsidiaries.  

Entergy’s subsidiaries’ contributions to defined contribution plans collectively were $49.1 million in 2017 , $47 million in 2016 , and $44.4 million in 2015 .  The majority of the contributions were to the System Savings Plan.

The Registrant Subsidiaries’ 2017 , 2016 , and 2015 contributions to defined contribution plans for their employees were as follows:
 
 
Year
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
 
(In Thousands)
2017
 

$3,741

 

$5,079

 

$2,133

 

$731

 

$1,865

2016
 

$3,528

 

$4,746

 

$1,997

 

$708

 

$1,778

2015
 

$3,242

 

$4,324

 

$1,920

 

$721

 

$1,620



NOTE 12.    STOCK-BASED COMPENSATION (Entergy Corporation)

Entergy grants stock options, restricted stock, performance units, and restricted stock unit awards to key employees of the Entergy subsidiaries under its Equity Ownership Plans which are shareholder-approved stock-based compensation plans.  Effective May 8, 2015, Entergy’s shareholders approved the 2015 Equity Ownership and Long-Term Cash Incentive Plan (2015 Plan).  The maximum number of common shares that can be issued from the 2015 Plan for stock-based awards is 6,900,000 with no more than 1,500,000 available for incentive stock option grants.  The 2015 Plan only applies to awards granted on or after May 8, 2015 and awards will expire ten years from the date of grant. As of December 31, 2017 , there were 3,498,788 authorized shares remaining for stock-based awards, including 1,500,000 for incentive stock option grants.

Stock Options

Stock options are granted at exercise prices that equal the closing market price of Entergy Corporation common stock on the date of grant.  Generally, stock options granted will become exercisable in equal amounts on each of the first three anniversaries of the date of grant.  Unless they are forfeited previously under the terms of the grant, options expire 10 years after the date of the grant if they are not exercised.

The following table includes financial information for stock options for each of the years presented:
 
2017
 
2016
 
2015
 
(In Millions)
Compensation expense included in Entergy’s consolidated net income
$4.4
 
$4.4
 
$4.3
Tax benefit recognized in Entergy’s consolidated net income
$1.7
 
$1.7
 
$1.6
Compensation cost capitalized as part of fixed assets and inventory
$0.7
 
$0.7
 
$0.7


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Entergy determines the fair value of the stock option grants by considering factors such as lack of marketability, stock retention requirements, and regulatory restrictions on exercisability in accordance with accounting standards.  The stock option weighted-average assumptions used in determining the fair values are as follows:
 
2017
 
2016
 
2015
Stock price volatility
18.39%
 
20.38%
 
23.62%
Expected term in years
7.35
 
7.25
 
7.06
Risk-free interest rate
2.31%
 
1.77%
 
1.59%
Dividend yield
4.75%
 
4.50%
 
4.50%
Dividend payment per share
$3.50
 
$3.42
 
$3.34

Stock price volatility is calculated based upon the daily public stock price volatility of Entergy Corporation common stock over a period equal to the expected term of the award.  The expected term of the options is based upon historical option exercises and the weighted average life of options when exercised and the estimated weighted average life of all vested but unexercised options.  In 2008, Entergy implemented stock ownership guidelines for its senior executive officers.  These guidelines require an executive officer to own shares of Entergy Corporation common stock equal to a specified multiple of his or her salary.  Until an executive officer achieves this ownership position the executive officer is required to retain 75% of the net-of-tax net profit upon exercise of the option to be held in Entergy Corporation common stock.  The reduction in fair value of the stock options due to this restriction is based upon an estimate of the call option value of the reinvested gain discounted to present value over the applicable reinvestment period. 

A summary of stock option activity for the year ended December 31, 2017 and changes during the year are presented below:
 
 
 
Number
of Options
 
Weighted-
Average
Exercise
Price
 
 
Aggregate
Intrinsic
Value
 
Weighted-
Average
Contractual Life
Options outstanding as of January 1, 2017
7,137,210

 
$84.91
 
 
 
 
Options granted
791,900

 
$70.53
 
 
 
 
Options exercised
(1,109,306
)
 
$72.74
 
 
 
 
Options forfeited/expired
(1,654,950
)
 
$91.36
 
 
 
 
Options outstanding as of December 31, 2017
5,164,854

 
$83.26
 
$—
 
4.18 years
Options exercisable as of December 31, 2017
4,027,902

 
$86.37
 
$—
 
2.94 years
Weighted-average grant-date fair value of options granted during 2017
$6.54
 
 
 
 
 
 

The weighted-average grant-date fair value of options granted during the year was $7.40 for 2016 and $11.41 for 2015 .  The total intrinsic value of stock options exercised was $11 million during 2017 , $5 million during 2016 , and $5 million during 2015 .  The intrinsic value, which has no effect on net income, of the outstanding stock options exercised is calculated by the positive difference between the weighted average exercise price of the stock options granted and Entergy Corporation’s common stock price as of December 31, 2017 .  Because Entergy’s year-end common stock price was less than the weighted average exercise price, the aggregate intrinsic value of stock options outstanding as of December 31, 2017 was zero . The intrinsic value of “in the money” stock options is $32 million as of December 31, 2017 . Entergy recognizes compensation cost over the vesting period of the options based on their grant-date fair value.  The total fair value of options that vested was approximately $6 million during 2017 , $5 million during 2016 , and $4 million during 2015 . Cash received from option exercises was $81 million for the year ended December 31, 2017 . The tax benefits realized from options exercised was $4 million for the year ended December 31, 2017 .


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The following table summarizes information about stock options outstanding as of December 31, 2017 :
 
 
 
Options Outstanding
 
Options Exercisable
Range of
 
As of
 
Weighted-Average Remaining Contractual Life-Yrs.
 
Weighted Average Exercise Price
 
Number Exercisable as of
 
Weighted Average Exercise Price
Exercise Prices
 
12/31/2017
 
 
 
12/31/2017
 

$51
 -
$64.99
 
502,709

 
5.73
 
$63.68
 
502,709

 
$63.68

$65
 -
$78.99
 
2,790,045

 
5.56
 
$72.94
 
1,751,402

 
$74.36

$79
 -
$91.99
 
441,000

 
7.08
 
$89.90
 
342,691

 
$89.90

$92
 -
$108.20
 
1,431,100

 
0.06
 
$108.20
 
1,431,100

 
$108.20

$51
 -
$108.20
 
5,164,854

 
4.18
 
$83.26
 
4,027,902

 
$86.37

Stock-based compensation cost related to non-vested stock options outstanding as of December 31, 2017 not yet recognized is approximately $6 million and is expected to be recognized over a weighted-average period of 1.70 years.

Restricted Stock Awards

Entergy grants restricted stock awards earned under its stock benefit plans in the form of stock units. One-third of the restricted stock awards will vest upon each anniversary of the grant date and are expensed ratably over the three year vesting period.  Shares of restricted stock have the same dividend and voting rights as other common stock and are considered issued and outstanding shares of Entergy upon vesting. In January 2017 the Board approved and Entergy granted 379,850 restricted stock awards under the 2015 Equity Ownership and Long-term Cash Incentive Plan.  The restricted stock awards were made effective as of January 26, 2017 and were valued at $70.53 per share, which was the closing price of Entergy Corporation’s common stock on that date.  

The following table includes information about the restricted stock awards outstanding as of December 31, 2017 :
 
Shares
 
Weighted-Average Grant Date Fair Value Per Share
Outstanding shares at January 1, 2017
683,474

 
$74.80
Granted
410,787

 
$70.71
Vested
(330,816
)
 
$73.61
Forfeited
(53,834
)
 
$75.63
Outstanding shares at December 31, 2017
709,611

 
$72.92

The following table includes financial information for restricted stock for each of the years presented:
 
2017
 
2016
 
2015
 
(In Millions)
Compensation expense included in Entergy’s consolidated net income
$19.7
 
$19.8
 
$19.5
Tax benefit recognized in Entergy’s consolidated net income
$7.6
 
$7.6
 
$7.5
Compensation cost capitalized as part of fixed assets and inventory
$5.2
 
$4.5
 
$3.9

The total fair value of the restricted stock awards granted was $29 million for each of the years ended December 31, 2017 , 2016 , and 2015 .


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The total fair value of the restricted stock awards vested was $24 million , $23 million , and $29 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively.

Long-Term Performance Unit Program

Entergy grants long-term incentive awards earned under its stock benefit plans in the form of performance units, which represents the value of one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period. The Long-Term Performance Unit Program specifies a minimum, target, and maximum achievement level, the achievement of which will determine the number of performance units that may be earned. Entergy measures performance by assessing Entergy’s total shareholder return relative to the total shareholder return of the companies in the Philadelphia Utility Index. There is no payout for performance that falls within the lowest quartile of performance of the peer companies.  For top quartile performance, a maximum payout of 200% of target is earned.

The costs of incentive awards are charged to income over the 3 -year period.  In January 2017 the Board approved and Entergy granted 220,450 performance units under the 2015 Equity Ownership and Long-Term Cash Incentive Plan.  The performance units were made effective as of January 26, 2017, and were valued at $71.40 per share. Shares of the performance units have the same dividend and voting rights as other common stock, are considered issued and outstanding shares of Entergy upon vesting, and are expensed ratably over the 3-year vesting period.

The following table includes information about the long-term performance units outstanding at the target level as of December 31, 2017 :
 
Shares
 
Weighted-Average Grant Date Fair Value Per Share
Outstanding shares at January 1, 2017
571,551

 
$82.02
Granted
258,808

 
$72.28
Vested
(86,964
)
 
$67.16
Forfeited
(209,244
)
 
$72.12
Outstanding shares at December 31, 2017
534,151

 
$83.60

The following table includes financial information for the long-term performance units for each of the years presented:
 
2017
 
2016
 
2015
 
(In Millions)
Compensation expense included in Entergy’s consolidated net income
$10.8
 

$12.3

 

$11.8

Tax benefit recognized in Entergy’s consolidated net income
$4.2
 

$4.8

 

$4.5

Compensation cost capitalized as part of fixed assets and inventory
$3.0
 

$2.9

 

$2.3

    
The total fair value of the long-term performance units granted was $19 million , $21 million , and $16 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively.

In January 2017, Entergy issued 86,964 shares of Entergy Corporation common stock at a share price of $71.89 for awards earned and dividends accrued under the 2014-2016 Long-Term Performance Unit Program. In January 2016, Entergy issued 54,103 shares of Entergy Corporation common stock at a share price of $68.09 for awards earned and dividends accrued under the 2013-2015 Long-Term Performance Unit Program. In January 2015, Entergy issued 105,503 shares of Entergy Corporation common stock at a share price of $88.67 for awards earned and dividends accrued under the 2012-2014 Long-Term Performance Unit Program.

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Restricted Stock Unit Awards

Entergy grants restricted stock unit awards earned under its stock benefit plans in the form of stock units that are subject to time-based restrictions.  The restricted stock units may be settled in shares of Entergy Corporation common stock or the cash value of shares of Entergy Corporation common stock at the time of vesting.  The costs of restricted stock unit awards are charged to income over the restricted period, which varies from grant to grant.  The average vesting period for restricted stock unit awards granted is 41 months.  As of December 31, 2017 , there were 201,570 unvested restricted stock units that are expected to vest over an average period of 24 months.

The following table includes information about the restricted stock unit awards outstanding as of December 31, 2017 :
 
Shares
 
Weighted-Average Grant Date Fair Value Per Share
Outstanding shares at January 1, 2017
181,650

 
$74.94
Granted
40,170

 
$79.10
Vested
(5,800
)
 
$73.22
Forfeited
(14,450
)
 
$79.69
Outstanding shares at December 31, 2017
201,570

 
$75.48

The following table includes financial information for restricted stock unit awards for each of the years presented:
 
2017
 
2016
 
2015
 
(In Millions)
Compensation expense included in Entergy’s consolidated net income
$2.5
 
$2.2
 
$0.9
Tax benefit recognized in Entergy’s consolidated net income
$1.0
 
$0.8
 
$0.4
Compensation cost capitalized as part of fixed assets and inventory
$0.6
 
$0.4
 
$0.3

The total fair value of the restricted stock unit awards granted was $3 million , $5 million , and $4 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively.

The total fair value of the restricted stock unit awards vested was $0.4 million , $2 million , and $1 million for the years ended December 31, 2017 , 2016 , and 2015 , respectively.


NOTE 13. BUSINESS SEGMENT INFORMATION  (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,  Entergy New Orleans, Entergy Texas, and System Energy)

Entergy’s reportable segments as of December 31, 2017 are Utility and Entergy Wholesale Commodities.  Utility includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Louisiana, Mississippi, and Texas, and natural gas utility service in portions of Louisiana.  Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.  “All Other” includes the parent company, Entergy Corporation, and other business activity.


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Entergy’s segment financial information is as follows:
2017
 
 
 
Utility
 
Entergy Wholesale Commodities*
 
 
 
All Other
 
 
 
Eliminations
 
 
 
Consolidated
 
 
(In Thousands)
Operating revenues
 

$9,417,866

 

$1,656,730

 

$—

 

($115
)
 

$11,074,481

Asset write-offs, impairments, and related charges
 

$—

 

$538,372

 

$—

 

$—

 

$538,372

Depreciation, amortization, & decommissioning
 

$1,345,906

 

$448,079

 

$1,678

 

$—

 

$1,795,663

Interest and investment income
 

$218,317

 

$224,121

 

$21,669

 

($175,910
)
 

$288,197

Interest expense
 

$547,301

 

$23,714

 

$139,619

 

($48,291
)
 

$662,343

Income taxes
 

$794,616

 

($146,480
)
 

($105,566
)
 

$—

 

$542,570

Consolidated net income (loss)
 

$773,148

 

($172,335
)
 

($47,840
)
 

($127,620
)
 

$425,353

Total assets
 

$42,978,669

 

$5,638,009

 

$1,011,612

 

($2,921,141
)
 

$46,707,149

Investment in affiliates - at equity
 

$198

 

$—

 

$—

 

$—

 

$198

Cash paid for long-lived asset additions
 

$3,680,513

 

$320,667

 

$438

 

$—

 

$4,001,618


2016
 
 
 
Utility
 
Entergy Wholesale Commodities*
 
 
 
All Other
 
 
 
Eliminations
 
 
 
Consolidated
 
 
(In Thousands)
Operating revenues
 

$8,996,106

 

$1,849,638

 

$—

 

($99
)
 

$10,845,645

Asset write-offs, impairments, and related charges
 

$—

 

$2,835,637

 

$—

 

$—

 

$2,835,637

Depreciation, amortization, & decommissioning
 

$1,298,043

 

$374,922

 

$1,647

 

$—

 

$1,674,612

Interest and investment income
 

$189,994

 

$108,466

 

$27,385

 

($180,718
)
 

$145,127

Interest expense
 

$557,546

 

$22,858

 

$139,090

 

($53,124
)
 

$666,370

Income taxes
 

$424,388

 

($1,192,263
)
 

($49,384
)
 

$—

 

($817,259
)
Consolidated net income (loss)
 

$1,151,133

 

($1,493,124
)
 

($94,917
)
 

($127,595
)
 

($564,503
)
Total assets
 

$41,098,751

 

$6,696,038

 

$1,283,816

 

($3,174,171
)
 

$45,904,434

Investment in affiliates - at equity
 

$198

 

$—

 

$—

 

$—

 

$198

Cash paid for long-lived asset additions
 

$3,754,225

 

$289,639

 

$393

 

$—

 

$4,044,257



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2015
 
 
 
Utility
 
Entergy Wholesale Commodities*
 
 
 
All Other
 
 
 
Eliminations
 
 
 
Consolidated
 
 
(In Thousands)
Operating revenues
 

$9,451,486

 

$2,061,827

 

$—

 

($62
)
 

$11,513,251

Asset write-offs, impairments, and related charges
 

$68,672

 

$2,036,234

 

$—

 

$—

 

$2,104,906

Depreciation, amortization, & decommissioning
 

$1,238,832

 

$376,560

 

$2,156

 

$—

 

$1,617,548

Interest and investment income
 

$191,546

 

$148,654

 

$34,303

 

($187,441
)
 

$187,062

Interest expense
 

$543,132

 

$26,788

 

$129,750

 

($56,201
)
 

$643,469

Income taxes
 

$16,761

 

($610,339
)
 

($49,349
)
 

$—

 

($642,927
)
Consolidated net income (loss)
 

$1,114,516

 

($1,065,657
)
 

($74,353
)
 

($131,240
)
 

($156,734
)
Total assets
 

$38,356,906

 

$8,210,183

 

($461,505
)
 

($1,457,903
)
 

$44,647,681

Investment in affiliates - at equity
 

$199

 

$4,142

 

$—

 

$—

 

$4,341

Cash paid for long-lived asset additions
 

$2,495,194

 

$569,824

 

$236

 

$—

 

$3,065,254


Businesses marked with * are sometimes referred to as the “competitive businesses.”  Eliminations are primarily intersegment activity.  Almost all of Entergy’s goodwill is related to the Utility segment.

On December 29, 2014, the Vermont Yankee plant ceased power production and entered its decommissioning phase. In December 2015, Rhode Island State Energy Center, a natural gas-fired combined cycle generating plant, was sold. In October 2015 management announced the intention to shutdown the FitzPatrick plant in 2017 and the Pilgrim plant in 2019, earlier than previously expected. In 2016 management announced the planned sale of Vermont Yankee in 2018, the planned sale of FitzPatrick in 2017, and the planned amendment of the Consumers Energy PPA to terminate early, in May 2018, and the subsequent plan to shut down the Palisades plant in 2018, earlier than expected. In January 2017 management announced a settlement with New York State to shut down Indian Point 2 in 2020 and Indian Point 3 in 2021, both earlier than expected. In March 2017 the FitzPatrick plant was sold to Exelon. In September 2017 management announced the termination of the PPA amendment agreement with Consumers Energy and the revised plan to continue to operate Palisades under the current PPA and to shut down Palisades permanently on May 31, 2022.

Management expects these transactions to result in the cessation of merchant power generation at all Entergy Wholesale Commodities nuclear power plants owned and operated by Entergy by 2022. Entergy will continue to have the obligation to decommission the nuclear plants owned by Entergy.
 
These decisions and transactions resulted in asset impairments; employee retention and severance expenses and other benefits-related costs; and contracted economic development contributions. The employee retention and severance expenses and other benefits-related costs, and contracted economic development contributions are included in "Other operation and maintenance" in the consolidated statement of operations.


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Total restructuring charges in 2017 were comprised of the following:
 
 
Employee retention and severance expenses and other benefits-related costs

 
Contracted economic development costs
 
Total
 
 
(In Millions)
Balance as of January 1, 2017
 

$70

 

$21

 

$91

Restructuring costs accrued
 
113

 
—

 
113

Non-cash portion
 
—

 
(7
)
 
(7
)
Cash paid out
 
100

 
—

 
100

Balance as of December 31, 2017
 

$83

 

$14

 

$97


Total restructuring charges in 2016 were comprised of the following:
 
 
Employee retention and severance expenses and other benefits-related costs

 
Contracted economic development costs
 
Total
 
 
(In Millions)
Balance as of January 1, 2016
 

$—

 

$—

 

$—

Restructuring costs accrued
 
74

 
21

 
95

Non-cash portion
 
(3
)
 
—

 
(3
)
Cash paid out
 
1

 
—

 
1

Balance as of December 31, 2016
 

$70

 

$21

 

$91


In addition, Entergy Wholesale Commodities incurred $0.5 billion in 2017 and $2.8 billion in 2016 of impairment and other related charges associated with these strategic decisions and transactions. See Note 14 to the financial statements for further discussion of these impairment charges.

Going forward, Entergy Wholesale Commodities expects to incur employee retention and severance expenses of approximately $165 million in 2018 and approximately $205 million from 2019 through mid-2022 associated with these strategic transactions.

Geographic Areas

For the years ended December 31, 2017 , 2016 , and 2015 , the amount of revenue Entergy derived from outside of the United States was insignificant.  As of December 31, 2017 and 2016 , Entergy had no long-lived assets located outside of the United States.

Registrant Subsidiaries

Each of the Registrant Subsidiaries has one reportable segment, which is an integrated utility business, except for System Energy, which is an electricity generation business.  Each of the Registrant Subsidiaries’ operations is managed on an integrated basis by that company because of the substantial effect of cost-based rates and regulatory oversight on the business process, cost structures, and operating results.



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NOTE 14.  ACQUISITIONS, DISPOSITIONS, AND IMPAIRMENT OF LONG-LIVED ASSETS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans)

Acquisitions

Union Power Station

In March 2016, Entergy Arkansas, Entergy Louisiana, and Entergy New Orleans purchased the Union Power Station, a 1,980 MW (summer rating) power generation facility located near El Dorado, Arkansas, from Union Power Partners, L.P. The Union Power Station consists of four natural gas-fired, combined-cycle gas turbine power blocks, each rated at 495 MW (summer rating). Entergy Louisiana purchased two of the power blocks and a 50% undivided ownership interest in certain assets related to the facility, and Entergy Arkansas and Entergy New Orleans each purchased one power block and a 25% undivided ownership interest in such related assets. The aggregate purchase price for the Union Power Station was approximately $949 million (approximately $237 million for each power block and associated assets).

Palisades Purchased Power Agreement

Entergy’s purchase of the Palisades plant in 2007 included a unit-contingent, 15 -year purchased power agreement (PPA) with Consumers Energy for 100% of the plant’s output, excluding any future uprates.  Prices under the PPA range from $43.50 /MWh in 2007 to $61.50 /MWh in 2022, and the average price under the PPA is $51 /MWh.  For the PPA, which was at below-market prices at the time of the acquisition, Entergy will amortize a liability to revenue over the life of the agreement.  The amount that will be amortized each period is based upon the present value, calculated at the date of acquisition, of each year’s difference between revenue under the agreement and revenue based on estimated market prices.  Amounts amortized to revenue were $28 million in 2017 , $13 million in 2016 , and $15 million in 2015 .  

In December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. Pursuant to the agreement to amend the PPA, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. Entergy updated the liability amortization calculation to reflect the expected early termination of the PPA.

In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but only granting Consumers Energy recovery of $136.6 million of the $172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently on May 31, 2022. Based on that decision, the amounts to be amortized to revenue for the next five years will be approximately $6 million in 2018, $10 million in 2019, $11 million in 2020, $12 million in 2021, and $5 million in 2022.

NYPA Value Sharing Agreements

Entergy’s purchase of the FitzPatrick and Indian Point 3 plants from NYPA included value sharing agreements with NYPA.  In October 2007, Entergy subsidiaries and NYPA amended and restated the value sharing agreements to clarify and amend certain provisions of the original terms.  Under the amended value sharing agreements, Entergy subsidiaries made annual payments to NYPA based on the generation output of the Indian Point 3 and FitzPatrick plants from January 2007 through December 2014.  Entergy subsidiaries paid NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million , and $3.91 per MWh for power sold from FitzPatrick, up to an annual

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cap of $24 million .  The annual payment for each year’s output was due by January 15 of the following year, and the final payment to NYPA was made in January 2015.  Entergy recorded the liability for payments to NYPA as power was generated and sold by Indian Point 3 and FitzPatrick.  An amount equal to the liability was recorded to the plant asset account as contingent purchase price consideration for the plants.

Dispositions

Vermont Yankee

In November 2016, Entergy entered into an agreement to sell 100% of the membership interests in Entergy Nuclear Vermont Yankee, LLC to a subsidiary of NorthStar. Entergy Nuclear Vermont Yankee is the owner of the Vermont Yankee plant and is in the Entergy Wholesale Commodities segment. The sale of Entergy Nuclear Vermont Yankee to NorthStar will include the transfer of the nuclear decommissioning trust fund and the asset retirement obligation for the spent fuel management and decommissioning of the plant.

Entergy Nuclear Vermont Yankee has an outstanding credit facility with borrowing capacity of $145 million to pay for dry fuel storage costs. This credit facility is guaranteed by Entergy Corporation. At or before closing, a subsidiary of Entergy will assume the obligations under the existing credit facility or enter into a new credit facility and Entergy will guarantee the credit facility. At the closing of the sale transaction, NorthStar will pay $1,000 for the membership interests in Entergy Nuclear Vermont Yankee, and NorthStar will cause Entergy Nuclear Vermont Yankee to issue a promissory note to an Entergy subsidiary. The amount of the promissory note issued will be equal to the amount drawn under the credit facility or the amount drawn under the new credit facility, plus borrowing fees and costs incurred by Entergy in connection with such facility. The principal amount drawn under the outstanding credit facility was $104 million as of December 31, 2017, and the net book value of Entergy Nuclear Vermont Yankee, including unrealized gains on the decommissioning trust fund, as of December 31, 2017, was approximately $123 million .

Entergy plans to transfer all spent nuclear fuel to dry cask storage by the end of 2018 in advance of the planned transaction close. Under the sale agreement and related agreements to be entered into at the closing, NorthStar will commit to initiate decommissioning and site restoration by 2021 and complete those activities by 2030. The original planned completion date, as outlined in Entergy’s Post Shutdown Decommissioning Activities Report filed with the NRC, was 2075. Entergy Nuclear Vermont Yankee, under NorthStar ownership, will be required to repay the promissory note issued to Entergy with certain of the proceeds from the recovery of damages under its claims against the DOE related to spent nuclear fuel disposal, with any balance remaining due at partial site release, subject to extension not to exceed two years from partial site release.

The transaction is subject to certain closing conditions, including approval by the NRC; approval by the State of Vermont Public Utility Commission, including approval of revised site restoration standards that have been proposed as part of the transaction; the transfer of all spent nuclear fuel to dry fuel storage on the independent spent fuel storage installation; and that the market value of the fund assets held in the decommissioning trust fund for the Vermont Yankee Nuclear Power Station, less the hypothetical income tax on the aggregate unrealized net gain of such fund assets at closing, is equal to or exceeds $451.95 million , subject to adjustments. Entergy has the option to contribute to the decommissioning trust fund if the value is less than $451.95 million , subject to adjustments. The transaction is planned to close by the end of 2018.

FitzPatrick

In August 2016, Entergy entered into an agreement to sell the FitzPatrick plant, an 838 MW nuclear power plant owned by Entergy in the Entergy Wholesale Commodities segment. As a result of the sales agreement and the status of the necessary regulatory approvals, the assets and liabilities associated with the sale of FitzPatrick to Exelon were classified as held for sale on Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet as of December 31, 2016. At December 31, 2016, the receivable for the beneficial interest in the decommissioning trust fund was $785 million , classified within other deferred debits, and the asset retirement obligation was $714 million , classified within

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other non-current liabilities. See Note 9 to the financial statements for further discussion of FitzPatrick’s decommissioning liability and see Note 16 to the financial statements for further discussion of the receivables for the beneficial interest in FitzPatrick’s decommissioning trust fund.

In March 2017 the NRC approved the sale of the plant to Exelon. The transaction closed in March 2017 for a purchase price of $110 million , which included a $10 million non-refundable signing fee paid in August 2016, in addition to the assumption by Exelon of certain liabilities related to the FitzPatrick plant, resulting in a pre-tax gain on the sale of $16 million . At the transaction close, Exelon paid an additional $8 million for the proration of certain expenses prepaid by Entergy. The disposition-date fair value of the decommissioning trust fund was $805 million , classified within other deferred debits, and the disposition-date fair value of the asset retirement obligation was $727 million , classified within other non-current liabilities. The transaction also included property, plant, and equipment with a net book value of zero , materials and supplies, and prepaid assets.

As part of the transaction, Entergy entered into a reimbursement agreement with Exelon pursuant to which Exelon reimbursed Entergy for specified out-of-pocket costs associated with Entergy’s operation of FitzPatrick prior to closing of the sale. In the first quarter 2017, Entergy billed Exelon for reimbursement of $98 million of other operation and maintenance expenses, $7 million in lost operating revenues, and $3 million in taxes other than income taxes, partially offset by a $10 million defueling credit to Exelon.

As discussed in Note 3 to the financial statements, as a result of the sale of FitzPatrick on March 31, 2017, Entergy redetermined the plant’s tax basis, resulting in a $44 million income tax benefit in the first quarter 2017.

Top Deer

In November 2016, Entergy sold its 50% membership interest in Top Deer Wind Ventures, LLC, a wind-powered electric generation joint venture owned by Entergy in the Entergy Wholesale Commodities segment and accounted for as an equity method investment. Entergy sold its 50% membership interest in Top Deer for approximately $0.5 million and realized a pre-tax loss of $0.2 million on the sale.

Rhode Island State Energy Center

In December 2015, Entergy sold the Rhode Island State Energy Center, a 583 MW natural gas-fired combined-cycle generating plant owned by Entergy in the Entergy Wholesale Commodities segment. Entergy sold the Rhode Island State Energy Center for approximately $490 million and realized a pre-tax gain of $154 million on the sale.

Impairment of Long-lived Assets

2015 Impairment Conclusions

Entergy determined in October 2015 that it would close FitzPatrick at the end of its fuel cycle, which was planned for January 27, 2017, because of poor market conditions that led to reduced revenues, a poor market design that failed to properly compensate nuclear generators for the benefits they provide, and increased operational costs. This decision came after management’s extensive analysis of whether it was advisable economically to refuel the plant, as scheduled, in the fall of 2016. Entergy also had discussions with the State of New York regarding the future of FitzPatrick. Because of the uncertainty regarding the refueling decision and its implications to the plant’s expected operating life, Entergy tested the recoverability of the plant and related assets as of September 30, 2015. See above in the Dispositions section for further information on the subsequent decision to sell the FitzPatrick plant.

Entergy determined in October 2015 that it would close Pilgrim no later than June 1, 2019 because of poor market conditions that led to reduced revenues, a poor market design that failed to properly compensate nuclear generators for the benefits they provide, and increased operational costs. The decision came after management’s extensive analysis of the economics and operating life of the plant following the NRC’s decision in September 2015

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to place the plant in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix. Because of the uncertainty regarding the plant’s operating life created by the NRC’s decision and management’s analysis of the plant, Entergy tested the recoverability of the plant and related assets as of September 30, 2015.

Due to the announced plant closures in October 2015, as well as the continued challenging market price trend, the high level of investment required to continue to operate the Entergy Wholesale Commodities plants, and the inadequate compensation provided to nuclear generators for their capacity benefits under the current market design, in the fourth quarter 2015, Entergy tested the recoverability of the plant and related assets of the two remaining operating nuclear power generating facilities in the Entergy Wholesale Commodities business, Palisades and Indian Point. For purposes of that evaluation, Entergy considered a number of factors associated with the facilities’ continued operation, including the status of the associated NRC licenses, the status of state regulatory issues, existing power purchase agreements, and the supply region in which the nuclear facilities sell energy and capacity.

Under generally accepted accounting principles the determination of an asset’s recoverability is based on the probability-weighted undiscounted net cash flows expected to be generated by the plant and related assets. Projected net cash flows primarily depend on the status of the operations of the plant and pending legal and state regulatory matters, as well as projections of future revenues and costs over the estimated remaining life of the plant.

The tests for FitzPatrick and Pilgrim indicated that the probability-weighted undiscounted net cash flows did not exceed the carrying values of the plants and related assets as of September 30, 2015.

The test for Palisades indicated that the probability-weighted undiscounted net cash flows did not exceed the carrying value of the plant and related assets as of December 31, 2015.

The test for Indian Point indicated that the probability-weighted undiscounted net cash flows exceeded the carrying value of the plant and related assets as of December 31, 2015. As such, the carrying value of Indian Point was not impaired as of December 31, 2015.

As of September 30, 2015, the estimated fair value of the FitzPatrick plant and related long-lived assets was $29 million , while the carrying value was $742 million , resulting in an impairment charge of $713 million . Materials and supplies were evaluated and written down by $48 million . In addition, FitzPatrick had a contract asset recorded for an agreement between Entergy subsidiaries and NYPA entered when Entergy subsidiaries purchased FitzPatrick from NYPA in 2000 and NYPA retained the decommissioning trusts and the decommissioning liabilities. The agreement gave NYPA the right to require the Entergy subsidiaries to assume the decommissioning liability provided that it assigns the decommissioning trust, up to a specified level, to Entergy. If NYPA retained the decommissioning liabilities, the Entergy subsidiaries would perform the decommissioning of the plant at a price equal to the lesser of a pre-specified level or the amount in the decommissioning trusts. The contract asset represented an estimate of the present value of the difference between the Entergy subsidiaries’ stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies. See Note 9 for further discussion of the contract asset. Due to a change in expectation regarding the timing of decommissioning cash flows, the result was a write down of the contract asset from $335 million to $131 million , for a charge of $204 million . In summary, as of September 30, 2015, the impairment and related charges for FitzPatrick was $965 million ( $624 million net-of-tax).

As of September 30, 2015, the estimated fair value of the Pilgrim plant and related long-lived assets is $65 million , while the carrying value was $718 million , resulting in an impairment charge of $653 million . Materials and supplies were evaluated and written down by $24 million . In summary, as of September 30, 2015, the total impairment loss and related charges for Pilgrim was $677 million ( $438 million net-of-tax). The pre-impairment carrying value of $718 million includes the effect of a $134 million increase in Pilgrim’s estimated decommissioning cost liability and the related asset retirement cost asset. The increase in the estimated decommissioning cost liability primarily resulted from the change in expectation regarding the timing of decommissioning cash flows.

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As of December 31, 2015, the estimated fair value of the Palisades plant and related long-lived assets was $463 million , while the carrying value was $859 million , resulting in an impairment charge of $396 million ( $256 million net-of-tax). The pre-impairment carrying value of $859 million includes the effect of a $42 million increase in Palisades’ estimated decommissioning cost liability and the related asset retirement cost asset. The increase in the estimated decommissioning cost liability primarily resulted from the assessment of the estimated decommissioning cash flows that occurred in conjunction with the impairment analysis.

2016 Impairment Conclusions

As discussed in more detail above in the Acquisitions section, in December 2016, Entergy reached an agreement with Consumers Energy to amend the existing PPA to terminate early, on May 31, 2018. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. As a result of the planned PPA termination and its intention to shut down the plant, Entergy tested the recoverability of the plant and related assets as of December 31, 2016. Entergy and Consumers Energy subsequently agreed to terminate the PPA amendment agreement and Entergy now intends to shut down the Palisades plant permanently on May 31, 2022.

Indian Point 2 and Indian Point 3 have an application pending for renewed NRC licenses.  Various parties, including the State of New York, expressed opposition to renewal of the licenses.  Under federal law, nuclear power plants may continue to operate beyond their original license expiration dates while their timely filed renewal applications are pending NRC approval.  Indian Point 2 reached the expiration date of its original NRC operating license on September 28, 2013, and Indian Point 3 reached the expiration date of its original NRC operating license on December 12, 2015. Upon expiration of their operating licenses, each plant entered into a period of extended operation under the timely renewal rule.

In January 2017, Entergy announced that it reached a settlement with New York State to shut down Indian Point 2 by April 30, 2020 and Indian Point 3 by April 30, 2021, and resolve all New York State-initiated legal challenges to Indian Point’s operating license renewal. As part of the settlement, New York State agreed to issue Indian Point’s water quality certification and Coastal Zone Management Act consistency certification and to withdraw its objection to license renewal before the NRC. New York State also agreed to issue a water discharge permit, which is required regardless of whether the plant is seeking a renewed NRC license. The shutdowns are conditioned, among other things, upon such actions being taken by New York State. As a result of its evaluation of alternatives to the continued operation of the Indian Point plants, and taking into consideration the status of negotiations with the State of New York, Entergy tested the recoverability of the plants and related assets as of December 31, 2016.

The tests for Palisades and Indian Point indicated that the probability-weighted undiscounted net cash flows did not exceed the carrying values of the plants and related assets as of December 31, 2016.

As of December 31, 2016 the estimated fair value of the Palisades plant and related long-lived assets was $206 million , while the carrying value was $558 million , resulting in an impairment charge of $352 million . Materials and supplies were evaluated and written down by $48 million . In summary, as of December 31, 2016, the total impairment loss and related charges for Palisades was $400 million ( $258 million net-of-tax). The pre-impairment carrying value of $558 million included the effect of a $129 million increase in Palisades’ estimated decommissioning cost liability and the related asset retirement cost asset. The increase in the estimated decommissioning cost liability primarily resulted from the change in expectation regarding the timing of decommissioning cash flows. See Note 9 to the financial statements for further discussion regarding the Palisades decommissioning cost revision.

As of December 31, 2016 the estimated fair value of the Indian Point plants and related long-lived assets was $433 million , while the carrying value was $2,619 million , resulting in an impairment charge of $2,186 million . Materials and supplies were evaluated and written down by $157 million . In summary, as of December 31, 2016, the total impairment loss and related charges for Indian Point was $2,343 million ( $1,511 million net-of-tax). The pre-

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impairment carrying value of $2,619 million included the effect of a $392 million increase in Indian Point’s estimated decommissioning cost liability and the related asset retirement cost asset. The increase in the estimated decommissioning cost liability primarily resulted from the change in expectation regarding the timing of decommissioning cash flows. See Note 9 to the financial statements for further discussion regarding the Indian Point decommissioning cost revision.

2017 Impairment Conclusions

In 2017 Entergy management continued to execute the strategy to reduce the size of Entergy Wholesale Commodities’ merchant fleet, with the planned shutdowns of Pilgrim by May 31, 2019, Indian Point 2 by April 30, 2020, Indian Point 3 by April 30, 2021, and, as discussed in further detail above in the Acquisitions section, Palisades on May 31, 2022. The FitzPatrick plant was classified as held-for-sale at December 31, 2016, and subsequently sold to Exelon in March 2017.

In 2017 Entergy Wholesale Commodities incurred $538 million of impairment charges related to nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets. These costs were charged to expense as incurred as a result of the impaired fair value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet.

As discussed above in the Acquisitions section, as a result of the Michigan Public Service Commission only granting Consumers Energy partial recovery of the requested early termination payment, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement in September 2017. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades plant permanently on May 31, 2022. As a result of the change in expected operating life of the Palisades plant, the expected probability-weighted undiscounted net cash flows as of September 30, 2017 exceeded the carrying value of the plant and related assets. Accordingly, nuclear fuel spending, nuclear refueling outage spending, and expenditures for capital assets incurred at Palisades after September 30, 2017 are no longer charged to expense as incurred, but recorded as assets and depreciated or amortized, subject to the typical periodic impairment reviews prescribed in the accounting rules.

Overall Regarding All Impairments

The impairments and other related charges are recorded as a separate line item in Entergy’s consolidated statements of operations and are included within the results of the Entergy Wholesale Commodities segment. In addition to the impairments and other related charges, Entergy expects to incur additional charges through mid-2022 associated with these strategic transactions. See Note 13 to the financial statements for further discussion of these additional charges.

The fair value analyses for FitzPatrick, Pilgrim, and Palisades in 2015, and Palisades and Indian Point in 2016, were performed based on the income approach, a discounted cash flow method, to determine the amount of impairment. The estimates of fair value were based on the prices that Entergy would expect to receive in hypothetical sales of the FitzPatrick, Pilgrim, Palisades, and Indian Point plants and related assets to a market participant. In order to determine these prices, Entergy used significant observable inputs, including quoted forward power and gas prices, where available. Significant unobservable inputs, such as projected long-term pre-tax operating margins (cash basis) and estimated weighted-average costs of capital, were also used in the estimation of fair value. In addition, Entergy made certain assumptions regarding future tax deductions associated with the plants and related assets, the amount and timing of recoveries from future litigation with the DOE related to spent fuel storage costs, and the expected operating life of the plant.  Based on the use of significant unobservable inputs, the fair value measurement for the entirety of the asset group, and for each type of asset within the asset group, are classified as Level 3 in the fair value hierarchy discussed in Note 15 to the financial statements.


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The following table sets forth a description of significant unobservable inputs used in the valuation of the FitzPatrick, Pilgrim, Palisades, and Indian Point plants and related assets:
Significant Unobservable Inputs
 
Amount
 
Weighted-Average
2015
 
 
 
 
Weighted-average cost of capital
 
 
 
 
FitzPatrick
 
7.5%
 
7.5%
Pilgrim (a)
 
7.5%-8.0%
 
7.9%
Palisades
 
7.5%
 
7.5%
 
 
 
 
 
Long-term pre-tax operating margin (cash basis)
 
 
 
 
FitzPatrick
 
10.2%
 
10.2%
Pilgrim (a)
 
2.4%-10.6%
 
8.1%
Palisades (b)
 
30.8%
 
30.8%
 
 
 
 
 
2016
 
 
 
 
Weighted-average cost of capital
 
 
 
 
Indian Point (c)
 
7.0%-7.5%

 
7.2%
Palisades
 
6.5%
 
6.5%
 
 
 
 
 
Long-term pre-tax operating margin (cash basis)
 
 
 
 
Indian Point
 
19.7%
 
19.7%
Palisades (b) (d)
 
17.8%-38.8%

 
34.6%

(a)
The fair value of Pilgrim was based on the probability weighting of two potential scenarios.
(b)
Most of the Palisades output is sold under a 15 -year power purchase agreement, entered at the plant’s acquisition in 2007, that is scheduled to expire in 2022. The power purchase agreement prices currently exceed market prices and escalate each year, up to $61.50 /MWh in 2022.
(c)
The cash flows extending through the 2021 shutdown at Indian Point 3 were assigned a higher discount factor to incorporate the increased risk associated with longer operations.
(d)
The fair value of Palisades at December 31, 2016 is based on the probability weighting of whether the PPA will terminate before the originally scheduled termination in 2022.

Entergy’s Accounting Policy and Entergy Wholesale Commodities Accounting group, which reports to the Chief Accounting Officer, was primarily responsible for determining the valuation of the FitzPatrick, Pilgrim, Palisades and Indian Point plants and related assets, in consultation with external advisors. Entergy’s Accounting Policy group obtained and reviewed information from other Entergy departments with expertise on the various inputs and assumptions that were necessary to calculate the fair values of the asset groups.


NOTE 15.  RISK MANAGEMENT AND FAIR VALUES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi,  Entergy New Orleans, Entergy Texas, and System Energy)

Market Risk

In the normal course of business, Entergy is exposed to a number of market risks.  Market risk is the potential loss that Entergy may incur as a result of changes in the market or fair value of a particular commodity or instrument.  All financial and commodity-related instruments, including derivatives, are subject to market risk including commodity

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price risk, equity price, and interest rate risk.  Entergy uses derivatives primarily to mitigate commodity price risk, particularly power price and fuel price risk.

The Utility has limited exposure to the effects of market risk because it operates primarily under cost-based rate regulation.  To the extent approved by their retail regulators, the Utility operating companies use derivative instruments to hedge the exposure to price volatility inherent in their purchased power, fuel, and gas purchased for resale costs that are recovered from customers.

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy and capacity in the day ahead or spot markets.  In addition to its forward physical power and gas contracts, Entergy Wholesale Commodities also uses a combination of financial contracts, including swaps, collars, and options, to mitigate commodity price risk.  When the market price falls, the combination of instruments is expected to settle in gains that offset lower revenue from generation, which results in a more predictable cash flow.

Entergy’s exposure to market risk is determined by a number of factors, including the size, term, composition, and diversification of positions held, as well as market volatility and liquidity.  For instruments such as options, the time period during which the option may be exercised and the relationship between the current market price of the underlying instrument and the option’s contractual strike or exercise price also affects the level of market risk.  A significant factor influencing the overall level of market risk to which Entergy is exposed is its use of hedging techniques to mitigate such risk.  Hedging instruments and volumes are chosen based on ability to mitigate risk associated with future energy and capacity prices; however, other considerations are factored into hedge product and volume decisions including corporate liquidity, corporate credit ratings, counterparty credit risk, hedging costs, firm settlement risk, and product availability in the marketplace.  Entergy manages market risk by actively monitoring compliance with stated risk management policies as well as monitoring the effectiveness of its hedging policies and strategies.  Entergy’s risk management policies limit the amount of total net exposure and rolling net exposure during the stated periods.  These policies, including related risk limits, are regularly assessed to ensure their appropriateness given Entergy’s objectives.

Derivatives

Some derivative instruments are classified as cash flow hedges due to their financial settlement provisions while others are classified as normal purchase/normal sale transactions due to their physical settlement provisions.  Normal purchase/normal sale risk management tools include power purchase and sales agreements, fuel purchase agreements, capacity contracts, and tolling agreements.  Financially-settled cash flow hedges can include natural gas and electricity swaps and options and interest rate swaps.  Entergy may enter into financially-settled swap and option contracts to manage market risk that may or may not be designated as hedging instruments.

Entergy enters into derivatives to manage natural risks inherent in its physical or financial assets or liabilities. Electricity over-the-counter instruments and futures contracts that financially settle against day-ahead power pool prices are used to manage price exposure for Entergy Wholesale Commodities generation.  The maximum length of time over which Entergy Wholesale Commodities is currently hedging the variability in future cash flows with derivatives for forecasted power transactions at December 31, 2017 is approximately 3.25 years .  Planned generation currently under contract from Entergy Wholesale Commodities nuclear power plants is 98% for 2018 , of which approximately 79% is sold under financial derivatives and the remainder under normal purchase/normal sale contracts.  Total planned generation for 2018 is 27.9 TWh. 

Entergy may use standardized master netting agreements to help mitigate the credit risk of derivative instruments. These master agreements facilitate the netting of cash flows associated with a single counterparty and may include collateral requirements. Cash, letters of credit, and parental/affiliate guarantees may be obtained as security from counterparties in order to mitigate credit risk. The collateral agreements require a counterparty to post cash or letters of credit in the event an exposure exceeds an established threshold. The threshold represents an unsecured credit limit, which may be supported by a parental/affiliate guaranty, as determined in accordance with Entergy’s credit policy.

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In addition, collateral agreements allow for termination and liquidation of all positions in the event of a failure or inability to post collateral.

Certain of the agreements to sell the power produced by Entergy Wholesale Commodities power plants contain provisions that require an Entergy subsidiary to provide credit support to secure its obligations depending on the mark-to-market values of the contracts.  The primary form of credit support to satisfy these requirements is an Entergy Corporation guarantee.  As of December 31, 2017 , derivative contracts with eight counterparties were in a liability position (approximately $65 million total). In addition to the corporate guarantee, $1 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties and $4 million in cash collateral and $34 million in letters of credit were required to be posted by its counterparties to the Entergy subsidiary. As of December 31, 2016 , derivative contracts with three counterparties were in a liability position (approximately $8 million total). In addition to the corporate guarantee, $2 million in cash collateral was required to be posted by the Entergy subsidiary to its counterparties. If the Entergy Corporation credit rating falls below investment grade, Entergy would have to post collateral equal to the estimated outstanding liability under the contract at the applicable date.   

Entergy manages fuel price volatility for its Louisiana jurisdictions (Entergy Louisiana and Entergy New Orleans) and Entergy Mississippi through the purchase of short-term natural gas swaps that financially settle against NYMEX futures. These swaps are marked-to-market through fuel expense with offsetting regulatory assets or liabilities. All benefits or costs of the program are recorded in fuel costs. The notional volumes of these swaps are based on a portion of projected annual exposure to gas for electric generation at Entergy Louisiana and Entergy Mississippi and projected winter purchases for gas distribution at Entergy Louisiana and Entergy New Orleans. The total volume of natural gas swaps outstanding as of December 31, 2017 is 38,540,750 MMBtu for Entergy, including 31,361,500 MMBtu for Entergy Louisiana, 6,714,250 MMBtu for Entergy Mississippi, and 465,000 MMBtu for Entergy New Orleans.  Credit support for these natural gas swaps is covered by master agreements that do not require collateral based on mark-to-market value, but do carry adequate assurance language that may lead to requests for collateral.

During the second quarter 2017, Entergy participated in the annual financial transmission rights auction process for the MISO planning year of June 1, 2017 through May 31, 2018. Financial transmission rights are derivative instruments which represent economic hedges of future congestion charges that will be incurred in serving Entergy’s customer load. They are not designated as hedging instruments. Entergy initially records financial transmission rights at their estimated fair value and subsequently adjusts the carrying value to their estimated fair value at the end of each accounting period prior to settlement. Unrealized gains or losses on financial transmission rights held by Entergy Wholesale Commodities are included in operating revenues. The Utility operating companies recognize regulatory liabilities or assets for unrealized gains or losses on financial transmission rights. The total volume of financial transmission rights outstanding as of December 31, 2017 is 46,474 GWh for Entergy, including 10,479 GWh for Entergy Arkansas, 20,590 GWh for Entergy Louisiana, 6,391 GWh for Entergy Mississippi, 2,366 GWh for Entergy New Orleans, and 6,322 GWh for Entergy Texas. Credit support for financial transmission rights held by the Utility operating companies is covered by cash and/or letters of credit issued by each Utility operating company as required by MISO. Credit support for financial transmission rights held by Entergy Wholesale Commodities is covered by cash. No cash or letters of credit were required to be posted for financial transmission rights exposure for Entergy Wholesale Commodities as of December 31, 2017 and December 31, 2016. Letters of credit posted with MISO covered the financial transmission rights exposure for Entergy Arkansas, Entergy Mississippi, and Entergy Texas as of December 31 2017 and for Entergy Arkansas and Entergy Mississippi as of December 31, 2016.


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The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2017 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Business
 
 
 
 
(In Millions)
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$19
 
($19)
 
$—
 
Entergy Wholesale Commodities
Electricity swaps and options

Other deferred debits and other assets (non-current portion)
 
$19
 
($14)
 
$5
 
Entergy Wholesale Commodities
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$86
 
($20)
 
$66
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$17
 
($14)
 
$3
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$9
 
($9)
 
$—
 
Entergy Wholesale Commodities
Financial transmission rights
 
Prepayments and other
 
$22
 
($1)
 
$21
 
Utility and Entergy Wholesale Commodities
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$9
 
($8)
 
$1
 
Entergy Wholesale Commodities
Natural gas swaps
 
Other current liabilities
 
$6
 
$—
 
$6
 
Utility


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The fair values of Entergy’s derivative instruments in the consolidated balance sheet as of December 31, 2016 are shown in the table below. Certain investments, including those not designated as hedging instruments, are subject to master netting agreements and are presented in the balance sheet on a net basis in accordance with accounting guidance for derivatives and hedging.
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Offset (b)
 
Net (c) (d)
 
Business
 
 
 
 
(In Millions)
 
 
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$25
 
($14)
 
$11
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$6
 
($6)
 
$—
 
Entergy Wholesale Commodities
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$11
 
($10)
 
$1
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$16
 
($7)
 
$9
 
Entergy Wholesale Commodities
Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Prepayments and other (current portion)
 
$18
 
($13)
 
$5
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other deferred debits and other assets (non-current portion)
 
$5
 
($5)
 
$—
 
Entergy Wholesale Commodities
Natural gas swaps
 
Prepayments and other
 
$13
 
$—
 
$13
 
Utility
Financial transmission rights
 
Prepayments and other
 
$22
 
($1)
 
$21
 
Utility and Entergy Wholesale Commodities
 
 
 
 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
 
 
 
Electricity swaps and options
 
Other current liabilities (current portion)
 
$18
 
($17)
 
$1
 
Entergy Wholesale Commodities
Electricity swaps and options
 
Other non-current liabilities (non-current portion)
 
$4
 
($4)
 
$—
 
Entergy Wholesale Commodities

(a)
Represents the gross amounts of recognized assets/liabilities
(b)
Represents the netting of fair value balances with the same counterparty
(c)
Represents the net amounts of assets/liabilities presented on the Entergy Corporation and Subsidiaries’ Consolidated Balance Sheet
(d)
Excludes cash collateral in the amount of $1 million posted and $4 million held as of December 31, 2017 and $2 million posted as of December 31, 2016. Also excludes $34 million in letters of credit held as of December 31, 2017.

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The effects of Entergy’s derivative instruments designated as cash flow hedges on the consolidated income statements for the years ended December 31, 2017 , 2016 , and 2015 are as follows:
Instrument
 
Amount of gain recognized in other comprehensive income
 
Income Statement location
 
Amount of gain (loss) reclassified from accumulated other comprehensive income into income (a)
 
 
(In Millions)
 
 
 
(In Millions)
2017
 
 
 
 
 
 
Electricity swaps and options
 
$44
 
Competitive business operating revenues
 
$109
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Electricity swaps and options
 
$135
 
Competitive business operating revenues
 
$293
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
Electricity swaps and options
 
$254
 
Competitive business operating revenues
 
($244)

(a)
Before taxes of $38 million , $103 million , and ($85) million , for the years ended December 31, 2017 , 2016 , and 2015 , respectively

At each reporting period, Entergy measures its hedges for ineffectiveness. Any ineffectiveness is recognized in earnings during the period. The ineffective portion of cash flow hedges is recorded in competitive businesses operating revenues. The change in fair value of Entergy’s cash flow hedges due to ineffectiveness was ($3) million , ($356) thousand , and $150 thousand for the years ended December 31, 2017 , 2016 , and 2015 , respectively.
   
Based on market prices as of December 31, 2017 , unrealized gains recorded in accumulated other comprehensive income on cash flow hedges relating to power sales totaled $55 million of net unrealized losses.  Approximately ($59) million is expected to be reclassified from accumulated other comprehensive income to operating revenues in the next twelve months.  The actual amount reclassified from accumulated other comprehensive income, however, could vary due to future changes in market prices. 

Entergy may effectively liquidate a cash flow hedge instrument by entering into a contract offsetting the original hedge, and then de-designating the original hedge in this situation.  Gains or losses accumulated in other comprehensive income prior to de-designation continue to be deferred in other comprehensive income until they are included in income as the original hedged transaction occurs. From the point of de-designation, the gains or losses on the original hedge and the offsetting contract are recorded as assets or liabilities on the balance sheet and offset as they flow through to earnings.
    

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The effects of Entergy’s derivative instruments not designated as hedging instruments on the consolidated income statements for the years ended December 31, 2017 , 2016 , and 2015 are as follows:
Instrument
 
Amount of gain recognized in accumulated other comprehensive income
 
Income Statement location
 
Amount of gain (loss) recorded in the income statement
 
 
(In Millions)
 
 
 
(In Millions)
2017
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($31)
Financial transmission rights
 
$—
 
Purchased power expense
(b)
$139
Electricity swaps and options
 
$—
(c)
Competitive business operating revenues
 
$—
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
$11
Financial transmission rights
 
$—
 
Purchased power expense
(b)
$125
Electricity swaps and options
 
$—
(c)
Competitive business operating revenues
 
($11)
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
Natural gas swaps
 
$—
 
Fuel, fuel-related expenses, and gas purchased for resale
(a)
($41)
Financial transmission rights
 
$—
 
Purchased power expense
(b)
$166
Electricity swaps and options
 
$12
(c)
Competitive business operating revenues
 
($19)

(a)
Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)
Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.
(c)
Amount of gain (loss) recognized in accumulated other comprehensive income from electricity swaps and options de-designated as hedged items.



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The fair values of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their balance sheets as of December 31, 2017 and 2016 are as follows:
Instrument
 
Balance Sheet Location
 
Fair Value (a)
 
Registrant
 
 
 
 
(In Millions)
 
 
2017
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Financial transmission rights
 
Prepayments and other
 
$3.0
 
Entergy Arkansas
Financial transmission rights
 
Prepayments and other
 
$10.2
 
Entergy Louisiana
Financial transmission rights
 
Prepayments and other
 
$2.1
 
Entergy Mississippi
Financial transmission rights
 
Prepayments and other
 
$2.2
 
Entergy New Orleans
Financial transmission rights
 
Prepayments and other
 
$3.4
 
Entergy Texas
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
Natural gas swaps
 
Other current liabilities
 
$5.0
 
Entergy Louisiana
Natural gas swaps
 
Other current liabilities
 
$1.2
 
Entergy Mississippi
Natural gas swaps
 
Other current liabilities
 
$0.2
 
Entergy New Orleans
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Assets:
 
 
 
 
 
 
Natural gas swaps
 
Prepayments and other
 
$10.9
 
Entergy Louisiana
Natural gas swaps
 
Prepayments and other
 
$2.3
 
Entergy Mississippi
Natural gas swaps
 
Prepayments and other
 
$0.2
 
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Prepayments and other
 
$5.4
 
Entergy Arkansas
Financial transmission rights
 
Prepayments and other
 
$8.5
 
Entergy Louisiana
Financial transmission rights
 
Prepayments and other
 
$3.2
 
Entergy Mississippi
Financial transmission rights
 
Prepayments and other
 
$1.1
 
Entergy New Orleans
Financial transmission rights
 
Prepayments and other
 
$3.1
 
Entergy Texas

(a)
As of December 31, 2017, letters of credit posted with MISO covered financial transmission rights exposure of $0.2 million for Entergy Arkansas, $0.1 million for Entergy Mississippi, and $0.05 million for Entergy Texas. As of December 31, 2016, letters of credit posted with MISO covered financial transmission rights exposure of $0.3 million for Entergy Arkansas and $0.1 million for Entergy Mississippi.





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The effects of the Registrant Subsidiaries’ derivative instruments not designated as hedging instruments on their income statements for the years ended December 31, 2017 , 2016 , and 2015 are as follows:
Instrument
 
Income Statement Location
 
Amount of gain (loss) recorded in the income statement
 
Registrant
 
 
 
 
(In Millions)
 
 
2017
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($25.4)
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($5.2)
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.3)
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power
 
$41.7
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power
 
$45.8
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power
 
$18.9
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power
 
$9.1
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power
 
$22.3
(b)
Entergy Texas
 
 
 
 
 
 
 
2016
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$8.4
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
$3.1
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($0.4)
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power
 
$23.2
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power
 
$69.7
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power
 
$16.6
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power
 
$4.1
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power
 
$10.2
(b)
Entergy Texas
 
 
 
 
 
 
 
2015
 
 
 
 
 
 
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($33.2)
(a)
Entergy Louisiana
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($6.1)
(a)
Entergy Mississippi
Natural gas swaps
 
Fuel, fuel-related expenses, and gas purchased for resale
 
($1.4)
(a)
Entergy New Orleans
 
 
 
 
 
 
 
Financial transmission rights
 
Purchased power
 
$68.7
(b)
Entergy Arkansas
Financial transmission rights
 
Purchased power
 
$55.4
(b)
Entergy Louisiana
Financial transmission rights
 
Purchased power
 
$16.5
(b)
Entergy Mississippi
Financial transmission rights
 
Purchased power
 
$8.5
(b)
Entergy New Orleans
Financial transmission rights
 
Purchased power
 
$16.8
(b)
Entergy Texas

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(a)
Due to regulatory treatment, the natural gas swaps are marked-to-market through fuel, fuel-related expenses, and gas purchased for resale and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as fuel expenses when the swaps are settled are recovered or refunded through fuel cost recovery mechanisms.
(b)
Due to regulatory treatment, the changes in the estimated fair value of financial transmission rights for the Utility operating companies are recorded through purchased power expense and then such amounts are simultaneously reversed and recorded as an offsetting regulatory asset or liability.  The gains or losses recorded as purchased power expense when the financial transmission rights for the Utility operating companies are settled are recovered or refunded through fuel cost recovery mechanisms.

Fair Values

The estimated fair values of Entergy’s financial instruments and derivatives are determined using historical prices, bid prices, market quotes, and financial modeling.  Considerable judgment is required in developing the estimates of fair value.  Therefore, estimates are not necessarily indicative of the amounts that Entergy could realize in a current market exchange.  Gains or losses realized on financial instruments other than those instruments held by the Entergy Wholesale Commodities business are reflected in future rates and therefore do not affect net income. Entergy considers the carrying amounts of most financial instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the short maturity of these instruments.

Accounting standards define fair value as an exit price, or the price that would be received to sell an asset or the amount that would be paid to transfer a liability in an orderly transaction between knowledgeable market participants at the date of measurement.  Entergy and the Registrant Subsidiaries use assumptions or market input data that market participants would use in pricing assets or liabilities at fair value.  The inputs can be readily observable, corroborated by market data, or generally unobservable.  Entergy and the Registrant Subsidiaries endeavor to use the best available information to determine fair value.

Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value.  The hierarchy establishes the highest priority for unadjusted market quotes in an active market for the identical asset or liability and the lowest priority for unobservable inputs.  

The three levels of the fair value hierarchy are:

•
Level 1 - Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.  Level 1 primarily consists of individually owned common stocks, cash equivalents (temporary cash investments, securitization recovery trust account, and escrow accounts), debt instruments, and gas hedge contracts.  Cash equivalents includes all unrestricted highly liquid debt instruments with an original or remaining maturity of three months or less at the date of purchase.

•
Level 2 - Level 2 inputs are inputs other than quoted prices included in Level 1 that are, either directly or indirectly, observable for the asset or liability at the measurement date.  Assets are valued based on prices derived by independent third parties that use inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads.  Prices are reviewed and can be challenged with the independent parties and/or overridden by Entergy if it is believed such would be more reflective of fair value.  Level 2 inputs include the following:

–
quoted prices for similar assets or liabilities in active markets;
–
quoted prices for identical assets or liabilities in inactive markets;
–
inputs other than quoted prices that are observable for the asset or liability; or

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–
inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 2 consists primarily of individually-owned debt instruments.

•
Level 3 - Level 3 inputs are pricing inputs that are generally less observable or unobservable from objective sources.  These inputs are used with internally developed methodologies to produce management’s best estimate of fair value for the asset or liability.  Level 3 consists primarily of financial transmission rights and derivative power contracts used as cash flow hedges of power sales at merchant power plants.

The values for power contract assets or liabilities are based on both observable inputs including public market prices and interest rates, and unobservable inputs such as implied volatilities, unit contingent discounts, expected basis differences, and credit adjusted counterparty interest rates.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Business Unit Risk Control group and the Accounting Policy and Entergy Wholesale Commodities Accounting group.  The primary functions of the Business Unit Risk Control group include: gathering, validating and reporting market data, providing market risk analyses and valuations in support of Entergy Wholesale Commodities’ commercial transactions, developing and administering protocols for the management of market risks, and implementing and maintaining controls around changes to market data in the energy trading and risk management system.  The Business Unit Risk Control group is also responsible for managing the energy trading and risk management system, forecasting revenues, forward positions and analysis.  The Accounting Policy and Entergy Wholesale Commodities Accounting group performs functions related to market and counterparty settlements, revenue reporting and analysis and financial accounting. The Business Unit Risk Control group reports to the Vice President and Treasurer while the Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

The amounts reflected as the fair value of electricity swaps are based on the estimated amount that the contracts are in-the-money at the balance sheet date (treated as an asset) or out-of-the-money at the balance sheet date (treated as a liability) and would equal the estimated amount receivable to or payable by Entergy if the contracts were settled at that date.  These derivative contracts include cash flow hedges that swap fixed for floating cash flows for sales of the output from the Entergy Wholesale Commodities business.  The fair values are based on the mark-to-market comparison between the fixed contract prices and the floating prices determined each period from quoted forward power market prices.  The differences between the fixed price in the swap contract and these market-related prices multiplied by the volume specified in the contract and discounted at the counterparties’ credit adjusted risk free rate are recorded as derivative contract assets or liabilities.  For contracts that have unit contingent terms, a further discount is applied based on the historical relationship between contract and market prices for similar contract terms.

The amounts reflected as the fair values of electricity options are valued based on a Black Scholes model, and are calculated at the end of each month for accounting purposes.  Inputs to the valuation include end of day forward market prices for the period when the transactions will settle, implied volatilities based on market volatilities provided by a third party data aggregator, and U.S. Treasury rates for a risk-free return rate.  As described further below, prices and implied volatilities are reviewed and can be adjusted if it is determined that there is a better representation of fair value.  

On a daily basis, the Business Unit Risk Control group calculates the mark-to-market for electricity swaps and options.  The Business Unit Risk Control group also validates forward market prices by comparing them to other sources of forward market prices or to settlement prices of actual market transactions.  Significant differences are analyzed and potentially adjusted based on these other sources of forward market prices or settlement prices of actual market transactions.  Implied volatilities used to value options are also validated using actual counterparty quotes for Entergy Wholesale Commodities transactions when available and compared with other sources of market implied volatilities.  Moreover, on at least a monthly basis, the Office of Corporate Risk Oversight confirms the mark-to-market calculations and prepares price scenarios and credit downgrade scenario analysis.  The scenario analysis is communicated to senior management within Entergy and within Entergy Wholesale Commodities.  Finally, for all

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proposed derivative transactions, an analysis is completed to assess the risk of adding the proposed derivative to Entergy Wholesale Commodities’ portfolio.  In particular, the credit and liquidity effects are calculated for this analysis.  This analysis is communicated to senior management within Entergy and Entergy Wholesale Commodities.

The values of financial transmission rights are based on unobservable inputs, including estimates of congestion costs in MISO between applicable generation and load pricing nodes based on the 50th percentile of historical prices.  They are classified as Level 3 assets and liabilities.  The valuations of these assets and liabilities are performed by the Business Unit Risk Control group.  The values are calculated internally and verified against the data published by MISO. Entergy’s Accounting Policy and Entergy Wholesale Commodities Accounting group reviews these valuations for reasonableness, with the assistance of others within the organization with knowledge of the various inputs and assumptions used in the valuation. The Business Unit Risk Control groups report to the Vice President and Treasurer.  The Accounting Policy and Entergy Wholesale Commodities Accounting group reports to the Chief Accounting Officer.

The following tables set forth, by level within the fair value hierarchy, Entergy’s assets and liabilities that are accounted for at fair value on a recurring basis as of December 31, 2017 and December 31, 2016 .  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect their placement within the fair value hierarchy levels.

2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$725

 

$—

 

$—

 

$725

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
526

 
—

 
—

 
526

Debt securities
 
1,125

 
1,425

 
—

 
2,550

Common trusts (b)
 
 
 
 
 
 
 
4,136

Power contracts
 
—

 
—

 
5

 
5

Securitization recovery trust account
 
45

 
—

 
—

 
45

Escrow accounts
 
406

 
—

 
—

 
406

Financial transmission rights
 
—

 
—

 
21

 
21

 
 

$2,827

 

$1,425

 

$26

 

$8,414

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$70

 

$70

Gas hedge contracts
 
6

 
—

 
—

 
6

 
 

$6

 

$—

 

$70

 

$76






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2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$1,058

 

$—

 

$—

 

$1,058

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
480

 
—

 
—

 
480

Debt securities
 
985

 
1,228

 
—

 
2,213

Common trusts (b)
 
 
 
 
 
 
 
3,031

Power contracts
 
—

 
—

 
16

 
16

Securitization recovery trust account
 
46

 
—

 
—

 
46

Escrow accounts
 
433

 
—

 
—

 
433

Gas hedge contracts
 
13

 
—

 
—

 
13

Financial transmission rights
 
—

 
—

 
21

 
21

 
 

$3,015

 

$1,228

 

$37

 

$7,311

Liabilities:
 
 
 
 
 
 
 
 
Power contracts
 

$—

 

$—

 

$11

 

$11


(a)
The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements for additional information on the investment portfolios.
(b)
Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.

The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the years ended December 31, 2017 , 2016 , and 2015 :
 
2017
 
2016
 
2015
 
Power Contracts
Financial transmission rights
 
Power Contracts
Financial transmission rights
 
Power Contracts
Financial transmission rights
 
(In Millions)
Balance as of January 1,

$5


$21

 

$189


$23

 

$215


$47

Total gains (losses) for the period (a)
 
 
 
 
 
 
 
 
Included in earnings
(3
)
1

 
(10
)
—

 
(20
)
(1
)
Included in other comprehensive income
44

—

 
135

—

 
254

—

Included as a regulatory liability/asset
—

76

 
—

68

 
—

63

Issuances of financial transmission rights
—

62

 
—

55

 
—

80

Purchases
—

—

 
—

—

 
15

—

Settlements
(111
)
(139
)
 
(309
)
(125
)
 
(275
)
(166
)
Balance as of December 31,

($65
)

$21

 

$5


$21

 

$189


$23


(a)
Change in unrealized gains or losses for the period included in earnings for derivatives held at the end of the reporting period is $0.9 million , $0.2 million , and $3 million for the years ended December 31, 2017, 2016, and 2015, respectively.

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The following table sets forth a description of the types of transactions classified as Level 3 in the fair value hierarchy and significant unobservable inputs to each which cause that classification, as of December 31, 2017 :
Transaction Type
 
Fair Value as of December 31, 2017
 
Significant Unobservable Inputs
 
Range from Average %
 
Effect on Fair Value
 
 
(In Millions)
 
 
 
 
 
(In Millions)
Power contracts - electricity swaps
 
($65)
 
Unit contingent discount
 
+/- 4% - 4.75%
 
$6 - $7
 
The following table sets forth an analysis of each of the types of unobservable inputs impacting the fair value of items classified as Level 3 within the fair value hierarchy, and the sensitivity to changes to those inputs:
Significant Unobservable Input
 
Transaction Type
 
Position
 
Change to Input
 
Effect on Fair Value
 
 
 
 
 
 
 
 
 
Unit contingent discount
 
Electricity swaps
 
Sell
 
Increase (Decrease)
 
Decrease (Increase)

The following table sets forth, by level within the fair value hierarchy, the Registrant Subsidiaries’ assets that are accounted for at fair value on a recurring basis as of December 31, 2017 and December 31, 2016 .  The assessment of the significance of a particular input to a fair value measurement requires judgment and may affect its placement within the fair value hierarchy levels.

Entergy Arkansas

2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 

$11.7

 

$—

 

$—

 

$11.7

Debt securities
 
115.8

 
232.4

 
—

 
348.2

Common trusts (b)
 
 
 
 
 
 
 
585.0

Securitization recovery trust account
 
3.7

 
—

 
—

 
3.7

Escrow accounts
 
2.4

 
—

 
—

 
2.4

Financial transmission rights
 
—

 
—

 
3.0

 
3.0

 
 

$133.6

 

$232.4

 

$3.0

 

$954.0


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 

$3.6

 

$—

 

$—

 

$3.6

Debt securities
 
112.5

 
196.8

 
—

 
309.3

Common trusts (b)
 
 
 
 
 
 
 
521.8

Securitization recovery trust account
 
4.1

 
—

 
—

 
4.1

Escrow accounts
 
7.1

 
—

 
—

 
7.1

Financial transmission rights
 
—

 
—

 
5.4

 
5.4

 
 

$127.3

 

$196.8

 

$5.4

 

$851.3


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Entergy Louisiana

2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$30.1

 

$—

 

$—

 

$30.1

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
15.2

 
—

 
—

 
15.2

Debt securities
 
143.3

 
350.5

 
—

 
493.8

Common trusts (b)
 
 
 
 
 
 
 
803.1

Escrow accounts
 
289.5

 
—

 
—

 
289.5

Securitization recovery trust account
 
2.0

 
—

 
—

 
2.0

Financial transmission rights
 
—

 
—

 
10.2

 
10.2

 
 

$480.1

 

$350.5

 

$10.2

 

$1,643.9

Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$5.0

 

$—

 

$—

 

$5.0


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$163.9

 

$—

 

$—

 

$163.9

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
13.9

 
—

 
—

 
13.9

Debt securities
 
132.3

 
292.5

 
—

 
424.8

Common trusts (b)
 
 
 
 
 
 
 
702.0

Escrow accounts
 
305.7

 
—

 
—

 
305.7

Securitization recovery trust account
 
2.8

 
—

 
—

 
2.8

Gas hedge contracts
 
10.9

 
—

 
—

 
10.9

Financial transmission rights
 
—

 
—

 
8.5

 
8.5

 
 

$629.5

 

$292.5

 

$8.5

 

$1,632.5


Entergy Mississippi
2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$4.5

 

$—

 

$—

 

$4.5

Escrow accounts
 
32.0

 
—

 
—

 
32.0

Financial transmission rights
 
—

 
—

 
2.1

 
2.1

 
 

$36.5

 

$—

 

$2.1

 

$38.6

Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$1.2

 

$—

 

$—

 

$1.2



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2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$76.8

 

$—

 

$—

 

$76.8

Escrow accounts
 
31.8

 
—

 
—

 
31.8

Gas hedge contracts
 
2.3

 
—

 
—

 
2.3

Financial transmission rights
 
—

 
—

 
3.2

 
3.2

 
 

$110.9

 

$—

 

$3.2

 

$114.1


Entergy New Orleans

2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$32.7

 

$—

 

$—

 

$32.7

Securitization recovery trust account
 
1.5

 
—

 
—

 
1.5

Escrow accounts
 
81.9

 
—

 
—

 
81.9

Financial transmission rights
 
—

 
—

 
2.2

 
2.2

 
 

$116.1

 

$—

 

$2.2

 

$118.3

Liabilities:
 
 
 
 
 
 
 
 
Gas hedge contracts
 

$0.2

 

$—

 

$—

 

$0.2


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$103.0

 

$—

 

$—

 

$103.0

Securitization recovery trust account
 
1.7

 
—

 
—

 
1.7

Escrow accounts
 
88.6

 
—

 
—

 
88.6

Gas hedge contracts
 
0.2

 
—

 
—

 
0.2

Financial transmission rights
 
—

 
—

 
1.1

 
1.1

 
 

$193.5

 

$—

 

$1.1

 

$194.6


Entergy Texas

2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Temporary cash investments
 

$115.5

 

$—

 

$—

 

$115.5

Securitization recovery trust account
 
37.7

 
—

 
—

 
37.7

Financial transmission rights
 
—

 
—

 
3.4

 
3.4

 
 

$153.2

 

$—

 

$3.4

 

$156.6



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2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets :
 
 
 
 
 
 
 
 
Temporary cash investments
 

$5.0

 

$—

 

$—

 

$5.0

Securitization recovery trust account
 
37.5

 
—

 
—

 
37.5

Financial transmission rights
 
—

 
—

 
3.1

 
3.1

 
 

$42.5

 

$—

 

$3.1

 

$45.6


System Energy

2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$287.1

 

$—

 

$—

 

$287.1

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
3.1

 
—

 
—

 
3.1

Debt securities
 
187.2

 
143.3

 
—

 
330.5

Common trusts (b)
 
 
 
 
 
 
 
572.1

 
 

$477.4

 

$143.3

 

$—

 

$1,192.8


2016
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
(In Millions)
Assets:
 
 
 
 
 
 
 
 
Temporary cash investments
 

$245.1

 

$—

 

$—

 

$245.1

Decommissioning trust funds (a):
 
 
 
 
 
 
 
 
Equity securities
 
0.3

 
—

 
—

 
0.3

Debt securities
 
248.3

 
58.3

 
—

 
306.6

Common trusts (b)
 
 
 
 
 
 
 
473.6

 
 

$493.7

 

$58.3

 

$—

 

$1,025.6


(a)
The decommissioning trust funds hold equity and fixed income securities. Equity securities are invested to approximate the returns of major market indices.  Fixed income securities are held in various governmental and corporate securities.  See Note 9 to the financial statements for additional information on the investment portfolios.
(b)
Common trust funds are not publicly quoted, and are valued by the fund administrators using net asset value as a practical expedient. Accordingly, these funds are not assigned a level in the fair value table. The fund administrator of these investments allows daily trading at the net asset value and trades settle at a later date.


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The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the year ended December 31, 2017 .

Entergy Arkansas
 
Entergy Louisiana

Entergy Mississippi

Entergy New Orleans

Entergy Texas
 
(In Millions)

 
 











Balance as of January 1,

$5.4

 

$8.5

 

$3.2

 

$1.1

 

$3.1

Issuances of financial transmission rights
8.9

 
31.0

 
9.6

 
5.0

 
7.1

Gains (losses) included as a regulatory liability/asset
30.4

 
16.5

 
8.2

 
5.2

 
15.5

Settlements
(41.7
)
 
(45.8
)
 
(18.9
)
 
(9.1
)
 
(22.3
)
Balance as of December 31,

$3.0

 

$10.2

 

$2.1

 

$2.2

 

$3.4


The following table sets forth a reconciliation of changes in the net assets (liabilities) for the fair value of derivatives classified as Level 3 in the fair value hierarchy for the year ended December 31, 2016 .
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
(In Millions)
 
 
 
 
 
 
 
 
 
 
Balance as of January 1,

$7.9

 

$8.5

 

$2.4

 

$1.5

 

$2.2

Issuances of financial transmission rights
18.8

 
18.1

 
5.9

 
2.8

 
9.3

Gains included as a regulatory liability/asset
1.9

 
51.6

 
11.5

 
0.9

 
1.8

Settlements
(23.2
)
 
(69.7
)
 
(16.6
)
 
(4.1
)
 
(10.2
)
Balance as of December 31,

$5.4

 

$8.5

 

$3.2

 

$1.1

 

$3.1



NOTE 16.    DECOMMISSIONING TRUST FUNDS (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

Entergy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The NRC requires Entergy subsidiaries to maintain trusts to fund the costs of decommissioning ANO 1, ANO 2, River Bend, Waterford 3, Grand Gulf, Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades.  The funds are invested primarily in equity securities, fixed-rate debt securities, and cash and cash equivalents.

For the Indian Point 3 and FitzPatrick plants purchased in 2000 from NYPA, NYPA retained the decommissioning trust funds and the decommissioning liabilities. NYPA and Entergy subsidiaries executed decommissioning agreements, which specified their decommissioning obligations. At the time of the acquisition of the plants Entergy recorded a contract asset that represented an estimate of the present value of the difference between the stipulated contract amount for decommissioning the plants less the decommissioning costs estimated in independent decommissioning cost studies.

In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy. The transaction

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was contingent upon receiving approval from the NRC, which was received in January 2017.  As a result of the agreement with NYPA, in the third quarter 2016, Entergy removed the contract asset from its balance sheet, and recorded receivables for the beneficial interests in the decommissioning trust funds and recorded asset retirement obligations for the decommissioning liabilities. At December 31, 2016, the fair values of the decommissioning trust funds held by NYPA were $719 million for the Indian Point 3 plant and $785 million for the FitzPatrick plant. The fair values were based on the trust statements received from NYPA and were valued by the fund administrator using net asset value as a practical expedient. Accordingly, these funds were not assigned a level in the fair value hierarchy. For Indian Point 3, the receivable for the beneficial interest in the decommissioning trust fund was recorded in other deferred debits on the consolidated balance sheet as of December 31, 2016. For FitzPatrick, the receivable for the beneficial interest in the decommissioning trust fund was classified as held for sale within other deferred debits on the consolidated balance sheet as of December 31, 2016. In January 2017, NYPA transferred to Entergy the Indian Point 3 decommissioning trust funds with a fair value of $726 million and the FitzPatrick decommissioning trust fund with a fair value of $793 million . In March 2017, Entergy closed on the sale of the FitzPatrick plant to Exelon. As part of the transaction, Entergy transferred the FitzPatrick decommissioning trust fund to Exelon. The FitzPatrick decommissioning trust fund had a disposition-date fair value of $805 million . See Note 9 to the financial statements for further discussion of the decommissioning agreements with NYPA and see Note 14 to the financial statements for further discussion of the sale of FitzPatrick.

Entergy records decommissioning trust funds on the balance sheet at their fair value.  Because of the ability of the Registrant Subsidiaries to recover decommissioning costs in rates and in accordance with the regulatory treatment for decommissioning trust funds, the Registrant Subsidiaries have recorded an offsetting amount of unrealized gains/(losses) on investment securities in other regulatory liabilities/assets.  For the 30% interest in River Bend formerly owned by Cajun, Entergy Louisiana records an offsetting amount in other deferred credits for the excess trust earnings not currently expected to be needed to decommission the plant.  Decommissioning trust funds for Pilgrim, Indian Point 1, Indian Point 2, Indian Point 3, Vermont Yankee, and Palisades do not meet the criteria for regulatory accounting treatment.  Accordingly, unrealized gains recorded on the assets in these trust funds are recognized in the accumulated other comprehensive income component of shareholders’ equity because these assets are classified as available for sale.  Unrealized losses (where cost exceeds fair market value) on the assets in these trust funds are also recorded in the accumulated other comprehensive income component of shareholders’ equity unless the unrealized loss is other than temporary and therefore recorded in earnings.  Generally, Entergy records realized gains and losses on its debt and equity securities using the specific identification method to determine the cost basis of its securities.

The securities held as of December 31, 2017 and 2016 are summarized as follows:
 
 
2017
 
2016
 
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
 
(In Millions)
Equity Securities
 

$4,662

 

$2,131

 

$1

 

$3,511

 

$1,673

 

$1

Debt Securities
 
2,550

 
44

 
16

 
2,213

 
34

 
27

Total
 

$7,212

 

$2,175

 

$17

 

$5,724

 

$1,707

 

$28


The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2017 are $491 million for Indian Point 1, $621 million for Indian Point 2, $798 million for Indian Point 3, $458 million for Palisades, $1,068 million for Pilgrim, and $613 million for Vermont Yankee. The fair values of the decommissioning trust funds related to the Entergy Wholesale Commodities nuclear plants as of December 31, 2016 are $443 million for Indian Point 1, $564 million for Indian Point 2, $412 million for Palisades, $960 million for Pilgrim, and $584 million for Vermont Yankee. The fair values of the decommissioning trust funds for the Registrant Subsidiaries’ nuclear plants are detailed below.
    

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Deferred taxes on unrealized gains/(losses) are recorded in other comprehensive income (loss) for the decommissioning trusts which do not meet the criteria for regulatory accounting treatment as described above. Unrealized gains/(losses) above are reported before deferred taxes of $479 million and $399 million as of December 31, 2017 and 2016 , respectively.  The amortized cost of debt securities was $2,539 million as of December 31, 2017 and $2,212 million as of December 31, 2016 .  As of December 31, 2017 , the debt securities have an average coupon rate of approximately 3.24% , an average duration of approximately 6.33 years, and an average maturity of approximately 9.99 years.  The equity securities are generally held in funds that are designed to approximate or somewhat exceed the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index or the Russell 3000 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2017 and 2016 :
 
2017
 
2016
 
Equity Securities
 
Debt Securities
 
Equity Securities
 
Debt Securities
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
(In Millions)
Less than 12 months

$8

 

$1

 

$1,099

 

$7

 

$23

 

$1

 

$1,169

 

$26

More than 12 months
—

 
—

 
265

 
9

 
1

 
—

 
20

 
1

Total

$8

 

$1

 

$1,364

 

$16

 

$24

 

$1

 

$1,189

 

$27


The fair value of debt securities, summarized by contractual maturities, as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$74

 

$125

1 year - 5 years
902

 
763

5 years - 10 years
812

 
719

10 years - 15 years
147

 
109

15 years - 20 years
100

 
73

20 years+
515

 
424

Total

$2,550

 

$2,213


During the years ended December 31, 2017 , 2016 , and 2015 , proceeds from the dispositions of securities amounted to $3,163 million , $2,409 million , and $2,492 million , respectively.  During the years ended December 31, 2017 , 2016 , and 2015 , gross gains of $149 million , $32 million , and $72 million , respectively, and gross losses of $13 million , $13 million , and $13 million , respectively, were reclassified out of other comprehensive income into earnings.


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Entergy Arkansas

Entergy Arkansas holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of December 31, 2017 and 2016 are summarized as follows:
 
 
2017
 
2016
 
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
 
(In Millions)
Equity Securities
 

$596.7

 

$354.9

 

$—

 

$525.4

 

$281.5

 

$—

Debt Securities
 
348.2

 
2.1

 
3.0

 
309.3

 
3.4

 
4.2

Total
 

$944.9

 

$357.0

 

$3.0

 

$834.7

 

$284.9

 

$4.2


The amortized cost of debt securities was $349.1 million as of December 31, 2017 and $310.1 million as of December 31, 2016 .  As of December 31, 2017 , the debt securities have an average coupon rate of approximately 2.64% , an average duration of approximately 5.61 years, and an average maturity of approximately 7.00 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2017 and 2016 :
 
2017
 
2016
 
Equity Securities
 
Debt Securities
 
Equity Securities
 
Debt Securities
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$168.0

 

$1.2

 

$—

 

$—

 

$146.7

 

$4.2

More than 12 months
—

 
—

 
41.4

 
1.8

 
—

 
—

 
—

 
—

Total

$—

 

$—

 

$209.4

 

$3.0

 

$—

 

$—

 

$146.7

 

$4.2


The fair value of debt securities, summarized by contractual maturities, as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$13.0

 

$16.7

1 year - 5 years
123.4

 
106.2

5 years - 10 years
180.6

 
161.2

10 years - 15 years
4.8

 
7.7

15 years - 20 years
3.4

 
1.0

20 years+
23.0

 
16.5

Total

$348.2

 

$309.3


During the years ended December 31, 2017 , 2016 , and 2015 , proceeds from the dispositions of securities amounted to $339.4 million , $197.4 million , and $213 million , respectively.  During the years ended December 31,

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2017 , 2016 , and 2015 , gross gains of $17.7 million , $1.8 million , and $5.9 million , respectively, and gross losses of $0.6 million , $0.8 million , and $0.3 million , respectively, were recorded in earnings.

Entergy Louisiana

Entergy Louisiana holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of December 31, 2017 and 2016 are summarized as follows:
 
 
2017
 
2016
 
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
 
(In Millions)
Equity Securities
 

$818.3

 

$461.2

 

$—

 

$715.9

 

$346.6

 

$—

Debt Securities
 
493.8

 
10.9

 
3.6

 
424.8

 
8.0

 
5.0

Total
 

$1,312.1

 

$472.1

 

$3.6

 

$1,140.7

 

$354.6

 

$5.0


The amortized cost of debt securities was $490 million as of December 31, 2017 and $421.9 million as of December 31, 2016 .  As of December 31, 2017 , the debt securities have an average coupon rate of approximately 3.88% , an average duration of approximately 6.17 years, and an average maturity of approximately 12.06 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2017 and 2016 :
 
2017
 
2016
 
Equity Securities
 
Debt Securities
 
Equity Securities
 
Debt Securities
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$135.3

 

$1.1

 

$—

 

$—

 

$198.8

 

$4.8

More than 12 months
—

 
—

 
84.4

 
2.5

 
—

 
—

 
4.8

 
0.2

Total

$—

 

$—

 

$219.7

 

$3.6

 

$—

 

$—

 

$203.6

 

$5.0


The fair value of debt securities, summarized by contractual maturities, as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$23.2

 

$31.4

1 year - 5 years
122.8

 
99.1

5 years - 10 years
109.3

 
122.8

10 years - 15 years
52.7

 
41.4

15 years - 20 years
50.7

 
30.9

20 years+
135.1

 
99.2

Total

$493.8

 

$424.8



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During the years ended December 31, 2017 , 2016 , and 2015 , proceeds from the dispositions of securities amounted to $231.3 million , $219.2 million , and $123.5 million , respectively.  During the years ended December 31, 2017 , 2016 , and 2015 , gross gains of $12 million , $3.9 million , and $1.9 million , respectively, and gross losses of $0.4 million , $0.4 million , and $0.3 million , respectively, were recorded in earnings.

System Energy    

System Energy holds debt and equity securities, classified as available-for-sale, in nuclear decommissioning trust accounts.  The securities held as of December 31, 2017 and 2016 are summarized as follows:
 
 
2017
 
2016
 
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
Fair Value
 
Total Unrealized Gains
 
Total Unrealized Losses
 
 
(In Millions)
Equity Securities
 

$575.2

 

$308.6

 

$—

 

$473.9

 

$221.9

 

$0.1

Debt Securities
 
330.5

 
4.2

 
1.2

 
306.6

 
2.0

 
4.5

Total
 

$905.7

 

$312.8

 

$1.2

 

$780.5

 

$223.9

 

$4.6


The amortized cost of debt securities was $327.5 million as of December 31, 2017 and $309.1 million as of December 31, 2016 .  As of December 31, 2017 , the debt securities have an average coupon rate of approximately 2.67% , an average duration of approximately 6.48 years, and an average maturity of approximately 9.22 years.  The equity securities are generally held in funds that are designed to approximate the return of the Standard & Poor’s 500 Index.  A relatively small percentage of the equity securities are held in funds intended to replicate the return of the Wilshire 4500 Index.

The fair value and gross unrealized losses of available-for-sale equity and debt securities, summarized by investment type and length of time that the securities have been in a continuous loss position, are as follows as of December 31, 2017 and 2016 :
 
2017
 
2016
 
Equity Securities
 
Debt Securities
 
Equity Securities
 
Debt Securities
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
Fair Value
 
Gross Unrealized Losses
 
(In Millions)
Less than 12 months

$—

 

$—

 

$196.9

 

$1.0

 

$—

 

$—

 

$220.9

 

$4.4

More than 12 months
—

 
—

 
10.4

 
0.2

 
—

 
0.1

 
0.8

 
0.1

Total

$—

 

$—

 

$207.3

 

$1.2

 

$—

 

$0.1

 

$221.7

 

$4.5



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The fair value of debt securities, summarized by contractual maturities, as of December 31, 2017 and 2016 are as follows:
 
2017
 
2016
 
(In Millions)
less than 1 year

$4.1

 

$6.6

1 year - 5 years
173.0

 
188.2

5 years - 10 years
78.5

 
78.5

10 years - 15 years
1.0

 
1.3

15 years - 20 years
6.9

 
7.8

20 years+
67.0

 
24.2

Total

$330.5

 

$306.6


During the years ended December 31, 2017 , 2016 , and 2015 , proceeds from the dispositions of securities amounted to $565.4 million , $499.3 million , and $390.4 million , respectively.  During the years ended December 31, 2017 , 2016 , and 2015 , gross gains of $1.4 million , $3.5 million , and $3.3 million , respectively, and gross losses of $3.3 million , $1.7 million , and $0.5 million , respectively, were recorded in earnings.

Other-than-temporary impairments and unrealized gains and losses

Entergy evaluates investment securities in the Entergy Wholesale Commodities’ nuclear decommissioning trust funds with unrealized losses at the end of each period to determine whether an other-than-temporary impairment has occurred.  The assessment of whether an investment in a debt security has suffered an other-than-temporary impairment is based on whether Entergy has the intent to sell or more likely than not will be required to sell the debt security before recovery of its amortized costs.  Further, if Entergy does not expect to recover the entire amortized cost basis of the debt security, an other-than-temporary impairment is considered to have occurred and it is measured by the present value of cash flows expected to be collected less the amortized cost basis (credit loss).  Entergy did not have any material other-than-temporary impairments relating to credit losses on debt securities for the years ended December 31, 2017 , 2016 , and 2015 .  The assessment of whether an investment in an equity security has suffered an other-than-temporary impairment is based on a number of factors including, first, whether Entergy has the ability and intent to hold the investment to recover its value, the duration and severity of any losses, and, then, whether it is expected that the investment will recover its value within a reasonable period of time.  Entergy’s trusts are managed by third parties who operate in accordance with agreements that define investment guidelines and place restrictions on the purchases and sales of investments.  Entergy did not record material charges to other income in 2017 , 2016 , or 2015 resulting from the recognition of the other-than-temporary impairment of equity securities held in its decommissioning trust funds.


NOTE 17.  VARIABLE INTEREST ENTITIES (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Under applicable authoritative accounting guidance, a variable interest entity (VIE) is an entity that conducts a business or holds property that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or where equity holders do not receive expected losses or returns. An entity may have an interest in a VIE through ownership or other contractual rights or obligations, and is required to consolidate a VIE if it is the VIE’s primary beneficiary. The primary beneficiary of a VIE is the entity that has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and has the obligation to absorb losses or has the right to residual returns that would potentially be significant to the entity.


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Entergy Arkansas, Entergy Louisiana, and System Energy consolidate the respective companies from which they lease nuclear fuel, usually in a sale and leaseback transaction. This is because Entergy directs the nuclear fuel companies with respect to nuclear fuel purchases, assists the nuclear fuel companies in obtaining financing, and, if financing cannot be arranged, the lessee (Entergy Arkansas, Entergy Louisiana, or System Energy) is responsible to repurchase nuclear fuel to allow the nuclear fuel company (the VIE) to meet its obligations. During the term of the arrangements, none of the Entergy operating companies have been required to provide financial support apart from their scheduled lease payments. See Note 4 to the financial statements for details of the nuclear fuel companies’ credit facility and commercial paper borrowings and long-term debt that are reported by Entergy, Entergy Arkansas, Entergy Louisiana, and System Energy. These amounts also represent Entergy’s and the respective Registrant Subsidiary’s maximum exposure to losses associated with their respective interests in the nuclear fuel companies.

Entergy Gulf States Reconstruction Funding I, LLC, and Entergy Texas Restoration Funding, LLC, companies wholly-owned and consolidated by Entergy Texas, are variable interest entities and Entergy Texas is the primary beneficiary. In June 2007, Entergy Gulf States Reconstruction Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Rita reconstruction costs. In November 2009, Entergy Texas Restoration Funding issued senior secured transition bonds (securitization bonds) to finance Entergy Texas’s Hurricane Ike and Hurricane Gustav restoration costs. With the proceeds, the variable interest entities purchased from Entergy Texas the transition property, which is the right to recover from customers through a transition charge amounts sufficient to service the securitization bonds. The transition property is reflected as a regulatory asset on the consolidated Entergy Texas balance sheet. The creditors of Entergy Texas do not have recourse to the assets or revenues of the variable interest entities, including the transition property, and the creditors of the variable interest entities do not have recourse to the assets or revenues of Entergy Texas. Entergy Texas has no payment obligations to the variable interest entities except to remit transition charge collections. See Note 5 to the financial statements for additional details regarding the securitization bonds.

Entergy Arkansas Restoration Funding, LLC, a company wholly-owned and consolidated by Entergy Arkansas, is a variable interest entity and Entergy Arkansas is the primary beneficiary. In August 2010, Entergy Arkansas Restoration Funding issued storm cost recovery bonds to finance Entergy Arkansas’s January 2009 ice storm damage restoration costs. With the proceeds, Entergy Arkansas Restoration Funding purchased from Entergy Arkansas the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds.  The storm recovery property is reflected as a regulatory asset on the consolidated Entergy Arkansas balance sheet. The creditors of Entergy Arkansas do not have recourse to the assets or revenues of Entergy Arkansas Restoration Funding, including the storm recovery property, and the creditors of Entergy Arkansas Restoration Funding do not have recourse to the assets or revenues of Entergy Arkansas.  Entergy Arkansas has no payment obligations to Entergy Arkansas Restoration Funding except to remit storm recovery charge collections. See Note 5 to the financial statements for additional details regarding the storm cost recovery bonds.

Entergy Louisiana Investment Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy Louisiana, is a variable interest entity and Entergy Louisiana is the primary beneficiary. In September 2011, Entergy Louisiana Investment Recovery Funding issued investment recovery bonds to recover Entergy Louisiana’s investment recovery costs associated with the canceled Little Gypsy repowering project.  With the proceeds, Entergy Louisiana Investment Recovery Funding purchased from Entergy Louisiana the investment recovery property, which is the right to recover from customers through an investment recovery charge amounts sufficient to service the bonds. The investment recovery property is reflected as a regulatory asset on the consolidated Entergy Louisiana balance sheet.  The creditors of Entergy Louisiana do not have recourse to the assets or revenues of Entergy Louisiana Investment Recovery Funding, including the investment recovery property, and the creditors of Entergy Louisiana Investment Recovery Funding do not have recourse to the assets or revenues of Entergy Louisiana.  Entergy Louisiana has no payment obligations to Entergy Louisiana Investment Recovery Funding except to remit investment recovery charge collections. See Note 5 to the financial statements for additional details regarding the investment recovery bonds.

Entergy New Orleans Storm Recovery Funding I, L.L.C., a company wholly-owned and consolidated by Entergy New Orleans, is a variable interest entity, and Entergy New Orleans is the primary beneficiary. In July 2015,

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Entergy New Orleans Storm Recovery Funding issued storm cost recovery bonds to recover Entergy New Orleans’s Hurricane Isaac storm restoration costs, including carrying costs, the costs of funding and replenishing the storm recovery reserve, and up-front financing costs associated with the securitization. With the proceeds, Entergy New Orleans Storm Recovery Funding purchased from Entergy New Orleans the storm recovery property, which is the right to recover from customers through a storm recovery charge amounts sufficient to service the securitization bonds. The storm recovery property is reflected as a regulatory asset on the consolidated Entergy New Orleans balance sheet. The creditors of Entergy New Orleans do not have recourse to the assets or revenues of Entergy New Orleans Storm Recovery Funding, including the storm recovery property, and the creditors of Entergy New Orleans Storm Recovery Funding do not have recourse to the assets or revenues of Entergy New Orleans. Entergy New Orleans has no payment obligations to Entergy New Orleans Storm Recovery Funding except to remit storm recovery charge collections. See Note 5 to the financial statements for additional details regarding the securitization bonds.

Entergy Louisiana was considered to hold a variable interest in the lessor from which it leased an undivided interest in the Waterford 3 nuclear plant. After Entergy Louisiana acquired a beneficial interest in the leased assets in March 2016, however, the lessor was no longer considered a variable interest entity. Entergy Louisiana made payments on its lease, including interest, of $9.2 million through March 2016 and $28.8 million in 2015 .  See Note 10 to the financial statements for a discussion of Entergy Louisiana’s purchase of the Waterford 3 leased assets.

System Energy is considered to hold a variable interest in the lessor from which it leases an undivided interest in the Grand Gulf nuclear plant.  System Energy is the lessee under this arrangement, which is described in more detail in Note 10 to the financial statements. System Energy made payments on its lease, including interest, of $17.2 million in 2017 , $17.2 million in 2016 , and $52.3 million in 2015 .  The lessor is a bank acting in the capacity of owner trustee for the benefit of equity investors in the transaction pursuant to trust agreement entered solely for the purpose of facilitating the lease transaction.  It is possible that System Energy may be considered as the primary beneficiary of the lessor, but Entergy is unable to apply the authoritative accounting guidance with respect to this VIE because the lessor is not required to, and could not, provide the necessary financial information to consolidate the lessor.  Because Entergy accounts for this leasing arrangement as a capital financing, however, Entergy believes that consolidating the lessor would not materially affect the financial statements.  In the unlikely event of default under a lease, remedies available to the lessor include payment by the lessee of the fair value of the undivided interest in the plant, payment of the present value of the basic rent payments, or payment of a predetermined casualty value.  Entergy believes, however, that the obligations recorded on the balance sheet materially represent the company’s potential exposure to loss.

Entergy has also reviewed various lease arrangements, power purchase agreements, including agreements for renewable power, and other agreements that represent variable interests in other legal entities which have been determined to be variable interest entities.  In these cases, Entergy has determined that it is not the primary beneficiary of the related VIE because it does not have the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, or it does not have the obligation to absorb losses or the right to residual returns that would potentially be significant to the entity, or both.
 

NOTE 18.   TRANSACTIONS WITH AFFILIATES (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Each Registrant Subsidiary purchases electricity from or sells electricity to the other Registrant Subsidiaries, or both, under rate schedules filed with the FERC.  The Registrant Subsidiaries receive management, technical, advisory, operating, and administrative services from Entergy Services; and receive management, technical, and operating services from Entergy Operations.  These transactions are on an “at cost” basis.

As described in Note 1 to the financial statements, all of System Energy’s operating revenues consist of billings to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.


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As described in Note 4 to the financial statements, the Registrant Subsidiaries participate in Entergy’s money pool and earn interest income from the money pool.  As described in Note 2 to the financial statements, Entergy Louisiana receives preferred membership interest distributions from Entergy Holdings Company.

The tables below contain the various affiliate transactions of the Utility operating companies, System Energy, and other Entergy affiliates.

Intercompany Revenues
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
(In Millions)
2017

$127.8

 

$282.4

 

$1.7

 

$—

 

$57.9

 

$633.5

2016

$49.4

 

$376.6

 

$2.9

 

$30.3

 

$180.2

 

$548.3

2015

$127.9

 

$420.2

 

$86.0

 

$66.1

 

$259.1

 

$632.4


Intercompany Operating Expenses
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
(In Millions)
2017

$510.2

 

$619.5

 

$310.5

 

$286.1

 

$234.6

 

$197.0

2016

$467.4

 

$670.8

 

$256.5

 

$276.7

 

$343.7

 

$146.0

2015

$508.5

 

$929.4

 

$331.8

 

$278.4

 

$413.7

 

$155.1


Intercompany Interest and Investment Income
 
 
Entergy Louisiana
 
Entergy
Mississippi
 
Entergy
New
Orleans
 
System
Energy
 
 
(In Millions)
 
 
 
 
 
 
 
 
 
2017
 

$128.0

 

$—

 

$0.2

 

$0.9

2016
 

$127.7

 

$0.1

 

$—

 

$0.1

2015
 

$133.6

 

$—

 

$—

 

$—


Transactions with Equity Method Investees

EWO Marketing, LLC, an indirect wholly-owned subsidiary of Entergy, paid capacity charges and gas transportation to RS Cogen in the amounts of $24.6 million in 2017, $24.7 million in 2016, and $24.5 million in 2015.

Entergy’s operating transactions with its other equity method investees were not significant in 2017 , 2016 , or 2015 .

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NOTE 19.  QUARTERLY FINANCIAL DATA (UNAUDITED) (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Operating results for the four quarters of 2017 and 2016 for Entergy Corporation and subsidiaries were:
 
Operating Revenues
 
Operating Income (Loss)
 
Consolidated Net Income (Loss)
 
Net Income (Loss) Attributable to Entergy Corporation
 
(In Thousands)
2017:
 
 
 
First Quarter

$2,588,458

 

$174,803

 

$86,051

 

$82,605

Second Quarter

$2,618,550

 

$143,509

 

$413,368

 

$409,922

Third Quarter

$3,243,628

 

$729,469

 

$401,644

 

$398,198

Fourth Quarter

$2,623,845

 

$211,901

 

($475,710
)
 

($479,113
)
2016:
 
 
 
First Quarter

$2,609,852

 

$498,218

 

$235,242

 

$229,966

Second Quarter

$2,462,562

 

$442,258

 

$572,590

 

$567,314

Third Quarter

$3,124,703

 

$772,060

 

$393,204

 

$388,170

Fourth Quarter

$2,648,528

 

($2,599,001
)
 

($1,765,539
)
 

($1,769,068
)

Earnings (loss) per average common share
 
2017
 
2016
 
Basic
 
Diluted
 
Basic
 
Diluted
First Quarter

$0.46

 

$0.46

 

$1.29

 

$1.28

Second Quarter

$2.28

 

$2.27

 

$3.17

 

$3.16

Third Quarter

$2.22

 

$2.21

 

$2.17

 

$2.16

Fourth Quarter

($2.67
)
 

($2.66
)
 

($9.89
)
 

($9.86
)

Results of operations for 2017 include: 1) $538 million ( $350 million net-of-tax) of impairment charges due to costs being charged to expense as incurred as a result of the impaired value of the Entergy Wholesale Commodities nuclear plants’ long-lived assets due to the significantly reduced remaining estimated operating lives associated with management’s strategy to reduce the size of the Entergy Wholesale Commodities’ merchant fleet; 2) a reduction in income of $181 million , including a $34 million net-of-tax reduction of regulatory liabilities, at Utility and $397 million at Entergy Wholesale Commodities and an increase in income of $52 million at Parent and Other as a result of Entergy’s re-measurement of its deferred tax assets and liabilities not subject to the ratemaking process due to the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21% ; and 3) a reduction in income tax expense, net of unrecognized tax benefits, of $373 million as a result of a change in the tax classification of legal entities that own Entergy Wholesale Commodities nuclear power plants. See Note 14 to the financial statements for further discussion of the impairment and related charges. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act and the change in the tax classification.

Results of operations for 2016 include: 1) $2,836 million ( $1,829 million net-of-tax) of impairment and related charges primarily to write down the carrying values of the Entergy Wholesale Commodities’ Palisades, Indian Point 2, and Indian Point 3 plants and related assets to their fair values; 2) a reduction of income tax expense, net of unrecognized tax benefits, of $238 million as a result of a change in the tax classification of a legal entity that owned one of the Entergy Wholesale Commodities nuclear power plants; income tax benefits as a result of the settlement of the 2010-2011 IRS audit, including a $75 million tax benefit recognized by Entergy Louisiana related to the treatment

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of the Vidalia purchased power agreement and a $54 million net benefit recognized by Entergy Louisiana related to the treatment of proceeds received in 2010 for the financing of Hurricane Gustav and Hurricane Ike storm costs pursuant to Louisiana Act 55; and 3) a reduction in expenses of $100 million ( $64 million net-of-tax) due to the effects of recording in 2016 the final court decisions in several lawsuits against the DOE related to spent nuclear fuel storage costs. See Note 14 to the financial statements for further discussion of the impairment and related charges, see Note 3 to the financial statements for additional discussion of the income tax items, and see Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

The business of the Utility operating companies is subject to seasonal fluctuations with the peak periods occurring during the third quarter.  Operating results for the Registrant Subsidiaries for the four quarters of 2017 and 2016 were:

Operating Revenues
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
(In Thousands)
2017:
 
 
 
 
 
 
 
 
 
 
 
First Quarter

$474,351

 

$880,783

 

$258,443

 

$168,989

 

$363,927

 

$154,787

Second Quarter

$496,662

 

$1,083,434

 

$291,212

 

$176,222

 

$378,488

 

$164,956

Third Quarter

$673,226

 

$1,290,494

 

$349,197

 

$199,017

 

$432,909

 

$156,106

Fourth Quarter

$495,680

 

$1,045,839

 

$299,377

 

$171,842

 

$369,569

 

$157,609

2016:
 
 
 
 
 
 
 
 
 
 
 
First Quarter

$465,373

 

$955,145

 

$263,046

 

$149,340

 

$378,304

 

$137,693

Second Quarter

$504,252

 

$999,034

 

$248,138

 

$164,920

 

$412,922

 

$151,323

Third Quarter

$654,599

 

$1,249,452

 

$309,739

 

$201,336

 

$442,085

 

$114,039

Fourth Quarter

$462,384

 

$973,417

 

$273,726

 

$149,867

 

$382,308

 

$145,236


Operating Income
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
(In Thousands)
2017:
 
 
 
 
 
 
 
 
 
 
 
First Quarter

$39,847

 

$152,648

 

$39,608

 

$21,762

 

$38,842

 

$41,544

Second Quarter

$68,994

 

$193,779

 

$55,262

 

$27,606

 

$47,787

 

$40,717

Third Quarter

$169,755

 

$290,089

 

$84,035

 

$33,415

 

$78,950

 

$37,459

Fourth Quarter

$14,507

 

$210,325

 

$42,169

 

$12,333

 

$33,800

 

$41,073

2016:
 
 
 
 
 
 
 
 
 
 
 
First Quarter

$54,378

 

$181,618

 

$41,573

 

$21,880

 

$41,269

 

$47,466

Second Quarter

$73,447

 

$193,752

 

$61,890

 

$26,913

 

$58,039

 

$45,020

Third Quarter

$188,660

 

$312,951

 

$88,312

 

$42,279

 

$107,964

 

$43,886

Fourth Quarter

$29,843

 

$111,066

 

$32,464

 

$8,807

 

$38,338

 

$44,781





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Net Income (Loss)
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
(In Thousands)
2017:
 
 
 
 
 
 
 
 
 
 
 
First Quarter

$14,304

 

$94,378

 

$17,158

 

$10,978

 

$10,854

 

$20,347

Second Quarter

$38,550

 

$124,479

 

$28,303

 

$14,882

 

$21,101

 

$19,350

Third Quarter

$92,638

 

$186,284

 

$46,545

 

$18,529

 

$39,588

 

$20,583

Fourth Quarter

($5,648
)
 

($88,794
)
 

$18,026

 

$164

 

$4,630

 

$18,316

2016:
 
 
 
 
 
 
 
 
 
 
 
First Quarter

$19,294

 

$111,606

 

$17,118

 

$11,167

 

$14,562

 

$25,958

Second Quarter

$33,891

 

$253,325

 

$32,194

 

$11,843

 

$24,058

 

$25,090

Third Quarter

$110,148

 

$189,506

 

$46,612

 

$23,701

 

$56,133

 

$22,370

Fourth Quarter

$3,879

 

$67,610

 

$13,260

 

$2,138

 

$12,785

 

$23,326


Earnings (Loss) Applicable to Common Equity
 
Entergy Arkansas
 
Entergy Mississippi
 
Entergy New Orleans
 
(In Thousands)
2017:
 
 
 
 
 
First Quarter

$13,947

 

$16,920

 

$10,737

Second Quarter

$38,193

 

$28,064

 

$14,641

Third Quarter

$92,281

 

$46,307

 

$18,288

Fourth Quarter

($6,005
)
 

$17,788

 

$46

2016:
 
 
 
 
 
First Quarter

$17,576

 

$16,411

 

$10,926

Second Quarter

$32,173

 

$31,487

 

$11,602

Third Quarter

$108,672

 

$45,905

 

$23,460

Fourth Quarter

$3,521

 

$12,938

 

$1,896




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ENTERGY’S BUSINESS

Entergy is an integrated energy company engaged primarily in electric power production and retail distribution operations.  Entergy owns and operates power plants with approximately 30,000 MW of electric generating capacity, including nearly 9,000 MW of nuclear power. Entergy delivers electricity to 2.9 million utility customers in Arkansas, Louisiana, Mississippi, and Texas.  Entergy had annual revenues of $11.1 billion in 2017 and had more than 13,000 employees as of December 31, 2017.

Entergy operates primarily through two business segments: Utility and Entergy Wholesale Commodities.

•
The Utility business segment includes the generation, transmission, distribution, and sale of electric power in portions of Arkansas, Mississippi, Texas, and Louisiana, including the City of New Orleans; and operation of a small natural gas distribution business.
•
The Entergy Wholesale Commodities business segment includes the ownership, operation, and decommissioning of nuclear power plants located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers. Entergy Wholesale Commodities also provides services to other nuclear power plant owners and owns interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Entergy Wholesale Commodities Exit from the Merchant Power Business ” for discussion of the operation and planned shutdown or sale of each of the Entergy Wholesale Commodities nuclear power plants.

See Note 13 to the financial statements for financial information regarding Entergy’s business segments.

Strategy

Entergy’s mission is to operate a world-class energy business that creates sustainable value for its owners, customers, employees, and communities.  Entergy aspires to achieve top quartile total shareholder returns in a socially and environmentally responsible fashion by leveraging the scale and expertise inherent in its operations.  Entergy’s current scope includes electricity generation, transmission, and distribution as well as natural gas distribution.  Entergy focuses on operational excellence with an emphasis on safety, reliability, customer service, sustainability, cost efficiency, risk management, and engaged employees.  Entergy also continually seeks opportunities to grow its utility business to benefit all stakeholders and to optimize its portfolio of assets in an ever-dynamic market through periodic buy, build, hold, or disposal decisions.  To accomplish this, Entergy has established strategic imperatives for each business segment.  For the Utility, the strategic imperative is to modernize its operations, maintain reliability, and better serve its customers while growing the business. For Entergy Wholesale Commodities, the strategic imperative is to continue to manage the risk of its operating portfolio as Entergy completes its exit from the merchant power business.

Utility
 
The Utility business segment includes five wholly-owned retail electric utility subsidiaries: Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas.  These companies generate, transmit, distribute and sell electric power to retail and wholesale customers in Arkansas, Louisiana, Mississippi, and Texas.  Entergy Louisiana and Entergy New Orleans also provide natural gas utility services to customers in and around Baton Rouge, Louisiana, and New Orleans, Louisiana, respectively.  Also included in the Utility is System Energy, a wholly-owned subsidiary of Entergy Corporation that owns or leases 90 percent of Grand Gulf.  System Energy sells its power and capacity from Grand Gulf at wholesale to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.  The five retail utility subsidiaries are each regulated by the FERC and by state utility commissions, or, in the case of Entergy New Orleans, the City Council.  System Energy is regulated by the FERC because all of its transactions are at wholesale.  The overall generation portfolio of the Utility, which relies heavily on natural gas and nuclear generation, is consistent with Entergy’s strong support for the environment.


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Customers

As of December 31, 2017 , the Utility operating companies provided retail electric and gas service to customers in Arkansas, Louisiana, Mississippi, and Texas, as follows:
 
 
 
Electric Customers
 
Gas Customers
 
Area Served
 
(In Thousands)
 
(%)
 
(In Thousands)
 
(%)
Entergy Arkansas
Portions of Arkansas
 
709

 
25
%
 
 
 
 
Entergy Louisiana
Portions of Louisiana
 
1,078

 
37
%
 
93

 
47
%
Entergy Mississippi
Portions of Mississippi
 
449

 
16
%
 
 
 
 
Entergy New Orleans
City of New Orleans
 
200

 
7
%
 
106

 
53
%
Entergy Texas
Portions of Texas
 
448

 
15
%
 
 
 
 
Total customers
 
 
2,884

 
100
%
 
199

 
100
%

Electric Energy Sales

The electric energy sales of the Utility operating companies are subject to seasonal fluctuations, with the peak sales period normally occurring during the third quarter of each year.  On July 20, 2017, Entergy reached a 2017 peak demand of 21,671 MWh, compared to the 2016 peak of 21,387 MWh recorded on July 21, 2016.  Selected electric energy sales data is shown in the table below:

Selected 2017 Electric Energy Sales Data
 
Entergy Arkansas
 
Entergy Louisiana
 
Entergy Mississippi
 
Entergy New Orleans
 
Entergy Texas
 
System Energy
 
Entergy (a)
 
(In GWh)
Sales to retail customers
20,888

 
55,243

 
13,048

 
5,622

 
18,058

 
—

 
112,859

Sales for resale:
 
 
 
 
 
 
 
 
 
 
 
 
 
Affiliates
1,782

 
4,793

 
—

 
—

 
1,534

 
6,675

 
—

Others
6,549

 
1,711

 
857

 
1,703

 
729

 
—

 
11,550

Total
29,219

 
61,747

 
13,905

 
7,325

 
20,321

 
6,675

 
124,409

Average use per residential customer (kWh)
12,349

 
14,377

 
14,142

 
11,986

 
14,597

 
—

 
13,716


(a)
Includes the effect of intercompany eliminations.

The following table illustrates the Utility operating companies’ 2017 combined electric sales volume as a percentage of total electric sales volume, and 2017 combined electric revenues as a percentage of total 2017 electric revenue, each by customer class.
Customer Class
 
% of Sales Volume
 
% of Revenue
Residential
 
27.2
 
36.2
Commercial
 
23.1
 
26.7
Industrial (a)
 
38.4
 
27.8
Governmental
 
2.0
 
2.5
Wholesale/Other
 
9.3
 
6.8

(a)
Major industrial customers are primarily in the petroleum refining and chemical industries.


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See “Selected Financial Data” for each of the Utility operating companies for the detail of their sales by customer class for 2013-2017.

Selected 2017 Natural Gas Sales Data

Entergy New Orleans and Entergy Louisiana provide both electric power and natural gas to retail customers.  Entergy New Orleans and Entergy Louisiana sold 9,745,874 and 6,017,174 Mcf, respectively, of natural gas to retail customers in 2017.  In 2017, 99% of Entergy Louisiana’s operating revenue was derived from the electric utility business, and only 1% from the natural gas distribution business.  For Entergy New Orleans, 88% of operating revenue was derived from the electric utility business and 12% from the natural gas distribution business in 2017.  

Following is data concerning Entergy New Orleans’s 2017 retail operating revenue sources.
Customer Class
 
Electric Operating Revenue
 
Natural Gas Operating Revenue
Residential
 
42%
 
46%
Commercial
 
39%
 
28%
Industrial
 
6%
 
7%
Governmental/Municipal
 
13%
 
19%


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Retail Rate Regulation

General (Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas)

Each Utility operating company regularly participates in retail rate proceedings.  The status of material retail rate proceedings is described in Note 2 to the financial statements.  Certain aspects of the Utility operating companies’ retail rate mechanisms are discussed below.

 
 
Rate base (in billions)
 
Current authorized return on common equity
 
Weighted average cost of capital (after-tax)
 
Equity ratio
 
Regulatory construct
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas
 
$7.095 (a)
 
9.25% -10.25%
 
4.67%
 
31.69%
 
- forward test year formula rate plan

- riders: MISO, capacity, Grand
Gulf, energy efficiency, fuel and
purchased power
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Louisiana (electric)
 
$8.303 (b)
 
9.15% - 10.75%
 
7.35%
 
49.64%
 
- formula rate plan through 2016 test
year

- riders/specific recovery: MISO,
capacity, fuel
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Louisiana (gas)
 
$0.059 (c)
 
9.45% - 10.45%
 
7.54%
 
51.63%
 
- gas rate stabilization plan

- rider: gas infrastructure
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Mississippi
 
$2.131 (d)
 
9.47% - 11.49%
 
7.35%
 
49.37%
 
- formula rate plan with
forward-looking features

- riders: power management, Grand
Gulf, fuel, MISO, unit power cost,
storm damage, energy efficiency, ad
valorem tax adjustment
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy New Orleans (electric)
 
$0.299 (e)
 
10.7% - 11.5%
 
8.58%
 
50.08%
 
- rate case

- riders/specific recovery: fuel,
   capacity
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy New Orleans (gas)
 
$0.089 (f)
 
10.25% - 11.25%
 
8.40%
 
50.08%
 
- rate case

- rider: purchased gas
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Texas
 
$1.634 (g)
 
9.8%
 
8.22%
 
48.6%
 
- rate case

- riders: fuel, distribution and
   transmission, RPCE payments
   and rate case expenses, among
   others
 
 
 
 
 
 
 
 
 
 
 
 
 
System Energy
 
$1.201 (h)
 
10.94%
 
8.90%
 
65%
 
- monthly cost of service
 


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(a)
Based on 2018 forward test year.
(b)
Based on December 31, 2016 test year.
(c)
Based on September 30, 2016 test year.
(d)
Based on 2017 forward test year.
(e)
Based on December 31, 2011 test year and excludes approximately $228 million first-year average rate base for Union.
(f)
Based on December 31, 2011 test year.
(g)
Based on March 31, 2013 adjusted test year and excludes approximately $331 million for rate base being recovered through the distribution cost recovery rider and the transmission cost recovery rider
(h)
Based on calculation as of December 31, 2017.

Entergy Arkansas

Fuel and Purchased Power Cost Recovery

Entergy Arkansas’s rate schedules include an energy cost recovery rider to recover fuel and purchased power costs in monthly bills.  The rider utilizes prior calendar year energy costs and projected energy sales for the twelve-month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery, including carrying charges, of the energy cost for the prior calendar year.  The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.  In December 2007 the APSC issued an order stating that Entergy Arkansas’s energy cost recovery rider will remain in effect, and any future termination of the rider would be subject to eighteen months advance notice by the APSC, which would occur following notice and hearing.

Entergy Louisiana

Fuel Recovery

Entergy Louisiana’s rate schedules include a fuel adjustment clause designed to recover the cost of fuel and purchased power costs.  The fuel adjustment clause contains a surcharge or credit for deferred fuel expense and related carrying charges arising from the monthly reconciliation of actual fuel costs incurred with fuel cost revenues billed to customers, including carrying charges. See Note 2 to the financial statements for a discussion of proceedings related to audits of Entergy Louisiana’s fuel adjustment clause filings.

To help stabilize electricity costs, Entergy Louisiana received approval from the LPSC to hedge its exposure to natural gas price volatility through the use of financial instruments.  Entergy Louisiana hedges approximately one-third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year.  The hedge quantity is reviewed on an annual basis. In January 2018, Entergy Louisiana filed an application with the LPSC to suspend these seasonal hedging programs and implement financial hedges with terms up to five years for a portion of its natural gas exposure. A decision is expected in 2018.

Entergy Louisiana’s gas rates include a purchased gas adjustment clause based on estimated gas costs for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.

To help stabilize retail gas costs, Entergy Louisiana received approval from the LPSC to hedge its exposure to natural gas price volatility for its gas purchased for resale through the use of financial instruments.  Entergy Louisiana hedges approximately one-half of the projected natural gas volumes used to serve its natural gas customers for November through March.  The hedge quantity is reviewed on an annual basis.


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Due to higher fuel costs for the operating month of January 2018 resulting in part from recent cold weather, higher Henry Hub prices, and an increase in total fuel and purchased power costs, Entergy Louisiana plans to cap the average fuel adjustment charge to be billed in March 2018 at $0.03060 per kWh and to defer billing of all fuel costs in excess of the capped amounts by including such costs in the over- or under-recovery account.

Storm Cost Recovery

See Note 2 to the financial statements for a discussion of Entergy Louisiana’s filings to recover storm-related costs.

Other

In March 2016 the LPSC opened two dockets to examine, on a generic basis, issues that it identified in connection with its review of Cleco Corporation’s acquisition by third party investors.  The first docket is captioned “In re: Investigation of double leveraging issues for all LPSC-jurisdictional utilities,” and the second is captioned “In re: Investigation of tax structure issues for all LPSC-jurisdictional utilities.”  In April 2016 the LPSC clarified that the concerns giving rise to the two dockets arose as a result of its review of the structure of the recently-approved Cleco-Macquarie transaction and that the specific intent of the directives is to seek more information regarding intra-corporate debt financing of a utility’s capital structure as well as the use of investment tax credits to mitigate the tax obligation at the parent level of a consolidated entity.  No schedule has been set for either docket, and limited discovery has occurred.

Entergy Mississippi

Fuel Recovery

Entergy Mississippi’s rate schedules include energy cost recovery riders to recover fuel and purchased power costs.  The energy cost rate for each calendar year is redetermined annually and includes a true-up adjustment reflecting the over-recovery or under-recovery of the energy costs as of the 12-month period ended September 30.  Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.
    
To help stabilize electricity costs, Entergy Mississippi received approval from the MPSC to hedge its exposure to natural gas price volatility through the use of financial instruments.  Entergy Mississippi hedges approximately one-third of the projected exposure to natural gas price changes for the gas used to serve its native electric load for all months of the year.  The hedge quantity is reviewed on an annual basis.

Storm Cost Recovery

See Note 2 to the financial statements for a discussion of proceedings regarding recovery of Entergy Mississippi’s storm-related costs.

Formula Rate Plan

In August 2012 the MPSC opened inquiries to review whether the current formulaic methodology used to calculate the return on common equity in both Entergy Mississippi’s formula rate plan and Mississippi Power Company’s annual formula rate plan was still appropriate or could be improved to better serve the public interest. The intent of this inquiry and review was for informational purposes only; the evaluation of any recommendations for changes to the existing methodology would take place in a general rate case or in the existing formula rate plan docket. In March 2013 the Mississippi Public Utilities Staff filed its consultant’s report which noted the return on common equity estimation methods used by Entergy Mississippi and Mississippi Power Company are commonly used throughout the electric utility industry. The report suggested ways in which the methods used by Entergy Mississippi and Mississippi Power Company might be improved, but did not recommend specific changes in the return on common equity formulas

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or calculations at that time. In June 2014 the MPSC expanded the scope of the August 2012 inquiry to study the merits of adopting a uniform formula rate plan that could be applied, where possible in whole or in part, to both Entergy Mississippi and Mississippi Power Company in order to achieve greater consistency in the plans. The MPSC directed the Mississippi Public Utilities Staff to investigate and review Entergy Mississippi’s formula rate plan rider schedule and Mississippi Power Company’s Performance Evaluation Plan by considering the merits and deficiencies and possibilities for improvement of each and then to propose a uniform formula rate plan that, where possible, could be applicable to both companies. No procedural schedule has been set. In October 2014 the Mississippi Public Utilities Staff conducted a public technical conference to discuss performance benchmarking and its potential application to the electric utilities’ formula rate plans. The docket remains open.

Entergy New Orleans

Fuel Recovery

Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges.

Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.  

To help stabilize gas costs, Entergy New Orleans seeks approval annually from the City Council to continue implementation of its natural gas hedging program consistent with the City Council’s stated policy objectives.  The program uses financial instruments to hedge exposure to volatility in the wholesale price of natural gas purchased to serve Entergy New Orleans gas customers.  Entergy New Orleans hedges up to 25% of actual gas sales made during the winter months.

Due to higher fuel costs associated in part with the extended Grand Gulf outage and the partially simultaneous Union Power Block 1 planned outage, for the December 2016, January 2017, and February 2017 billing months, the City Council authorized Entergy New Orleans to cap the fuel adjustment charge billed to customers at $0.035 per kWh and to defer billing of all fuel costs in excess of the capped amount by including such costs in the over- or under-recovery account.

Due to higher fuel costs for the operating month of January 2018 resulting in part from recent cold weather, higher Henry Hub prices, and an increase in total fuel and purchased power costs associated in part with certain plant outages, Entergy New Orleans has proposed to cap the fuel adjustment charge to be billed in March 2018 to non-transmission Entergy New Orleans legacy customers and Entergy New Orleans Algiers customers at $0.035323 per kWh and $0.025446 per kWh, respectively. Entergy New Orleans has also proposed to cap the fuel adjustment charge to be billed in March 2018 for Entergy New Orleans legacy transmission customers at $0.034609 per kWh and to defer billing of all fuel costs in excess of the capped amount by including such costs in the over- or under-recovery account.

Storm Cost Recovery

See Note 2 to the financial statements for a discussion of Entergy New Orleans’s efforts to recover storm-related costs.


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Entergy Texas

Fuel Recovery

Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including interest, that are not included in base rates.  Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix.  The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.  The PUCT fuel cost proceedings are discussed in Note 2 to the financial statements.

At the PUCT’s April 2013 open meeting, the PUCT Commissioners discussed their view that a purchased power capacity rider was good public policy. The PUCT issued an order in May 2013 adopting the rule allowing for a purchased power capacity rider, subject to an offsetting adjustment for load growth. The rule, as adopted, also includes a process for obtaining pre-approval by the PUCT of purchased power agreements. Entergy Texas has not exercised the option to recover its capacity costs under the new rider mechanism, but will continue to evaluate the benefits of utilizing the new rider to recover future capacity costs.
    
Electric Industry Restructuring

In June 2009, a law was enacted in Texas that required Entergy Texas to cease all activities relating to Entergy Texas’s transition to competition.  The law allows Entergy Texas to remain a part of the SERC Region, although it does not prevent Entergy Texas from joining another power region.  The law provides that proceedings to certify a power region that Entergy Texas belongs to as a qualified power region can be initiated by the PUCT, or on motion by another party, when the conditions supporting such a proceeding exist.  Under the law, the PUCT may not approve a transition to competition plan for Entergy Texas until the expiration of four years from the PUCT’s certification of Entergy Texas’s power region.

The law also contains provisions that allow Entergy Texas to take advantage of a cost recovery mechanism that permits annual filings for the recovery of reasonable and necessary expenditures for transmission infrastructure improvement and changes in wholesale transmission charges.  This mechanism was previously available to other non-ERCOT Texas utility companies, but not to Entergy Texas.

The law further amended already existing law that had required Entergy Texas to propose for PUCT approval a tariff to allow eligible customers the ability to contract for competitive generation.  The amending language in the law provides, among other things, that:  1) the tariff shall not be implemented in a manner that harms the sustainability or competitiveness of manufacturers who choose not to participate in the tariff; 2) Entergy Texas shall “purchase competitive generation service, selected by the customer, and provide the generation at retail to the customer”; and 3)  Entergy Texas shall provide and price transmission service and ancillary services under that tariff at a rate that is unbundled from its cost of service.  The law directs that the PUCT may not issue an order on the tariff that is contrary to an applicable decision, rule, or policy statement of a federal regulatory agency having jurisdiction.

Entergy Texas and the other parties to the PUCT proceeding to determine the design of the competitive generation tariff were involved in negotiations throughout 2011 and 2012 with the objective of resolving as many disputed issues as possible regarding the tariff.  The PUCT determined that unrecovered costs that could be recovered through the rider consist only of those costs necessary to implement and administer the competitive generation program and do not include lost revenues or embedded generation costs.  The PUCT also ruled that the amount of customer load that may be included in the competitive generation service program is limited to 115 MW.  After additional negotiations, and ultimately the scheduling of a hearing to resolve remaining contested issues, the PUCT issued the order approving the competitive generation service rider in July 2013. Entergy Texas filed for rehearing of the PUCT’s July 2013 order, which the PUCT denied. Entergy Texas has since filed its appeal of that PUCT order to the Travis County District Court, which found in favor of the PUCT in an order issued in October 2014. In November 2014, Entergy Texas appealed the District Court’s order which moves the appeal to the Third Court of Appeals. Entergy

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Texas and opposing parties filed briefs and responses in the first quarter 2015. Oral argument was held in May 2015. In March 2016 the Court of Appeals upheld the District Court’s ruling favoring the PUCT. In May 2016, Entergy Texas filed with the Texas Supreme Court a petition for review of the Court of Appeals ruling. In January 2017, Entergy Texas filed its petitioner’s brief on the merits with the Texas Supreme Court. In June 2017 the Texas Supreme Court denied Entergy Texas’s petition in this matter.

In September 2011 the PUCT adopted a proposed rule implementing a distribution cost recovery factor to recover capital and capital-related costs related to distribution infrastructure.  The distribution cost recovery factor permits utilities once per year to implement an increase or decrease in rates above or below amounts reflected in base rates to reflect depreciation expense, federal income tax and other taxes, and return on investment.  The distribution cost recovery factor rider may be changed a maximum of four times between base rate cases.

Franchises

Entergy Arkansas holds exclusive franchises to provide electric service in approximately 308 incorporated cities and towns in Arkansas.  These franchises are unlimited in duration and continue unless the municipalities purchase the utility property.  In Arkansas franchises are considered to be contracts and, therefore, are terminable pursuant to the terms of the franchise agreement and applicable statutes.

Entergy Louisiana holds non-exclusive franchises to provide electric service in approximately 175 incorporated municipalities and in the unincorporated areas of approximately 59 parishes of Louisiana.  Entergy Louisiana holds non-exclusive franchises to provide natural gas service to customers in the City of Baton Rouge and in East Baton Rouge Parish.  Municipal franchise agreement terms range from 25 to 60 years while parish franchise terms range from 25 to 99 years.

Entergy Mississippi has received from the MPSC certificates of public convenience and necessity to provide electric service to areas within 45 counties, including a number of municipalities, in western Mississippi.  Under Mississippi statutory law, such certificates are exclusive.  Entergy Mississippi may continue to serve in such municipalities upon payment of a statutory franchise fee, regardless of whether an original municipal franchise is still in existence.

Entergy New Orleans provides electric and gas service in the City of New Orleans pursuant to indeterminate permits set forth in city ordinances.  These ordinances contain a continuing option for the City of New Orleans to purchase Entergy New Orleans’s electric and gas utility properties.

Entergy Texas holds a certificate of convenience and necessity from the PUCT to provide electric service to areas within approximately 27 counties in eastern Texas, and holds non-exclusive franchises to provide electric service in approximately 68 incorporated municipalities.  Entergy Texas typically obtains 25-year franchise agreements as existing agreements expire.  Entergy Texas’s electric franchises expire during 2018-2058.

The business of System Energy is limited to wholesale power sales.  It has no distribution franchises.


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Property and Other Generation Resources

Owned Generating Stations

The total capability of the generating stations owned and leased by the Utility operating companies and System Energy as of December 31, 2017 , is indicated below:
 
 
Owned and Leased Capability MW(a)
Company
 
Total
 
Gas/Oil
 
Nuclear
 
Coal
 
Hydro
 
Solar
Entergy Arkansas
 
5,217

 
2,136

 
1,821

 
1,189

 
71

 
—

Entergy Louisiana
 
9,099

 
6,603

 
2,136

 
360

 
—

 
—

Entergy Mississippi
 
3,359

 
2,944

 
—

 
414

 
—

 
1

Entergy New Orleans
 
492

 
491

 
—

 
—

 
—

 
1

Entergy Texas
 
2,331

 
2,065

 
—

 
266

 
—

 
—

System Energy
 
1,271

 
—

 
1,271

 
—

 
—

 
—

Total
 
21,769

 
14,239

 
5,228

 
2,229

 
71

 
2


(a)
“Owned and Leased Capability” is the dependable load carrying capability as demonstrated under actual operating conditions based on the primary fuel (assuming no curtailments) that each station was designed to utilize.

Summer peak load for the Utility has averaged 21,533 MW over the previous decade.  

The Utility operating companies’ load and capacity projections are reviewed periodically to assess the need and timing for additional generating capacity and interconnections. These reviews consider existing and projected demand, the availability and price of power, the location of new load, the economy, environmental regulations, public policy goals, and the age and condition of Entergy’s existing infrastructure.

The Utility operating companies’ long-term resource strategy (Portfolio Transformation Strategy) calls for the bulk of capacity needs to be met through long-term resources, whether owned or contracted.  Over the past decade, the Portfolio Transformation Strategy has resulted in the addition of about 6,800 MW of new long-term resources and the deactivation of over 5,200 MW of legacy generation. As MISO market participants, the Utility operating companies also participate in MISO’s Day Ahead and Real Time Energy and Ancillary Services markets to economically dispatch generation and purchase energy to serve customers reliably and at the lowest reasonable cost.

Other Generation Resources

RFP Procurements

The Utility operating companies from time to time issue requests for proposals (RFP) to procure supply-side resources from sources other than the spot market to meet the unique regional needs of the Utility operating companies. The RFPs issued by the Utility operating companies have sought resources needed to meet near-term MISO reliability requirements as well as longer-term requirements through a broad range of wholesale power products, including limited-term (1 to 3 years) and long-term contractual products and asset acquisitions.  The RFP process has resulted in selections or acquisitions, including, among other things:

•
Entergy Louisiana’s June 2005 purchase of the 718 MW, gas-fired Perryville plant, of which 35% of the output is sold to Entergy Texas;
•
Entergy Arkansas’s September 2008 purchase of the 789 MW, combined-cycle, gas-fired Ouachita Generating Facility. Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, owns one-third of the facility;

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•
Entergy Arkansas’s November 2012 purchase of the 620 MW, combined-cycle, gas-fired Hot Spring Energy facility;
•
Entergy Mississippi’s November 2012 purchase of the 450 MW, combined-cycle, gas-fired Hinds Energy facility;
•
Entergy Louisiana’s construction of the 560 MW, combined-cycle, gas turbine Ninemile 6 generating facility at its existing Ninemile Point electric generating station. The facility reached commercial operation in December 2014;
•
Entergy Louisiana’s construction of the 980 MW, combined-cycle, gas turbine St. Charles generating facility at its existing Little Gypsy electric generating station. Entergy Louisiana received regulatory approval from the LPSC in December 2016 and the facility is scheduled to be in service by mid-2019;
•
Entergy Texas’s construction of the 993 MW, combined-cycle, gas turbine Montgomery County generating facility at its existing Lewis Creek electric generating station. Entergy Texas received regulatory approval from the PUCT in July 2017 and the facility is scheduled to be in service by mid-2021; and
•
Entergy Louisiana’s construction of the 994 MW, combined-cycle, gas turbine Lake Charles generating facility at its existing Nelson electric generating station. Entergy Louisiana received regulatory approval from the LPSC in July 2017 and the facility is scheduled to be in service by mid-2020.

The RFP process has also resulted in the selection, or confirmation of the economic merits of, long-term purchased power agreements (PPAs), including, among others:

•
River Bend 30% life-of-unit PPA between Entergy Louisiana and Entergy New Orleans for 100 MW related to Entergy Louisiana’s unregulated portion of the River Bend nuclear station, which portion was formerly owned by Cajun;
•
Entergy Arkansas wholesale base load capacity life-of-unit PPAs executed in 2003 totaling approximately 220 MW between Entergy Arkansas and Entergy Louisiana (110 MW) and between Entergy Arkansas and Entergy New Orleans (110 MW) related to the sale of a portion of Entergy Arkansas’s coal and nuclear base load resources (which had not been included in Entergy Arkansas’s retail rates);
•
In December 2009, Entergy Texas and Exelon Generation Company, LLC executed a 10-year agreement for 150-300 MW from the Frontier Generating Station located in Grimes County, Texas;
•
In May 2011, Entergy Texas and Calpine Energy Services, L.P. executed a 10-year agreement for 485 MW from the Carville Energy Center located in St. Gabriel, Louisiana. Entergy Louisiana purchases 50% of the facility’s capacity and energy from Entergy Texas. In July 2014, LS Power purchased the Carville Energy Center and replaced Calpine Energy Services as the counterparty to the agreement;
•
In September 2012, Entergy Gulf States Louisiana executed a 20-year agreement for 28 MW, with the potential to purchase an additional 9 MW when available, from Rain CII Carbon LLC’s pet coke calcining facility in Sulphur, Louisiana. The facility began commercial operation in May 2013. Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, now holds the agreement with the facility;
•
In March 2013, Entergy Gulf States Louisiana executed a 20-year agreement for 8.5 MW from Agrilectric Power Partners, LP’s refurbished rice hull-fueled electric generation facility located in Lake Charles, Louisiana. Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, now holds the agreement with Agrilectric;
•
In September 2013, Entergy Louisiana executed a 10-year agreement with TX LFG Energy, LP, a wholly-owned subsidiary of Montauk Energy Holdings, LLC, to purchase approximately 3 MW from its landfill gas-fueled power generation facility located in Cleveland, Texas;
•
Entergy Mississippi’s cost-based purchase, beginning in January 2013, of 90 MW from Entergy Arkansas’s share of Grand Gulf (only 60 MW of this PPA came through the RFP process). Cost recovery for the 90 MW was approved by the MPSC in January 2013;
•
In April 2015, Entergy Arkansas and Stuttgart Solar, LLC executed a 20-year agreement for 81 MW from a solar photovoltaic electric generation facility located near Stuttgart, Arkansas. The APSC has approved the project, and the expected commercial operation date is in June 2019;

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•
In November 2016, Entergy Louisiana and LS Power executed a 10-year agreement for 485 MW from the Carville Energy Center located in St. Gabriel, Louisiana. The transaction has received regulatory approval and will begin in June 2022;
•
In November 2016, Entergy Louisiana and Occidental Chemical Corporation executed a 10-year agreement for 500 MW from the Taft Cogeneration facility located in Hahnville, Louisiana. The transaction has received regulatory approval and will begin in June 2018; and
•
In June 2017, Entergy Arkansas and Chicot Solar, LLC executed 20-year agreement for 100 MW from a solar photovoltaic electric generating facility located in Chicot County, Arkansas. Entergy Arkansas filed for regulatory approval in October 2017.

In June 2016, Entergy Services, on behalf of Entergy Louisiana, issued an RFP for long-term renewable generation resources. The RFP was seeking up to 200 MW of renewable resources that could provide energy, fuel diversity, and other benefits to customers. Two proposals were placed in the primary selection list and the transactions are currently in negotiations.

In July 2016, Entergy Services, on behalf of Entergy New Orleans, issued an RFP for long-term renewable generation resources. The RFP was seeking up to 20 MW of renewable resources that could provide increased depth and diversity to Entergy New Orleans’s generation resource portfolio. In May 2017, Entergy New Orleans selected three proposals, including a 5 MW self-build option for an aggregated solar photovoltaic resource located within Orleans Parish, Louisiana. In October 2017, Entergy New Orleans filed an application seeking City Council approval for the self-build option, which is pending before the City Council. Following unsuccessful negotiations related to the other proposals selected in May 2017, Entergy New Orleans suspended negotiations in November 2017 and invited bidders to re-submit proposals with current information. From these submissions, in January 2018, Entergy New Orleans selected three proposals with an anticipated total capacity of 90 MW. The updated proposals selected are in addition to the self-build option.

Other Procurements From Third Parties

The Utility operating companies have also made resource acquisitions outside of the RFP process, including Entergy Mississippi’s January 2006 acquisition of the 480 MW, combined-cycle, gas-fired Attala power plant; Entergy Gulf States Louisiana’s March 2008 acquisition of the 322 MW, simple-cycle, gas-fired Calcasieu Generating Facility; Entergy Louisiana’s April 2011 acquisition of the 580 MW, combined-cycle, gas-fired Acadia Energy Center Unit 2; and Entergy Arkansas’s (Power Block 2), Entergy Louisiana’s (Power Blocks 3 and 4), and Entergy New Orleans’s (Power Block 1) March 2016 acquisitions of the 1,980 MW (summer rating), natural gas-fired, combined-cycle gas turbine Union Power Station power blocks, each rated at 495 MW (summer rating). The Utility operating companies have also entered into various limited- and long-term contracts in recent years as a result of bilateral negotiations.

The Washington Parish Energy Center is a 361 MW natural gas-fired peaking power plant under advanced development approximately 60 miles north of New Orleans on a partially developed site Calpine has owned since 2001. This simple-cycle power plant is proposed to be developed pursuant to an agreement with Entergy Louisiana, which will purchase the plant upon completion in 2021 for a fixed payment to reimburse construction costs plus an associated premium. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. The application is pending.

Interconnections

The Utility operating companies’ generating units are interconnected by a transmission system operating at various voltages up to 500 kV.  These generating units consist primarily of steam-electric production facilities and are provided dispatch instructions by MISO. Entergy’s Utility operating companies are MISO market participants and are interconnected with many neighboring utilities.  MISO is an essential link in the safe, cost-effective delivery of electric power across all or parts of 15 U.S. states and the Canadian province of Manitoba. As a Regional Transmission Organization, MISO assures consumers of unbiased regional grid management and open access to the transmission

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facilities under MISO’s functional supervision. In addition, the Utility operating companies are members of the SERC Reliability Corporation (SERC). SERC is a nonprofit corporation responsible for promoting and improving the reliability, adequacy, and critical infrastructure of the bulk power supply systems in all or portions of 16 central and southeastern states. SERC serves as a regional entity with delegated authority from the North American Electric Reliability Corporation (NERC) for the purpose of proposing and enforcing reliability standards within the SERC Region.

Gas Property

As of December 31, 2017 , Entergy New Orleans distributed and transported natural gas for distribution within New Orleans, Louisiana, through approximately 2,500 miles of gas pipeline.  As of December 31, 2017, the gas properties of Entergy Louisiana, which are located in and around Baton Rouge, Louisiana, were not material to Entergy Louisiana’s financial position.

Title

The Utility operating companies’ generating stations are generally located on properties owned in fee simple.  Most of the substations and transmission and distribution lines are constructed on private property or public rights-of-way pursuant to easements, servitudes, or appropriate franchises.  Some substation properties are owned in fee simple.  The Utility operating companies generally have the right of eminent domain, whereby they may perfect title to, or secure easements or servitudes on, private property for their utility operations.

Substantially all of the physical properties and assets owned by Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are subject to the liens of mortgages securing bonds issued by those companies.  The Lewis Creek generating station is owned by GSG&T, Inc., a subsidiary of Entergy Texas, and is not subject to its mortgage lien.  Lewis Creek is leased to and operated by Entergy Texas.

Fuel Supply

The sources of generation and average fuel cost per kWh for the Utility operating companies and System Energy for the years 2015-2017 were:
 
 
Natural Gas
 
Nuclear
 
Coal
 
Purchased Power
 
MISO Purchases
Year
 
% of Gen
 
Cents Per kWh
 
% of Gen
 
Cents Per kWh
 
% of Gen
 
Cents Per kWh
 
% of Gen
 
Cents Per kWh
 
% of Gen
 
Cents Per kWh
2017
 
38
 
2.60

 
26
 
0.86

 
8
 
2.35

 
8
 
4.02

 
20
 
3.09

2016
 
41
 
2.44

 
28
 
0.63

 
7
 
2.65

 
9
 
3.71

 
15
 
3.13

2015
 
35
 
2.65

 
31
 
0.85

 
7
 
2.85

 
11
 
3.63

 
16
 
3.24



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Actual 2017 and projected 2018 sources of generation for the Utility operating companies and System Energy, including certain power purchases from affiliates under life of unit power purchase agreements, including the Unit Power Sales Agreement, are:
 
Natural Gas
 
Nuclear
 
Coal
 
Purchased Power (d)
 
MISO Purchases (e)
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
2018
Entergy Arkansas (a)
28
%
 
33
%
 
49
%
 
51
%
 
18
%
 
15
%
 
—
%
 
1
%
 
5
%
 
—
Entergy Louisiana
38
%
 
49
%
 
26
%
 
33
%
 
3
%
 
4
%
 
9
%
 
14
%
 
24
%
 
—
Entergy Mississippi (b)
47
%
 
55
%
 
18
%
 
30
%
 
13
%
 
15
%
 
—
%
 
—

 
22
%
 
—
Entergy New Orleans (b)
53
%
 
57
%
 
33
%
 
41
%
 
2
%
 
1
%
 
—
%
 
1
%
 
12
%
 
—
Entergy Texas
30
%
 
33
%
 
10
%
 
17
%
 
7
%
 
9
%
 
28
%
 
41
%
 
25
%
 
—
System Energy (c)
—

 
—

 
100
%
 
100
%
 
—

 
—

 
—

 
—

 
—

 
—
Utility (a) (b)
38
%
 
44
%
 
26
%
 
36
%
 
8
%
 
9
%
 
8
%
 
11
%
 
20
%
 
—

(a)
Hydroelectric power provided less than 1% of Entergy Arkansas’s generation in 2017 and is expected to provide about less than1% of its generation in 2018.
(b)
Solar power provided less than 1% of Entergy Mississippi’s and Entergy New Orleans's generation in 2017 and is expected to provide less than 1% of each of Entergy Mississippi’s and Entergy New Orleans's generation in 2018.
(c)
Capacity and energy from System Energy’s interest in Grand Gulf is allocated as follows under the Unit Power Sales Agreement: Entergy Arkansas - 36%; Entergy Louisiana - 14%; Entergy Mississippi - 33%; and Entergy New Orleans - 17%.  Pursuant to purchased power agreements, Entergy Arkansas is selling a portion of its owned capacity and energy from Grand Gulf to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.
(d)
Excludes MISO purchases
(e)
In December 2013, Entergy integrated its transmission system into the MISO RTO. Entergy offers all of its generation into the MISO energy market on a day-ahead and real-time basis and bids for power in the MISO energy market to serve the demand of its customers, with MISO making dispatch decisions. MISO purchases cannot be projected for 2018.

Some of the Utility’s gas-fired plants are also capable of using fuel oil, if necessary. Although based on current economics the Utility does not expect fuel oil use in 2018, it is possible that various operational events including weather or pipeline maintenance may require the use of fuel oil.

Natural Gas

The Utility operating companies have long-term firm and short-term interruptible gas contracts for both supply and transportation. Over 50% of the Utility operating companies’ power plants maintain some level of long-term firm transportation. Short-term contracts and spot-market purchases satisfy additional gas requirements.  Entergy Texas owns a gas storage facility that provides reliable and flexible natural gas service to certain generating stations.

Many factors, including wellhead deliverability, storage, pipeline capacity, and demand requirements of end users, influence the availability and price of natural gas supplies for power plants.  Demand is tied to weather conditions as well as to the prices and availability of other energy sources.  Pursuant to federal and state regulations, gas supplies to power plants may be interrupted during periods of shortage.  To the extent natural gas supplies are disrupted or natural gas prices significantly increase, the Utility operating companies will use alternate fuels, such as oil, or rely to a larger extent on coal, nuclear generation, and purchased power.


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Coal

Entergy Arkansas has committed to eight one- to three-year and two spot contracts that will supply approximately 85% of the total coal supply needs in 2018.  These contracts are staggered in term so that not all contracts have to be renewed the same year.  The remaining 15% of total coal requirements will be satisfied by contracts with a term of less than one year.  Based on continued improved Powder River Basin (PRB) coal deliveries by rail and the high cost of alternate sources and modes of transportation, no alternative coal consumption is expected at Entergy Arkansas during 2018.  Coal will be transported to Arkansas via an existing transportation agreement that is expected to provide all of Entergy Arkansas’s rail transportation requirements for 2018.

Entergy Louisiana has committed to five one- to three-year contracts that will supply approximately 90% of Nelson Unit 6 coal needs in 2018.  If needed, additional PRB coal will be purchased through contracts with a term of less than one year to provide the remaining supply needs.  For the same reasons as for Entergy Arkansas’s plants, no alternative coal consumption is expected at Nelson Unit 6 during 2018.  Coal will be transported to Nelson primarily via an existing transportation agreement that is expected to provide all of Entergy Louisiana’s rail transportation requirements for 2018.

For the year 2017, coal transportation delivery to Entergy Arkansas-and Entergy Louisiana-operated coal-fired units was adequate for the majority of the year but experienced some delays in the fourth quarter of 2017. It is expected that delivery times will improve in 2018. Both Entergy Arkansas and Entergy Louisiana control a sufficient number of railcars to satisfy the rail transportation requirement.

The operator of Big Cajun 2 - Unit 3, Louisiana Generating, LLC, has advised Entergy Louisiana and Entergy Texas that it has adequate rail car and barge capacity to meet the volumes of PRB coal requested for 2018.  Entergy Louisiana’s and Entergy Texas’s coal nomination requests to Big Cajun 2 - Unit 3 are made on an annual basis.

Nuclear Fuel

The nuclear fuel cycle consists of the following:

•
mining and milling of uranium ore to produce a concentrate;
•
conversion of the concentrate to uranium hexafluoride gas;
•
enrichment of the uranium hexafluoride gas;
•
fabrication of nuclear fuel assemblies for use in fueling nuclear reactors; and
•
disposal of spent fuel.

The Registrant Subsidiaries that own nuclear plants, Entergy Arkansas, Entergy Louisiana, and System Energy, are responsible through a shared regulated uranium pool for contracts to acquire nuclear material to be used in fueling Entergy’s Utility nuclear units.  These companies own the materials and services in this shared regulated uranium pool on a pro rata fractional basis determined by the nuclear generation capability of each company.  Any liabilities for obligations of the pooled contracts are on a several but not joint basis.  The shared regulated uranium pool maintains inventories of nuclear materials during the various stages of processing.  The Registrant Subsidiaries purchase enriched uranium hexafluoride for their nuclear plant reload requirements at the average inventory cost from the shared regulated uranium pool.  Entergy Operations, Inc. contracts separately for the fabrication of nuclear fuel as agent on behalf of each of the Registrant Subsidiaries that owns a nuclear plant.  All contracts for the disposal of spent nuclear fuel are between the DOE and the owner of a nuclear power plant.

Based upon currently planned fuel cycles, the nuclear units in both the Utility and Entergy Wholesale Commodities segments have a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonably predictable or fixed prices through most of 2018 or beyond.  The nuclear fuel supply portfolio for the Entergy Wholesale Commodities segment is being adjusted to reflect reduced overall requirements related to the planned permanent shutdowns of the

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Palisades, Pilgrim, Indian Point 2, and Indian Point 3 plants. Entergy’s ability to purchase nuclear fuel at reasonably predictable prices, however, depends upon the performance reliability of uranium miners.  There are a number of possible supply alternatives that may be accessed to mitigate any supplier performance failure, including potentially drawing upon Entergy’s inventory intended for later generation periods depending upon its risk management strategy at that time, although the pricing of any alternate uranium supply from the market will be dependent upon the market for uranium supply at that time.  In addition, some nuclear fuel contracts are on a non-fixed price basis subject to prevailing prices at the time of delivery.

The effects of market price changes may be reduced and deferred by risk management strategies, such as negotiation of floor and ceiling amounts for long-term contracts, buying for inventory or entering into forward physical contracts at fixed prices when Entergy believes it is appropriate and useful.  Entergy buys uranium from a diversified mix of sellers located in a diversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S.

Entergy’s ability to assure nuclear fuel supply also depends upon the performance reliability of conversion, enrichment, and fabrication services providers. There are fewer of these providers than for uranium. For conversion and enrichment services, like uranium, Entergy diversifies its supply by supplier and country and may take special measures as needed to ensure supply of enriched uranium for the reliable fabrication of nuclear fuel. For fabrication services, each plant is dependent upon the effective performance of the fabricator of that plant’s nuclear fuel, therefore, Entergy provides additional monitoring, inspection, and oversight for the fabrication process to assure reliability and quality.

Entergy Arkansas, Entergy Louisiana, and System Energy each have made arrangements to lease nuclear fuel and related equipment and services.  The lessors, which are consolidated in the financial statements of Entergy and the applicable Registrant Subsidiary, finance the acquisition and ownership of nuclear fuel through credit agreements and the issuance of notes.  These credit facilities are subject to periodic renewal, and the notes are issued periodically, typically for terms between three and seven years.

Natural Gas Purchased for Resale

Entergy New Orleans has several suppliers of natural gas.  Its system is interconnected with three interstate and three intrastate pipelines.  Entergy New Orleans has a “no-notice” service gas purchase contract with Centerpoint Energy Services which guarantees Entergy New Orleans gas delivery at specific delivery points and at any volume within the minimum and maximum set forth in the contract amounts.  The Centerpoint Energy Service gas supply is transported to Entergy New Orleans pursuant to a transportation service agreement with Gulf South Pipeline Co.  This service is subject to FERC-approved rates.  Entergy New Orleans also makes interruptible spot market purchases. 

Entergy Louisiana purchased natural gas for resale in 2017 under a firm contract from Sequent Energy Management L.P.  The gas is delivered through a combination of intrastate and interstate pipelines.

As a result of the implementation of FERC-mandated interstate pipeline restructuring in 1993, curtailments of interstate gas supply could occur if Entergy Louisiana’s or Entergy New Orleans’s suppliers failed to perform their obligations to deliver gas under their supply agreements.  Gulf South Pipeline Co. could curtail transportation capacity only in the event of pipeline system constraints.

Federal Regulation of the Utility

State or local regulatory authorities, as described above, regulate the retail rates of the Utility operating companies.  The FERC regulates wholesale sales of electricity rates and interstate transmission of electricity, including System Energy’s sales of capacity and energy from Grand Gulf to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans pursuant to the Unit Power Sales Agreement. See Note 2 to the financial statements for further discussion of federal regulation proceedings.

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System Agreement (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

Prior to each operating company’s termination of participation in the System Agreement (Entergy Arkansas in December 2013, Entergy Mississippi in November 2015, and Entergy Louisiana, Entergy New Orleans, and Entergy Texas each in August 2016), the Utility operating companies engaged in the coordinated planning, construction, and operation of generating and bulk transmission facilities under the terms of the System Agreement, which was a rate schedule approved by the FERC. Under the terms of the System Agreement, generating capacity and other power resources were jointly operated by the Utility operating companies that were participating in the System Agreement.  The System Agreement provided, among other things, that parties having generating reserves greater than their allocated share of reserves (long companies) would receive payments from those parties having generating reserves that were less than their allocated share of reserves (short companies).  Such payments were at amounts sufficient to cover certain of the long companies’ costs for intermediate and peaking oil/gas-fired generation, including operating expenses, fixed charges on debt, dividend requirements on preferred equity, and a fair rate of return on common equity investment.  Under the System Agreement, the rates used to compensate long companies were based on costs associated with the long companies’ steam electric generating units fueled by oil or gas and having an annual average heat rate above 10,000 Btu/kWh.  In addition, for all energy exchanged among the Utility operating companies under the System Agreement, the companies purchasing exchange energy were required to pay the cost of fuel consumed in generating such energy plus a charge to cover other associated costs. Entergy Arkansas terminated its participation in the System Agreement in December 2013. Entergy Mississippi terminated its participation in the System Agreement in November 2015. The System Agreement terminated with respect to its remaining participants in August 2016.

Although the System Agreement has terminated, certain of the Utility operating companies’ and their retail regulators are pursuing litigation involving the System Agreement at the FERC and in federal courts. The proceedings include challenges to the allocation of costs as defined by the System Agreement and other matters. See Note 2 to the financial statements for discussion of legal proceedings at the FERC and in federal courts involving the System Agreement.

Transmission and MISO Markets

On December 19, 2013, the Utility operating companies integrated into the MISO RTO. Although becoming a member of MISO does not affect the ownership by the Utility operating companies of their transmission facilities or the responsibility for maintaining those facilities, MISO maintains functional control over the combined transmission systems of its members and administers wholesale energy and ancillary services markets for market participants in the MISO region, including the Utility operating companies. MISO also exercises functional control of transmission planning and congestion management and provides schedules and pricing for the commitment and dispatch of generation that is offered into MISO’s markets, as well as pricing for load that bids into the markets. The Utility operating companies sell capacity, energy, and ancillary services on a bilateral basis to certain wholesale customers and offer available electricity production of their generating facilities into the MISO day-ahead and real-time energy markets pursuant to the MISO tariff and market rules. Each Utility operating company has its own transmission pricing zone and a formula rate template (included as Attachment O to the MISO tariff) used to establish transmission rates within MISO. The terms and conditions of the MISO tariff, including provisions related to the design and implementation of wholesale markets and the allocation of transmission upgrade costs, are subject to regulation by the FERC.

System Energy and Related Agreements

System Energy recovers costs related to its interest in Grand Gulf through rates charged to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans for capacity and energy under the Unit Power Sales Agreement (described below).  In December 1995, System Energy commenced a rate proceeding at the FERC.  In July 2001 the rate proceeding became final, with the FERC approving a prospective 10.94% return on equity.    In 1998 the FERC approved requests by Entergy Arkansas and Entergy Mississippi to accelerate a portion of their Grand Gulf purchased power obligations.  Entergy Arkansas’s and Entergy Mississippi’s acceleration of Grand Gulf purchased

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power obligations ceased effective July 2001 and July 2003, respectively, as approved by the FERC. See Note 2 to the financial statements for discussion of a complaint filed with the FERC in January 2017 regarding System Energy’s return on equity.

Unit Power Sales Agreement

The Unit Power Sales Agreement allocates capacity, energy, and the related costs from System Energy’s ownership and leasehold interests in Grand Gulf to Entergy Arkansas (36%), Entergy Louisiana (14%), Entergy Mississippi (33%), and Entergy New Orleans (17%).  Each of these companies is obligated to make payments to System Energy for its entitlement of capacity and energy on a full cost-of-service basis regardless of the quantity of energy delivered.  Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenue.  The financial condition of System Energy depends upon the continued commercial operation of Grand Gulf and the receipt of such payments.  Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans generally recover payments made under the Unit Power Sales Agreement through rates charged to their customers.

In the case of Entergy Arkansas and Entergy Louisiana, payments are also recovered through sales of electricity from their respective retained shares of Grand Gulf.  Under a settlement agreement entered into with the APSC in 1985 and amended in 1988, Entergy Arkansas retains 22% of its 36% share of Grand Gulf-related costs and recovers the remaining 78% of its share in rates.  In the event that Entergy Arkansas is not able to sell its retained share to third parties, it may sell such energy to its retail customers at a price equal to its avoided cost, which is currently less than Entergy Arkansas’s cost from its retained share.  Entergy Arkansas has life-of-resources purchased power agreements with Entergy Louisiana and Entergy New Orleans that sell a portion of the output of Entergy Arkansas’s retained share of Grand Gulf to those companies, with the remainder of the retained share being sold to Entergy Mississippi through a separate life-of-resources purchased power agreement.  In a series of LPSC orders, court decisions, and agreements from late 1985 to mid-1988, Entergy Louisiana was granted rate relief with respect to costs associated with Entergy Louisiana’s share of capacity and energy from Grand Gulf, subject to certain terms and conditions.  Entergy Louisiana retains and does not recover from retail ratepayers 18% of its 14% share of the costs of Grand Gulf capacity and energy and recovers the remaining 82% of its share in rates.  Entergy Louisiana is allowed to recover through the fuel adjustment clause at 4.6 cents per kWh for the energy related to its retained portion of these costs.  Alternatively, Entergy Louisiana may sell such energy to non-affiliated parties at prices above the fuel adjustment clause recovery amount, subject to the LPSC’s approval. Entergy Arkansas also has a life-of-resources purchased power agreement with Entergy Mississippi to sell a portion of the output of Entergy Arkansas’s non-retained share of Grand Gulf. Entergy Mississippi was granted rate relief for those purchases by the MPSC through its annual unit power cost rate mechanism.

Availability Agreement

The Availability Agreement among System Energy and Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans was entered into in 1974 in connection with the financing by System Energy of Grand Gulf. The Availability Agreement provides that System Energy make available to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans all capacity and energy available from System Energy’s share of Grand Gulf.

Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans also agreed severally to pay System Energy monthly for the right to receive capacity and energy from Grand Gulf in amounts that (when added to any amounts received by System Energy under the Unit Power Sales Agreement) would at least equal System Energy’s total operating expenses for Grand Gulf (including depreciation at a specified rate and expenses incurred in a permanent shutdown of Grand Gulf) and interest charges.

The allocation percentages under the Availability Agreement are fixed as follows: Entergy Arkansas - 17.1%; Entergy Louisiana - 26.9%; Entergy Mississippi - 31.3%; and Entergy New Orleans - 24.7%. The allocation percentages under the Availability Agreement would remain in effect and would govern payments made under such agreement in

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the event of a shortfall of funds available to System Energy from other sources, including payments under the Unit Power Sales Agreement.

System Energy has assigned its rights to payments and advances from Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under the Availability Agreement as security for its one outstanding series of first mortgage bonds.  In these assignments, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans further agreed that, in the event they were prohibited by governmental action from making payments under the Availability Agreement (for example, if the FERC reduced or disallowed such payments as constituting excessive rates), they would then make subordinated advances to System Energy in the same amounts and at the same times as the prohibited payments. System Energy would not be allowed to repay these subordinated advances so long as it remained in default under the related indebtedness or in other similar circumstances.

Each of the assignment agreements relating to the Availability Agreement provides that Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans will make payments directly to System Energy. However, if there is an event of default, those payments must be made directly to the holders of indebtedness that are the beneficiaries of such assignment agreements. The payments must be made pro rata according to the amount of the respective obligations secured.

The obligations of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans to make payments under the Availability Agreement are subject to the receipt and continued effectiveness of all necessary regulatory approvals.  Sales of capacity and energy under the Availability Agreement would require that the Availability Agreement be submitted to the FERC for approval with respect to the terms of such sale. No such filing with the FERC has been made because sales of capacity and energy from Grand Gulf are being made pursuant to the Unit Power Sales Agreement.  If, for any reason, sales of capacity and energy are made in the future pursuant to the Availability Agreement, the jurisdictional portions of the Availability Agreement would be submitted to the FERC for approval.

Since commercial operation of Grand Gulf began, payments under the Unit Power Sales Agreement to System Energy have exceeded the amounts payable under the Availability Agreement and, therefore, no payments under the Availability Agreement have ever been required.  If Entergy Arkansas or Entergy Mississippi fails to make its Unit Power Sales Agreement payments, and System Energy is unable to obtain funds from other sources, Entergy Louisiana and Entergy New Orleans could become subject to claims or demands by System Energy or its creditors for payments or advances under the Availability Agreement (or the assignments thereof) equal to the difference between their required Unit Power Sales Agreement payments and their required Availability Agreement payments because their Availability Agreement obligations exceed their Unit Power Sales Agreement obligations.

The Availability Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, without further consent of any assignees or other creditors.

Capital Funds Agreement

System Energy and Entergy Corporation have entered into the Capital Funds Agreement, whereby Entergy Corporation has agreed to supply System Energy with sufficient capital to (i) maintain System Energy’s equity capital at an amount equal to a minimum of 35% of its total capitalization (excluding short-term debt) and (ii) permit the continued commercial operation of Grand Gulf and pay in full all indebtedness for borrowed money of System Energy when due.

Entergy Corporation has entered into various supplements to the Capital Funds Agreement. System Energy has assigned its rights under such a supplement as security for its one outstanding series of first mortgage bonds. The supplement provides that permitted indebtedness for borrowed money incurred by System Energy in connection with the financing of Grand Gulf may be secured by System Energy’s rights under the Capital Funds Agreement on a pro rata basis (except for the Specific Payments, as defined below). In addition, in the supplements to the Capital Funds Agreement relating to the specific indebtedness being secured, Entergy Corporation has agreed to make cash capital

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contributions directly to System Energy sufficient to enable System Energy to make payments when due on such indebtedness (Specific Payments). However, if there is an event of default, Entergy Corporation must make those payments directly to the holders of indebtedness benefiting from the supplemental agreements. The payments (other than the Specific Payments) must be made pro rata according to the amount of the respective obligations benefiting from the supplemental agreements.

The Capital Funds Agreement may be terminated, amended, or modified by mutual agreement of the parties thereto, upon obtaining the consent, if required, of those holders of System Energy’s indebtedness then outstanding who have received the assignments of the Capital Funds Agreement. No such consent would be required to terminate the Capital Funds Agreement or the supplement thereto at this time.

Service Companies

Entergy Services, a corporation wholly-owned by Entergy Corporation, provides management, administrative, accounting, legal, engineering, and other services primarily to the Utility operating companies, but also provides services to Entergy Wholesale Commodities. Entergy Operations is also wholly-owned by Entergy Corporation and provides nuclear management, operations and maintenance services under contract for ANO, River Bend, Waterford 3, and Grand Gulf, subject to the owner oversight of Entergy Arkansas, Entergy Louisiana, and System Energy, respectively.  Entergy Services and Entergy Operations provide their services to the Utility operating companies and System Energy on an “at cost” basis, pursuant to cost allocation methodologies for these service agreements that were approved by the FERC.

Jurisdictional Separation of Entergy Gulf States, Inc. into Entergy Gulf States Louisiana and Entergy Texas

Effective December 31, 2007, Entergy Gulf States, Inc. completed a jurisdictional separation into two vertically integrated utility companies, one operating under the sole retail jurisdiction of the PUCT, Entergy Texas, and the other operating under the sole retail jurisdiction of the LPSC, Entergy Gulf States Louisiana.  Entergy Texas owns all Entergy Gulf States, Inc. distribution and transmission assets located in Texas, the gas-fired generating plants located in Texas, undivided 42.5% ownership shares of Entergy Gulf States, Inc.’s 70% ownership interest in Nelson 6 and 42% ownership interest in Big Cajun 2, Unit 3, which are coal-fired generating plants located in Louisiana, and other assets and contract rights to the extent related to utility operations in Texas.  Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, owns all of the remaining assets that were owned by Entergy Gulf States, Inc.  On a book value basis, approximately 58.1% of the Entergy Gulf States, Inc. assets were allocated to Entergy Gulf States Louisiana and approximately 41.9% were allocated to Entergy Texas.

Entergy Texas purchases from Entergy Louisiana pursuant to a life-of-unit purchased power agreement a 42.5% share of capacity and energy from the 70% of River Bend subject to retail regulation.  Entergy Texas was allocated a share of River Bend’s nuclear and environmental liabilities that is identical to the share of the plant’s output purchased by Entergy Texas under the purchased power agreement.  In connection with the termination of the System Agreement effective August 31, 2016, the purchased power agreements that were put in place for certain legacy units at the time of the jurisdictional separation were also terminated at that time. See Note 2 to the financial statements for additional discussion of the purchased power agreements.

Entergy Louisiana and Entergy Gulf States Louisiana Business Combination

On October 1, 2015, the businesses formerly conducted by Entergy Louisiana (Old Entergy Louisiana) and Entergy Gulf States Louisiana (Old Entergy Gulf States Louisiana) were combined into a single public utility. In order to effect the business combination, under the Texas Business Organizations Code (TXBOC), Old Entergy Louisiana allocated substantially all of its assets to a new subsidiary, Entergy Louisiana Power, LLC, a Texas limited liability company (New Entergy Louisiana), and New Entergy Louisiana assumed the liabilities of Old Entergy Louisiana, in a transaction regarded as a merger under the TXBOC. Under the TXBOC, Old Entergy Gulf States Louisiana allocated substantially all of its assets to a new subsidiary (New Entergy Gulf States Louisiana) and New Entergy Gulf States

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Louisiana assumed the liabilities of Old Entergy Gulf States Louisiana, in a transaction regarded as a merger under the TXBOC. New Entergy Gulf States Louisiana then merged into New Entergy Louisiana with New Entergy Louisiana surviving the merger. Thereupon, Old Entergy Louisiana changed its name from “Entergy Louisiana, LLC” to “EL Investment Company, LLC” and New Entergy Louisiana changed its name from “Entergy Louisiana Power, LLC” to “Entergy Louisiana, LLC” (Entergy Louisiana). With the completion of the business combination, Entergy Louisiana holds substantially all of the assets, and has assumed the liabilities, of Old Entergy Louisiana and Old Entergy Gulf States Louisiana. See Note 2 to the financial statements for additional discussion of the business combination.

Entergy New Orleans Internal Restructuring

In November 2017, pursuant to the agreement in principle, Entergy New Orleans, Inc. undertook a multi-step restructuring, including the following:

•
Entergy New Orleans, Inc. redeemed its outstanding preferred stock at a price of approximately $21 million , which included a call premium of approximately $819,000 , plus any accumulated and unpaid dividends.
•
Entergy New Orleans, Inc. converted from a Louisiana corporation to a Texas corporation.
•
Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans, Inc. allocated substantially all of its assets to a new subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), and Entergy New Orleans Power assumed substantially all of the liabilities of Entergy New Orleans, Inc. in a transaction regarded as a merger under the TXBOC. Entergy New Orleans, Inc. remained in existence and held the membership interests in Entergy New Orleans Power.
•
Entergy New Orleans, Inc. contributed the membership interests in Entergy New Orleans Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy New Orleans Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.

In December 2017, Entergy New Orleans, Inc. changed its name to Entergy Utility Group, Inc., and Entergy New Orleans Power then changed its name to Entergy New Orleans, LLC. Entergy New Orleans, LLC holds substantially all of the assets, and has assumed substantially all of the liabilities, of Entergy New Orleans, Inc. The restructuring was accounted for as a transaction between entities under common control.

Earnings Ratios of Registrant Subsidiaries

The Registrant Subsidiaries’ ratios of earnings to fixed charges and ratios of earnings to combined fixed charges and preferred dividends or distributions pursuant to Item 503 of SEC Regulation S-K are as follows:
 
Ratios of Earnings to Fixed Charges
Years Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Entergy Arkansas
2.87
 
3.32
 
2.04
 
3.08
 
3.62
Entergy Louisiana
3.85
 
3.57
 
3.36
 
3.44
 
3.30
Entergy Mississippi
4.49
 
3.96
 
3.59
 
3.23
 
3.19
Entergy New Orleans
4.50
 
4.61
 
4.90
 
3.55
 
1.85
Entergy Texas
2.41
 
2.92
 
2.22
 
2.39
 
1.94
System Energy
4.91
 
5.39
 
4.53
 
4.04
 
5.66


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Ratios of Earnings to Combined Fixed
Charges and Preferred Dividends or Distributions
Years Ended December 31,
 
2017
 
2016
 
2015
 
2014
 
2013
Entergy Arkansas
2.81
 
3.09
 
1.85
 
2.76
 
3.25
Entergy Louisiana
3.85
 
3.57
 
3.24
 
3.28
 
3.14
Entergy Mississippi
4.36
 
3.71
 
3.34
 
3.00
 
2.97
Entergy New Orleans
4.24
 
4.30
 
4.50
 
3.26
 
1.70

The Registrant Subsidiaries accrue interest expense related to unrecognized tax benefits in income tax expense and do not include it in fixed charges.

Entergy Wholesale Commodities

Entergy Wholesale Commodities includes the ownership, operation, and decommissioning of nuclear power plants, located in the northern United States and the sale of the electric power produced by its operating plants to wholesale customers.  Entergy Wholesale Commodities revenues are primarily derived from sales of energy and generation capacity from these plants.  Entergy Wholesale Commodities also provides operations and management services, including decommissioning services, to nuclear power plants owned by other utilities in the United States. Entergy Wholesale Commodities also includes the ownership of interests in non-nuclear power plants that sell the electric power produced by those plants to wholesale customers.

On December 29, 2014, Entergy Wholesale Commodities’ Vermont Yankee plant was removed from the grid, after 42 years of operations. The decision to close and decommission Vermont Yankee, which was announced in August 2013, was due to numerous issues including sustained low natural gas and wholesale energy prices, the high cost structure of the plant, and lack of a market structure that adequately compensates merchant nuclear plants for their environmental and fuel diversity benefits in the Northeast region. In November 2016, Entergy entered into an agreement to sell 100% of its membership interest in Entergy Nuclear Vermont Yankee, LLC to a subsidiary of NorthStar. Entergy Nuclear Vermont Yankee is the owner of the Vermont Yankee plant.  The sale of Entergy Nuclear Vermont Yankee to NorthStar will include the transfer of Entergy Nuclear Vermont Yankee’s nuclear decommissioning trust fund and the asset retirement obligation for spent fuel management and decommissioning of the plant. Entergy plans to transfer all spent nuclear fuel to dry cask storage by the end of 2018 in advance of the planned transaction close. Under the sale and related agreements to be entered into at the closing, NorthStar will commit to initiate decommissioning and site restoration by 2021 and complete those activities, along with partial restoration of the Vermont Yankee site, with the exception of the independent spent fuel storage installation and switchyard, by 2030. The original completion date, as outlined in Entergy’s Post Shutdown Decommissioning Activities Report filed with the NRC, was 2075. The transaction is contingent upon certain closing conditions, including approval by the NRC; approval by the State of Vermont Public Utility Commission, including approval of site restoration standards that will be proposed as part of the transaction; the transfer of all spent nuclear fuel to dry fuel storage on the independent spent fuel storage installation; and that the market value of the assets held in the decommissioning trust fund for the Vermont Yankee Nuclear Power Station, less the hypothetical income tax on the aggregate unrealized net gain of such assets at closing, is equal to or exceeds $451.95 million, subject to adjustments.

In October 2015, Entergy determined that it would close the FitzPatrick plant at the end of its fuel cycle in January 2017. In August 2016, Entergy entered into an agreement to sell the FitzPatrick plant to Exelon. The transaction was contingent upon, among other things, the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the receipt of necessary regulatory approvals from the FERC, the NRC, and the Public Service Commission of the State of New York (NYPSC), and the receipt of a private letter ruling from the IRS. Because certain specified conditions were satisfied in November 2016, including the continued effectiveness of the Clean Energy Standards/Zero Emissions Credit program (CES/ZEC), the establishment of certain long-term agreements on acceptable terms with the Energy Research and Development Authority of the State of New York in connection with the CES/ZEC program, and NYPSC approval of the transaction on acceptable terms, Entergy

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refueled the FitzPatrick plant in January and February 2017. The sale closed in March 2017 after obtaining all the necessary approvals.

In October 2015, Entergy determined that it would close the Pilgrim plant. The decision came after management’s extensive analysis of the economics and operating life of the plant following the NRC’s decision in September 2015 to place the plant in its “multiple/repetitive degraded cornerstone column” (Column 4) of its Reactor Oversight Process Action Matrix. The Pilgrim plant is expected to cease operations on May 31, 2019, after refueling in the spring of 2017 and operating through the end of that fuel cycle.

In December 2015, Entergy Wholesale Commodities closed on the sale of its 583 MW Rhode Island State Energy Center, in Johnston, Rhode Island. The base sales price, excluding adjustments, was approximately $490 million. Entergy Wholesale Commodities purchased the Rhode Island State Energy Center for $346 million in December 2011.

In December 2016, Entergy announced that it had reached an agreement with Consumers Energy to terminate the existing PPA for the Palisades plant on May 31, 2018. Pursuant to the agreement, Consumers Energy would pay Entergy $172 million for the early termination of the PPA. The PPA amendment agreement was subject to regulatory approvals, including approval by the Michigan Public Service Commission. Separately, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. In September 2017 the Michigan Public Service Commission issued an order conditionally approving the PPA amendment transaction, but granting Consumers Energy recovery of only $136.6 million of the $172 million requested early termination payment. As a result, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy will continue to operate Palisades under the current PPA with Consumers Energy, instead of shutting down in the fall of 2018 as previously planned. Entergy intends to shut down the Palisades nuclear power plant permanently on May 31, 2022.

In January 2017, Entergy reached a settlement with New York State, several State agencies, and Riverkeeper, Inc., under which Indian Point 2 and Indian Point 3 will cease commercial operation by April 30, 2020 and April 30, 2021, respectively, subject to certain conditions, including New York State’s withdrawal of opposition to Indian Point’s license renewals and issuance of contested permits and similar authorizations. See Note 14 to the financial statements for a discussion of the impairment and related charges associated with the settlement with New York State.

The Indian Point settlement required New York State agencies to issue environmental certifications needed for license renewal and a renewed water discharge permit based on current plant configuration. It also required the New York State Attorney General and Riverkeeper to withdraw their contentions pending before the Atomic Safety and Licensing Board (ASLB). In exchange, Entergy commits to cease commercial operation of Indian Point 2 by April 30, 2020 and Indian Point 3 by April 30, 2021. These actions have been completed, all New York State approvals required for the NRC to issue renewed licenses have been granted, and the ASLB has terminated proceedings before it following the withdrawal of pending contentions. The NRC is not expected to issue renewed licenses earlier than third quarter 2018, as its staff must complete updates to the record on environmental and safety matters (a supplement to the final supplemental environmental impact statement and a supplement to the final safety evaluation report).

With the settlement concerning Indian Point, Entergy has announced plans for the disposition of all of the Entergy Wholesale Commodities nuclear power plants, including the sales of Vermont Yankee and FitzPatrick, and the earlier than previously expected shutdowns of Pilgrim, Palisades, Indian Point 2, and Indian Point 3. See “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” for further discussion.


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Property

Nuclear Generating Stations

Entergy Wholesale Commodities includes the ownership of the following nuclear power plants:
Power Plant
 
Market
 
In Service Year
 
Acquired
 
Location
 
Capacity - Reactor Type
 
License Expiration Date
Pilgrim (a)
 
ISO-NE
 
1972
 
July 1999
 
Plymouth, MA
 
688 MW - Boiling Water
 
2032 (a)
Indian Point 3 (b)
 
NYISO
 
1976
 
Nov. 2000
 
Buchanan, NY
 
1,041 MW - Pressurized Water
 
2015 (b)
Indian Point 2 (b)
 
NYISO
 
1974
 
Sept. 2001
 
Buchanan, NY
 
1,028 MW - Pressurized Water
 
2013 (b)
Vermont Yankee (c)
 
IS0-NE
 
1972
 
July 2002
 
Vernon, VT
 
605 MW - Boiling Water
 
2032 (c)
Palisades (d)
 
MISO
 
1971
 
Apr. 2007
 
Covert, MI
 
811 MW - Pressurized Water
 
2031 (d)

(a)
In October 2015, Entergy determined that it would close the Pilgrim plant no later than June 1, 2019, as discussed above.
(b)
In January 2017, Entergy announced that it reached a settlement with New York State to shut down Indian Point 2 by April 30, 2020 and Indian Point 3 by April 30, 2021, and resolve all New York State-initiated legal challenges to Indian Point’s operating license renewal. See below for discussion of Indian Point 2 and Indian Point 3 entering their “period of extended operation” after expiration of the plants’ initial license terms under “timely renewal.”
(c)
On December 29, 2014, the Vermont Yankee plant ceased power production. In November 2016, Entergy entered into an agreement to sell 100% of the membership interest in Entergy Nuclear Vermont Yankee, to NorthStar. Entergy Nuclear Vermont Yankee is the owner of the Vermont Yankee plant.
(d)
In December 2016, Entergy announced that it had reached an agreement with Consumers Energy to terminate the existing PPA for the Palisades plant in 2018. Separately, and assuming regulatory approvals are obtained for the PPA termination agreement, Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. In September 2017, as a result of the Michigan Public Service Commission’s order, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy intends to shut down the Palisades nuclear power plant permanently on May 31, 2022.

In October 2015, Entergy determined that it would close the FitzPatrick plant at the end of the fuel cycle, in January 2017, but in August 2016, Entergy entered into an agreement to sell the FitzPatrick plant to Exelon, and the sale closed in March 2017.

Entergy Wholesale Commodities also includes the ownership of two non-operating nuclear facilities, Big Rock Point in Michigan and Indian Point 1 in New York that were acquired when Entergy purchased the Palisades and Indian Point 2 nuclear plants, respectively.  These facilities are in various stages of the decommissioning process.

In April 2007, Entergy submitted to the NRC a joint application to renew the operating licenses for Indian Point 2 and Indian Point 3 for an additional 20 years. The original expiration dates of the NRC operating licenses for Indian Point 2 and Indian Point 3 were September 28, 2013 and December 12, 2015, respectively. Authorization to operate Indian Point 2 and Indian Point 3 rests on Entergy’s having timely filed a license renewal application that remains pending before the NRC. Indian Point 2 and Indian Point 3 have now entered their “period of extended operation” after expiration of the plants’ initial license term under “timely renewal,” which is a federal statutory rule of general applicability providing for extension of a license for which a renewal application has been timely filed with the licensing agency until the license renewal process has been completed. The license renewal application for Indian Point 2 and Indian Point 3 qualifies for timely renewal protection because it met NRC regulatory standards for timely filing. The NRC is not expected to issue renewed licenses earlier than third quarter 2018. For additional discussion of the license renewal applications and the settlement with New York State, see “ Entergy Wholesale Commodities

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Authorizations to Operate Indian Point ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

Non-nuclear Generating Stations

In November 2016, Entergy sold its 50% membership interest in Top Deer Wind Ventures, LLC, a wind-powered electric generation joint venture owned in the Entergy Wholesale Commodities segment and accounted for as an equity method investment. Entergy sold its 50% membership interest in Top Deer for $0.5 million and realized a pre-tax loss of $0.2 million.

Entergy Wholesale Commodities includes the ownership, or interests in joint ventures that own, the following non-nuclear power plants:
Plant
 
Location
 
Ownership
 
Net Owned Capacity (a)
 
Type
Independence Unit 2;   842 MW
 
Newark, AR
 
14%
 
121 MW(b)
 
Coal
RS Cogen;   425 MW (c)
 
Lake Charles, LA
 
50%
 
213 MW
 
Gas/Steam
Nelson 6;   550 MW
 
Westlake, LA
 
11%
 
60 MW(b)
 
Coal

(a)
“Net Owned Capacity” refers to the nameplate rating on the generating unit.
(b)
The owned MW capacity is the portion of the plant capacity owned by Entergy Wholesale Commodities.  For a complete listing of Entergy’s jointly-owned generating stations, refer to “ Jointly-Owned Generating Stations ” in Note 1 to the financial statements.
(c)
Indirectly owned through interests in unconsolidated joint ventures.

Independent System Operators

The Pilgrim plant falls under the authority of the Independent System Operator New England (ISO-NE) and the Indian Point plants fall under the authority of the New York Independent System Operator (NYISO).  The Palisades plant falls under the authority of the MISO.  The primary purpose of ISO-NE, NYISO, and MISO is to direct the operations of the major generation and transmission facilities in their respective regions; ensure grid reliability; administer and monitor wholesale electricity markets; and plan for their respective region’s energy needs.

Energy and Capacity Sales

As a wholesale generator, Entergy Wholesale Commodities’ core business is selling energy, measured in MWh, to its customers.  Entergy Wholesale Commodities enters into forward contracts with its customers and also sells energy in the day ahead or spot markets.  Entergy Wholesale Commodities also sells unforced capacity, which allows load-serving entities to meet specified reserve and related requirements placed on them by the ISOs in their respective areas.  Entergy Wholesale Commodities’ forward physical power contracts consist of contracts to sell energy only, contracts to sell capacity only, and bundled contracts in which it sells both capacity and energy.  While the terminology and payment mechanics vary in these contracts, each of these types of contracts requires Entergy Wholesale Commodities to deliver MWh of energy, make capacity available, or both.   See “ Market and Credit Risk Sensitive Instruments ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for additional information regarding these contracts.

As part of the purchase of the Palisades plant in 2007, Entergy executed a 15-year PPA with the seller, Consumers Energy, for 100% of the plant’s output, excluding any future uprates.  Under the purchased power agreement, Consumers Energy receives the value of any new environmental credits for the first ten years of the agreement.  Palisades and Consumers Energy will share on a 50/50 basis the value of any new environmental credits for years 11 through 15 of the agreement.  The environmental credits are defined as benefits from a change in law that causes capability of the plant as of the purchase date to become a tradable attribute (e.g., emission credit, renewable energy credit, environmental

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credit, “green” credit, etc.) or otherwise to have a market value. In December 2016, Entergy announced that it reached an agreement with Consumers Energy to terminate the existing PPA for the Palisades plant in 2018. Entergy intended to shut down the Palisades nuclear power plant permanently on October 1, 2018, after refueling in the spring of 2017 and operating through the end of that fuel cycle. In September 2017, as a result of the Michigan Public Service Commission’s order, Entergy and Consumers Energy agreed to terminate the PPA amendment agreement. Entergy intends to shut down the Palisades nuclear power plant permanently on May 31, 2022. See discussion above for additional details regarding the agreement.

Customers

Entergy Wholesale Commodities’ customers for the sale of both energy and capacity from its nuclear plants include retail power providers, utilities, electric power co-operatives, power trading organizations, and other power generation companies.  These customers include Consolidated Edison and Consumers Energy, companies from which Entergy purchased plants, and ISO-NE, NYISO, and MISO. Substantially all of the credit exposure associated with the planned energy output under contract for Entergy Wholesale Commodities nuclear plants is with counterparties or their guarantors that have public investment grade credit ratings.

Competition

The ISO-NE and NYISO markets are highly competitive.  Entergy Wholesale Commodities has numerous competitors in New England and New York, including generation companies affiliated with regulated utilities, other independent power producers, municipal and co-operative generators, owners of co-generation plants and wholesale power marketers.  Entergy Wholesale Commodities is an independent power producer, which means it generates power for sale to third parties at day ahead or spot market prices to the extent that the power is not sold under a fixed price contract.  Municipal and co-operative generators also generate power but use most of it to deliver power to their municipal or co-operative power customers.  Owners of co-generation plants produce power primarily for their own consumption.  Wholesale power marketers do not own generation; rather they buy power from generators or other market participants and resell it to retail providers or other market participants.  Competition in the New England and New York power markets is affected by, among other factors, the amount of generation and transmission capacity in these markets.  MISO does not have a centralized clearing capacity market, but load serving entities do meet the majority of their capacity needs through bilateral contracts and self-supply with a smaller portion coming through voluntary MISO auctions.  The majority of Palisades’ current output is contracted to Consumers Energy through 2022. Entergy Wholesale Commodities does not expect to be materially affected by competition in the MISO market in the near term.

Seasonality

Entergy Wholesale Commodities’ revenues and operating income are subject to fluctuations during the year due to seasonal factors, weather conditions, and contract pricing.  Refueling outages are generally in the spring and fall, and cause volumetric decreases during those seasons.  When outdoor and cooling water temperatures are low, generally during colder months, Entergy Wholesale Commodities nuclear power plants operate more efficiently, and consequently, generate more electricity.  Many of Entergy Wholesale Commodities’ contracts provide for shaped pricing over the course of the year.  As a result of these factors, Entergy Wholesale Commodities’ revenues are typically higher in the first and third quarters than in the second and fourth quarters.


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Fuel Supply

Nuclear Fuel

See “ Fuel Supply - Nuclear Fuel ” in the Utility portion of Part I, Item 1 for a discussion of the nuclear fuel cycle and markets.  Entergy Nuclear Fuels Company, a wholly-owned subsidiary, is responsible for contracts to acquire nuclear materials, except for fuel fabrication, for Entergy Wholesale Commodities nuclear power plants, while Entergy Nuclear Operations, Inc. acts as the agent for the purchase of nuclear fuel assembly fabrication services.  All contracts for the disposal of spent nuclear fuel are between the DOE and each of the nuclear power plant owners.

Other Business Activities

Entergy Nuclear Power Marketing, LLC (ENPM) was formed in 2005 to centralize the power marketing function for Entergy Wholesale Commodities nuclear plants.  Upon its formation, ENPM entered into long-term power purchase agreements with the Entergy Wholesale Commodities subsidiaries that own nuclear power plants (generating subsidiaries).  As part of a series of agreements, ENPM agreed to assume and/or otherwise service the existing power purchase agreements that were in effect between the generating subsidiaries and their customers.  ENPM’s functions include origination of new energy and capacity transactions and generation scheduling.

Entergy Nuclear, Inc. can pursue service agreements with other nuclear power plant owners who seek the advantages of Entergy’s scale and expertise but do not necessarily want to sell their assets.  Services provided by either Entergy Nuclear, Inc. or other Entergy Wholesale Commodities subsidiaries include engineering, operations and maintenance, fuel procurement, management and supervision, technical support and training, administrative support, and other managerial or technical services required to operate, maintain, and decommission nuclear electric power facilities.  Entergy Nuclear, Inc. provided decommissioning services for the Maine Yankee nuclear power plant.

TLG Services, a subsidiary of Entergy Nuclear, Inc., offers decommissioning, engineering, and related services to nuclear power plant owners.

In September 2003, Entergy agreed to provide plant operation support services for the 800 MW Cooper Nuclear Station located near Brownville, Nebraska.  The original contract was to expire in 2014 corresponding to the original operating license life of the plant.  In 2006 an Entergy subsidiary signed an agreement to provide license renewal services for the Cooper Nuclear Station.  The Cooper Nuclear Station received its license renewal from the NRC in November 2010.  In 2010 an Entergy subsidiary signed an agreement to extend the management support services to Cooper Nuclear Station by 15 years, through January 2029. In 2017 the contract was amended so that it could not be terminated prior to December 21, 2022.

Regulation of Entergy’s Business

Federal Power Act

The Federal Power Act provides the FERC the authority to regulate:

•
the transmission and wholesale sale of electric energy in interstate commerce;
•
the reliability of the high voltage interstate transmission system through reliability standards;
•
sale or acquisition of certain assets;
•
securities issuances;
•
the licensing of certain hydroelectric projects;
•
certain other activities, including accounting policies and practices of electric and gas utilities; and
•
changes in control of FERC jurisdictional entities or rate schedules.


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The Federal Power Act gives the FERC jurisdiction over the rates charged by System Energy for Grand Gulf capacity and energy provided to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans and over some of the rates charged by Entergy Arkansas and Entergy Louisiana.  The FERC also regulates the provisions of the System Agreement, including the rates, and the provision of transmission service to wholesale market participants. The FERC also regulates the MISO RTO, an independent entity that maintains functional control over the combined transmission systems of its members and administers wholesale energy, capacity, and ancillary services markets for market participants in the MISO region, including the Utility operating companies. FERC regulation of the MISO RTO includes regulation of the design and implementation of the wholesale markets administered by the MISO RTO, as well as the rates, terms, and conditions of open access transmission service over the member systems and the allocation of costs associated with transmission upgrades.

Entergy Arkansas holds a FERC license that expires in 2053 for two hydroelectric projects totaling 70 MW of capacity.

State Regulation

Utility

Entergy Arkansas is subject to regulation by the APSC, which includes the authority to:

•
oversee utility service;
•
set retail rates;
•
determine reasonable and adequate service;
•
control leasing;
•
control the acquisition or sale of any public utility plant or property constituting an operating unit or system;
•
set rates of depreciation;
•
issue certificates of convenience and necessity and certificates of environmental compatibility and public need; and
•
regulate the issuance and sale of certain securities.

Additionally, Entergy Arkansas serves a limited number of retail customers in Tennessee. Pursuant to recent legislation enacted in Tennessee, Entergy Arkansas is subject to complaints before the Tennessee Regulatory Authority only if it fails to treat its retail customers in Tennessee in the same manner as its retail customers in Arkansas. Additionally, Entergy Arkansas maintains limited facilities in Missouri but does not provide retail electric service to customers in Missouri. Although Entergy Arkansas obtained a certificate with respect to its Missouri facilities, Entergy Arkansas is not subject to the retail rate or regulatory scheme in Missouri.

Entergy Louisiana’s electric and gas business is subject to regulation by the LPSC as to:

•
utility service;
•
retail rates and charges;
•
certification of generating facilities and certain transmission projects;
•
certification of power or capacity purchase contracts;
•
audit of the fuel adjustment charge, environmental adjustment charge, and avoided cost payment to Qualifying Facilities;
•
integrated resource planning;
•
utility mergers and acquisitions and other changes of control; and
•
depreciation and other matters.


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Entergy Mississippi is subject to regulation by the MPSC as to the following:

•
utility service;
•
service areas;
•
facilities;
•
certification of generating facilities and certain transmission projects;
•
retail rates;
•
fuel cost recovery;
•
depreciation rates; and
•
mergers and changes of control.

Entergy Mississippi is also subject to regulation by the APSC as to the certificate of environmental compatibility and public need for the Independence Station, which is located in Arkansas.

Entergy New Orleans is subject to regulation by the City Council as to the following:

•
utility service;
•
retail rates and charges;
•
standards of service;
•
depreciation and other matters;
•
issuance and sale of certain securities; and
•
mergers and changes of control.

To the extent authorized by governing legislation, Entergy Texas is subject to the original jurisdiction of the municipal authorities of a number of incorporated cities in Texas with appellate jurisdiction over such matters residing in the PUCT.  Entergy Texas is also subject to regulation by the PUCT as to:

•
retail rates and service in unincorporated areas of its service territory, and in municipalities that have ceded jurisdiction to the PUCT;
•
customer service standards;
•
certification of certain transmission and generation projects; and
•
extensions of service into new areas.

Regulation of the Nuclear Power Industry

Atomic Energy Act of 1954 and Energy Reorganization Act of 1974

Under the Atomic Energy Act of 1954 and the Energy Reorganization Act of 1974, the operation of nuclear plants is heavily regulated by the NRC, which has broad power to impose licensing and safety-related requirements.  The NRC has broad authority to impose fines or shut down a unit, or both, depending upon its assessment of the severity of the situation, until compliance is achieved.  Entergy Arkansas, Entergy Louisiana, and System Energy, as owners of all or portions of ANO, River Bend and Waterford 3, and Grand Gulf, respectively, and Entergy Operations, as the licensee and operator of these units, are subject to the jurisdiction of the NRC.  Entergy subsidiaries in the Entergy Wholesale Commodities segment are subject to the NRC’s jurisdiction as the owners and operators of Pilgrim, Indian Point Energy Center, Vermont Yankee, and Palisades.  Substantial capital expenditures, increased operating expenses, and/or higher decommissioning costs at Entergy’s nuclear plants because of revised safety requirements of the NRC could be required in the future.


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Nuclear Waste Policy Act of 1982

Spent Nuclear Fuel

Under the Nuclear Waste Policy Act of 1982, the DOE is required, for a specified fee, to construct storage facilities for, and to dispose of, all spent nuclear fuel and other high-level radioactive waste generated by domestic nuclear power reactors.  Entergy’s nuclear owner/licensee subsidiaries have been charged fees for the estimated future disposal costs of spent nuclear fuel in accordance with the Nuclear Waste Policy Act of 1982.  The affected Entergy companies entered into contracts with the DOE, whereby the DOE is to furnish disposal services at a cost of one mill per net kWh generated and sold after April 7, 1983, plus a one-time fee for generation prior to that date.  Entergy Arkansas is the only one of the Utility operating companies that generated electric power with nuclear fuel prior to that date and has a recorded liability as of December 31, 2017 of $183.3 million for the one-time fee.  Entergy accepted assignment of the Pilgrim, FitzPatrick and Indian Point 3, Indian Point 1 and Indian Point 2, Vermont Yankee, Palisades, and Big Rock Point spent fuel disposal contracts with the DOE held by their previous owners.  The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of the sale of the plant, completed in March 2017. The previous owners have paid or retained liability for the fees for all generation prior to the purchase dates of those plants.  The fees payable to the DOE may be adjusted in the future to assure full recovery.  Entergy considers all costs incurred for the disposal of spent nuclear fuel, except accrued interest, to be proper components of nuclear fuel expense.  Provisions to recover such costs have been or will be made in applications to regulatory authorities for the Utility plants.  Entergy’s total spent fuel fees to date, including the one-time fee liability of Entergy Arkansas, have surpassed $1.6 billion (exclusive of amounts relating to Entergy plants that were paid or are owed by prior owners of those plants).

The permanent spent fuel repository in the U.S. has been legislated to be Yucca Mountain, Nevada. The DOE is required by law to proceed with the licensing (the DOE filed the license application in June 2008) and, after the license is granted by the NRC, proceed with the repository construction and commencement of receipt of spent fuel. Because the DOE has not begun accepting spent fuel, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts. The DOE continues to delay meeting its obligation. Specific steps were taken to discontinue the Yucca Mountain project, including a motion to the NRC to withdraw the license application with prejudice and the establishment of a commission to develop recommendations for alternative spent fuel storage solutions. In August 2013 the U.S. Court of Appeals for the D.C. Circuit ordered the NRC to continue with the Yucca Mountain license review, but only to the extent of funds previously appropriated by Congress for that purpose and not yet used. Although the NRC completed the safety evaluation report for the license review in 2015, the previously appropriated funds are not sufficient to complete the review, including required hearings. The government has taken no effective action to date related to the recommendations of the appointed spent fuel study commission. Accordingly, large uncertainty remains regarding the time frame under which the DOE will begin to accept spent fuel from Entergy’s facilities for storage or disposal. As a result, continuing future expenditures will be required to increase spent fuel storage capacity at Entergy’s nuclear sites.

Following the defunding of the Yucca Mountain spent fuel repository program, the National Association of Regulatory Utility Commissioners and others sued the government seeking cessation of collection of the one mill per net kWh generated and sold after April 7, 1983 fee. In November 2013 the D.C. Circuit Court of Appeals ordered the DOE to submit a proposal to Congress to reset the fee to zero until the DOE complies with the Nuclear Waste Policy Act or Congress enacts an alternative waste disposal plan. In January 2014 the DOE submitted the proposal to Congress under protest, and also filed a petition for rehearing with the D.C. Circuit. The petition for rehearing was denied. The zero spent fuel fee went into effect prospectively in May 2014. Management cannot predict the potential timing or magnitude of future spent fuel fee revisions that may occur.

As a result of the DOE’s failure to begin disposal of spent nuclear fuel in 1998 pursuant to the Nuclear Waste Policy Act of 1982 and the spent fuel disposal contracts, Entergy’s nuclear owner/licensee subsidiaries have incurred and will continue to incur damages. These subsidiaries have been, and continue to be, involved in litigation to recover the damages caused by the DOE’s delay in performance. Through 2017, Entergy’s subsidiaries won and collected on judgments against the government totaling over $500 million.

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In April 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $29 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case. Also in April 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $44 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case. In June 2015, Entergy Arkansas and System Energy appealed to the U.S. Court of Appeals for the Federal Circuit portions of those decisions relating to cask loading costs. In April 2016 the Federal Circuit issued a decision in both appeals in favor of Entergy Arkansas and System Energy, and remanded the cases back to the U.S. Court of Federal Claims. In June 2016 the U.S. Court of Federal Claims issued a final judgment in the amount of $49 million in favor of System Energy and against the DOE in the second round Grand Gulf damages case, and Entergy received the payment from the U.S. Treasury in August 2016. In July 2016 the U.S. Court of Federal Claims issued a final judgment in the amount of $31 million in favor of Entergy Arkansas and against the DOE in the second round ANO damages case, and Entergy received payment from the U.S. Treasury in October 2016.
 
In May 2015 the U.S. Court of Federal Claims issued a final partial summary judgment on a portion, $21 million, of the claims in the Palisades case. The DOE did not appeal that decision, and Entergy received the payment from the U.S. Treasury in October 2015.

In December 2015 the U.S. Court of Federal Claims issued a judgment in the amount of $81 million in favor of Entergy Nuclear Indian Point 3 and Entergy Nuclear FitzPatrick in the first round Indian Point 3/FitzPatrick damages case, and Entergy received the payment from the U.S. Treasury in June 2016.

In January 2016 the U.S. Court of Federal Claims issued a judgment in the amount of $49 million in favor of Entergy Louisiana and against the DOE in the first round Waterford 3 damages case. In April 2016, Entergy Louisiana appealed to the U.S. Court of Appeals for the Federal Circuit the portion of that decision relating to cask loading costs. After the ANO and Grand Gulf appeal was rendered, the U.S. Court of Appeals for the Federal Circuit remanded the Waterford 3 case back to the U.S. Court of Federal Claims for decision in accordance with the U.S. Court of Appeals ruling on cask loading costs. In August 2016 the U.S. Court of Federal Claims issued a final judgment in the Waterford 3 case in the amount of $53 million, and Entergy Louisiana received the payment from the U.S. Treasury in November 2016.

In April 2016 the U.S. Court of Federal Claims issued a partial judgment in the amount of $42 million in favor of Entergy Louisiana and against the DOE in the first round River Bend damages case, reserving the issue of cask loading costs pending resolution of the appeal on the same issues in the Entergy Arkansas and System Energy cases. Entergy Louisiana received payment from the U.S. Treasury in August 2016. In September 2016 the U.S. Court of Federal Claims issued a further judgment in the River Bend case in the amount of $5 million. Entergy Louisiana received the payment from the U.S. Treasury in January 2017. In May 2017 the U.S. Court of Federal Claims issued a final judgment in the first round River Bend damages case for $0.6 million, awarding certain cask loading costs that had not previously been adjudicated by the court.
    
In May 2016, Entergy Nuclear Vermont Yankee and the DOE entered into a stipulated agreement and the U.S. Court of Federal Claims issued a judgment in the amount of $19 million in favor of Entergy Nuclear Vermont Yankee and against the DOE in the second round Vermont Yankee damages case. Entergy received payment from the U.S. Treasury in June 2016.

In September 2016 the U.S. Court of Federal Claims issued a final judgment in the Entergy Nuclear Palisades case in the amount of $14 million. Entergy Nuclear Palisades received payment from the U.S. Treasury in January 2017.

In October 2016 the U.S. Supreme Court of Federal Claims issued a judgment in the second round Entergy Nuclear Indian Point 2 case in the amount of $34 million. Entergy Nuclear Indian Point 2 received payment from the U.S. Treasury in January 2017.


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Management cannot predict the timing or amount of any potential recoveries on other claims filed by Entergy subsidiaries, and cannot predict the timing of any eventual receipt from the DOE of the U.S. Court of Federal Claims damage awards.

Pending DOE acceptance and disposal of spent nuclear fuel, the owners of nuclear plants are providing their own spent fuel storage.  Storage capability additions using dry casks began operations at Palisades in 1993, at ANO in 1996, at FitzPatrick in 2002, at River Bend in 2005, at Grand Gulf in 2006, at Indian Point and Vermont Yankee in 2008, at Waterford 3 in 2011, and at Pilgrim in 2015.  These facilities will be expanded as needed.  

Nuclear Plant Decommissioning

Entergy Arkansas, Entergy Louisiana, and System Energy are entitled to recover from customers through electric rates the estimated decommissioning costs for ANO, Waterford 3, and Grand Gulf, respectively.  In addition, Entergy Louisiana and Entergy Texas are entitled to recover from customers through electric rates the estimated decommissioning costs for the portion of River Bend subject to retail rate regulation. The collections are deposited in trust funds that can only be used for future decommissioning costs.  Entergy periodically reviews and updates the estimated decommissioning costs to reflect inflation and changes in regulatory requirements and technology, and then makes applications to the regulatory authorities to reflect, in rates, the changes in projected decommissioning costs.

In July 2010 the LPSC approved increased decommissioning collections for Waterford 3 and the Louisiana regulated share of River Bend and in December 2010 the PUCT approved increased decommissioning collections for the Texas share of River Bend to address previously identified funding shortfalls.  In December 2016 the APSC ordered continued collections for decommissioning for ANO 2, while finding that ANO 1’s decommissioning was adequately funded without continued collections. In December 2017 the APSC ordered continued collections for decommissioning for ANO 2, and again found that ANO 1’s decommissioning was adequately funded without continued collections. In September 2016 the NRC issued a 20-year operating license renewal for Grand Gulf. In a 2017 filing at the FERC, System Energy stated that with the renewed operating license, Grand Gulf’s decommissioning trust was sufficiently funded, and proposed (among other things) to cease decommissioning collections for Grand Gulf effective October 1, 2017. The FERC accepted the proposal subject to refund, and appointed a settlement judge to oversee settlement negotiations in the case. Entergy currently believes its decommissioning funding will be sufficient for its nuclear plants subject to retail rate regulation, although decommissioning cost inflation and trust fund performance will ultimately determine the adequacy of the funding amounts.

In November 2016, Entergy entered into an agreement to sell 100% of the membership interest in Entergy Nuclear Vermont Yankee to a subsidiary of NorthStar. Upon closing of the sale, NorthStar will assume ownership of Vermont Yankee and its decommissioning and site restoration trusts, together with complete responsibility for the facility’s decommissioning and site restoration. The sale is subject to certain closing conditions, including approval from the NRC and the State of Vermont Public Utility Commission. See Note 9 to the financial statements for further discussion of Vermont Yankee decommissioning costs and see “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion of the NorthStar transaction.

For the Indian Point 3 and FitzPatrick plants purchased in 2000 from NYPA, NYPA retained the decommissioning trust funds and the decommissioning liabilities with the right to require the Entergy subsidiaries to assume each of the decommissioning liabilities provided that it assigns the corresponding decommissioning trust, up to a specified level, to the Entergy subsidiaries.  In August 2016, Entergy entered into a trust transfer agreement with NYPA to transfer the decommissioning trust funds and decommissioning liabilities for the Indian Point 3 and FitzPatrick plants to Entergy, which was completed in January 2017. In March 2017, Entergy sold the FitzPatrick plant to Exelon, and as part of the transaction, the FitzPatrick decommissioning trust fund, along with the decommissioning obligation for that plant, was transferred to Exelon. The FitzPatrick spent fuel disposal contract was assigned to Exelon as part of the transaction. See Note 14 to the financial statements for discussion of the FitzPatrick sale.


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In March 2017 filings with the NRC were made for certain Entergy subsidiaries’ nuclear plants reporting on decommissioning funding.  Those reports showed that decommissioning funding for each of those nuclear plants met the NRC’s financial assurance requirements.

Additional information with respect to Entergy’s decommissioning costs and decommissioning trust funds is found in Note 9 and Note 16 to the financial statements.

Price-Anderson Act

The Price-Anderson Act requires that reactor licensees purchase and maintain the maximum amount of nuclear liability insurance available and participate in an industry assessment program called Secondary Financial Protection in order to protect the public in the event of a nuclear power plant accident.  The costs of this insurance are borne by the nuclear power industry.  Congress amended and renewed the Price-Anderson Act in 2005 for a term through 2025.  The Price-Anderson Act limits the contingent liability for a single nuclear incident to a maximum assessment of approximately $127.3 million per reactor (with 102 nuclear industry reactors currently participating).  In the case of a nuclear event in which Entergy Arkansas, Entergy Louisiana, System Energy, or an Entergy Wholesale Commodities company is liable, protection is afforded through a combination of private insurance and the Secondary Financial Protection program. In addition to this, insurance for property damage, costs of replacement power, and other risks relating to nuclear generating units is also purchased.  The Price-Anderson Act and insurance applicable to the nuclear programs of Entergy are discussed in more detail in Note 8 to the financial statements.

NRC Reactor Oversight Process

The NRC’s Reactor Oversight Process is a program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response. The NRC evaluates plant performance by analyzing two distinct inputs: inspection findings resulting from the NRC’s inspection program and performance indicators reported by the licensee. The evaluations result in the placement of each plant in one of the NRC’s Reactor Oversight Process Action Matrix columns: “licensee response column,” or Column 1, “regulatory response column,” or Column 2, “degraded cornerstone column,” or Column 3, and “multiple/repetitive degraded cornerstone column,” or Column 4. Plants in Column 1 are subject to normal NRC inspection activities. Plants in Column 2, Column 3, or Column 4 are subject to progressively increasing levels of inspection by the NRC with, in general, progressively increasing levels of associated costs. Waterford 3, River Bend, Indian Point 2, Indian Point 3, and Palisades are in Column 1. Grand Gulf is in Column 2. ANO 1 and 2 are in Column 4, and are subject to an extensive set of required NRC inspections. Pilgrim is also in Column 4 and is subject to an extensive, but limited, set of required NRC inspections. See Note 8 to the financial statements for further discussion of the placement of ANO 1 and 2, and Pilgrim in Column 4 of the NRC’s matrix.

Environmental Regulation

Entergy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters.  Management believes that Entergy’s businesses are in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted below.  Because environmental regulations are subject to change, future compliance requirements and costs cannot be precisely estimated.  Except to the extent discussed below, at this time compliance with federal, state, and local provisions regulating the discharge of materials into the environment, or otherwise protecting the environment, is incorporated into the routine cost structure of Entergy’s businesses and is not expected to have a material effect on their competitive position, results of operations, cash flows, or financial position.


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Clean Air Act and Subsequent Amendments

The Clean Air Act and its amendments establish several programs that currently or in the future may affect Entergy’s fossil-fueled generation facilities and, to a lesser extent, certain operations at nuclear and other  facilities.  Individual states also operate similar independent state programs or delegated federal programs that may include requirements more stringent than federal regulatory requirements.  These programs include:

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New source review and preconstruction permits for new sources of criteria air pollutants, greenhouse gases, and significant modifications to existing facilities;
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Acid rain program for control of sulfur dioxide (SO 2 ) and nitrogen oxides (NO x );
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Nonattainment area programs for control of criteria air pollutants, which could include fee assessments for air pollutant emission sources under Section 185 of the Clean Air Act if attainment is not reached in a timely manner;
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Hazardous air pollutant emissions reduction programs;
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Interstate Air Transport;
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Operating permit programs and enforcement of these and other Clean Air Act programs;
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Regional Haze programs; and
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New and existing source standards for greenhouse gas emissions.

New Source Review (NSR)

Preconstruction permits are required for new facilities and for existing facilities that undergo a modification that results in a significant net emissions increase and is not classified as routine repair, maintenance, or replacement.  Units that undergo certain non-routine modifications must obtain a permit modification and may be required to install additional air pollution control technologies. Entergy has an established process for identifying modifications requiring additional permitting approval and follows the regulations and associated guidance provided by the states and the federal government with regard to the determination of routine repair, maintenance, and replacement.  In recent years, however, the EPA has begun an enforcement initiative, aimed primarily at coal plants, to identify modifications that it does not consider routine for which the unit did not obtain a modified permit.  Various courts and the EPA have been inconsistent in their judgments regarding modifications that are considered routine and on other legal issues that affect this program.

In February 2011, Entergy received a request from the EPA for several categories of information concerning capital and maintenance projects at the White Bluff and Independence facilities, both located in Arkansas, in order to determine compliance with the Clean Air Act, including NSR requirements and air permits issued by the Arkansas Department of Environmental Quality. In August 2011, Entergy’s Nelson facility, located in Louisiana, received a similar request for information from the EPA. In September 2015 a subsequent request for similar information was received for the White Bluff facility. Entergy responded to all requests. None of these EPA requests for information alleged that the facilities were in violation of law.

In January 2018 and February 2018, Entergy Arkansas, Entergy Mississippi, Entergy Power, and other co-owners received 60-day notice of intent to sue letters from the Sierra Club and the National Parks Conservation Association concerning allegations of violations of new source review and permitting provisions of the Clean Air Act at the Independence and White Bluff coal-burning units, respectively. Entergy is reviewing these claims and will respond accordingly.
 

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Ozone Nonattainment

Entergy Texas operates one fossil-fueled generating facility (Lewis Creek) and is in the process of permitting and constructing one fossil-fueled facility (Montgomery Count Power Station) in a geographic area that is not in attainment with the currently-enforced national ambient air quality standards (NAAQS) for ozone.  The nonattainment area that affects Entergy Texas is the Houston-Galveston-Brazoria area.  Areas in nonattainment are classified as “marginal,” “moderate,” “serious,” or “severe.”  When an area fails to meet the ambient air standard, the EPA requires state regulatory authorities to prepare state implementation plans meant to cause progress toward bringing the area into attainment with applicable standards.

The Houston-Galveston-Brazoria area was originally classified as “moderate” nonattainment under the 1997 8-hour ozone standard with an attainment date of June 15, 2010.  In June 2007 the Texas governor petitioned the EPA to reclassify Houston-Galveston-Brazoria from “moderate” to “severe” and the EPA granted the request in October 2008.  In February 2015 the Texas Commission on Environmental Quality (TCEQ) submitted a request to the EPA for a finding that the Houston-Galveston-Brazoria area is in attainment with the 1997 8-hour ozone standard. The EPA issued this finding in December 2015. In April 2015 the EPA revoked the 1997 ozone NAAQS and in May 2016, the EPA issued a proposed rule approving a substitute for the Houston-Galveston-Brazoria area. This redesignation indicates that the area has attained the revoked 1997 8-hour ozone NAAQS due to permanent and enforceable emission reductions and that it will maintain that NAAQS for 10 years from the date of the approval. Final approval, which was effective in December 2016, resulted in the area no longer being subject to any remaining anti-backsliding or non-attainment new source review requirements associated with the revoked 1997 NAAQS.

In March 2008 the EPA revised the NAAQS for ozone, creating the potential for additional counties and parishes in which Entergy operates to be placed in nonattainment status.  In April 2012 the EPA released its final non-attainment designations for the 2008 ozone NAAQS.  In Entergy’s utility service area, the Houston-Galveston-Brazoria, Texas; Baton Rouge, Louisiana; and Memphis, Tennessee/Mississippi/Arkansas areas were designated as in “marginal” nonattainment. In August 2015 and January 2016, the EPA proposed determinations that the Baton Rouge and Memphis areas had attained the 2008 standard. In May 2016 the EPA finalized those determinations and extended the Houston-Galveston-Brazoria area’s attainment date for the 2008 Ozone standard to July 20, 2016 and reclassified the Baton Rouge area as attainment for ozone under the 2008 8-hour ozone standard. In December 2016 the EPA determined that the Houston-Galveston-Brazoria area had failed to attain the 2008 ozone standard by the 2016 attainment date. This finding reclassifies the Houston-Galveston-Brazoria area from marginal to “moderate.”

In October 2015 the EPA issued a final rule lowering the primary and secondary NAAQS for ozone to a level of 70 parts per billion. States were required to assess their attainment status and recommend designations to the EPA. In January 2018 the EPA proposed that the following counties and parishes in Entergy’s service territory be listed as in non-attainment: in Louisiana, Ascension Parish, East Baton Rouge Parish, West Baton Rouge Parish, Iberville Parish, and Livingston Parish; in Texas, Montgomery County. In addition to Lewis Creek in Montgomery County, Texas, Entergy owns or operates fossil-fueled generating units in East Baton Rouge Parish (Louisiana Station) and in Iberville Parish (Willow Glen), Louisiana. The EPA’s final designations are pending. Entergy will continue to work with state environmental agencies on appropriate methods for assessing attainment and non-attainment with the new standard and, where necessary, in planning for compliance. Following designations by the EPA, states will be required to develop plans intended to return non-attainment areas to a condition of attainment. The timing for that action depends largely on the severity of non-attainment in a given area.

Potential SO 2   Nonattainment

The EPA issued a final rule in June 2010 adopting an SO 2 1-hour national ambient air quality standard of 75 parts per billion.  The EPA designations for counties in attainment and nonattainment were originally due in June 2012, but the EPA indicated that it would delay designations except for those areas with existing monitoring data from 2009 to 2011 indicating violations of the new standard. In August 2013 the EPA issued final designations for these areas. In Entergy’s utility service territory, only St. Bernard Parish in Louisiana is designated as non-attainment for the SO 2

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1-hour national ambient air quality standard of 75 parts per billion. Entergy does not have a generation asset in that parish. In July 2016 the EPA finalized another round of designations for areas with newly monitored violations of the 2010 standard and those with stationary sources that emit over a threshold amount of SO 2 . Counties and parishes in which Entergy owns and operates fossil generating facilities that were included in this round of designations include Independence County and Jefferson County, Arkansas and Calcasieu Parish, Louisiana. Independence County and Calcasieu Parish were designated “unclassifiable,” and Jefferson County was designated “unclassifiable/attainment.” In August 2015 the EPA issued a final data requirement rule for the SO 2 1-hour standard. This rule will guide the process to be followed by the states and the EPA to determine the appropriate designation for the remaining unclassified areas in the country. In August 2017 the EPA issued a letter indicating that East Baton Rouge and St. Charles parishes would be designated by December 31, 2020 as monitors were installed to determine compliance. In January 2018 the EPA published a final rule designating a third round of attainment and non-attainment areas. Evangeline Parish, Louisiana, was designated non-attainment. Entergy does not have a generation asset in that parish. Additional capital projects or operational changes may be required to continue operating Entergy facilities in areas eventually designated as in non-attainment of the standard or designated as contributing to non-attainment areas.

Hazardous Air Pollutants

The EPA released the final Mercury and Air Toxics Standard (MATS) rule in December 2011, which had a compliance date, with a widely granted one-year extension, of April 2016. The required controls have been installed and are operational at all affected Entergy units.

Cross-State Air Pollution

In March 2005 the EPA finalized the Clean Air Interstate Rule (CAIR), which was intended to reduce SO 2 and NO x emissions from electric generation plants in order to improve air quality in twenty-nine eastern states.  The rule required a combination of capital investment to install pollution control equipment and increased operating costs through the purchase of emission allowances.  Entergy began implementation in 2007, including installation of controls at several facilities and the development of an emission allowance procurement strategy.

Based on several court challenges, CAIR and its subsequent versions, now known as the Cross State Air Pollution Rule (CSAPR), have been remanded to and modified by the EPA on multiple occasions. In July 2015 the D.C. Circuit invalidated the allowance budgets created by the EPA for several states, including Texas, and remanded that portion of the rule to the EPA for further action. The court did not stay or vacate the rule in the interim. CSAPR remains in effect.

The CSAPR Phase 1 implementation became effective January 1, 2015. Entergy has developed a compliance plan that could, over time, include both installation of controls at certain facilities and an emission allowance procurement strategy.

In September 2016 the EPA finalized the CSAPR Update Rule to address interstate transport for the 2008 ozone NAAQS. Starting in 2017 the final rule will require reductions in summer nitrogen oxides (NO x ) emissions. Several states, including Arkansas and Texas, filed a challenge to the Update Rule, which remains pending.

Regional Haze

In June 2005 the EPA issued its final Clean Air Visibility Rule (CAVR) regulations that potentially could result in a requirement to install SO 2 and NO x pollution control technology as Best Available Retrofit Control Technology (BART) to continue operating certain of Entergy’s fossil generation units.  The rule leaves certain CAVR determinations to the states.  

In Arkansas, the Arkansas Department of Environmental Quality prepared a state implementation plan (SIP) for Arkansas facilities to implement its obligations under the CAVR.   In April 2012 the EPA finalized a decision

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addressing the Arkansas Regional Haze SIP, in which it disapproved a large portion of the Arkansas plan, including the emission limits for NO x and SO 2 at White Bluff.  In April 2015 the EPA published a proposed federal implementation plan (FIP) for Arkansas, taking comment on requiring installation of scrubbers and low NO x burners to continue operating both units at the White Bluff plant and both units at the Independence plant and NO x controls to continue operating the Lake Catherine plant. Entergy filed comments by the deadline in August 2015. Among other comments, including opposition to the EPA’s proposed controls on the Independence units, Entergy proposed to meet more stringent SO 2 and NO x limits at both White Bluff and Independence within three years of the effective date of the final FIP and to cease the use of coal at the White Bluff units at a later date.

In September 2016 the EPA published the final Arkansas Regional Haze FIP. In most respects, the EPA finalized its original proposal but shortened the time for compliance for installation of the NO x controls. The FIP required an emission limitation consistent with SO 2 scrubbers at both White Bluff and Independence by October 2021 and NO x controls by April 2018. The EPA declined to adopt Entergy’s proposals related to ceasing coal use as an alternative to SO 2 scrubbers for White Bluff SO 2 BART. In November 2016, Entergy and other interested parties, including the State of Arkansas, filed petitions for administrative reconsideration and stay at the EPA as well as petitions for judicial review in the U.S. Court of Appeals for the Eighth Circuit. The Eighth Circuit continues to review its prior grant of the government’s motion to hold the appeal litigation in abeyance pending settlement discussions and pending the State’s development of a SIP that, if approved by the EPA, would replace the FIP. The state has proposed its replacement SIP in two parts: Part I considers NO x requirements, and Part II considers SO 2 requirements. The EPA approved the Part I NO x SIP in January 2018. Arkansas has proposed a Part II SIP which is still under consideration at the state level. The public comment period on Part II ended on February 2, 2018.

In Louisiana, Entergy worked with the Louisiana Department of Environmental Quality (LDEQ) and the EPA to revise the Louisiana SIP for regional haze, which was disapproved in part in 2012. The LDEQ submitted a revised SIP in February 2017. In May 2017 the EPA proposed to approve a majority of the revisions. In September 2017 the EPA issued a proposed SIP approval for the Nelson plant, requiring an emission limitation consistent with the use of low-sulfur coal, with a compliance date three years from the effective date of the final EPA approval. The EPA’s final approval decision was issued in December 2017 and is on appeal to the U.S. Court of Appeals for the Fifth Circuit.

New and Existing Source Performance Standards for Greenhouse Gas Emissions

As a part of a climate plan announced in June 2013, the EPA was directed to (i) reissue proposed carbon pollution standards for new power plants by September 20, 2013, with finalization of the rules to occur in a timely manner; (ii) issue proposed carbon pollution standards, regulations, or guidelines, as appropriate, for modified, reconstructed, and existing power plants no later than June 1, 2014; (iii) finalize those rules by no later than June 1, 2015; and (iv) include in the guidelines addressing existing power plants a requirement that states submit to the EPA the implementation plans required under Section 111(d) of the Clean Air Act and its implementing regulations by no later than June 30, 2016. In January 2014 the EPA issued the proposed New Source Performance Standards rule for new sources. In June 2014 the EPA issued proposed standards for existing power plants.  Entergy was actively engaged in the rulemaking process, and submitted comments to the EPA in December 2014. The EPA issued the final rules for both new and existing sources in August 2015, and they were published in the Federal Register in October 2015. The existing source rule, also called the Clean Power Plan, requires states to develop plans for compliance with the EPA’s emission standards. In February 2016 the U.S. Supreme Court issued a stay halting the effectiveness of the rule until the rule is reviewed by the D.C. Circuit and by the U.S. Supreme Court, if further review is granted. In March 2017 the current administration issued an executive order entitled “Promoting Energy Independence and Economic Growth” instructing the EPA to review and then to suspend, revise, or rescind the Clean Power Plan, if appropriate. The EPA subsequently asked the D.C. Circuit to hold the challenges to the Clean Power Plan and the greenhouse gas new source performance standards in abeyance and signed a notice of withdrawal of the proposed federal plan, model trading rules, and the Clean Energy Incentive Program. The court placed the litigation in abeyance in April 2017. The EPA Administrator also sent a letter to the affected governors explaining that states are not currently required to meet Clean Power Plan deadlines, some of which have passed. In October 2017 the EPA proposed a new rule that would repeal the Clean Power Plan on the grounds that it exceeds the EPA’s statutory authority under the Clean Air Act. In December

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2017 the EPA issued an advanced notice of proposed rulemaking regarding section 111(d), seeking comment on the form and content of a replacement for the Clean Power Plan, if one is promulgated. Entergy will continue to be engaged in this rulemaking process.

Potential Legislative, Regulatory, and Judicial Developments

In addition to the specific instances described above, there are a number of legislative and regulatory initiatives concerning air emissions, as well as other media, that are under consideration at the federal, state, and local level.  Because of the nature of Entergy’s business, the imposition of any of these initiatives could affect Entergy’s operations.  Entergy continues to monitor these initiatives and activities in order to analyze their potential operational and cost implications.  These initiatives include:

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designation by the EPA and state environmental agencies of areas that are not in attainment with national ambient air quality standards;
•
introduction of bills in Congress and development of regulations by the EPA proposing further limits on NO x , SO 2 , mercury, and carbon dioxide and other air emissions.  New legislation or regulations applicable to stationary sources could take the form of market-based cap-and-trade programs, direct requirements for the installation of air emission controls onto air emission sources, or other or combined regulatory programs;
•
efforts in Congress or at the EPA to establish a mandatory federal carbon dioxide emission control structure or unit performance standards;
•
revisions to the estimates of the Social Cost of Carbon and its use for regulatory impact analysis of Federal laws and regulations;
•
implementation of the Regional Greenhouse Gas Initiative by several states in the northeastern United States and similar actions in other regions of the United States;
•
efforts on the state and federal level to codify renewable portfolio standards, a clean energy standard, or a similar mechanism requiring utilities to produce or purchase a certain percentage of their power from defined renewable energy sources or energy sources with lower emissions;
•
efforts to develop more stringent state water quality standards, effluent limitations for Entergy’s industry sector, stormwater runoff control regulations, and cooling water intake structure requirements;
•
efforts to restrict the previously-approved continued use of oil-filled equipment containing certain levels of PCBs;
•
efforts by certain external groups to encourage reporting and disclosure of carbon dioxide emissions and risk;
•
the listing of additional species as threatened or endangered, the protection of critical habitat for these species, and developments in the legal protection of eagles and migratory birds; and
•
the regulation of the management, disposal, and beneficial reuse of coal combustion residuals.

Entergy continues to support national legislation that would increase planning certainty for electric utilities while addressing carbon dioxide emissions in a responsible and flexible manner.  By virtue of its proportionally large investment in low-emitting gas-fired and nuclear generation technologies, Entergy has a low overall carbon dioxide emission “intensity,” or rate of carbon dioxide emitted per megawatt-hour of electricity generated.  In anticipation of the imposition of carbon dioxide emission limits on the electric industry in the future, Entergy initiated actions designed to reduce its exposure to potential new governmental requirements related to carbon dioxide emissions.  These voluntary actions included establishment of a formal program to stabilize power plant carbon dioxide emissions at 2000 levels through 2005, and Entergy succeeded in reducing emissions below 2000 levels. Total carbon dioxide emissions representing Entergy’s ownership share of power plants in the United States were approximately 53.2 million tons in 2000 and 35.6 million tons in 2005.  In 2006, Entergy changed its method of calculating emissions to include emissions from controllable power purchases as well as its ownership share of generation.  Entergy established a second formal voluntary program to stabilize power plant carbon dioxide emissions and emissions from controllable power purchases at 20% below 2000 levels through 2010.  In 2011, Entergy extended this commitment through 2020.  Total carbon dioxide emissions representing Entergy’s ownership share of power plants and controllable power purchases in the United States were approximately 46.1 million tons in 2011, 45.5 million tons in 2012, 46.2 million tons in 2013, 42.4 million tons in 2014, 39.5 million tons in 2015, 42.5 million tons in 2016, and 39.9 million tons in 2017. The decrease

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in this number from 2014 to 2015 was largely attributable to the impact on the calculation methodology of the Utility operating companies’ transition into the MISO system. Participation in this system resulted in fewer power purchases being classified as “controllable” and thus included in the calculation of the emissions total.
    
Entergy participates in the M.J. Bradley & Associates’ Annual Benchmarking Air Emissions Report, an annual analysis of the 100 largest U.S. electric power producers. The report is available on the M.J. Bradley website. Entergy’s annual CO 2 emissions audit is also third-party verified, and that certification is made available on the American Carbon Registry website. Entergy participates annually in the Dow Jones Sustainability Index and in 2017 was listed on the North American Index.

Clean Water Act

The 1972 amendments to the Federal Water Pollution Control Act (known as the Clean Water Act) provide the statutory basis for the National Pollutant Discharge Elimination System (NPDES) permit program and the basic structure for regulating the discharge of pollutants from point sources to waters of the United States.  The Clean Water Act requires virtually all discharges of pollutants to waters of the United States to be permitted.  Section 316(b) of the Clean Water Act regulates cooling water intake structures, section 401 of the Clean Water Act requires a water quality certification from the state in support of certain federal actions and approvals, and section 404 regulates the dredge and fill of waters of the United States, including jurisdictional wetlands.

NPDES Permits and Section 401 Water Quality Certifications

NPDES permits are subject to renewal every five years.  Consequently, Entergy is currently in various stages of the data evaluation and discharge permitting process for its power plants.  

For thirteen years, Entergy participated in an administrative permitting process with the New York State Department of Environmental Conservation (NYSDEC) for renewal of the Indian Point 2 and Indian Point 3 discharge permit.  That proceeding recently was settled along with other ongoing proceedings. For a discussion of the recent Indian Point settlement, see “ Entergy Wholesale Commodities Authorization to Operate Indian Point ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

316(b) Cooling Water Intake Structures

The EPA finalized regulations in July 2004 governing the intake of water at large existing power plants employing cooling water intake structures. The rule sought to reduce perceived impacts on aquatic resources by requiring covered facilities to implement technology or other measures to meet EPA-targeted reductions in water use and corresponding perceived aquatic impacts. Entergy, other industry members and industry groups, environmental groups, and a coalition of northeastern and mid-Atlantic states challenged various aspects of the rule. After litigation, the EPA issued a new final 316(b) rule in August 2014. Entergy is developing a compliance plan for each affected facility in accordance with the requirements of the final rule.

Entergy filed a petition for review of the final rule as a co-petitioner with the Utility Water Act Group. The U.S. Court of Appeals for the Second Circuit heard oral argument in September 2017. A decision is expected in 2018.

Coastal Zone Management Act

Before a federal licensing agency (such as the NRC) may issue a major license or permit for an activity within the federally designated coastal zone, the agency must be satisfied that the requirements of the Coastal Zone Management Act (CZMA), as applicable, have been met. In many cases, CZMA requirements are satisfied by the state’s written concurrence with a “consistency determination” filed by the federal license applicant explaining why the activity proposed to be federally licensed is consistent with the state’s coastal management program. For a discussion of the recent Indian Point settlement, including the CZMA proceedings related to Indian Point license renewal, see “ Entergy

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Wholesale Commodities Authorizations to Operate Indian Point ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

Federal Jurisdiction of Waters of the United States

In September 2013 the EPA and the U.S. Army Corps of Engineers announced the intention to propose a rule to clarify federal Clean Water Act jurisdiction over waters of the United States. The announcement was made in conjunction with the EPA’s release of a draft scientific report on the “connectivity” of waters that the agency said would inform the rulemaking. This report was finalized in January 2015. The final rule was published in the Federal Register in June 2015. The rule could significantly increase the number and types of waters included in the EPA’s and the U.S. Army Corps of Engineers’ jurisdiction, which in turn could pose additional permitting and pollutant management burdens on Entergy’s operations. The final rule has been challenged in various federal courts by several parties, including most states. In August 2015 the District Court for North Dakota issued a preliminary injunction staying the new rule in 13 states, including Arkansas. In October 2015 the U.S. Court of Appeals for the Sixth Circuit issued a nationwide stay of the rule. In February 2017 the current administration issued an executive order instructing the EPA and the U.S. Army Corps of Engineers to review the Waters of the United States rule and to revise or rescind, as appropriate. In June 2017 the EPA and the U.S. Army Corps of Engineers released a proposed rule that rescinds the June 2015 rule and recodifies the definition of “waters of the U.S.” that was in effect prior to the 2015 rule. The administration is expected to propose a definition of “waters of the U.S.” at a later date. In January 2018 the Supreme Court determined that the Sixth Circuit lacked jurisdiction over the petition to review the 2015 rule and that the challenges should be heard in the federal district court. The matter has been remanded to the Sixth Circuit, which is expected to lift the nationwide stay. After the Supreme Court decision, the EPA and the U.S. Army Corps of Engineers finalized a rule delaying the applicability date of the 2015 rule to early 2020. In February 2018 the states of Louisiana, Mississippi, and Texas filed suit in Texas federal district court seeking a preliminary injunction of the 2015 rule. Entergy will continue to monitor this rulemaking and litigation.

Groundwater at Certain Nuclear Sites

The NRC requires nuclear power plants to monitor and report regularly the presence of radioactive material in the environment.  Entergy joined other nuclear utilities and the Nuclear Energy Institute in 2006 to develop a voluntary groundwater monitoring and protection program.  This initiative began after detection of very low levels of radioactive material, primarily tritium, in groundwater at several plants in the United States.  Tritium is a radioactive form of hydrogen that occurs naturally and is also a byproduct of nuclear plant operations.  In addition to tritium, other radionuclides have been found in site groundwater at nuclear plants.

As part of the groundwater monitoring and protection program, Entergy has: (1) performed reviews of plant groundwater characteristics (hydrology) and historical records of past events on site that may have potentially impacted groundwater; (2) implemented fleet procedures on how to handle events that could impact groundwater; and (3) installed groundwater monitoring wells and began periodic sampling.  The program also includes protocols for notifying local officials if contamination is found.  To date, radionuclides such as tritium have been detected at Arkansas Nuclear One, Indian Point, Palisades, Pilgrim, Grand Gulf, Vermont Yankee, and River Bend.  Each of these sites has installed groundwater monitoring wells and implemented a program for testing groundwater at the sites for the presence of tritium and other radionuclides.  Based on current information, the concentrations and locations of radionuclides detected at these plants pose no threat to public health or safety, but each site continues to evaluate the results from its groundwater monitoring program.

In February 2016, Entergy disclosed that elevated tritium levels had been detected in samples from several monitoring wells that are part of Indian Point’s groundwater monitoring program.  Investigation of the source of elevated tritium has determined that the source is related to a temporary system to process water in preparation for the regularly scheduled refueling outage at Indian Point 2. The system was secured and is no longer in use and additional measures have been taken to prevent reoccurrence should the system be needed again. In June 2016, Indian Point detected trace amounts of cobalt 58 in a single well. This was associated with the draining and disassembly of a temporary heat

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exchanger operated in support of the Indian Point 2 outage. Oversight by NRC and other federal/state government bodies continues. The NRC has issued a green notice of violation related to the adequacy of Entergy’s controls to prevent the introduction of radioactivity into the site groundwater. Entergy has completed all required corrective actions and expects the NRC to close the notice of violation by March 2018.

Comprehensive Environmental Response, Compensation, and Liability Act of 1980

The Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (CERCLA), authorizes the EPA to mandate clean-up by, or to collect reimbursement of clean-up costs from, owners or operators of sites at which hazardous substances may be or have been released.  Certain private parties also may use CERCLA to recover response costs.  Parties that transported hazardous substances to these sites or arranged for the disposal of the substances are also deemed liable by CERCLA.  CERCLA has been interpreted to impose strict, joint and several liability on responsible parties.  Many states have adopted programs similar to CERCLA.  Entergy subsidiaries in the Utility and Entergy Wholesale Commodities businesses have sent waste materials to various disposal sites over the years, and releases have occurred at Entergy facilities.  In addition, environmental laws now regulate certain of Entergy’s operating procedures and maintenance practices that historically were not subject to regulation.  Some disposal sites used by Entergy subsidiaries have been the subject of governmental action under CERCLA or similar state programs, resulting in site clean-up activities.  Entergy subsidiaries have participated to various degrees in accordance with their respective potential liabilities in such site clean-ups and have developed experience with clean-up costs.  The affected Entergy subsidiaries have established provisions for the liabilities for such environmental clean-up and restoration activities.  Details of potentially material CERCLA and similar state program liabilities are discussed in the “ Other Environmental Matters ” section below.

Coal Combustion Residuals

In June 2010 the EPA issued a proposed rule on coal combustion residuals (CCRs) that contained two primary regulatory options: (1) regulating CCRs destined for disposal in landfills or received (including stored) in surface impoundments as so-called “special wastes” under the hazardous waste program of RCRA Subtitle C; or (2) regulating CCRs destined for disposal in landfills or surface impoundments as non-hazardous wastes under Subtitle D of RCRA.  Under both options, CCRs that are beneficially reused in certain processes would remain excluded from hazardous waste regulation. In April 2015 the EPA published the final CCR rule with the material being regulated under the second scenario presented above - as non-hazardous wastes regulated under RCRA Subtitle D.

The final regulations create new compliance requirements including modified storage, new notification and reporting practices, product disposal considerations, and CCR unit closure criteria.  Entergy believes that on-site disposal options will be available at its facilities, to the extent needed for CCR that cannot be transferred for beneficial reuse. As of December 31, 2017, Entergy’s has recorded asset retirement obligations related to CCR management of $8.6 million, including $3.9 million at Entergy Arkansas, $1.8 million at Entergy Louisiana, $1.1 million at Entergy Mississippi, and $1.3 million at Entergy Texas.

In December 2016 the Water Infrastructure Improvements for the Nation Act (WIIN Act) was signed into law, which authorizes states to regulate coal ash rather than leaving primary enforcement to citizen suit actions. States may submit to the EPA proposals for a permit programs. In September 2017 the EPA agreed to reconsider certain provisions of the CCR rule in light of the WIIN Act. The EPA has not yet initiated a new round of rulemaking and did not extend the existing mid-October 2017 groundwater monitoring deadline. Entergy met the existing monitoring deadline, is monitoring state agency actions, and will participate in the regulatory development process.

In late-2017, Entergy determined that certain in-ground wastewater treatment system recycle ponds at its White Bluff and Independence facilities require management under the new EPA regulations. Entergy is taking action to address the operational and regulatory management of these facilities. Entergy also has monitored levels of constituents in the groundwater monitoring system surrounding its coal combustion residual landfills at these locations that require reporting and additional monitoring. Reporting has occurred as required, and monitoring will continue. Any potential

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requirements for corrective action or operational changes under the new EPA rule are currently being assessed. Moreover, the rule is currently under review at the EPA for potential changes, and the nature and cost of any corrective action requirements may depend, in part, on the outcome of the EPA’s review.

Other Environmental Matters

Entergy Louisiana and Entergy Texas

Entergy Louisiana, as successor in interest to Entergy Gulf States Louisiana, currently is involved in the second phase of the remedial investigation of the Lake Charles Service Center site, located in Lake Charles, Louisiana.  A manufactured gas plant (MGP) is believed to have operated at this site from approximately 1916 to 1931.  Coal tar, a by-product of the distillation process employed at MGPs, apparently was routed to a portion of the property for disposal.  The same area also has been used as a landfill.  In 1999, Entergy Gulf States, Inc. signed a second administrative consent order with the EPA to perform a removal action at the site.  In 2002 approximately 7,400 tons of contaminated soil and debris were excavated and disposed of from an area within the service center.  In 2003 a cap was constructed over the remedial area to prevent the migration of contamination to the surface.  In August 2005 an administrative order was issued by the EPA requiring that a 10-year groundwater study be conducted at this site.  The groundwater monitoring study commenced in January 2006 and is continuing.  The EPA released the second Five Year Review in 2015. The EPA indicated that the current remediation technique was insufficient and that Entergy would need to utilize other remediation technologies on the site. In July 2015, Entergy submitted a Focused Feasibility Study to the EPA outlining the potential remedies and suggesting installation of a waterloo barrier. The estimated cost for this remedy is approximately $2 million. Entergy is awaiting comments and direction from the EPA on the Focused Feasibility Study and potential remedy selection.  In early 2017 the EPA indicated that the new remedial method, a waterloo barrier, may not be necessary and requested revisions to the Focused Feasibility Study. The EPA plans to provide comments on the revised 2017 Focused Feasibility Study in the next Five Year Review in 2020. Entergy is continuing discussions with the EPA regarding the ongoing actions at the site.

Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas

The Texas Commission on Environmental Quality (TCEQ) notified Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas that the TCEQ believes those entities are potentially responsible parties (PRPs) concerning contamination existing at the San Angelo Electric Service Company (SESCO) facility in San Angelo, Texas.  The facility operated as a transformer repair and scrapping facility from the 1930s until 2003.  Both soil and groundwater contamination exists at the site.  Entergy subsidiaries sent transformers to this facility.  Entergy Arkansas, Entergy Louisiana, and Entergy Texas responded to an information request from the TCEQ and continue to cooperate in this investigation.  Entergy Louisiana and Entergy Texas joined a group of PRPs responding to site conditions in cooperation with the State of Texas, creating cost allocation models based on review of SESCO documents and employee interviews, and investigating contribution actions against other PRPs.  Entergy Louisiana and Entergy Texas have agreed to contribute to the remediation of contaminated soil and groundwater at the site in a measure proportionate to those companies’ involvement at the site, while Entergy Arkansas likely will pay a de minimis amount.  Current estimates, although variable depending on ultimate remediation design and performance, indicate that Entergy’s total share of remediation costs likely will be approximately $1.5 million to $2 million.  Remediation activities continue at the site.

Entergy Texas

In December 2016 a transformer inside the Hartburg, Texas Substation had an internal fault resulting in a release of approximately 15,000 gallons of non-PCB mineral oil. Cleanup ensued immediately; however, rain caused much of the oil to spread across the substation yard and into a nearby wetland. The Texas Commission on Environmental Quality (TCEQ) and the National Response Center were immediately notified, and TCEQ responded to the site approximately two hours after the cleanup was initiated. The remediation liability is estimated at $2.2 million; however, this number could fluctuate depending on the remediation extent and wetland mitigation requirements. In July 2017,

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Entergy entered into the Voluntary Cleanup Program with TCEQ. Additional direction is expected from TCEQ regarding final remediation requirements for the site.

Entergy

In May 2015 a transformer at the Indian Point facility failed, resulting in a fire and the release of non-PCB oil to the ground surface. The fire was extinguished by the facility’s fire deluge system. No injuries occurred due to the transformer failure or company response. An estimated 3,000 gallons of oil were released into the facility’s discharge canal and the environment surrounding the transformer and discharge canal, including the Hudson River, as a result of the failure, fire, and fire suppression. Once the fire was extinguished, Indian Point personnel and contractors began recovering free-product from the damaged transformer, the transformer containment moat, and the area surrounding the transformer. The United States Coast Guard designated Entergy as the responsible party under the Oil Pollution Act of 1990 and assessed a $1,000 civil penalty for the discharge of oil into navigable waters. As required, Entergy established a claims process including a voluntary hotline. Entergy received no reports to the voluntary hotline or claims under the established claims process. In September 2016, Indian Point personnel identified an oil sheen in the discharge canal. Further investigation revealed that an estimated 600 gallons of lubricating oil had leaked from the Indian Point 3 turbine system. The leaking component has been taken out of service and no oil has been discovered in the Hudson River. In October 2016 the New York Department of Environmental Conservation issued two notices of violation, one for each of these events, and a proposed order on consent for the 2015 event. In January 2017, Entergy and the New York Department of Environmental Conservation resolved this matter with an order on consent. Pursuant to the order, Entergy paid approximately $600 thousand in civil penalties, natural resource damages, and oversight costs. Additionally, Entergy repaired a section of the discharge canal wall and will conduct daily visual inspections of the discharge canal wall to help identify additional material erosion or material structural deficiencies. Entergy has completed all compliance obligations under the consent order and the Department of Environmental Conservation closed the matter in December 2017.

Litigation

Entergy uses legal and appropriate means to contest litigation threatened or filed against it, but certain states in which Entergy operates have proven to be unusually litigious environments.  Judges and juries in Louisiana, Mississippi, and Texas have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and business tort cases.  The litigation environment in these states poses a significant business risk to Entergy.

Ratepayer and Fuel Cost Recovery Lawsuits   (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

Mississippi Attorney General Complaint

See Note 2 to the financial statements for a discussion of this proceeding.
 
Asbestos Litigation   (Entergy Arkansas, Entergy Louisiana, Entergy New Orleans, and Entergy Texas)

See Note 8 to the financial statements for a discussion of this litigation.

Employment and Labor-related Proceedings (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

See Note 8 to the financial statements for a discussion of these proceedings.

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Employees

Employees are an integral part of Entergy’s commitment to serving customers.  As of December 31, 2017 , Entergy subsidiaries employed 13,504 people.

Utility:
 

Entergy Arkansas
1,278

Entergy Louisiana
1,713

Entergy Mississippi
737

Entergy New Orleans
274

Entergy Texas
616

System Energy
—

Entergy Operations
3,361

Entergy Services
3,264

Entergy Nuclear Operations
2,211

Other subsidiaries
50

Total Entergy
13,504


Approximately 4,600 employees are represented by the International Brotherhood of Electrical Workers, the Utility Workers Union of America, the International Brotherhood of Teamsters, the United Government Security Officers of America, and the International Union, Security, Police, Fire Professionals of America.

Availability of SEC filings and other information on Entergy’s website

Entergy electronically files reports with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxies, and amendments to such reports.  The public may read and copy any materials that Entergy files with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an internet site that contains reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC at http://www.sec.gov.

Entergy uses its website, http://www.entergy.com, as a routine channel for distribution of important information, including news releases, analyst presentations and financial information.  Filings made with the SEC are posted and available without charge on Entergy’s website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.  These filings include annual and quarterly reports on Forms 10-K and 10-Q (including related filings in XBRL format) and current reports on Form 8-K; proxy statements; and any amendments to those reports or statements.  All such postings and filings are available on Entergy’s Investor Relations website free of charge.  Entergy is providing the address to its internet site solely for the information of investors and does not intend the address to be an active link.  The contents of the website are not incorporated into this report.



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RISK FACTORS

Investors should review carefully the following risk factors and the other information in this Form 10-K.  The risks that Entergy faces are not limited to those in this section.  There may be additional risks and uncertainties (either currently unknown or not currently believed to be material) that could adversely affect Entergy’s financial condition, results of operations, and liquidity.  See “ FORWARD-LOOKING INFORMATION .”

Utility Regulatory Risks

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

The terms and conditions of service, including electric and gas rates, of the Utility operating companies and System Energy are determined through regulatory approval proceedings that can be lengthy and subject to appeal that could result in delays in effecting rate changes and uncertainty as to ultimate results.
 
The rates that the Utility operating companies and System Energy charge reflect their capital expenditures, operations and maintenance costs, allowed rates of return, financing costs, and related costs of service.  These rates significantly influence the financial condition, results of operations, and liquidity of Entergy and each of the Utility operating companies and System Energy.  These rates are determined in regulatory proceedings and are subject to periodic regulatory review and adjustment, including adjustment upon the initiative of a regulator or affected stakeholders.

In addition, regulators may initiate proceedings to investigate the prudence of costs in the Utility operating companies’ base rates and examine, among other things, the reasonableness or prudence of the companies’ operation and maintenance practices, level of expenditures (including storm costs and costs associated with capital projects), allowed rates of return and rate base, proposed resource acquisitions, and previously incurred capital expenditures that the operating companies seek to place in rates.  The regulators may disallow costs subject to their jurisdiction found not to have been prudently incurred or found not to have been incurred in compliance with applicable tariffs, creating some risk to the ultimate recovery of those costs.  Regulatory proceedings relating to rates and other matters typically involve multiple parties seeking to limit or reduce rates.  Traditional base rate proceedings, as opposed to formula rate plans, generally have long timelines, are primarily based on historical costs, and may or may not be limited in scope or duration by statute. The length of these base rate proceedings can cause the Utility operating companies and System Energy to experience regulatory lag in recovering costs through rates.  Decisions are typically subject to appeal, potentially leading to additional uncertainty associated with rate case proceedings. 

The base rates of Entergy Texas are established largely in traditional base rate case proceedings. Apart from base rate proceedings, Entergy Texas has also filed to use rate riders to recover the revenue requirements associated with certain authorized historical costs. For example, Entergy Texas has recovered distribution-related capital investments through the distribution cost recovery factor rider mechanism, transmission-related capital investments and certain non-fuel MISO charges through the transmission cost recovery factor rider mechanism, and MISO fuel and energy-related costs through the fixed fuel factor mechanism. Entergy Texas is also required to make a filing every three years, at a minimum, reconciling its fuel and purchased power costs and fuel factor revenues. In the course of this reconciliation, the PUCT determines whether eligible fuel and fuel-related expenses and revenues are necessary and reasonable, and makes a prudence finding for each of the fuel-related contracts for the reconciliation period.

Between base rate cases, Entergy Arkansas and Entergy Mississippi are able to adjust base rates annually through formula rate plans that utilize a forward test year (Entergy Arkansas) or forward-looking features (Entergy Mississippi). In response to Entergy Arkansas’s application for a general change in rates in 2015, the APSC approved the formula rate plan tariff proposed by Entergy Arkansas including its use of a projected year test period and an initial five-year term. The initial five-year term expires in 2021 unless Entergy Arkansas requests, and the APSC approves, the extension of the formula rate plan tariff for an additional five years through 2026. In the event that Entergy Arkansas’s formula rate plan is terminated or is not extended beyond the initial term, Entergy Arkansas could file an

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application for a general change in rates that may include a request for continued regulation under a formula rate review mechanism. If Entergy Mississippi’s formula rate plan is terminated, it would revert to the more traditional rate case environment or seek approval of a new formula rate plan. Entergy Arkansas and Entergy Mississippi recover fuel and purchased energy and certain non-fuel costs through other APSC-approved and MPSC-approved tariffs, respectively.

Entergy Louisiana historically sets electric base rates annually through a formula rate plan using an historic test year. The form of the formula rate plan, on a combined basis, was approved in connection with the business combination of Entergy Louisiana and Entergy Gulf States Louisiana and largely followed the formula rate plans that were approved by the LPSC in connection with the full electric base rate cases filed by those companies in February 2013. The formula rate plan was approved for continued use through the test year 2016 filing and included a cap in cost of service increases at a cumulative total of $30 million through the formula rate plan cycle, which cap was not reached. The LPSC also approved in the business combination Entergy Louisiana’s continuation of a mechanism to recover non-fuel MISO-related costs, which are calculated separately from the formula rate plan requirements, but embedded in the formula rate plan factor applied on customer bills. This recovery mechanism expired following the 2015 test year, but was renewed for the 2016 test year. MISO fuel and energy-related costs are recoverable in Entergy Louisiana’s fuel adjustment clause. The formula rate plan includes exceptions from the rate cap and sharing requirements for certain large capital investment projects, including acquisition or construction of generating facilities, as well as purchase power agreements approved by the LPSC, among other items. In August 2017, Entergy Louisiana filed to extend the formula rate plan for an additional three years and to reset rates to the authorized mid-point return on equity of 9.95%. The filing also seeks certain modifications to the formula rate plan, including a narrower, 80 basis points earnings sharing bandwidth and implementation of a rider to recover certain transmission-related investments, when those investments begin delivering benefits to customers. In the event that the electric formula rate plan is not renewed or extended, Entergy Louisiana would revert to the more traditional rate case environment.

Entergy New Orleans previously operated under a formula rate plan that ended with the 2011 test year. Currently, based on a settlement agreement approved by the City Council, with limited exceptions, no action may be taken with respect to Entergy New Orleans’s base rates until rates are implemented from a base rate case that must be filed for its electric and gas operations in 2018. The limited exceptions include implementation of the final year of a four-year phased-in rate increase for its Algiers operations in the Fifteenth Ward of the City of New Orleans and certain exceptional cost increases or decreases in its base revenue requirement.

The rates of System Energy are established by the FERC, and the costs allowed to be charged pursuant to these rates are, in turn, passed through to the participating Utility operating companies through the Unit Power Sales Agreement, which allows monthly adjustments to reflect the current operating costs of, and investment in, Grand Gulf.

The Utility operating companies and System Energy, and the energy industry as a whole, have experienced a period of rising costs and investments, and an upward trend in spending, especially with respect to infrastructure investments, which is likely to continue in the foreseeable future and could result in more frequent rate cases and requests for, and the continuation of, cost recovery mechanisms.  For information regarding rate case proceedings and formula rate plans applicable to the Utility operating companies, see Note 2 to the financial statements.

The Utility operating companies recover fuel, purchased power, and associated costs through rate mechanisms that are subject to risks of delay or disallowance in regulatory proceedings.

The Utility operating companies recover their fuel, purchased power, and associated costs from their customers through rate mechanisms subject to periodic regulatory review and adjustment.  Because regulatory review can result in the disallowance of incurred costs found not to have been prudently incurred, including the cost of replacement power purchased when generators experience outages, with the possibility of refunds to ratepayers, there exists some risk to the ultimate recovery of those costs.  Regulators may also initiate proceedings to investigate the continued usage or the adequacy and operation of the fuel and purchased power recovery clauses of the Utility operating companies and, therefore, there can be no assurance that existing recovery mechanisms will remain unchanged or in effect at all.


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The Utility operating companies’ cash flows can be negatively affected by the time delays between when gas, power, or other commodities are purchased and the ultimate recovery from customers of the costs in rates.  On occasion, when the level of incurred costs for fuel and purchased power rises very dramatically, some of the Utility operating companies may agree to defer recovery of a portion of that period’s fuel and purchased power costs for recovery at a later date, which could increase the near-term working capital and borrowing requirements of those companies.  For a description of fuel and purchased power recovery mechanisms and information regarding the regulatory proceedings for fuel and purchased power costs recovery, see Note 2 to the financial statements.
 
There remains uncertainty regarding the effect of the termination of the System Agreement on the Utility operating companies.

The Utility operating companies historically have engaged in the coordinated planning, construction, and operation of generating resources and bulk transmission facilities under the terms of the System Agreement, which is a rate schedule that had been approved by the FERC. The System Agreement terminated in its entirety on August 31, 2016.

There remains uncertainty regarding the long-term effect of the termination of the System Agreement on the Utility operating companies because of the significant effect of the agreement on the generation and transmission functions of the Utility operating companies and the significant period of time (over 30 years) that it had been in existence. In the absence of the System Agreement, there remains uncertainty around the effectiveness of governance processes and the potential absence of federal authority to resolve certain issues among the Utility operating companies and their retail regulators.

In addition, although the System Agreement terminated in its entirety in August 2016, there are a number of outstanding System Agreement proceedings at the FERC that may require future adjustments, including challenges to the level and timing of payments made by Entergy Arkansas under the System Agreement. The outcome and timing of these FERC proceedings and resulting recovery and impact on rates cannot be predicted at this time.

For further information regarding the regulatory proceedings relating to the System Agreement, see Note 2 to the financial statements.

The Utility operating companies are subject to economic risks associated with participation in the MISO markets and the allocation of transmission upgrade costs. The operation of the Utility operating companies’ transmission system pursuant to the MISO RTO tariff and their participation in the MISO RTO’s wholesale markets may be adversely affected by regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.

On December 19, 2013, the Utility operating companies integrated into the MISO RTO. MISO maintains functional control over the combined transmission systems of its members and administers wholesale energy and ancillary services markets for market participants in the MISO region, including the Utility operating companies. The Utility operating companies sell capacity, energy, and ancillary services on a bilateral basis to certain wholesale customers and offer available electricity production of their generating facilities into the MISO day-ahead and real-time energy markets pursuant to the MISO tariff and market rules. The Utility operating companies are subject to economic risks associated with participation in the MISO markets. MISO tariff rules and system conditions, including transmission congestion, could affect the Utility operating companies’ ability to sell power in certain regions and/or the economic value of such sales, and MISO market rules may change in ways that cause additional risk.

The Utility operating companies participate in the MISO regional transmission planning process and are subject to risks associated with planning decisions that MISO makes in the exercise of control over the planning of the Utility operating companies’ transmission assets that are under MISO’s functional control. The Utility operating companies pay transmission rates that reflect the cost of transmission projects that the Utility operating companies do not own, which could increase cash or financing needs. MISO is currently evaluating through its stakeholder process potential changes in the transmission project criteria in MISO. These changes, if adopted, could potentially result in a larger

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volume of competitively bid and regionally cost allocated transmission projects. In addition to the cash and financing-related risks arising from the potential additional cost allocation to the Utility operating companies from these projects, there is a risk that the Utility operating companies’ business and financial position could be harmed as a result of lost investment opportunities and other effects that flow from an increased number of competitive projects being approved and constructed that are interconnected with their transmission systems. Further, the terms and conditions of the MISO tariff, including provisions related to the design and implementation of wholesale markets and the allocation of transmission upgrade costs, are subject to regulation by the FERC. The operation of the Utility operating companies’ transmission system pursuant to the MISO tariff and their participation in the MISO wholesale markets may be adversely affected by regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements. In addition, orders from each of the Utility operating companies’ respective retail regulators generally require that the Utility operating companies make periodic filings setting forth the results of analysis of the costs and benefits realized from MISO membership as well as the projected costs and benefits of continued membership in MISO and/or requesting approval of their continued membership in MISO. These filings have been submitted periodically by each of the Utility operating companies as required by their respective retail regulators, and the outcome of the resulting proceedings may affect the Utility operating companies’ continued membership in MISO.

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

A delay or failure in recovering amounts for storm restoration costs incurred as a result of severe weather could have material effects on Entergy and those Utility operating companies affected by severe weather.

Entergy’s and its Utility operating companies’ results of operations, liquidity, and financial condition can be materially affected by the destructive effects of severe weather.  Severe weather can also result in significant outages for the customers of the Utility operating companies and, therefore, reduced revenues for the Utility operating companies during the period of the outages.  A delay or failure in recovering amounts for storm restoration costs incurred or revenues lost as a result of severe weather could have a material effect on Entergy and those Utility operating companies affected by severe weather.

Nuclear Operating, Shutdown and Regulatory Risks

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy)

Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities must consistently operate their nuclear power plants at high capacity factors in order to be successful, and lower capacity factors could materially affect Entergy’s and their results of operations, financial condition, and liquidity.

Nuclear capacity factors significantly affect the results of operations of certain Utility operating companies, System Energy, and Entergy Wholesale Commodities.  Nuclear plant operations involve substantial fixed operating costs.  Consequently, to be successful, a plant owner must consistently operate its nuclear power plants at high capacity factors, consistent with safety requirements. For the Utility operating companies that own nuclear plants, lower capacity factors can increase production costs by requiring the affected companies to generate additional energy, sometimes at higher costs, from their fossil facilities or purchase additional energy in the spot or forward markets in order to satisfy their supply needs.  For the Entergy Wholesale Commodities nuclear plants, lower capacity factors directly affect revenues and cash flow from operations.  Entergy Wholesale Commodities’ forward sales are comprised of various hedge products, many of which have some degree of operational-contingent price risk. Certain unit-contingent contracts guarantee specified minimum capacity factors. In the event plants with these contracts were operating below the guaranteed capacity factors, Entergy would be subject to price risk for the undelivered power.  Further, Entergy Wholesale Commodities’ nuclear forward sales contracts can also be on a firm LD basis, which subjects Entergy to increasing price risk as capacity factors decrease. Many of these firm hedge products have damages risk, capped through the use of risk management products.

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Certain of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities nuclear plant owners periodically shut down their nuclear power plants to replenish fuel.  Plant maintenance and upgrades are often scheduled during such refueling outages.  If refueling outages last longer than anticipated or if unplanned outages arise, Entergy’s and their results of operations, financial condition, and liquidity could be materially affected.

Outages at nuclear power plants to replenish fuel require the plant to be “turned off.”  Refueling outages generally are planned to occur once every 18 to 24 months and average approximately 30 days in duration.  Plant maintenance and upgrades are often scheduled during such planned outages.  When refueling outages last longer than anticipated or a plant experiences unplanned outages, capacity factors decrease and maintenance costs may increase.  Lower than forecasted capacity factors may cause Entergy Wholesale Commodities to experience reduced revenues and may also create damages risk with certain hedge products as previously discussed.

Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities face risks related to the purchase of uranium fuel (and its conversion, enrichment, and fabrication). These risks could materially affect Entergy’s and their results of operations, financial condition and liquidity.

Based upon currently planned fuel cycles, Entergy’s nuclear units have a diversified portfolio of contracts and inventory that provides substantially adequate nuclear fuel materials and conversion and enrichment services at what Entergy believes are reasonably predictable prices through most of 2018.  The nuclear fuel supply portfolio for the Entergy Wholesale Commodities segment is being adjusted to reflect reduced overall requirements related to the planned permanent shutdown of the Palisades, Pilgrim, Indian Point 2 and Indian Point 3 plants over the next two to five years . Entergy’s ability to purchase nuclear fuel at reasonably predictable prices, however, depends upon the performance reliability of uranium miners. While there are a number of possible alternate suppliers that may be accessed to mitigate any supplier performance failure, the pricing of any such alternate uranium supply from the market will be dependent upon the market for uranium supply at that time. Entergy buys uranium from a diversified mix of sellers located in a diversified mix of countries, and from time to time purchases from nearly all qualified reliable major market participants worldwide that sell into the U.S. Market prices for nuclear fuel have been extremely volatile from time to time in the past.  Although Entergy’s nuclear fuel contract portfolio provides a degree of hedging against market risks for several years, costs for nuclear fuel in the future cannot be predicted with certainty due to normal inherent market uncertainties, and price changes could materially affect the liquidity, financial condition, and results of operations of certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities.

Entergy’s ability to assure nuclear fuel supply also depends upon the performance and reliability of conversion, enrichment, and fabrication services providers. These service providers are fewer in number than uranium suppliers. For conversion and enrichment services, Entergy diversifies its supply by supplier and country and may take special measures to ensure a reliable supply of enriched uranium for fabrication into nuclear fuel. For fabrication services, each plant is dependent upon the performance of the fabricator of that plant’s nuclear fuel; therefore, Entergy relies upon additional monitoring, inspection, and oversight of the fabrication process to assure reliability and quality of its nuclear fuel. Certain of the suppliers and service providers are located in or dependent upon countries, such as Russia, in which deteriorating economic conditions or international sanctions could restrict the ability of such suppliers to continue to supply fuel or provide such services.  The inability of such suppliers or service providers to perform such obligations could materially affect the liquidity, financial condition, and results of operations of certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities.

Entergy Arkansas, Entergy Louisiana, System Energy, and the Entergy Wholesale Commodities business face the risk that the NRC will change or modify its regulations, suspend, not renew, or revoke their licenses, or increase oversight of their nuclear plants, which could materially affect Entergy’s and their results of operations, financial condition, and liquidity.

Under the Atomic Energy Act and Energy Reorganization Act, the NRC regulates the operation of nuclear power plants.  The NRC may modify, suspend, not renew, or revoke licenses, shut down a nuclear facility and impose civil penalties for failure to comply with the Atomic Energy Act, related regulations, or the terms of the licenses for

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nuclear facilities. The license renewal process in some cases may be the subject of significant public debate and legislative review and scrutiny at the federal and, in some cases, state level, though the decision whether to renew is subject to the exclusive jurisdiction of the NRC. Interested parties may also intervene which could result in prolonged proceedings. A change in the Atomic Energy Act, other applicable statutes, or the applicable regulations or licenses, or the NRC’s interpretation thereof, may require a substantial increase in capital expenditures or may result in increased operating or decommissioning costs and could materially affect the results of operations, liquidity, or financial condition of Entergy (through Entergy Wholesale Commodities), its Utility operating companies, or System Energy.  A change in the classification of a plant owned by one of these companies under the NRC’s Reactor Oversight Process, which is the NRC’s program to collect information about plant performance, assess the information for its safety significance, and provide for appropriate licensee and NRC response, also could cause the owner of the plant to incur material additional costs as a result of the increased oversight activity and potential response costs associated with the change in classification. For additional information concerning the current classification of the plants owned by Entergy Arkansas, Entergy Louisiana, System Energy, and the Entergy Wholesale Commodities business, see “ Regulation of Entergy’s Business - Regulation of the Nuclear Power Industry - NRC Reactor Oversight Process ” in Part I, Item 1 and Note 8 to the financial statements.

Events at nuclear plants owned by one of these companies, as well as those owned by others, may lead to a change in laws or regulations or the terms of the applicable licenses, or the NRC’s interpretation thereof, or may cause the NRC to increase oversight activity or initiate actions to modify, suspend, or revoke licenses, shut down a nuclear facility, or impose civil penalties.  As a result, if an incident were to occur at any nuclear generating unit, whether an Entergy nuclear generating unit or not, it could materially affect the financial condition, results of operations, and liquidity of Entergy, certain of the Utility operating companies, System Energy, or Entergy Wholesale Commodities. 

Certain of the Utility operating companies, System Energy, and Entergy Wholesale Commodities are exposed to risks and costs related to operating and maintaining their nuclear power plants, and their failure to maintain operational efficiency at their nuclear power plants could materially affect Entergy’s and  their results of operations, financial condition, and liquidity.

The nuclear generating units owned by certain of the Utility operating companies, System Energy,   and the Entergy Wholesale Commodities business began commercial operations in the 1970s-1980s.  Older equipment may require more capital expenditures to keep each of these nuclear power plants operating safely and efficiently.  This equipment is also likely to require periodic upgrading and improvement.  Any unexpected failure, including failure associated with breakdowns, forced outages, or any unanticipated capital expenditures, could result in increased costs, some of which costs may not be fully recoverable by the Utility operating companies and System Energy in regulatory proceedings.  Operations at any of the nuclear generating units owned and operated by Entergy’s subsidiaries could degrade to the point where the affected unit needs to be shut down or operated at less than full capacity.  If this were to happen, identifying and correcting the causes may require significant time and expense.  A decision may be made to close a unit rather than incur the expense of restarting it or returning the unit to full capacity.  For the Utility operating companies and System Energy, this could result in certain costs being stranded and potentially not fully recoverable in regulatory proceedings. For Entergy Wholesale Commodities, this could result in lost revenue and increased fuel and purchased power expense to meet supply commitments and penalties for failure to perform under their contracts with customers. In addition, the operation and maintenance of Entergy’s nuclear facilities require the commitment of substantial human resources that can result in increased costs.

The nuclear industry continues to address susceptibility to the effects of stress corrosion cracking and other corrosion mechanisms on certain materials within plant systems.  The issue is applicable at all nuclear units to varying degrees and is managed in accordance with industry standard practices and guidelines that include in-service examinations, replacements, and mitigation strategies.  Developments in the industry or identification of issues at the nuclear units could require unanticipated remediation efforts that cannot be quantified in advance.

Moreover, Entergy is becoming more dependent on fewer suppliers for key parts of Entergy’s nuclear power plants that may need to be replaced or refurbished.  In addition, certain major parts have long lead-times to manufacture

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if an unplanned replacement is needed. This dependence on a reduced number of suppliers and long lead-times on certain major parts for unplanned replacements could result in delays in obtaining qualified replacement parts and, therefore, greater expense for Entergy.

The costs associated with the storage of the spent nuclear fuel of certain of the Utility operating companies, System Energy, and the owners of the Entergy Wholesale Commodities nuclear power plants, as well as the costs of and their ability to fully decommission their nuclear power plants, could be significantly affected by the timing of the opening of a spent nuclear fuel disposal facility, as well as interim storage and transportation requirements.

Certain of the Utility operating companies, System Energy and the owners of the Entergy Wholesale Commodities nuclear plants incur costs for the on-site storage of spent nuclear fuel.  The approval of a license for a national repository for the disposal of spent nuclear fuel, such as the one proposed for Yucca Mountain, Nevada, or any interim storage facility, and the timing of such facility opening, will significantly affect the costs associated with on-site storage of spent nuclear fuel.  For example, while the DOE is required by law to proceed with the licensing of Yucca Mountain and, after the license is granted by the NRC, to construct the repository and commence the receipt of spent fuel, the NRC licensing of the Yucca Mountain repository is effectively at a standstill. These actions are prolonging the time before spent fuel is removed from Entergy’s plant sites.  Because the DOE has not accomplished its objectives, it is in non-compliance with the Nuclear Waste Policy Act of 1982 and has breached its spent fuel disposal contracts, and Entergy has sued the DOE for such breach.  Furthermore, Entergy is uncertain as to when the DOE will commence acceptance of spent fuel from its facilities for storage or disposal.  As a result, continuing future expenditures will be required to increase spent fuel storage capacity at the companies’ nuclear sites and maintenance costs on existing storage facilities, including aging management of fuel storage casks, may increase.  The costs of on-site storage are also affected by regulatory requirements for such storage.  In addition, the availability of a repository or other off-site storage facility for spent nuclear fuel may affect the ability to fully decommission the nuclear units and the costs relating to decommissioning.  For further information regarding spent fuel storage, see the “ Critical Accounting Estimates – Nuclear Decommissioning Costs – Spent Fuel Disposal ” section of Management’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Louisiana, and System Energy and Note 8 to the financial statements.

Certain of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities nuclear plant owners may be required to pay substantial retrospective premiums imposed under the Price-Anderson Act in the event of a nuclear incident, and losses not covered by insurance could have a material effect on Entergy’s and their results of operations, financial condition, or liquidity.

Accidents and other unforeseen problems at nuclear power plants have occurred both in the United States and elsewhere.  The Price-Anderson Act limits each reactor owner’s public liability (off-site) for a single nuclear incident to the payment of retrospective premiums into a secondary insurance pool of up to approximately $127.3 million per reactor.   With 102 reactors currently participating, this translates to a total public liability cap of approximately $13 billion per incident.  The limit is subject to change to account for the effects of inflation, a change in the primary limit of insurance coverage, and changes in the number of licensed reactors.  As required by the Price-Anderson Act, the Utility operating companies, System Energy, and Entergy Wholesale Commodities carry the maximum available amount of primary nuclear off-site liability insurance with American Nuclear Insurers (which is $450 million for each operating site as of January 1, 2018).  Claims for any nuclear incident exceeding that amount are covered under the retrospective premiums paid into the secondary insurance pool.  As a result, in the event of a nuclear incident that causes damages (off-site) in excess of the primary insurance coverage, each owner of a nuclear plant reactor, including Entergy’s Utility operating companies, System Energy, and the Entergy Wholesale Commodities plant owners, regardless of fault or proximity to the incident, will be required to pay a retrospective premium, equal to its proportionate share of the loss in excess of the primary insurance level, up to a maximum of approximately $127.3 million per reactor per incident (Entergy’s maximum total contingent obligation per incident is $1.146 billion).  The retrospective premium payment is currently limited to approximately $19 million per year per incident per reactor until the aggregate public liability for each licensee is paid up to the $127.3 million cap.


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NEIL is a utility industry mutual insurance company, owned by its members, including the Utility operating companies, System Energy, and the owners of the Entergy Wholesale Commodities plants. All member plants could be subject to an annual assessment (retrospective premium of up to 10 times current annual premium for all policies) should the surplus (reserve) be significantly depleted due to   insured losses.  As of December 31, 2017, the maximum annual assessment amounts total $112.2 million for the Utility plants.  Retrospective premium insurance available through NEIL’s reinsurance treaty can cover the potential assessments and the Entergy Wholesale Commodities plants currently maintain the retrospective premium insurance to cover those potential assessments.

As an owner of nuclear power plants, Entergy participates in industry self-insurance programs and could be liable to fund claims should a plant owned by a different company experience a major event.  Any resulting liability from a nuclear accident may exceed the applicable primary insurance coverage and require contribution of additional funds through the industry-wide program that could significantly affect the results of operations, financial condition, or liquidity of Entergy, certain of the Utility operating companies, System Energy, or the Entergy Wholesale Commodities subsidiaries.

The decommissioning trust fund assets for the nuclear power plants owned by the Utility operating companies, System Energy and the Entergy Wholesale Commodities nuclear plant owners may not be adequate to meet decommissioning obligations if market performance and other changes decrease the value of assets in the decommissioning trusts, if one or more of Entergy’s nuclear power plants is retired earlier than the anticipated shutdown date, if the plants cost more to decommission than estimated, or if current regulatory requirements change, which then could require significant additional funding.
 
Owners of nuclear generating plants have an obligation to decommission those plants.  Certain of the Utility operating companies, System Energy, and owners of the Entergy Wholesale Commodities nuclear power plants maintain decommissioning trust funds for this purpose.  Certain of the Utility operating companies collect funds from their customers, which are deposited into the trusts covering the units operated for or on behalf of those companies.  Those rate collections, as adjusted from time to time by rate regulators, are generally based upon operating license lives and trust fund balances as well as estimated trust fund earnings and decommissioning costs.  Assets in these trust funds are subject to market fluctuations, will yield uncertain returns that may fall below projected return rates, and may result in losses resulting from the recognition of impairments of the value of certain securities held in these trust funds.

In connection with the acquisition of certain nuclear plants, the Entergy Wholesale Commodities plant owners acquired decommissioning trust funds that are funded in accordance with NRC regulations.  Under NRC regulations, Entergy Wholesale Commodities’ nuclear subsidiaries are permitted to project the NRC-required decommissioning amount, based on an NRC formula or a site-specific estimate, and the amount that will be available in each of the Entergy Wholesale Commodities nuclear power plant’s decommissioning trusts combined with other decommissioning financial assurances in place.  The projections are made based on the operating license expiration date and the mid-point of the subsequent decommissioning process, or the anticipated actual completion of decommissioning if a site-specific estimate is used, for each of these nuclear power plants.  As a result, if the projected amount of individual plants’ decommissioning trusts exceeds the NRC-required decommissioning amount, then its decommissioning obligations are considered to be funded in accordance with NRC regulations.  If the projected costs do not sufficiently reflect the actual costs the applicable Entergy subsidiaries would be required to incur to decommission these nuclear power plants, or funding is otherwise inadequate, or if the formula, formula inputs, or site-specific estimate is changed to require increased funding, additional resources would be required.  Furthermore, depending upon the level of funding available in the trust funds, the NRC may not permit the trust funds to be used to pay for related costs such as the management of spent nuclear fuel that are not included in the NRC’s formula.  The NRC may also require a plan for the provision of separate funding for spent fuel management costs.  In addition to NRC requirements, there are other decommissioning-related obligations for certain of the Entergy Wholesale Commodities nuclear power plants, which management believes it will be able to satisfy.

Further, federal or state regulatory changes, including mandated increases in decommissioning funding or changes in the methods or standards for decommissioning operations, may also increase the funding requirements of,

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or accelerate the timing for funding of, the obligations related to the decommissioning of Entergy Wholesale Commodities nuclear power plants or may restrict the decommissioning-related costs that can be paid from the decommissioning trusts.  As a result, under any of these circumstances, Entergy’s results of operations, liquidity, and financial condition could be materially affected.

An early plant shutdown (either generally or relative to current expectations), poor investment results or higher than anticipated decommissioning costs (including as a result of changing regulatory requirements) could cause trust fund assets to be insufficient to meet the decommissioning obligations, with the result that the Utility operating companies, System Energy or the Entergy Wholesale Commodities nuclear plant owners may be required to provide significant additional funds or credit support to satisfy regulatory requirements for decommissioning, which, with respect to the Utility operating companies, may not be recoverable from customers in a timely fashion or at all.

For further information regarding nuclear decommissioning costs, management’s decision to exit the merchant power business and the impairment charges that resulted from such decision, see the “ Critical Accounting Estimates - Nuclear Decommissioning Costs ” section of Management’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Louisiana, and System Energy, the “ Entergy Wholesale Commodities Exit from the Merchant Power Business ” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries and Notes 9 and 14 to the financial statements.

Changes in NRC regulations or other binding regulatory requirements may cause increased funding requirements for nuclear plant decommissioning trusts.

NRC regulations require certain minimum financial assurance requirements for meeting obligations to decommission nuclear power plants.  Those financial assurance requirements may change from time to time, and certain changes may result in a material increase in the financial assurance required for decommissioning the Utility operating companies’, System Energy’s, and owners of Entergy Wholesale Commodities nuclear power plants.  Such changes could result in the need for additional contributions to decommissioning trusts, or the posting of parent guarantees, letters of credit, or other surety mechanisms.  For further information regarding nuclear decommissioning costs, see the “ Critical Accounting Estimates – Nuclear Decommissioning Costs ” section of Management’s Financial Discussion and Analysis for Entergy, Entergy Arkansas, Entergy Louisiana, and System Energy and Note 9 to the financial statements.

New or existing safety concerns regarding operating nuclear power plants and nuclear fuel could lead to restrictions upon the operation and decommissioning of Entergy’s nuclear power plants.

New and existing concerns are being expressed in public forums about the safety of nuclear generating units and nuclear fuel, in particular in the northeastern United States, which is where most of the current fleet of Entergy Wholesale Commodities nuclear power plants is located.  These concerns have led to, and are expected to continue to lead to, various proposals to Federal regulators and governing bodies in some localities where Entergy’s subsidiaries own nuclear generating units for legislative and regulatory changes that could lead to the shutdown of nuclear units, denial of license renewal applications, additional requirements or restrictions related to spent nuclear fuel on-site storage and eventual disposal, or other adverse effects on owning, operating and decommissioning nuclear generating units.  Entergy vigorously responds to these concerns and proposals.  If any of the existing proposals, or any proposals that may arise in the future with respect to legislative and regulatory changes, become effective, they could have a material effect on Entergy’s results of operations, financial condition, and liquidity.

(Entergy Corporation)

A failure to obtain renewed licenses or other approvals required for the continued operation of the Entergy Wholesale Commodities’ Indian Point nuclear power plants could have a material effect on Entergy’s results of operations, financial condition, and liquidity and could lead to an acceleration of the timing for the funding of decommissioning obligations.

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The license renewal and related processes for the Entergy Wholesale Commodities’ Indian Point nuclear power plants have been and may continue to be the subject of significant public debate and regulatory and legislative review and scrutiny at the federal and, in certain cases, state level.  The original expiration date of the operating license for Indian Point 2 was September 2013 and the original expiration date of the operating license for Indian Point 3 was December 2015.  Because these plants filed timely license renewal applications, the NRC’s rules provide that these plants may continue to operate under their existing operating licenses until their renewal applications have been finally determined.

In January 2017, Entergy announced that it plans to shut down Indian Point 2 in 2020 and Indian Point 3 in 2021. The early and orderly shutdown is part of a settlement under which New York State has agreed to drop legal challenges and support renewal of the operating licenses for Indian Point. For additional discussion of the settlement agreement with New York State, see the “ Entergy Wholesale Commodities Authorizations to Operate Indian Point ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

If the NRC were to deny the applications for the renewal of operating licenses for the Indian Point nuclear power plants, or if Indian Point fails to obtain other approvals, Entergy’s results of operations, financial condition, and liquidity could be materially affected by loss of revenue and cash flow associated with the plant or plants until the proposed shutdown date, potential impairments of the carrying value of the plants, increased depreciation rates, and an accelerated need for decommissioning funds, which could require additional funding. In addition, Entergy may incur increased operating costs depending on any conditions that may be imposed in connection with license renewal.  For further discussion regarding the license renewal processes for the Indian Point nuclear power plants, see the “ Entergy Wholesale Commodities Authorizations to Operate Indian Point ” in Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis.

Entergy Wholesale Commodities nuclear power plants are exposed to price risk.

Entergy and its subsidiaries do not have a regulator-authorized rate of return on their capital investments in non-utility businesses.  As a result, the sale of capacity and energy from the Entergy Wholesale Commodities nuclear power plants, unless otherwise contracted, is subject to the fluctuation of market power prices. In order to reduce future price risk to desired levels, Entergy Wholesale Commodities utilizes contracts that are unit-contingent and Firm LD and various products such as forward sales, options, and collars.  As of December 31, 2017, Entergy Wholesale Commodities’ nuclear power generation plants had sold forward 98% in 2018, 91% in 2019, 51% in 2020, 74% in 2021, and 67% in 2022 of its generation portfolio’s planned energy output, reflecting the planned shutdown or sale of the Entergy Wholesale Commodities nuclear power plants by mid-2022.

Market conditions such as product cost, market liquidity, and other portfolio considerations influence the product and contractual mix.  The obligations under unit-contingent agreements depend on a generating asset that is operating; if the generation asset is not operating, the seller generally is not liable for damages.  For some unit-contingent obligations, however, there is also a guarantee of availability that provides for the payment to the power purchaser of contract damages, if incurred, in the event the unit owner fails to deliver power as a result of the failure of the specified generation unit to generate power at or above a specified availability threshold.  Firm LD sales transactions may be exposed to substantial operational price risk, a portion of which may be capped through the use of risk management products, to the extent that the plants do not run as expected and market prices exceed contract prices.

Market prices may fluctuate substantially, sometimes over relatively short periods of time, and at other times experience sustained increases or decreases.  Demand for electricity and its fuel stock can fluctuate dramatically, creating periods of substantial under- or over-supply.  During periods of over-supply, prices might be depressed.  Also, from time to time there may be political pressure, or pressure from regulatory authorities with jurisdiction over wholesale and retail energy commodity and transportation rates, to impose price limitations, credit requirements, bidding rules and other mechanisms to address volatility and other issues in these markets.


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The effects of sustained low natural gas prices and power market structure challenges have resulted in lower market prices for electricity in the power regions where the Entergy Wholesale Commodities nuclear power plants are located. In addition, currently the market design under which the plants operate does not adequately compensate merchant nuclear plants for their environmental and fuel diversity benefits in the region. These conditions were primary factors leading to Entergy’s decision to shut down (or sell) Entergy Wholesale Commodities’ nuclear power plants before the end of their operating licenses (or requested operating licenses for Indian Point 2 and Indian Point 3).

The price that different counterparties offer for various products including forward sales is influenced both by market conditions as well as the contract terms such as damage provisions, credit support requirements, and the number of available counterparties interested in contracting for the desired forward period.  Depending on differences between market factors at the time of contracting versus current conditions, Entergy Wholesale Commodities’ contract portfolio may have average contract prices above or below current market prices, including at the expiration of the contracts, which may significantly affect Entergy Wholesale Commodities’ results of operations, financial condition, or liquidity.  New hedges are generally layered into on a rolling forward basis, which tends to drive hedge over-performance to market in a falling price environment, and hedge underperformance to market in a rising price environment; however, hedge timing, product choice, and hedging costs will also affect these results. See the “ Market and Credit Risk Sensitive Instruments ” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries.  Since Entergy Wholesale Commodities has announced the closure (or sale) of its nuclear plants, Entergy Wholesale Commodities may enter into fewer forward sales contracts for output from such plants.

Among the factors that could affect market prices for electricity and fuel, all of which are beyond Entergy’s control to a significant degree, are:

•
prevailing market prices for natural gas, uranium (and its conversion, enrichment, and fabrication), coal, oil, and other fuels used in electric generation plants, including associated transportation costs, and supplies of such commodities;
•
seasonality and realized weather deviations compared to normalized weather forecasts;
•
availability of competitively priced alternative energy sources and the requirements of a renewable portfolio standard;
•
changes in production and storage levels of natural gas, lignite, coal and crude oil, and refined products;
•
liquidity in the general wholesale electricity market, including the number of creditworthy counterparties available and interested in entering into forward sales agreements for Entergy’s full hedging term;
•
the actions of external parties, such as the FERC and local independent system operators and other state or Federal energy regulatory bodies, that may impose price limitations and other mechanisms to address some of the volatility in the energy markets;
•
electricity transmission, competing generation or fuel transportation constraints, inoperability, or inefficiencies;
•
the general demand for electricity, which may be significantly affected by national and regional economic conditions;
•
weather conditions affecting demand for electricity or availability of hydroelectric power or fuel supplies;
•
the rate of growth in demand for electricity as a result of population changes, regional economic conditions, and the implementation of conservation programs or distributed generation;
•
regulatory policies of state agencies that affect the willingness of Entergy Wholesale Commodities customers to enter into long-term contracts generally, and contracts for energy in particular;
•
increases in supplies due to actions of current Entergy Wholesale Commodities competitors or new market entrants, including the development of new generation facilities, expansion of existing generation facilities, the disaggregation of vertically integrated utilities, and improvements in transmission that allow additional supply to reach Entergy Wholesale Commodities’ nuclear markets;
•
union and labor relations;
•
changes in Federal and state energy and environmental laws and regulations and other initiatives, such as the Regional Greenhouse Gas Initiative, including but not limited to, the price impacts of proposed emission controls;

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changes in law resulting from federal or state energy legislation or legislation subjecting energy derivatives used in hedging and risk management transactions to governmental regulation; and
•
natural disasters, terrorist actions, wars, embargoes, and other catastrophic events.

The Entergy Wholesale Commodities business is subject to substantial governmental regulation and may be adversely affected by legislative, regulatory or market design changes, as well as liability under, or any future inability to comply with, existing or future regulations or requirements.

The Entergy Wholesale Commodities business is subject to extensive regulation under federal, state, and local laws. Compliance with the requirements under these various regulatory regimes may cause the Entergy Wholesale Commodities business to incur significant additional costs, and failure to comply with such requirements could result in the shutdown of the non-complying facility, the imposition of liens, fines and/or civil or criminal liability.

Public utilities under the Federal Power Act are required to obtain FERC acceptance of their rate schedules for wholesale sales of electricity.  Each of the owners of the Entergy Wholesale Commodities nuclear power plants that generates electricity, as well as Entergy Nuclear Power Marketing, LLC, is a “public utility” under the Federal Power Act by virtue of making wholesale sales of electric energy and/or owning wholesale electric transmission facilities.  The FERC has granted these generating and power marketing companies the authority to sell electricity at market-based rates.  The FERC’s orders that grant the Entergy Wholesale Commodities’ generating and power marketing companies market-based rate authority reserve the right to revoke or revise that authority if the FERC subsequently determines that the Entergy Wholesale Commodities business can exercise market power in transmission or generation, create barriers to entry, or engage in abusive affiliate transactions.  In addition, the Entergy Wholesale Commodities’ market-based sales are subject to certain market behavior rules, and if any of its generating and power marketing companies were deemed to have violated one of those rules, they would be subject to potential disgorgement of profits associated with the violation and/or suspension or revocation of their market-based rate authority and potential penalties of up to $1 million per day per violation.  If the Entergy Wholesale Commodities’ generating or power marketing companies were to lose their market-based rate authority, such companies would be required to obtain the FERC’s acceptance of a cost-of-service rate schedule and could become subject to the accounting, record-keeping, and reporting requirements that are imposed on utilities with cost-based rate schedules.  This could have an adverse effect on the rates the Entergy Wholesale Commodities business charges for power from its facilities.

The Entergy Wholesale Commodities business is also affected by legislative and regulatory changes, as well as changes to market design, market rules, tariffs, cost allocations, and bidding rules imposed by the existing Independent System Operators.  The Independent System Operators that oversee most of the wholesale power markets may impose, and in the future may continue to impose, mitigation, including price limitations, offer caps and other mechanisms, to address some of the volatility and the potential exercise of market power in these markets.  These types of price limitations and other regulatory mechanisms may have an adverse effect on the profitability of the Entergy Wholesale Commodities business’ generation facilities that sell energy and capacity into the wholesale power markets. Further, the New York Independent System Operator could determine that the timing of the shutdown of the Indian Point units could be inconsistent with its market power rules, and impose certain penalties that could affect Entergy Wholesale Commodities. For further information regarding federal, state and local laws and regulation applicable to the Entergy Wholesale Commodities business, see the “ Regulation of Entergy’s Business ” section in Part I, Item 1.

The regulatory environment applicable to the electric power industry is subject to changes as a result of restructuring initiatives at both the state and federal levels. Entergy cannot predict the future design of the wholesale power markets or the ultimate effect that the changing regulatory environment will have on the Entergy Wholesale Commodities business.  In addition, in some of these markets, interested parties have proposed material market design changes, including the elimination of a single clearing price mechanism, have raised claims that the competitive marketplace is not working because energy prices in wholesale markets exceed the marginal cost of operating nuclear power plants, and have made proposals to re-regulate the markets, impose a generation tax, or require divestitures by generating companies to reduce their market share.  Other proposals to re-regulate may be made and legislative or other attention to the electric power market restructuring process may delay or reverse the deregulation process, which

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could require material changes to business planning models.  If competitive restructuring of the electric power markets is reversed, modified, discontinued, or delayed, the Entergy Wholesale Commodities business’ results of operations, financial condition, and liquidity could be materially affected.

The power plants owned by the Entergy Wholesale Commodities business are subject to impairment charges in certain circumstances, which could have a material effect on Entergy’s results of operations, financial condition or liquidity.

Entergy reviews long-lived assets held in all of its business segments whenever events or changes in circumstances indicate that recoverability of these assets is uncertain.  Generally, the determination of recoverability is based on the undiscounted net cash flows expected to result from the operations of such assets.  Projected net cash flows depend on the expected operating life of the assets, the future operating costs associated with the assets, the efficiency and availability of the assets and generating units, and the future market and price for energy and capacity over the remaining life of the assets.  In particular, the assets of the Entergy Wholesale Commodities business are subject to further impairment in connection with the closure or sale of the plants discussed below. Moreover, prior to the closure or sale of these plants, the failure of the Entergy Wholesale Commodities business to achieve forecasted operating results and cash flows, an unfavorable change in forecasted operating results or cash flows, a reduction in the expected remaining useful life of a unit (including if the operating licenses for the Indian Point power plants are not renewed by the NRC), or a decline in observable industry market multiples could all result in potential additional impairment charges for the affected assets.

On August 27, 2013, Entergy announced its plan to close and decommission Vermont Yankee.  Vermont Yankee ceased power production in the fourth quarter 2014 at the end of a fuel cycle.  This decision was approved by the Board in August 2013, and resulted in the recognition of impairment charges in 2013 and 2014. In October 2015, Entergy determined that it will close the Pilgrim and FitzPatrick plants. The Pilgrim plant will cease operations no later than June 1, 2019. FitzPatrick was expected to shut down at the end of its current fuel cycle, planned for January 27, 2017, but in March 2017, Entergy sold the FitzPatrick plant to Exelon Generation Company, LLC which continues to operate the plant. During the third quarter 2015, Entergy recorded impairment and other related charges to write down the carrying values of the FitzPatrick and Pilgrim plants and related assets to their fair values. In addition, in the fourth quarter 2015, Entergy recorded impairment and other related charges to write down the carrying value of the Palisades plant and related assets to their fair value. In December 2016, Entergy reached an agreement with Consumers Energy to terminate the PPA for the Palisades plant and to shut down the plant in 2018, but the agreement was terminated in September 2017 after the Michigan Public Service Commission decided that Consumers Power could not recover costs incurred under the agreement. Entergy intends to shut down the Palisades plant permanently on May 31, 2022. In January 2017, Entergy announced that it reached a settlement with New York State and plans to close the Indian Point 2 plant in 2020 and the Indian Point 3 plant in 2021. As a result, in the fourth quarter of 2016, Entergy recorded impairment and other related charges to write down the carrying values of the Palisades and Indian Point 2 and Indian Point 3 plants and related assets to their fair value. In addition to the impairments and other related charges, Entergy has incurred severance and employee retention costs and expects to incur additional charges through 2022 relating to the decisions to shut down Vermont Yankee, Palisades, Pilgrim, Indian Point 2 and Indian Point 3, and the sale of FitzPatrick.

If Entergy concludes that any of its nuclear power plants is unlikely to operate through its planned shutdown date, which conclusion would be based on a variety of factors, such a conclusion could result in a further impairment of part or all of the carrying value of the plant.  Any impairment charge taken by Entergy with respect to its long-lived assets, including the power plants owned by the Entergy Wholesale Commodities business, would likely be material in the quarter that the charge is taken and could otherwise have a material effect on Entergy’s results of operations, financial condition, or liquidity. For further information regarding evaluating long-lived assets for impairment, see the “ Critical Accounting Estimates - Impairment of Long-lived Assets and Trust Fund Investments ” section of Management’s Financial Discussion and Analysis for Entergy Corporation and Subsidiaries and for further discussion of the impairment charges, see Note 14 to the financial statements.

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General Business

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

Entergy and the Utility operating companies depend on access to the capital markets and, at times, may face potential liquidity constraints, which could make it more difficult to handle future contingencies such as natural disasters or substantial increases in gas and fuel prices.  Disruptions in the capital and credit markets may adversely affect Entergy’s and its subsidiaries’ ability to meet liquidity needs, access capital and operate and grow their businesses, and the cost of capital.

Entergy’s business is capital intensive and dependent upon its ability to access capital at reasonable rates and other terms.  At times there are also spikes in the price for natural gas and other commodities that increase the liquidity requirements of the Utility operating companies and Entergy Wholesale Commodities.  In addition, Entergy’s and the Utility operating companies’ liquidity needs could significantly increase in the event of a hurricane or other weather-related or unforeseen disaster similar to that experienced in Entergy’s service territory with Hurricane Katrina and Hurricane Rita in 2005, Hurricane Gustav and Hurricane Ike in 2008, and Hurricane Isaac in 2012.  The occurrence of one or more contingencies, including a delay in regulatory recovery of fuel or purchased power costs or storm restoration costs, higher than expected pension contributions, an acceleration of payments or decreased credit lines, less cash flow from operations than expected, or other unknown events, could cause the financing needs of Entergy and its subsidiaries to increase.  In addition, accessing the debt capital markets more frequently in these situations may result in an increase in leverage.  Material leverage increases could negatively affect the credit ratings of Entergy and the Utility operating companies, which in turn could negatively affect access to the capital markets.

The inability to raise capital on favorable terms, particularly during times of uncertainty in the capital markets, could negatively affect Entergy and its subsidiaries’ ability to maintain and to expand their businesses.  Events beyond Entergy’s control may create uncertainty that could increase its cost of capital or impair its ability to access the capital markets, including the ability to draw on its bank credit facilities.  Entergy and its subsidiaries are unable to predict the degree of success they will have in renewing or replacing their credit facilities as they come up for renewal.  Moreover, the size, terms, and covenants of any new credit facilities may not be comparable to, and may be more restrictive than, existing facilities.  If Entergy and its subsidiaries are unable to access the credit and capital markets on terms that are reasonable, they may have to delay raising capital, issue shorter-term securities and/or bear an unfavorable cost of capital, which, in turn, could impact their ability to grow their businesses, decrease earnings, significantly reduce financial flexibility and/or limit Entergy Corporation’s ability to sustain its current common stock dividend level.

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

A downgrade in Entergy Corporation ’ s or its subsidiaries ’ credit ratings could negatively affect Entergy Corporation ’ s and its subsidiaries ’ ability to access capital and/or could require Entergy Corporation or its subsidiaries to post collateral, accelerate certain payments, or repay certain indebtedness.

There are a number of factors that rating agencies evaluate to arrive at credit ratings for each of Entergy Corporation and the Registrant Subsidiaries, including each Registrant’s regulatory framework, ability to recover costs and earn returns, diversification and financial strength and liquidity.  If one or more rating agencies downgrade Entergy Corporation’s, any of the Utility operating companies’, or System Energy’s ratings, particularly below investment grade, borrowing costs would increase, the potential pool of investors and funding sources would likely decrease, and cash or letter of credit collateral demands may be triggered by the terms of a number of commodity contracts, leases, and other agreements.


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Most of Entergy Corporation’s and its subsidiaries’ large customers, suppliers, and counterparties require sufficient creditworthiness to enter into transactions.  If Entergy Corporation’s or its subsidiaries’ ratings decline, particularly below investment grade, or if certain counterparties believe Entergy Corporation or the Utility operating companies are losing creditworthiness and demand adequate assurance under fuel, gas, and purchased power contracts, the counterparties may require posting of collateral in cash or letters of credit, prepayment for fuel, gas or purchased power or accelerated payment, or counterparties may decline business with Entergy Corporation or its subsidiaries. At December 31, 2017, based on power prices at that time, Entergy had liquidity exposure of $167 million under the guarantees in place supporting Entergy Wholesale Commodities transactions and $8 million of posted cash collateral. In the event of a decrease in Entergy Corporation’s credit rating to below investment grade, based on power prices as of December 31, 2017, Entergy would have been required to provide approximately $98 million of additional cash or letters of credit under some of the agreements. In the event of a decrease in the credit ratings of Entergy’s Utility operating companies to below investment grade, those companies collectively could be required to provide up to $50 million of additional cash or letters of credit to MISO. As of December 31, 2017, the liquidity exposure associated with Entergy Wholesale Commodities assurance requirements, including return of previously received collateral from counterparties, would increase by $372 million for a $1 per MMBtu increase in gas prices in both the short- and long-term markets.

Recent U.S. tax legislation may materially adversely affect Entergy’s financial condition, results of operations, cash flows, and credit ratings.

The recently enacted H.R. 1, also known as the Tax Cuts and Jobs Act of 2017, will significantly change the U.S. Internal Revenue Code, including taxation of U.S. corporations, by, among other things, reducing the federal corporate income tax rate, limiting interest deductions, and altering the expensing of capital expenditures. The legislation is unclear in certain respects and will require interpretations and implementing regulations by the IRS, as well as state tax authorities, and the legislation could be subject to potential amendments and technical corrections, any of which could lessen or increase certain impacts of the legislation. In addition, the regulatory treatment of the impacts of this legislation, particularly on companies like Entergy and the Registrant Subsidiaries, will be subject to the discretion of federal, state, and local public utility regulators.

As further described in Note 3 to the financial statements, Entergy recorded a reduction of certain of its net deferred income tax assets (including the value of its net operating loss carryforwards) and regulatory liabilities, resulting in a charge against earnings in the fourth quarter 2017 of $526 million, including a $34 million net-of-tax reduction of regulatory liabilities, and Entergy and the Utility operating companies recorded a reduction of approximately $3.7 billion on a consolidated basis in certain of its net deferred tax liabilities and a corresponding increase in net regulatory liabilities. Depending on the outcome of the ratemaking process, IRS examinations, or tax positions and elections that Entergy may elect, Entergy and the Registrant Subsidiaries may be required to record additional charges or credits to income tax expense. Further, the amount and timing of the return of the deferred taxes to customers is dependent upon the regulatory treatment received, and, if the Registrant Subsidiaries are unsuccessful in receiving balanced regulatory treatment, Entergy’s or the Utility operating companies’ cash flow could be materially adversely affected. Further, there may be other material effects resulting from the legislation that have not been identified. While Entergy plans to finance its cash needs that result from the Act through a combination of Registrant Subsidiary debt and Entergy Corporation debt and equity, there can be no assurance that Entergy or the Registrant Subsidiaries will obtain debt or equity financing on terms that are satisfactory or consistent with their current expectations.

In addition, while Moody’s changed the ratings outlooks for Entergy Corporation to negative from stable in reaction to the legislation, it is unclear when or how capital markets, other credit rating agencies, the FERC or state or local regulators may respond to this legislation. Entergy expects that certain financial metrics used by credit rating agencies will be negatively affected as a result of the return of excess deferred taxes to customers, increased debt, and the decrease in the Registrant Subsidiaries’ revenue requirements, and related decrease in operating cash flows, expected as a consequence of the lower federal corporate income tax rate while, at the same time, the loss of the bonus depreciation tax deduction will increase taxable income in the future. Also, the timing of the return of excess deferred income taxes

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to customers will not exactly match the lower taxes that Entergy will be paying which will result in cash outflows to customers. It is also uncertain how other credit rating agencies will treat the impacts of this legislation on their credit ratings and metrics, and whether additional avenues will evolve for companies to manage the adverse aspects of this legislation. These avenues, to the extent available and if successfully applied, could lessen the impacts on certain credit metrics, although there can be no assurance in this regard.

Entergy believes that interpretations and implementing regulations by the IRS, as well as potential amendments and technical corrections, could result in lessening the impacts of certain aspects of this legislation. If Entergy is unable to successfully pursue avenues to manage the effects of the new tax legislation, or if additional interpretations, regulations, amendments, or technical corrections exacerbate the effects of the legislation, the legislation could have a material effect on Entergy’s results of operations, financial condition, and cash flows, and could result in additional credit rating agency actions. Any such actions by credit rating agencies may make it more difficult and costly for Entergy to issue debt securities and certain other types of financing and could increase borrowing costs under its credit facilities.

For further information regarding the effects of the Act, see the “ Income Tax Legislation ” section of Management’s Financial Discussion and Analysis for Entergy. Also, Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.

Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could negatively impact Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition and liquidity.

Entergy and its subsidiaries make judgments regarding the potential tax effects of various transactions and results of operations to estimate their obligations to taxing authorities.  These tax obligations include income, franchise, real estate, sales and use, and employment-related taxes.  These judgments include provisions for potential adverse outcomes regarding tax positions that have been taken.  Entergy and its subsidiaries also estimate their ability to utilize tax benefits, including those in the form of carryforwards for which the benefits have already been reflected in the financial statements.  Changes in federal, state, or local tax laws, adverse tax audit results or adverse tax rulings on positions taken by Entergy and its subsidiaries could negatively affect Entergy’s, the Utility operating companies’, and System Energy’s results of operations, financial condition, and liquidity. For further information regarding Entergy’s income taxes, see Note 3 to the financial statements.

Entergy and its subsidiaries’ ability to successfully complete strategic transactions, including merger, acquisition, divestiture, joint venture, restructuring or other strategic transactions, is subject to significant risks, including the risk that required regulatory or governmental approvals may not be obtained, risks relating to unknown or undisclosed problems or liabilities, and the risk that for these or other reasons, Entergy and its subsidiaries may be unable to achieve some or all of the benefits that they anticipate from such transactions.

From time to time, Entergy and its subsidiaries have pursued and may continue to pursue strategic transactions including merger, acquisition, divestiture, joint venture, restructuring or other strategic transactions. For example, in November 2016, Entergy announced that it had entered into a purchase and sale agreement with NorthStar for the sale of 100% of the membership interests in Entergy Nuclear Vermont Yankee, which owns the Vermont Yankee plant. In addition, as part of Entergy’s plan to exit the merchant power business, it plans to shut down its remaining merchant nuclear power plants by mid-2022. These transactions and plans are or may become subject to regulatory approval and other material conditions or contingencies. The failure to complete these transactions or plans or any future strategic transaction successfully or on a timely basis could have an adverse effect on Entergy’s financial condition, results of operations and the market’s perception of Entergy’s ability to execute its strategy. Further, these transactions, and any completed or future strategic transactions, involve substantial risks, including the following:


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•
the disposition of a business or asset may involve continued financial involvement in the divested business, such as through continuing equity ownership, transition service agreements, guarantees, indemnities, or other current or contingent financial obligations;
•
Entergy may encounter difficulty in finding buyers or executing alternative exit strategies on acceptable terms in a timely manner when it decides to sell an asset or a business, which could delay the accomplishment of its strategic objectives. Alternatively, Entergy may dispose of a business or asset at a price or on terms that are less than what it had anticipated, or with the exclusion of assets that must be divested or run off separately;
•
the disposition of a business could result in impairments and related write-offs of the carrying values of the relevant assets;
•
acquired businesses or assets may not produce revenues, earnings or cash flow at anticipated levels;
•
acquired businesses or assets could have environmental, permitting or other problems for which contractual protections prove inadequate;
•
Entergy and/or its subsidiaries may assume liabilities that were not disclosed to them, that exceed their estimates, or for which their rights to indemnification from the seller are limited;
•
the disposition of a business, including Entergy’s planned exit from the merchant power business, could divert management’s attention from other business concerns;
•
Entergy and/or its subsidiaries may be unable to obtain the necessary regulatory or governmental approvals to close a transaction, such approvals may be granted subject to terms that are unacceptable to them, or Entergy or its subsidiaries otherwise may be unable to achieve anticipated regulatory treatment of any such transaction or acquired business or assets; and
•
Entergy or its subsidiaries otherwise may be unable to achieve the full strategic and financial benefits that they anticipate from the transaction, or such benefits may be delayed or may not occur at all.

Entergy may not be successful in managing these or any other significant risks that it may encounter in acquiring or divesting a business, or engaging in other strategic transactions, which could have a material effect on its business.

The construction of, and capital improvements to, power generation facilities involve substantial risks.  Should construction or capital improvement efforts be unsuccessful, the financial condition, results of operations, or liquidity of Entergy and the Utility operating companies could be materially affected.

Entergy’s and the Utility operating companies’ ability to complete construction of power generation facilities, or make other capital improvements, in a timely manner and within budget is contingent upon many variables and subject to substantial risks.  These variables include, but are not limited to, project management expertise and escalating costs for materials, labor, and environmental compliance.  Delays in obtaining permits, shortages in materials and qualified labor, suppliers and contractors not performing as required under their contracts, changes in the scope and timing of projects, poor quality initial cost estimates from contractors, the inability to raise capital on favorable terms, changes in commodity prices affecting revenue, fuel costs, or materials costs,  downward changes in the economy, changes in law or regulation, including environmental compliance requirements, and other events beyond the control of the Utility operating companies or the Entergy Wholesale Commodities business may occur that may materially affect the schedule, cost, and performance of these projects.  If these projects or other capital improvements are significantly delayed or become subject to cost overruns or cancellation, Entergy and the Utility operating companies could incur additional costs and termination payments, or face increased risk of potential write-off of the investment in the project.  In addition, the Utility operating companies could be exposed to higher costs and market volatility, which could affect cash flow and cost recovery, should their respective regulators decline to approve the construction of new generation needed to meet the reliability needs of customers at the lowest reasonable cost.

For further information regarding capital expenditure plans and other uses of capital in connection with the potential construction of additional generation supply sources within the Utility operating companies’ service territory, and as to the Entergy Wholesale Commodities business, see the “ Capital Expenditure Plans and Other Uses of Capital ” section of Management’s Financial Discussion and Analysis for Entergy and each of the Registrant Subsidiaries.

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The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business may incur substantial costs to fulfill their obligations related to environmental and other matters.

The businesses in which the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business operate are subject to extensive environmental regulation by local, state, and federal authorities.  These laws and regulations affect the manner in which the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business conduct their operations and make capital expenditures.  These laws and regulations also affect how the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business manage air emissions, discharges to water, wetlands impacts, solid and hazardous waste storage and disposal, cooling and service water intake, the protection of threatened and endangered species, certain migratory birds and eagles, hazardous materials transportation, and similar matters.  Federal, state, and local authorities continually revise these laws and regulations, and the laws and regulations are subject to judicial interpretation and to the permitting and enforcement discretion vested in the implementing agencies.  Developing and implementing plans for facility compliance with these requirements can lead to capital, personnel, and operation and maintenance expenditures.  Violations of these requirements can subject the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs or operating restrictions to achieve compliance, remediation and clean-up costs, civil penalties, and exposure to third parties’ claims for alleged health or property damages or for violations of applicable permits or standards.  In addition, the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business potentially are subject to liability under these laws for the costs of remediation of environmental contamination of property now or formerly owned or operated by the Utility operating companies, System Energy, and Entergy Wholesale Commodities and of property contaminated by hazardous substances they generate.  The Utility operating companies are currently involved in proceedings relating to sites where hazardous substances have been released and may be subject to additional proceedings in the future.  The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business have incurred and expect to incur significant costs related to environmental compliance.

Emissions of nitrogen and sulfur oxides, mercury, particulates, greenhouse gases, and other regulated air emissions from generating plants are potentially subject to increased regulation, controls and mitigation expenses.  In addition, existing air regulations and programs promulgated by the EPA often are challenged legally, sometimes resulting in large-scale changes to anticipated regulatory regimes and the resulting need to shift course, both operationally and economically, depending on the nature of the changes.  Risks relating to global climate change, initiatives to compel greenhouse gas emission reductions, and water availability issues are discussed below.

Entergy and its subsidiaries may not be able to obtain or maintain all required environmental regulatory approvals.  If there is a delay in obtaining any required environmental regulatory approvals, or if Entergy and its subsidiaries fail to obtain, maintain, or comply with any such approval, the operation of its facilities could be stopped or become subject to additional costs.  For further information regarding environmental regulation and environmental matters, see the “ Regulation of Entergy ’ s Business – Environmental Regulation ” section of Part I, Item 1.

The Utility operating companies, System Energy, and the Entergy Wholesale Commodities business may incur substantial costs related to reliability standards.

Entergy’s business is subject to extensive and mandatory reliability standards.  Such standards, which are established by the North American Electric Reliability Corporation (NERC), the SERC Reliability Corporation (SERC), and other regional enforcement entities, are approved by the FERC and frequently are reviewed, amended, and supplemented.  Failure to comply with such standards could result in the imposition of fines or civil penalties, and potential exposure to third party claims for alleged violations of such standards.  The standards, as well as the laws and regulations that govern them, are subject to judicial interpretation and to the enforcement discretion vested in the implementing agencies.  In addition to exposure to civil penalties and fines, the Utility operating companies have incurred and expect to incur significant costs related to compliance with new and existing reliability standards, including costs associated with the Utility operating companies’ transmission system and generation assets.  The changes to the

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reliability standards applicable to the electric power industry are ongoing, and Entergy cannot predict the ultimate effect that the reliability standards will have on its Utility and Entergy Wholesale Commodities.

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

The effects of weather and economic conditions, and the related impact on electricity and gas usage, may materially affect the Utility operating companies ’ results of operations.

Temperatures above normal levels in the summer tend to increase electric cooling demand and revenues, and temperatures below normal levels in the winter tend to increase electric and gas heating demand and revenues.  As a corollary, moderate temperatures in either season tend to decrease usage of energy and resulting revenues.  Seasonal pricing differentials, coupled with higher consumption levels, typically cause the Utility operating companies to report higher revenues in the third quarter of the fiscal year than in the other quarters.  Extreme weather conditions or storms,  however, may stress the Utility operating companies’ generation facilities and transmission and distribution systems, resulting in increased maintenance and capital costs (and potential increased financing needs), limits on their ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction.  These extreme conditions could have a material effect on the Utility operating companies’ financial condition, results of operations, and liquidity.

Entergy’s electricity sales volumes are affected by a number of factors, including economic conditions, weather, customer bill sizes (large bills tend to induce conservation), trends in energy efficiency, new technologies and self-generation alternatives, including the willingness and ability of large industrial customers to develop co-generation facilities that greatly reduce their demand from Entergy. Some of these factors are inherently cyclical or temporary in nature, such as the weather or economic conditions, and rarely have a long-lasting effect on Entergy’s operating results.  Others, such as the increasing adoption of energy efficient appliances, new building codes, distributed energy resources, energy storage, demand side management and new technologies such as rooftop solar are having a more permanent effect of reducing sales growth rates from historical norms. As a result of these emerging efficiencies and technologies, the Utility operating companies may experience lower usage per customer in the residential and commercial classes, and further advances have the potential to limit sales growth in the future.  Electricity sales to industrial customers, in particular, benefit from steady economic growth and favorable commodity prices; however, they are sensitive to changes in conditions in the markets in which its customers operate.  Any negative change in any of these or other factors has the potential to result in slower sales growth or sales declines and increased bad debt expense, which could materially affect Entergy’s and the Utility operating companies’ results of operations, financial condition, and liquidity.

The effects of climate change and environmental and regulatory obligations intended to compel greenhouse gas emission reductions or to place a price on greenhouse gas emissions could materially affect the financial condition, results of operations, and liquidity of Entergy, the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business.

In an effort to address climate change concerns, federal, state, and local authorities are calling for additional laws and regulations aimed at known or suspected causes of climate change.  For example, in response to the United States Supreme Court’s 2007 decision holding that the EPA has authority to regulate emissions of CO 2 and other “greenhouse gases” under the Clean Air Act, the EPA, various environmental interest groups, and other organizations are focusing considerable attention on CO 2 emissions from power generation facilities and their potential role in climate change.  In 2010, the EPA promulgated its first regulations controlling greenhouse gas emissions from certain vehicles and from new and significantly modified stationary sources of emissions, including electric generating units.  During 2012 and 2014, the EPA proposed CO 2 emission standards for new and existing sources. The EPA finalized these standards in 2015; however, in late 2017, the EPA proposed to repeal the regulations and issued an Advanced Notice of Proposed Rulemaking for replacing certain aspects of the standards for existing sources. As examples of state action, in the Northeast, the Regional Greenhouse Gas Initiative establishes a cap on CO 2 emissions from electric power plants and requires generators to purchase emission permits to cover their CO 2 emissions, and a similar program has been

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developed in California. The impact that recent changes in the federal government will have on existing and pending environmental laws and regulations related to greenhouse gas emissions is currently unclear.

Developing and implementing plans for compliance with greenhouse gas emissions reduction requirements can lead to additional capital, personnel, and operation and maintenance expenditures and could significantly affect the economic position of existing facilities and proposed projects; moreover, long-term planning to meet environmental requirements can be negatively impacted and costs may increase to the extent laws and regulations change prior to full implementation.  These requirements could, in turn, lead to changes in the planning or operations of balancing authorities or organized markets in areas where the Utility operating companies, System Energy, or Entergy Wholesale Commodities do business. Violations of such requirements may subject Entergy Wholesale Commodities and the Utility operating companies to enforcement actions, capital expenditures to bring existing facilities into compliance, additional operating costs or operating restrictions to achieve compliance, civil penalties, and exposure to third parties’ claims for alleged health or property damages or for violations of applicable permits or standards.  To the extent Entergy believes any of these costs are recoverable in rates, however, additional material rate increases for customers could be resisted by Entergy’s regulators and, in extreme cases, Entergy’s regulators might deny or defer timely recovery of these costs.  Future changes in environmental regulation governing the emission of CO 2 and other greenhouse gases could make some of Entergy’s electric generating units uneconomical to maintain or operate, and could increase the difficulty that Entergy and its subsidiaries have with obtaining or maintaining required environmental regulatory approvals, which could also materially affect the financial condition, results of operations and liquidity of Entergy and its subsidiaries.  In addition, lawsuits have occurred or are reasonably expected against emitters of greenhouse gases alleging that these companies are liable for personal injuries and property damage caused by climate change.  These lawsuits may seek injunctive relief, monetary compensation, and punitive damages.

In addition to the regulatory and financial risks associated with climate change discussed above, potential physical risks from climate change include an increase in sea level, wind and storm surge damages, wetland and barrier island erosion, risks of flooding and changes in weather conditions, (such as increases in precipitation, drought, or changes in average temperatures), and potential increased impacts of extreme weather conditions or storms.  Entergy subsidiaries own assets in, and serve, communities that are at risk from sea level rise, changes in weather conditions, storms, and loss of the protection offered by coastal wetlands.  A significant portion of the nation’s oil and gas infrastructure is located in these areas and susceptible to storm damage that could be aggravated by wetland and barrier island erosion, which could give rise to fuel supply interruptions and price spikes. Entergy and its subsidiaries also face the risk that climate change could impact the availability and quality of water supply necessary for operations.

These and other physical changes could result in changes in customer demand, increased costs associated with repairing and maintaining generation facilities and transmission and distribution systems resulting in increased maintenance and capital costs (and potential increased financing needs), limits on the Entergy System’s ability to meet peak customer demand, increased regulatory oversight, and lower customer satisfaction.  Also, to the extent that climate change adversely impacts the economic health of a region or results in energy conservation or demand side management programs, it may adversely impact customer demand and revenues.  Such physical or operational risks could have a material effect on Entergy’s, Entergy Wholesale Commodities’, System Energy’s, and the Utility operating companies’ financial condition, results of operations, and liquidity.

Continued and future availability and quality of water for cooling, process, and sanitary uses could materially affect the financial condition, results of operations, and liquidity of the Utility operating companies, System Energy, and the Entergy Wholesale Commodities business.

Water is a vital natural resource that is also critical to the Utility operating companies’, System Energy’s, and Entergy Wholesale Commodities’ business operations.  Entergy’s facilities use water for cooling, boiler make-up, sanitary uses, potable supply, and many other uses.  Three of Entergy’s Utility operating companies own and/or operate hydroelectric facilities.  Accordingly, water availability and quality are critical to Entergy’s business operations.  Impacts to water availability or quality could negatively impact both operations and revenues.


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Entergy secures water through various mechanisms (ground water wells, surface waters intakes, municipal supply, etc.) and operates under the provisions and conditions set forth by the provider and/or regulatory authorities.  Entergy also obtains and operates in substantial compliance with water discharge permits issued under various provisions of the Clean Water Act and/or state water pollution control provisions. Regulations and authorizations for both water intake and use and for waste discharge can become more stringent in times of water shortages, low flows in rivers, low lake levels, low groundwater aquifer volumes, and similar conditions.  The increased use of water by industry, agriculture, and the population at large, population growth, and the potential impacts of climate change on water resources may cause water use restrictions that affect Entergy and its subsidiaries.

Entergy and its subsidiaries may not be adequately hedged against changes in commodity prices, which could materially affect Entergy’s and its subsidiaries’ results of operations, financial condition, and liquidity.

To manage near-term financial exposure related to commodity price fluctuations, Entergy and its subsidiaries, including the Utility operating companies and the Entergy Wholesale Commodities business, may enter into contracts to hedge portions of their purchase and sale commitments, fuel requirements, and inventories of natural gas, uranium and its conversion and enrichment, coal, refined products, and other commodities, within established risk management guidelines.  As part of this strategy, Entergy and its subsidiaries may utilize fixed- and variable-price forward physical purchase and sales contracts, futures, financial swaps, and option contracts traded in the over-the-counter markets or on exchanges.  However, Entergy and its subsidiaries normally cover only a portion of the exposure of their assets and positions to market price volatility, and the coverage will vary over time.  In addition, Entergy also elects to leave certain volumes during certain years unhedged.  To the extent Entergy and its subsidiaries have unhedged positions, fluctuating commodity prices can materially affect Entergy’s and its subsidiaries’ results of operations and financial position.

Although Entergy and its subsidiaries devote a considerable effort to these risk management strategies, they cannot eliminate all the risks associated with these activities.  As a result of these and other factors, Entergy and its subsidiaries cannot predict with precision the impact that risk management decisions may have on their business, results of operations, or financial position.

Entergy’s over-the-counter financial derivatives are subject to rules implementing the Dodd-Frank Wall Street Reform and Consumer Protection Act that are designed to promote transparency, mitigate systemic risk and protect against market abuse. Entergy cannot predict the impact any proposed or not fully-implemented final rules will have on its ability to hedge its commodity price risk or on over-the-counter derivatives markets as a whole, but such rules and regulations could have a material effect on Entergy's risk exposure, as well as reduce market liquidity and further increase the cost of hedging activities.

Entergy has guaranteed or indemnified the performance of a portion of the obligations relating to hedging and risk management activities.  Reductions in Entergy’s or its subsidiaries’ credit quality or changes in the market prices of energy commodities could increase the cash or letter of credit collateral required to be posted in connection with hedging and risk management activities, which could materially affect Entergy’s or its subsidiaries’ liquidity and financial position.

The Utility operating companies and the Entergy Wholesale Commodities business are exposed to the risk that counterparties may not meet their obligations, which may materially affect the Utility operating companies and Entergy Wholesale Commodities.

The hedging and risk management practices of the Utility operating companies and the Entergy Wholesale Commodities business are exposed to the risk that counterparties that owe Entergy and its subsidiaries money, energy, or other commodities will not perform their obligations.  Currently, some hedging agreements contain provisions that require the counterparties to provide credit support to secure all or part of their obligations to Entergy or its subsidiaries.  If the counterparties to these arrangements fail to perform, Entergy or its subsidiaries may enforce and recover the proceeds from the credit support provided and acquire alternative hedging arrangements, which credit

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support may not always be adequate to cover the related obligations.  In such event, Entergy and its subsidiaries might incur losses in addition to amounts, if any, already paid to the counterparties.  In addition, the credit commitments of Entergy’s lenders under its bank facilities may not be honored for a variety of reasons, including unexpected periods of financial distress affecting such lenders, which could materially affect the adequacy of its liquidity sources.

Market performance and other changes may decrease the value of benefit plan assets, which then could require additional funding and result in increased benefit plan costs.

The performance of the capital markets affects the values of the assets held in trust under Entergy’s pension and postretirement benefit plans.  A decline in the market value of the assets may increase the funding requirements relating to Entergy’s benefit plan liabilities and also result in higher benefit costs. As the value of the assets decreases, the “expected return on assets” component of benefit costs decreases, resulting in higher benefits costs. Additionally, asset losses are incorporated into benefit costs over time, thus increasing benefits costs.  Volatility in the capital markets has affected the market value of these assets, which may affect Entergy’s planned levels of contributions in the future.  Additionally, changes in interest rates affect the liabilities under Entergy’s pension and postretirement benefit plans; as interest rates decrease, the liabilities increase, potentially requiring additional funding and recognition of higher liability carrying costs.  The funding requirements of the obligations related to the pension benefit plans can also increase as a result of changes in, among other factors, retirement rates, life expectancy assumptions, or Federal regulations.  For further information regarding Entergy’s pension and other postretirement benefit plans, refer to the “ Critical Accounting Estimates – Qualified Pension and Other Postretirement Benefits ” section of Management’s Financial Discussion and Analysis for Entergy and each of its Registrant Subsidiaries and Note 11 to the financial statements.

The litigation environment in the states in which certain Entergy subsidiaries operate poses a significant risk to those businesses.

Entergy and its subsidiaries are involved in the ordinary course of business in a number of lawsuits involving employment, commercial, asbestos, hazardous material and ratepayer matters, and injuries and damages issues, among other matters.  The states in which the Utility operating companies operate, in particular Louisiana, Mississippi, and Texas, have proven to be unusually litigious environments.  Judges and juries in these states have demonstrated a willingness to grant large verdicts, including punitive damages, to plaintiffs in personal injury, property damage, and business tort cases.  Entergy and its subsidiaries use legal and appropriate means to contest litigation threatened or filed against them, but the litigation environment in these states poses a significant business risk.

Domestic or international terrorist attacks, including cyber attacks, and failures or breaches of Entergy’s and its subsidiaries’ technology systems may adversely affect Entergy’s results of operations.

As power generators and distributors, Entergy and its subsidiaries face heightened risk of an act or threat of terrorism, including physical and cyber attacks, either as a direct act against one of Entergy’s generation facilities, transmission operations centers, or distribution infrastructure used to manage and transport power to customers. An actual act could affect Entergy’s ability to operate, including its ability to operate the information technology systems and network infrastructure on which it relies to conduct its business. While malware was recently discovered on our corporate network and remediated on a timely basis, it did not affect the company’s operational systems, nuclear plants or transmission network, nor did it have a material effect on our operations. Additionally, within Entergy’s industry, there have been attacks on energy infrastructure, but with minimal impact to operations, and there may be more attacks in the future. The Utility operating companies also face heightened risk of an act or threat by cyber criminals intent on accessing personal information for the purpose of committing identity theft, taking company-sensitive data, or disrupting the company’s ability to operate.

Entergy and its subsidiaries operate in a highly regulated industry that requires the continued operation of sophisticated information technology systems and network infrastructure in accordance with mandatory and prescriptive standards. Despite the implementation of multiple layers of security by Entergy and its subsidiaries,

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technology systems remain vulnerable to potential threats that could lead to unauthorized access or loss of availability to critical systems essential to the reliable operation of Entergy’s electric system. Moreover, the functionality of Entergy’s technology systems depends on both its and third-party systems to which Entergy is connected directly or indirectly (such as systems belonging to suppliers, vendors and contractors). While Entergy has processes in place to assess systems of certain of these suppliers, vendors and contractors, Entergy does not ultimately control the adequacy of their defenses against cyber and other attacks, but has implemented oversight measures to assess maturity and manage third-party risk. If Entergy’s or its subsidiaries’ technology systems were compromised and unable to detect or recover in a timely fashion to a normal state of operations, Entergy or its subsidiaries may be unable to perform critical business functions that are essential to the company’s well-being and the health, safety, and security needs of its customers. In addition, an attack on its information technology infrastructure may result in a loss of its confidential, sensitive, and proprietary information, including personal information of its customers, employees, vendors, and others in Entergy’s care.
    
Any such attacks, failures or breaches could have a material effect on Entergy’s and the Utility operating companies’ business, financial condition, results of operations or reputation. Insurance may not be adequate to cover losses that might arise in connection with these events. The risk of such attacks, failures, or breaches may cause Entergy and the Utility operating companies to incur increased capital and operating costs to implement increased security for its power generation, transmission, and distribution assets and other facilities, such as additional physical facility security and security personnel, and for systems to protect its information technology and network infrastructure systems. Such events may also expose Entergy to an increased risk of litigation (and associated damages and fines).

(Entergy New Orleans)

The effect of higher purchased gas cost charges to customers taking gas service may adversely affect Entergy New Orleans’s results of operations and liquidity.

Gas rates charged to retail gas customers are comprised primarily of purchased gas cost charges, which provide no return or profit to Entergy New Orleans, and distribution charges, which provide a return or profit to the utility.  Distribution charges are affected by the amount of gas sold to customers.  Purchased gas cost charges, which comprise most of a customer’s bill and may be adjusted monthly, represent gas commodity costs that Entergy New Orleans recovers from its customers.  Entergy New Orleans’s cash flows can be affected by differences between the time period when gas is purchased and the time when ultimate recovery from customers occurs.  When purchased gas cost charges increase substantially reflecting higher gas procurement costs incurred by Entergy New Orleans, customer usage may decrease, especially in weaker economic times, resulting in lower distribution charges for Entergy New Orleans, which could adversely affect results of operations.

(System Energy)

System Energy owns and, through an affiliate, operates a single nuclear generating facility, and it is dependent on affiliated companies for all of its revenues.

System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% ownership/leasehold interest in Grand Gulf.  Charges under the Unit Power Sales Agreement are paid by the Utility operating companies as consideration for their respective entitlements to receive capacity and energy.  The useful economic life of Grand Gulf is finite and is limited by the terms of its operating license, which expires in November 2044. System Energy’s financial condition depends both on the receipt of payments from the Utility operating companies under the Unit Power Sales Agreement and on the continued commercial operation of Grand Gulf.

For information regarding the Unit Power Sales Agreement, the sale and leaseback transactions and certain other agreements relating to the Entergy System companies’ support of System Energy (including the Capital Funds

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Agreement), see Notes 8 and 10 to the financial statements and the “ Utility - System Energy and Related Agreements ” section of Part I, Item 1.

(Entergy Corporation)

As a holding company, Entergy Corporation depends on cash distributions from its subsidiaries to meet its debt service and other financial obligations and to pay dividends on its common stock.

Entergy Corporation is a holding company with no material revenue generating operations of its own or material assets other than the stock of its subsidiaries.  Accordingly, all of its operations are conducted by its subsidiaries.  Entergy Corporation’s ability to satisfy its financial obligations, including the payment of interest and principal on its outstanding debt, and to pay dividends on its common stock depends on the payment to it of dividends or distributions by its subsidiaries.  The payments of dividends or distributions to Entergy Corporation by its subsidiaries in turn depend on their results of operations and cash flows and other items affecting retained earnings, and on any applicable legal, regulatory, or contractual limitations on subsidiaries’ ability to pay such dividends or distributions.  Provisions in the articles of incorporation of certain of Entergy Corporation’s subsidiaries restrict the payment of cash dividends to Entergy Corporation.  For further information regarding dividend or distribution restrictions to Entergy Corporation, see Note 7 to the financial statements.


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

2017 Compared to 2016

Net income decreased $27.4 million primarily due to higher nuclear refueling outage expenses, higher depreciation and amortization expenses, higher taxes other than income taxes, and higher interest expense, partially offset by higher other income.

2016 Compared to 2015

Net income increased $92.9 million primarily due to higher net revenue and lower other operation and maintenance expenses, partially offset by a higher effective income tax rate and higher depreciation and amortization expenses.

Net Revenue

2017 Compared to 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing 2017 to 2016.
 
Amount
 
(In Millions)
 
 
2016 net revenue

$1,520.5

Retail electric price
33.8

Opportunity sales
5.6

Asset retirement obligation
(14.8
)
Volume/weather
(29.0
)
Other
6.5

2017 net revenue

$1,522.6


The retail electric price variance is primarily due to the implementation of formula rate plan rates effective with the first billing cycle of January 2017 and an increase in base rates effective February 24, 2016, each as approved by the APSC. A significant portion of the base rate increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016. The increase was partially offset by decreases in the energy efficiency rider, as approved by the APSC, effective April 2016 and January 2017. See Note 2 to the financial statements for further discussion of the rate case and formula rate plan filings. See Note 14 to the financial statements for further discussion of the Union Power Station purchase.

The opportunity sales variance results from the estimated net revenue effect of the 2017 and 2016 FERC orders in the opportunity sales proceeding attributable to wholesale customers. See Note 2 to the financial statements for further discussion of the opportunity sales proceeding.


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The asset retirement obligation affects net revenue because Entergy Arkansas records a regulatory charge or credit for the difference between asset retirement obligation-related expenses and decommissioning trust fund earnings plus asset retirement obligation-related costs collected in revenue. The variance is primarily caused by a decrease in regulatory credits because of an increase in decommissioning trust fund earnings, including portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds.
    
The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales during the billed and unbilled sales periods. The decrease was partially offset by an increase of 733 GWh , or 11% , in industrial usage primarily due to a new customer in the primary metals industry.

2016 Compared to 2015

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits).  Following is an analysis of the change in net revenue comparing 2016 to 2015.
 
Amount
 
(In Millions)
 
 
2015 net revenue

$1,362.2

Retail electric price
161.5

Other
(3.2
)
2016 net revenue

$1,520.5


The retail electric price variance is primarily due to an increase in base rates, as approved by the APSC. The new base rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. The increase includes an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. A significant portion of the increase was related to the purchase of Power Block 2 of the Union Power Station in March 2016. See Note 2 to the financial statements for further discussion of the rate case. See Note 14 to the financial statements for further discussion of the Union Power Station purchase.

Other Income Statement Variances

2017 Compared to 2016

Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages compared to previous outages.

Other operation and maintenance expenses increased primarily due to:

•
the deferral in the first quarter 2016 of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements for further discussion of the rate case settlement;
•
an increase of $9.5 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs and higher labor costs, including contract labor;
•
an increase of $5.9 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to the prior year; and
•
the effect of recording in July 2016 the final court decision in a lawsuit against the DOE related to spent nuclear fuel storage costs. The damages awarded included the reimbursement of $5.5 million of spent nuclear fuel

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storage costs previously recorded as other operation and maintenance expense. See Note 8 to the financial statements for further discussion of Entergy Arkansas’s spent nuclear fuel litigation.

The increase was partially offset by:

•
a decrease of $16 million in nuclear generation expenses primarily due to a decrease in regulatory compliance costs compared to the prior year, partially offset by higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals. The decrease in regulatory compliance costs is primarily related to NRC inspection activities in 2016 as a result of the NRC’s March 2015 decision to move ANO into the “multiple/repetitive degraded cornerstone column” of the NRC’s reactor oversight process action matrix. See Note 8 to the financial statements for a discussion of the ANO stator incident and subsequent NRC reviews;
•
a decrease of $11.5 million in energy efficiency expenses primarily due to the timing of recovery from customers; and
•
a decrease of $5.2 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs, partially offset by an overall higher scope of work including plant outages in 2017 compared to 2016.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes primarily due to higher assessments and higher millage rates and an increase in local franchise taxes primarily due to higher billing factors.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Block 2 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements for further discussion of the Union Power Station purchase.

Other income increased primarily due to higher realized gains in 2017 compared to 2016 on the decommissioning trust fund investments, including portfolio rebalancing for the ANO 1 and ANO 2 decommissioning trust funds.

Interest expense increased primarily due to:

•
an increase of $3.3 million in estimated interest expense recorded in connection with the opportunity sales proceeding. See Note 2 to the financial statements for further discussion of the opportunity sales proceeding; and
•
the issuance in May 2017 of $220 million of 3.5% Series first mortgage bonds and the issuance in June 2016 of $55 million of 3.5% Series first mortgage bonds, partially offset by the redemption in July 2016 of $60 million of 6.38% Series first mortgage bonds and the redemption in February 2016 of $175 million of 5.66% Series first mortgage bonds. See Note 5 to the financial statements for further discussion of long-term debt.

2016 Compared to 2015

Nuclear refueling outage expenses increased primarily due to the amortization of higher costs associated with the most recent outages compared to previous outages.

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $21.6 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ Critical Accounting Estimates ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefits costs;

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•
the deferral of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance, as approved by the APSC as part of the 2015 rate case settlement. These costs are being amortized over a ten-year period beginning March 2016. See Note 2 to the financial statements for further discussion of the rate case settlement; and
•
a decrease of $7.2 million in energy efficiency costs, including the effects of true-ups to the energy efficiency filings for fixed costs to be collected from customers and incentives recognized as a result of participation in energy efficiency programs.

The decrease was partially offset by an increase of $24.1 million in nuclear generation expenses primarily due to an overall higher scope of work performed during plant outages and higher nuclear labor costs compared to prior year and an increase of $8.2 million in fossil-fueled generation expenses primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016. See Note 14 to the financial statements for further discussion of the Union Power Station purchase.

Taxes other than income taxes decreased primarily due to a decrease in local franchise taxes resulting from lower residential and commercial revenues compared to the prior year and a decrease in payroll taxes.
    
Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Block 2 of the Union Power Station purchased in March 2016. See Note 14 to the financial statements for further discussion of the Union Power Station purchase.
        
Interest expense increased primarily due to:

•
$5.1 million in estimated interest expense recorded in connection with the FERC orders issued in April 2016 in the opportunity sales proceeding. See Note 2 to the financial statements for further discussion of the opportunity sales proceeding; and
•
the net issuance of $230 million of first mortgage bonds in 2016. See Note 5 to the financial statements for further discussion of long-term debt.

Income Taxes

The effective income tax rates for 2017, 2016, and 2015 were 40.1% , 39.2% , and 35.3% , respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.



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Liquidity and Capital Resources

Cash Flow

Cash flows for the years ended December 31, 2017, 2016, and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Cash and cash equivalents at beginning of period

$20,509

 

$9,135

 

$218,505

 
 
 
 
 
 
Net cash provided by (used in):
 
 
 

 
 

Operating activities
555,556

 
676,511

 
474,890

Investing activities
(829,312
)
 
(947,995
)
 
(685,274
)
Financing activities
259,463

 
282,858

 
1,014

Net increase (decrease) in cash and cash equivalents
(14,293
)
 
11,374

 
(209,370
)
 
 
 
 
 
 
Cash and cash equivalents at end of period

$6,216

 

$20,509

 

$9,135


Operating Activities

Net cash flow provided by operating activities decreased $121 million in 2017 primarily due to income tax refunds of $8.1 million in 2017 compared to income tax refunds of $135.7 million in 2016. Entergy Arkansas had income tax refunds in 2016 and 2017 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the utilization of Entergy Arkansas’s net operating losses. The 2016 income tax refunds resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit. See Note 3 to the financial statements for a discussion of the income tax audit.

Net cash flow provided by operating activities increased $201.6 million in 2016 primarily due to:

•
income tax refunds of $135.7 million in 2016 compared to income tax payments of $103.3 million in 2015. Entergy Arkansas had income tax refunds in 2016 and income tax payments in 2015 in accordance with an intercompany income tax allocation agreement. The 2016 income tax refunds resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit whereas the income tax payments in 2015 resulted primarily from final settlement of amounts outstanding associated with the 2006-2007 IRS audit as well as adjustments associated with the settlement of the 2008-2009 IRS audit. See Note 3 to the financial statements for further discussion of the income tax audits;
•
the timing of payments to vendors; and
•
an increase in net revenue.

The increase was partially offset by a decrease due to the timing of recovery of fuel and purchased power costs.

Investing Activities

Net cash flow used in investing activities decreased $118.7 million in 2017 primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million and a decrease of $35.5 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017. See Note 14 to the financial statements for further discussion of the Union Power Station purchase.


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The decrease was partially offset by:

•
an increase of $50.4 million in nuclear construction expenditures primarily due to a higher scope of work performed on various nuclear projects in 2017;
•
an increase of $37.7 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle;
•
an increase of $32.9 million in information technology construction expenditures primarily due to increased spending on substation technology upgrades;
•
an increase of $22.3 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed on various projects in 2017; and
•
an increase of $11.2 million due to increased spending on advanced metering infrastructure.

Net cash flow used in investing activities increased $262.7 million in 2016 primarily due to the purchase of Power Block 2 of the Union Power Station in March 2016 for approximately $237 million . See Note 14 to the financial statements for further discussion of the Union Power Station purchase. The increase was partially offset by fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle.

Financing Activities

Net cash flow provided by financing activities decreased $23.4 million in 2017 primarily due to:

•
a $200 million capital contribution received from Entergy Corporation in March 2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station;
•
the net issuance of $119.1 million of long-term debt in 2017 compared to the net issuance of $189.1 million of long-term debt in 2016; and
•
$15 million in common stock dividends paid in 2017 resulting from Entergy Arkansas’s routine evaluation of its ability to pay dividends. There were no common stock dividends paid in 2016 in anticipation of the purchase of Power Block 2 of the Union Power Station.

The decrease was partially offset by:

•
money pool activity;
•
the redemptions of $75 million of 6.45% Series preferred stock and $10 million of 6.08% Series preferred stock in 2016; and
•
net short-term borrowings of $50 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2017 compared to net repayments of $11.7 million in 2016.

Increases in Entergy Arkansas’s payable to the money pool are a source of cash flow, and Entergy Arkansas’s payable to the money pool increased by $114.9 million in 2017 compared to decreasing by $1.5 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Net cash flow provided by financing activities increased $281.8 million in 2016 primarily due to:

•
the net issuance of $189.1 million of long-term debt in 2016 compared to the net retirement of $13.2 million of long-term debt in 2015;
•
a $200 million capital contribution received from Entergy Corporation in March 2016 primarily in anticipation of Entergy Arkansas’s purchase of Power Block 2 of the Union Power Station; and
•
net repayments of $11.7 million on the Entergy Arkansas nuclear fuel company variable interest entity credit facility in 2016 compared to net repayments of $36.3 million in 2015.

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Management’s Financial Discussion and Analysis


The increase was partially offset by the redemptions of $75 million of 6.45% Series preferred stock and $10 million of 6.08% Series preferred stock in 2016 and money pool activity.

Decreases in Entergy Arkansas’s payable to the money pool are a use of cash flow, and Entergy Arkansas’s payable to the money pool decreased by $1.5 million in 2016 compared to increasing by $52.7 million in 2015.

See Note 5 to the financial statements for further details of long-term debt.

Capital Structure

Entergy Arkansas’s capitalization is balanced between equity and debt, as shown in the following table.
 
December 31,
2017
 
December 31,
2016
Debt to capital
55.5%
 
55.3%
Effect of excluding the securitization bonds
(0.3%)
 
(0.4%)
Debt to capital, excluding securitization bonds (a)
55.2%
 
54.9%
Effect of subtracting cash
—%
 
(0.2%)
Net debt to net capital, excluding securitization bonds (a)
55.2%
 
54.7%

(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Arkansas.

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings and long-term debt, including the currently maturing portion. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Arkansas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because the securitization bonds are non-recourse to Entergy Arkansas, as more fully described in Note 5 to the financial statements. Entergy Arkansas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Arkansas’s financial condition because net debt indicates Entergy Arkansas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Arkansas seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings.  To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure.  To the extent that operating cash flows are insufficient to support planned investments, Entergy Arkansas may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure.  In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure if financed entirely with debt and reducing dividends, Entergy Arkansas may receive equity contributions to maintain the targeted capital structure.

Uses of Capital

Entergy Arkansas requires capital resources for:

•
construction and other capital investments;
•
debt and preferred stock maturities or retirements;
•
working capital purposes, including the financing of fuel and purchased power costs; and
•
dividend and interest payments.


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Following are the amounts of Entergy Arkansas’s planned construction and other capital investments.
 
2018
 
2019
 
2020
 
(In Millions)
Planned construction and capital investment:
 
 
 

 
 

Generation

$190

 

$240

 

$225

Transmission
170

 
165

 
175

Distribution
225

 
245

 
225

Utility Support
110

 
85

 
85

Total

$695

 

$735

 

$710


Following are the amounts of Entergy Arkansas’s existing debt and lease obligations (includes estimated interest payments) and other purchase obligations.
 
2018
 
2019-2020
 
2021-2022
 
after 2022
 
Total
 
(In Millions)
Long-term debt (a)

$125

 

$266

 

$672

 

$4,208

 

$5,271

Operating leases

$17

 

$29

 

$16

 

$24

 

$86

Purchase obligations (b)

$595

 

$1,050

 

$863

 

$5,369

 

$7,877


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services.  For Entergy Arkansas, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which are discussed in Note 8 to the financial statements.

In addition to the contractual obligations given above, Entergy Arkansas currently expects to contribute approximately $64.1 million to its qualified pension plans and approximately $472 thousand to its other postretirement health care and life insurance plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.  See “ Critical Accounting Estimates – Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.

Also in addition to the contractual obligations, Entergy Arkansas has ($117.7) million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions.  See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.

In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Arkansas includes specific investments, such as transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering; resource planning, including potential generation projects; system improvements; investments in ANO 1 and 2; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.

As discussed above in “ Capital Structure ,” Entergy Arkansas routinely evaluates its ability to pay dividends to Entergy Corporation from its earnings. Provisions in Entergy Arkansas’s articles of incorporation relating to preferred

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stock restrict the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock.  

Advanced Metering Infrastructure (AMI)

In September 2016, Entergy Arkansas filed an application seeking a finding from the APSC that Entergy Arkansas’s deployment of AMI is in the public interest. Entergy Arkansas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Arkansas’s modernized power grid. The filing included an estimate of implementation costs for AMI of $208 million . The filing identified a number of quantified and unquantified benefits, and Entergy Arkansas provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominal net benefit to customers of $406 million. Entergy Arkansas also sought to continue to include in rate base the remaining book value of existing meters, which was approximately $57 million at December 31, 2015, that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Arkansas proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Deployment of the communications network is expected to begin in 2018. Entergy Arkansas proposed to include the AMI deployment costs and the quantified benefits in future formula rate plan filings, and the 2018 costs were approved in the 2017 formula rate plan filing. In June 2017 the APSC staff and Arkansas Attorney General filed direct testimony. The APSC staff generally supported Entergy Arkansas’s AMI deployment conditioned on various recommendations. The Arkansas Attorney General’s consultant primarily recommended denial of Entergy Arkansas’s application but alternatively suggested recommendations in the event the APSC approves Entergy Arkansas’s proposal. Entergy Arkansas filed rebuttal testimony in June 2017, substantially accepting the APSC staff’s recommendations. In August 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement. In October 2017 the APSC issued an order finding that Entergy Arkansas’s AMI deployment is in the public interest and approving the settlement agreement subject to a minor modification. Entergy Arkansas expects to recover the undepreciated balance of its existing meters through a regulatory asset to be amortized over 15 years. Entergy Arkansas has begun discussions with the other parties to implement the items in the settlement agreement including pre-pay and time of use programs.

Sources of Capital

Entergy Arkansas’s sources to meet its capital requirements include:

•
internally generated funds;
•
cash on hand;
•
debt or preferred stock issuances; and
•
bank financing under new or existing facilities.

Entergy Arkansas may refinance, redeem, or otherwise retire debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.

All debt and common and preferred stock issuances by Entergy Arkansas require prior regulatory approval.  Preferred stock and debt issuances are also subject to issuance tests set forth in Entergy Arkansas’s corporate charters, bond indentures, and other agreements.  Entergy Arkansas has sufficient capacity under these tests to meet its foreseeable capital needs.


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Entergy Arkansas’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years.
2017
 
2016
 
2015
 
2014
(In Thousands)
($166,137)
 
($51,232)
 
($52,742)
 
$2,218

See Note 4 to the financial statements for a description of the money pool.

Entergy Arkansas has a credit facility in the amount of $150 million scheduled to expire in August 2022. Entergy Arkansas also has a $20 million credit facility scheduled to expire in April 2018.  The $150 million credit facility permits the issuance of letters of credit against $5 million of the borrowing capacity of the facility. As of December 31, 2017, there were no cash borrowings and no letters of credit outstanding under the credit facilities. In addition, Entergy Arkansas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of December 31, 2017, a $1 million letter of credit was outstanding under Entergy Arkansas’s uncommitted letter of credit facility. See Note 4 to the financial statements for further discussion of the credit facilities.

The Entergy Arkansas nuclear fuel company variable interest entity has a credit facility in the amount of $80 million scheduled to expire in May 2019.  As of December 31, 2017, $50 million in letters of credit to support a like amount of commercial paper issued and $24.9 million in loans were outstanding under the Entergy Arkansas nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements for further discussion of the nuclear fuel company variable interest entity credit facility.

Entergy Arkansas obtained authorizations from the FERC through October 2019 for short-term borrowings not to exceed an aggregate amount of $250 million at any time outstanding and borrowings by its nuclear fuel company variable interest entity. See Note 4 to the financial statements for further discussion of Entergy Arkansas’s short-term borrowing limits. The long-term securities issuances of Entergy Arkansas are limited to amounts authorized by the APSC, and the current authorization extends through December 2018.

State and Local Rate Regulation and Fuel-Cost Recovery

Retail Rates

2015 Base Rate Filing

In April 2015, Entergy Arkansas filed with the APSC for a general change in rates, charges, and tariffs. The filing notified the APSC of Entergy Arkansas’s intent to implement a forward test year formula rate plan pursuant to Arkansas legislation passed in 2015, and requested a retail rate increase of $268.4 million , with a net increase in revenue of $167 million . The filing requested a 10.2% return on common equity. In September 2015 the APSC staff and intervenors filed direct testimony, with the APSC staff recommending a revenue requirement of $217.9 million and a 9.65% return on common equity. In December 2015, Entergy Arkansas, the APSC staff, and certain of the intervenors in the rate case filed with the APSC a joint motion for approval of a settlement of the case that proposed a retail rate increase of approximately $225 million with a net increase in revenue of approximately $133 million ; an authorized return on common equity of 9.75% ; and a formula rate plan tariff that provides a +/- 50 basis point band around the 9.75% allowed return on common equity. A significant portion of the rate increase is related to Entergy Arkansas’s acquisition in March 2016 of Union Power Station Power Block 2 for a base purchase price of $237 million. The settlement agreement also provided for amortization over a 10-year period of $7.7 million of previously-incurred costs related to ANO post-Fukushima compliance and $9.9 million of previously-incurred costs related to ANO flood barrier compliance. A settlement hearing was held in January 2016. In February 2016 the APSC approved the settlement with one exception that reduced the retail rate increase proposed in the settlement by $5 million . The settling parties agreed to the APSC modifications in February 2016. The new rates were effective February 24, 2016 and began billing with the first billing cycle of April 2016. In March 2016, Entergy Arkansas made a compliance filing regarding the

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new rates that included an interim base rate adjustment surcharge, effective with the first billing cycle of April 2016, to recover the incremental revenue requirement for the period February 24, 2016 through March 31, 2016. The interim base rate adjustment surcharge was designed to recover a total of $21.1 million over the nine-month period from April 2016 through December 2016.

2016 Formula Rate Plan Filing

In July 2016, Entergy Arkansas filed with the APSC its 2016 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2017 test period to be below the formula rate plan bandwidth. The filing requested a $67.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75% . In October 2016, Entergy Arkansas filed with the APSC revised formula rate plan attachments with an updated request for a $54.4 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors, as well as three additional adjustments identified as appropriate by Entergy Arkansas. In November 2016 a hearing was held and the APSC issued an order directing the parties to brief certain issues. In December 2016 the APSC approved the settlement agreement and the $54.4 million revenue requirement increase with approximately $25 million of the $54.4 million revenue requirement subject to possible future adjustment and refund to customers with interest. The APSC requested supplemental information for some of Entergy Arkansas’s requested nuclear expenditures. In December 2016 the APSC approved Entergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle of January 2017. In April 2017, Entergy Arkansas filed a motion consented to by all parties requesting that it be permitted to submit the supplemental information requested by the APSC in conjunction with its 2017 formula rate plan filing, which was subsequently made in July 2017 and is discussed below. In May 2017 the APSC approved the joint motion and proposal to review Entergy Arkansas’s supplemental information on a concurrent schedule with the 2017 formula rate plan filing. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and recovery of the 2017 and 2018 nuclear costs.

2017 Formula Rate Plan Filing

In July 2017, Entergy Arkansas filed with the APSC its 2017 formula rate plan filing showing Entergy Arkansas’s projected earned return on common equity for the twelve months ended December 31, 2018 test period to be below the formula rate plan bandwidth.  The filing projected a $129.7 million revenue requirement increase to achieve Entergy Arkansas’s target earned return on common equity of 9.75% .  Entergy Arkansas’s formula rate plan is subject to a four percent annual revenue constraint and the projected annual revenue requirement increase exceeded the four percent, resulting in a proposed increase for the 2017 formula rate plan of $70.9 million . In October 2017, Entergy Arkansas filed with the APSC revised formula rate plan attachments that projected a $126.2 million revenue requirement increase based on acceptance of certain adjustments and recommendations made by the APSC staff and other intervenors. The revised formula rate plan filing included a proposed $71.1 million revenue requirement increase based on a revision to the four percent constraint calculation. In October 2017, Entergy Arkansas and the parties to the proceeding filed a joint motion to approve a unanimous settlement agreement resolving all issues in the docket and providing for recovery of the 2017 and 2018 nuclear costs. In December 2017 the APSC approved the settlement agreement and the $71.1 million revenue requirement increase, as well as Entergy Arkansas’s formula rate plan compliance tariff, and the rates became effective with the first billing cycle of January 2018.

Internal Restructuring

In November 2017, Entergy Arkansas filed an application with the APSC seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy Arkansas to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring is subject to regulatory review and approval by the APSC, the FERC, and the NRC. Entergy Arkansas also filed a notice with the Missouri Public Service Commission in December 2017 out of an abundance of caution, although

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Entergy Arkansas does not serve any retail customers in Missouri. If the APSC approves the restructuring by September 1, 2018, and the restructuring closes on or before December 1, 2018, Entergy Arkansas proposed in its application to credit retail customers $66 million over six years, beginning in 2019. In February 2018, Entergy Arkansas filed supplemental testimony reducing the proposed retail customer credits to $39.6 million over six years. If the APSC, the FERC, and the NRC approvals are obtained, Entergy Arkansas expects the restructuring will be consummated on or before December 1, 2018.
It is currently contemplated that Entergy Arkansas would undertake a multi-step restructuring, which would include the following:
•
Entergy Arkansas would redeem its outstanding preferred stock at the aggregate redemption price of approximately $32.7 million, which includes call premiums, plus accumulated and unpaid dividends, if any.
•
Entergy Arkansas would convert from an Arkansas corporation to a Texas corporation.
•
Under the Texas Business Organizations Code (TXBOC), Entergy Arkansas will allocate substantially all of its assets to a new subsidiary, Entergy Arkansas Power, LLC, a Texas limited liability company (Entergy Arkansas Power), and Entergy Arkansas Power will assume substantially all of the liabilities of Entergy Arkansas, in a transaction regarded as a merger under the TXBOC. Entergy Arkansas will remain in existence and hold the membership interests in Entergy Arkansas Power.
•
Entergy Arkansas will contribute the membership interests in Entergy Arkansas Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy Arkansas Power will be a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.
•
Entergy Arkansas will change its name to Entergy Utility Property, Inc., and Entergy Arkansas Power will then change its name to Entergy Arkansas, LLC.

Upon the completion of the restructuring, Entergy Arkansas, LLC will hold substantially all of the assets, and will have assumed substantially all of the liabilities, of Entergy Arkansas. Entergy Arkansas may modify or supplement the steps to be taken to effectuate the restructuring.
Production Cost Allocation Rider

The APSC approved a production cost allocation rider for recovery from customers of the retail portion of the costs allocated to Entergy Arkansas as a result of the System Agreement proceedings, which are discussed in the “ System Agreement Cost Equalization Proceedings ” section below.  These costs cause an increase in Entergy Arkansas’s deferred fuel cost balance because Entergy Arkansas pays the costs over seven months but collects the costs from customers over twelve months .

In May 2014, Entergy Arkansas filed its annual redetermination of the production cost allocation rider to recover the $3 million unrecovered retail balance as of December 31, 2013 and the $67.8 million System Agreement bandwidth remedy payment made in May 2014 as a result of the compliance filing pursuant to the FERC’s February 2014 orders related to the bandwidth payments/receipts for the June - December 2005 period. In January 2015 the APSC issued an order approving Entergy Arkansas’s request for recovery of the $3 million under-recovered amount based on the true-up of the production cost allocation rider and the $67.8 million May 2014 System Agreement bandwidth remedy payment subject to refund with interest, with recovery of these payments concluding with the last billing cycle in December 2015. The APSC also found that Entergy Arkansas is entitled to carrying charges pursuant to the current terms of the production cost allocation rider. Entergy Arkansas made its compliance filing pursuant to the order in January 2015 and the APSC issued its approval order, also in January 2015. The redetermined rate went into effect with the first billing cycle of February 2015.

In May 2015, Entergy Arkansas filed its annual redetermination of the production cost allocation rider, which included a $38 million payment made by Entergy Arkansas as a result of the FERC’s February 2014 order related to the comprehensive bandwidth recalculation for calendar year 2006, 2007, and 2008 production costs. The redetermined rate for the 2015 production cost allocation rider update was added to the redetermined rate from the 2014 production

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cost allocation rider update and the combined rate was effective with the first billing cycle of July 2015. This combined rate was effective through December 2015. The collection of the remainder of the redetermined rate for the 2015 production cost allocation rider update continued through June 2016.

In May 2016, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflected recovery of the production cost allocation rider true-up adjustment of the 2014 and 2015 unrecovered retail balance in the amount of $1.9 million . Additionally, the redetermined rates reflected the recovery of a $1.9 million System Agreement bandwidth remedy payment resulting from a compliance filing pursuant to the FERC’s December 2015 order related to test year 2009 production costs. The rates for the 2016 production cost allocation rider update became effective with the first billing cycle of July 2016, and the rates were effective through June 2017.

In May 2017, Entergy Arkansas filed its annual redetermination pursuant to the production cost allocation rider, which reflected a credit amount of $0.3 million resulting from a compliance filing pursuant to the FERC’s September 2016 order. Additionally, the redetermined rate reflected recovery of the production cost allocation rider true-up adjustment of the 2016 unrecovered retail balance in the amount of $0.3 million. Because of the small effect of the 2017 production cost allocation rider update, Entergy Arkansas proposed to reduce the effective period of the update to one month, July 2017. After the one month collection period, rates were set to zero for all rate classes for the period August 2017 through June 2018.

Energy Cost Recovery Rider

Entergy Arkansas’s retail rates include an energy cost recovery rider to recover fuel and purchased energy costs in monthly customer bills.  The rider utilizes the prior calendar-year energy costs and projected energy sales for the twelve -month period commencing on April 1 of each year to develop an energy cost rate, which is redetermined annually and includes a true-up adjustment reflecting the over- or under-recovery, including carrying charges, of the energy costs for the prior calendar year.  The energy cost recovery rider tariff also allows an interim rate request depending upon the level of over- or under-recovery of fuel and purchased energy costs.

In January 2014, Entergy Arkansas filed a motion with the APSC relating to its redetermination of its energy cost rate that was subsequently filed in March 2014. In that motion, Entergy Arkansas requested that the APSC authorize Entergy Arkansas to exclude $65.9 million of deferred fuel and purchased energy costs incurred in 2013 from the redetermination of its 2014 energy cost rate. The $65.9 million is an estimate of the incremental fuel and replacement energy costs that Entergy Arkansas incurred as a result of the ANO stator incident. Entergy Arkansas requested that the APSC authorize Entergy Arkansas to retain that amount in its deferred fuel balance, with recovery to be reviewed in a later period after more information is available regarding various claims associated with the ANO stator incident. The APSC approved Entergy Arkansas’s request in February 2014. In July 2017, Entergy Arkansas filed for a change in rates pursuant to its formula rate plan rider. In that proceeding, the APSC approved a settlement agreement agreed upon by the parties, including a provision that requires Entergy Arkansas to initiate a proceeding for the purpose of recovering funds currently withheld from rates and related to the stator incident, including the $65.9 million of deferred fuel and purchased energy costs previously noted, subject to certain timelines and conditions set forth in the settlement agreement. See the “ ANO Damage, Outage, and NRC Reviews ” section in Note 8 to the financial statements for further discussion of the ANO stator incident.

In March 2017, Entergy Arkansas filed its annual redetermination of its energy cost rate pursuant to the energy cost recovery rider, which reflected an increase in the rate from $0.01164 per kWh to $0.01547 per kWh. The APSC staff filed testimony in March 2017 recommending that the redetermined rate be implemented with the first billing cycle of April 2017 under the normal operation of the tariff. Accordingly, the redetermined rate went into effect on March 31, 2017 pursuant to the tariff. In July 2017 the Arkansas Attorney General requested additional information to support certain of the costs included in Entergy Arkansas’s 2017 energy cost rate redetermination.


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Opportunity Sales Proceeding

In June 2009 the LPSC filed a complaint requesting that the FERC determine that certain of Entergy Arkansas’s sales of electric energy to third parties: (a) violated the provisions of the System Agreement that allocated the energy generated by Entergy System resources, (b) imprudently denied the Entergy System and its ultimate consumers the benefits of low-cost Entergy System generating capacity, and (c) violated the provision of the System Agreement that prohibited sales to third parties by individual companies absent an offer of a right-of-first-refusal to other Utility operating companies.   The LPSC’s complaint challenged sales made beginning in 2002 and requests refunds.  In July 2009 the Utility operating companies filed a response to the complaint requesting that the FERC dismiss the complaint on the merits without hearing because the LPSC has failed to meet its burden of showing any violation of the System Agreement and failed to produce any evidence of imprudent action by the Entergy System.  In their response, the Utility operating companies explained that the System Agreement clearly contemplates that the Utility operating companies may make sales to third parties for their own account, subject to the requirement that those sales be included in the load (or load shape) for the applicable Utility operating company.  The FERC subsequently ordered a hearing in the proceeding.

The LPSC filed direct testimony in the proceeding alleging, among other things, (1) that Entergy violated the System Agreement by permitting Entergy Arkansas to make non-requirements sales to non-affiliated third parties rather than making such energy available to the other Utility operating companies’ customers; and (2) that over the period 2000 - 2009, these non-requirements sales caused harm to the Utility operating companies’ customers and these customers should be compensated for this harm by Entergy.  In subsequent testimony, the LPSC modified its original damages claim in favor of quantifying damages by re-running intra-system bills.  The Utility operating companies believe the LPSC’s allegations are without merit.  A hearing in the matter was held in August 2010.

In December 2010 the ALJ issued an initial decision.  The ALJ found that the System Agreement allowed for Entergy Arkansas to make the sales to third parties but concluded that the sales should be accounted for in the same manner as joint account sales.  The ALJ concluded that “shareholders” should make refunds of the damages to the Utility operating companies, along with interest.  Entergy disagreed with several aspects of the ALJ’s initial decision and in January 2011 filed with the FERC exceptions to the decision.

The FERC issued a decision in June 2012 and held that, while the System Agreement is ambiguous, it does provide authority for individual Utility operating companies to make opportunity sales for their own account and Entergy Arkansas made and priced these sales in good faith.  The FERC found, however, that the System Agreement does not provide authority for an individual Utility operating company to allocate the energy associated with such opportunity sales as part of its load, but provides a different allocation authority.  The FERC further found that the after-the-fact accounting methodology used to allocate the energy used to supply the sales was inconsistent with the System Agreement.  Quantifying the effect of the FERC’s decision requires re-running intra-system bills for a ten-year period, and the FERC in its decision established further hearing procedures to determine the calculation of the effects.  In July 2012, Entergy and the LPSC filed requests for rehearing of the FERC’s June 2012 decision. A hearing was held in May 2013 to quantify the effect of repricing the opportunity sales in accordance with the FERC’s June 2012 decision.
    
In August 2013 the presiding judge issued an initial decision in the calculation proceeding. The initial decision concluded that the methodology proposed by the LPSC, rather than the methodologies proposed by Entergy or the FERC Staff, should be used to calculate the payments that Entergy Arkansas is to make to the other Utility operating companies. The initial decision also concluded that the other System Agreement service schedules should not be adjusted and that payments by Entergy Arkansas should not be reflected in the rough production cost equalization bandwidth calculations for the applicable years. The initial decision recognized that the LPSC’s methodology would result in an inequitable windfall to the other Utility operating companies and, therefore, concluded that any payments by Entergy Arkansas should be reduced by 20% . The LPSC, APSC, City Council, and FERC staff filed briefs on exceptions and/or briefs opposing exceptions. Entergy filed a brief on exceptions requesting that the FERC reverse the initial decision and a brief opposing certain exceptions taken by the LPSC and FERC staff.


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In April 2016 the FERC issued orders addressing requests for rehearing filed in July 2012 and the ALJ’s August 2013 initial decision. The first order denied Entergy’s request for rehearing and affirmed the FERC’s earlier rulings that Entergy’s original methodology for allocating energy costs to the opportunity sales was incorrect and, as a result, Entergy Arkansas must make payments to the other Utility operating companies to put them in the same position that they would have been in absent the incorrect allocation. The FERC clarified that interest should be included with the payments. The second order affirmed in part, and reversed in part, the rulings in the ALJ’s August 2013 initial decision regarding the methodology that should be used to calculate the payments Entergy Arkansas is to make to the other Utility operating companies. The FERC affirmed the ALJ’s ruling that a full re-run of intra-system bills should be performed, but required that methodology be modified so that the sales have the same priority for purposes of energy allocation as joint account sales. The FERC reversed the ALJ’s decision that any payments by Entergy Arkansas should be reduced by 20% . The FERC also reversed the ALJ’s decision that adjustments to other System Agreement service schedules and excess bandwidth payments should not be taken into account when calculating the payments to be made by Entergy Arkansas. The FERC held that such adjustments and excess bandwidth payments should be taken into account, but ordered further proceedings before an ALJ to address whether a cap on any reduction due to bandwidth payments was necessary and to implement the other adjustments to the calculation methodology.

In May 2016, Entergy Services filed a request for rehearing of the FERC’s April 2016 order arguing that payments made by Entergy Arkansas should be reduced as a result of the timing of the LPSC’s approval of certain contracts. Entergy Services also filed a request for clarification and/or rehearing of the FERC’s April 2016 order addressing the ALJ’s August 2013 initial decision. The APSC and the LPSC also filed requests for rehearing of the FERC’s April 2016 order. In September 2017 the FERC issued an order denying the request for rehearing on the issue of whether any payments by Entergy Arkansas to the other Utility operating companies should be reduced due to the timing of the LPSC’s approval of Entergy Arkansas’s wholesale baseload contract with Entergy Louisiana. In November 2017 the FERC issued an order denying all of the remaining requests for rehearing of the April 2016 order. In November 2017, Entergy Services filed a petition for review in the D.C. Circuit of the FERC’s orders in the first two phases of the opportunity sales case. In December 2017 the D.C. Circuit granted Entergy Services’s request to hold the appeal in abeyance pending final resolution of the related proceeding still pending with the FERC. In January 2018 the APSC and the LPSC filed separate petitions for review in the D.C. Circuit, and the D.C. Circuit consolidated the appeals with Entergy Services’s appeal and held all of the appeals in abeyance.

Pursuant to the procedural schedule established in the case, Entergy Services re-ran intra-system bills for the ten-year period 2000-2009 to quantify the effects of the FERC's ruling. In November 2016 the LPSC submitted testimony disputing certain aspects of the calculations. A hearing was held in May 2017. In July 2017, the ALJ issued an initial decision concluding that Entergy Arkansas should pay $86 million plus interest to the other Utility operating companies. In August 2017 the Utility operating companies, the LPSC, the APSC, and FERC staff filed individual briefs on exceptions challenging various aspects of the initial decision. In September 2017 the Utility operating companies, the LPSC, the APSC, the MPSC, the City Council, and FERC staff filed separate briefs opposing exceptions taken by various parties. The case is pending before the FERC. No payments will be made or received by the Utility operating companies until the FERC issues an order reviewing the initial decision and Entergy submits a subsequent filing to comply with that order.

The effect of the FERC’s decisions thus far in the case would be that Entergy Arkansas will make payments to some or all of the other Utility operating companies. Because further proceedings will still occur in the case, the amount and recipients of payments by Entergy Arkansas are unknown at this time. Based on testimony previously submitted in the case and its assessment of the April 2016 FERC orders, in the first quarter 2016, Entergy Arkansas recorded a liability of $87 million , which includes interest, for its estimated increased costs and payment to the other Utility operating companies. This estimate is subject to change depending on how the FERC resolves the issues that are still outstanding in the case, including its review of the July 2017 initial decision. Entergy Arkansas’s increased costs will be attributed to Entergy Arkansas’s retail and wholesale businesses, and it is not probable that Entergy Arkansas will recover the wholesale portion. Entergy Arkansas, therefore, recorded a deferred fuel regulatory asset in the first quarter 2016 of approximately $75 million , which represents its estimate of the retail portion of the costs. Following its assessment of the course of the proceedings, including the FERC’s denial of rehearing in November 2017

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Management’s Financial Discussion and Analysis


described above, in the fourth quarter 2017, Entergy Arkansas recorded an additional liability of $35 million and a regulatory asset of $31 million. Because management currently expects to recover the retail portion of the costs through a base rate proceeding or newly proposed rider, the regulatory asset is reflected as Other regulatory assets as of December 31, 2017.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.

Nuclear Matters

Entergy Arkansas owns and, through an affiliate, operates the ANO 1 and ANO 2 nuclear power plants.  Entergy Arkansas is, therefore, subject to the risks related to owning and operating nuclear plants. These include risks related to: the use, storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushima event; regulatory requirements and potential future regulatory changes, including changes affecting the regulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; the performance and capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete decommissioning of each site when required; and limitations on the amounts and types of insurance commercially available for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident. In the event of an unanticipated early shutdown of either ANO 1 or ANO 2, Entergy Arkansas may be required to file with the APSC a rate mechanism to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.

See Note 8 to the financial statements for discussion of the NRC’s decision in March 2015 to move ANO into the “multiple/repetitive degraded cornerstone column,” or Column 4, of the NRC’s Reactor Oversight Process Action Matrix, and the resulting significant additional NRC inspection activities at the ANO site.

Environmental Risks

Entergy Arkansas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters.  Management believes that Entergy Arkansas is in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted in “ Regulation of Entergy’s Business - Environmental Regulation ” in Part I, Item 1.  Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.

Critical Accounting Estimates

The preparation of Entergy Arkansas’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows.  Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Arkansas’s financial position or results of operations.


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Management’s Financial Discussion and Analysis


Nuclear Decommissioning Costs

See “ Nuclear Decommissioning Costs ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.

Utility Regulatory Accounting

See “ Utility Regulatory Accounting ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.

Unbilled Revenue

See “ Unbilled Revenue ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the unbilled revenue amounts.

Impairment of Long-lived Assets and Trust Fund Investments

See “ Impairment of Long-lived Assets and Trust Fund Investments ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the impairment of long-lived assets and trust fund investments.

Taxation and Uncertain Tax Positions

See “ Taxation and Uncertain Tax Positions ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

Qualified Pension and Other Postretirement Benefits

Entergy Arkansas’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.   See the “ Qualified Pension and Other Postretirement Benefits ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.  Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.

Costs and Sensitivities

The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Qualified Projected Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$3,107
 
$47,040
Rate of return on plan assets
 
(0.25%)
 
$2,914
 
$-
Rate of increase in compensation
 
0.25%
 
$1,353
 
$6,446


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Management’s Financial Discussion and Analysis


The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated Postretirement Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$506
 

$7,552

Health care cost trend
 
0.25%
 
$782
 

$5,513


Each fluctuation above assumes that the other components of the calculation are held constant.

Costs and Funding

Total qualified pension cost for Entergy Arkansas in 2017 was $37 million.  Entergy Arkansas anticipates 2018 qualified pension cost to be $43 million. In 2016, Entergy Arkansas refined its approach to estimating the service cost and interest cost components of qualified pension costs, which had the effect of lowering qualified pension costs by $13.3 million. Entergy Arkansas contributed $79.6 million to its qualified pension plan in 2017 and estimates pension contributions will be approximately $64.1 million in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

Total other postretirement health care and life insurance benefit income for Entergy Arkansas in 2017 was $4 million.  Entergy Arkansas expects 2018 postretirement health care and life insurance benefit income of approximately $10.2 million.  In 2016, Entergy Arkansas refined its approach to estimating the service cost and interest cost components of other postretirement costs, which had the effect of lowering qualified other postretirement costs by $2.5 million. Entergy Arkansas contributed $695 thousand to its other postretirement plans in 2017 and estimates 2018 contributions will be approximately $472 thousand.
  
Federal Healthcare Legislation

See “ Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.

Other Contingencies

See “ Other Contingencies ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and other risks.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements for a discussion of new accounting pronouncements.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the shareholders and Board of Directors of
Entergy Arkansas, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Entergy Arkansas, Inc. and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, cash flows and changes in common equity (pages 319 through 324 and applicable items in pages 55 through 230), for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Company’s auditor since 2001.


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$2,139,919

 

$2,086,608

 

$2,253,564

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
402,777

 
325,036

 
535,919

Purchased power
 
230,652

 
233,350

 
380,081

Nuclear refueling outage expenses
 
83,968

 
56,650

 
51,411

Other operation and maintenance
 
707,825

 
706,573

 
734,118

Decommissioning
 
56,860

 
53,610

 
50,414

Taxes other than income taxes
 
103,662

 
93,109

 
99,926

Depreciation and amortization
 
277,146

 
264,215

 
246,897

Other regulatory charges (credits) - net
 
(16,074
)
 
7,737

 
(24,608
)
TOTAL
 
1,846,816

 
1,740,280

 
2,074,158

 
 
 
 
 
 
 
OPERATING INCOME
 
293,103

 
346,328

 
179,406

 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
18,452

 
17,099

 
14,227

Interest and investment income
 
35,882

 
19,087

 
22,382

Miscellaneous - net
 
(299
)
 
(1,446
)
 
(3,385
)
TOTAL
 
54,035

 
34,740

 
33,224

 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
122,075

 
115,311

 
105,622

Allowance for borrowed funds used during construction
 
(8,585
)
 
(9,228
)
 
(7,805
)
TOTAL
 
113,490

 
106,083

 
97,817

 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
233,648

 
274,985

 
114,813

 
 
 
 
 
 
 
Income taxes
 
93,804

 
107,773

 
40,541

 
 
 
 
 
 
 
NET INCOME
 
139,844

 
167,212

 
74,272

 
 
 
 
 
 
 
Preferred dividend requirements
 
1,428

 
5,270

 
6,873

 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$138,416

 

$161,942

 

$67,399

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS



 

For the Years Ended December 31,
 

2017

2016

2015
 

(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 

$139,844

 

$167,212

 

$74,272

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
427,394

 
414,933

 
400,156

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
67,711

 
201,219

 
(4,330
)
Changes in assets and liabilities:
 
 

 
 

 
 

Receivables
 
(23,397
)
 
(39,118
)
 
20,813

Fuel inventory
 
3,402

 
29,929

 
(11,791
)
Accounts payable
 
16,011

 
143,645

 
(2,528
)
Prepaid taxes and taxes accrued
 
40,127

 
37,485

 
(54,531
)
Interest accrued
 
1,635

 
(3,303
)
 
(367
)
Deferred fuel costs
 
33,190

 
(105,741
)
 
151,332

Other working capital accounts
 
15,087

 
(46,490
)
 
(44,784
)
Provisions for estimated losses
 
16,047

 
13,130

 
(137
)
Other regulatory assets
 
(76,762
)
 
(95,464
)
 
60,279

Other regulatory liabilities
 
1,043,507

 
62,994

 
(11,123
)
Deferred tax rate change recognized as regulatory liability/asset
 
(1,047,837
)
 
—

 
—

Pension and other postretirement liabilities
 
(70,826
)
 
(36,805
)
 
(110,936
)
Other assets and liabilities
 
(29,577
)
 
(67,115
)
 
8,565

Net cash flow provided by operating activities
 
555,556

 
676,511

 
474,890

INVESTING ACTIVITIES
 
 

 
 

 
 

Construction expenditures
 
(735,816
)
 
(666,289
)
 
(624,546
)
Allowance for equity funds used during construction
 
19,211

 
17,754

 
15,882

Nuclear fuel purchases
 
(151,424
)
 
(102,050
)
 
(132,252
)
Proceeds from sale of nuclear fuel
 
51,029

 
39,313

 
52,281

Proceeds from nuclear decommissioning trust fund sales
 
339,434

 
197,390

 
212,954

Investment in nuclear decommissioning trust funds
 
(352,138
)
 
(213,093
)
 
(223,357
)
Payment for purchase of plant
 
—

 
(237,323
)
 
—

Changes in money pool receivable - net
 
—

 
—

 
2,218

Insurance proceeds
 
—

 
10,404

 
11,654

Other
 
392

 
5,899

 
(108
)
Net cash flow used in investing activities
 
(829,312
)

(947,995
)

(685,274
)
FINANCING ACTIVITIES
 
 

 
 

 
 

Proceeds from the issuance of long-term debt
 
294,656

 
817,563

 
—

Retirement of long-term debt
 
(175,560
)
 
(628,433
)
 
(13,234
)
Capital contribution from parent
 
—

 
200,000

 
—

Redemption of preferred stock
 
—

 
(85,283
)
 
—

Change in money pool payable - net
 
114,905

 
(1,510
)
 
52,742

Changes in short-term borrowings - net
 
49,974

 
(11,690
)
 
(36,278
)
Dividends paid:
 
 

 
 

 
 

Common stock
 
(15,000
)
 
—

 
—

Preferred stock
 
(1,428
)
 
(6,631
)
 
(6,873
)
Other
 
(8,084
)
 
(1,158
)
 
4,657

Net cash flow provided by financing activities
 
259,463

 
282,858

 
1,014

Net increase (decrease) in cash and cash equivalents
 
(14,293
)
 
11,374

 
(209,370
)
Cash and cash equivalents at beginning of period
 
20,509

 
9,135

 
218,505

Cash and cash equivalents at end of period
 

$6,216

 

$20,509

 

$9,135

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 

 
 

Cash paid (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$115,162

 

$112,912

 

$100,435

Income taxes
 

($8,141
)
 

($135,709
)
 

$103,296

See Notes to Financial Statements.

 


 


 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$6,184

 

$20,174

Temporary cash investments
 
32

 
335

Total cash and cash equivalents
 
6,216

 
20,509

Securitization recovery trust account
 
3,748

 
4,140

Accounts receivable:
 
 

 
 

Customer
 
110,016

 
102,229

Allowance for doubtful accounts
 
(1,063
)
 
(1,211
)
Associated companies
 
38,765

 
35,286

Other
 
65,209

 
58,153

Accrued unbilled revenues
 
105,120

 
100,193

Total accounts receivable
 
318,047

 
294,650

Deferred fuel costs
 
63,302

 
96,690

Fuel inventory - at average cost
 
29,358

 
32,760

Materials and supplies - at average cost
 
192,853

 
182,600

Deferred nuclear refueling outage costs
 
56,485

 
81,313

Prepayments and other
 
12,108

 
14,293

TOTAL
 
682,117

 
726,955

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Decommissioning trust funds
 
944,890

 
834,735

Other
 
3,160

 
7,912

TOTAL
 
948,050

 
842,647

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
11,059,538

 
10,488,060

Property under capital lease
 
—

 
716

Construction work in progress
 
280,888

 
304,073

Nuclear fuel
 
277,345

 
307,352

TOTAL UTILITY PLANT
 
11,617,771

 
11,100,201

Less - accumulated depreciation and amortization
 
4,762,352

 
4,635,885

UTILITY PLANT - NET
 
6,855,419

 
6,464,316

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
—

 
62,646

Other regulatory assets (includes securitization property of $28,583 as of December 31, 2017 and $41,164 as of December 31, 2016)
 
1,567,437

 
1,428,029

Deferred fuel costs
 
67,096

 
66,898

Other
 
13,910

 
14,626

TOTAL
 
1,648,443

 
1,572,199

 
 
 
 
 
TOTAL ASSETS
 

$10,134,029

 

$9,606,117

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$—

 

$114,700

Short-term borrowings
 
49,974

 
—

Accounts payable:
 
 

 
 

Associated companies
 
365,915

 
239,711

Other
 
215,942

 
185,153

Customer deposits
 
97,687

 
97,512

Taxes accrued
 
47,321

 
7,194

Interest accrued
 
18,215

 
16,580

Other
 
29,922

 
36,557

TOTAL
 
824,976

 
697,407

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
1,190,669

 
2,186,623

Accumulated deferred investment tax credits
 
34,104

 
35,305

Regulatory liability for income taxes - net
 
985,823

 
—

Other regulatory liabilities
 
363,591

 
305,907

Decommissioning
 
981,213

 
924,353

Accumulated provisions
 
34,729

 
18,682

Pension and other postretirement liabilities
 
353,274

 
424,234

Long-term debt (includes securitization bonds of $34,662 as of December 31, 2017 and $48,139 as of December 31, 2016)
 
2,952,399

 
2,715,085

Other
 
5,147

 
13,854

TOTAL
 
6,900,949

 
6,624,043

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
Preferred stock without sinking fund
 
31,350

 
31,350

 
 
 
 
 
COMMON EQUITY
 
 

 
 

Common stock, $0.01 par value, authorized 325,000,000 shares; issued and outstanding 46,980,196 shares in 2017 and 2016
 
470

 
470

Paid-in capital
 
790,264

 
790,243

Retained earnings
 
1,586,020

 
1,462,604

TOTAL
 
2,376,754

 
2,253,317

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$10,134,029

 

$9,606,117

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
 
 
Common Equity
 
 
 
 
Common Stock
 
Paid-in Capital
 
Retained Earnings
 
Total
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2014
 

$470

 

$588,471

 

$1,235,296

 

$1,824,237

Net income
 
—

 
—

 
74,272

 
74,272

Preferred stock dividends
 
—

 
—

 
(6,873
)
 
(6,873
)
Other
 
—

 
22

 
—

 
22

Balance at December 31, 2015
 

$470

 

$588,493

 

$1,302,695

 

$1,891,658

Net income
 
—

 
—

 
167,212

 
167,212

Capital contributions from parent
 
—

 
200,000

 
—

 
200,000

Capital stock redemption
 
—

 
1,750

 
(2,033
)
 
(283
)
Preferred stock dividends
 
—

 
—

 
(5,270
)
 
(5,270
)
Balance at December 31, 2016
 

$470

 

$790,243

 

$1,462,604

 

$2,253,317

Net income
 
—

 
—

 
139,844

 
139,844

Common stock dividends
 
—

 
—

 
(15,000
)
 
(15,000
)
Preferred stock dividends
 
—

 
—

 
(1,428
)
 
(1,428
)
Other
 
—

 
21

 
—

 
21

Balance at December 31, 2017
 

$470

 

$790,264

 

$1,586,020

 

$2,376,754

 
 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 

 
 



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ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
 
Operating revenues
 

$2,139,919

 

$2,086,608

 

$2,253,564

 

$2,172,391

 

$2,190,159

Net income
 

$139,844

 

$167,212

 

$74,272

 

$121,392

 

$161,948

Total assets
 

$10,134,029

 

$9,606,117

 

$8,747,774

 

$8,777,655

 

$8,007,707

Long-term obligations (a)
 

$2,983,749

 

$2,746,435

 

$2,691,189

 

$2,757,423

 

$2,424,969

 
 
 
 
 
 
 
 
 
 
 
(a) Includes long-term debt (excluding currently maturing debt) and preferred stock without sinking fund.
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
 
(Dollars In Millions)
 
 
 
 
 
 
 
 
 
 
 
Electric Operating Revenues:
 
 

 
 

 
 

 
 

 
 

Residential
 

$768

 

$789

 

$824

 

$755

 

$772

Commercial
 
495

 
495

 
515

 
461

 
469

Industrial
 
472

 
446

 
477

 
424

 
433

Governmental
 
19

 
18

 
20

 
18

 
19

Total retail
 
1,754

 
1,748

 
1,836

 
1,658

 
1,693

Sales for resale:
 
 

 
 

 
 

 
 

 
 

Associated companies
 
128

 
49

 
128

 
131

 
346

Non-associated companies
 
121

 
118

 
195

 
282

 
83

Other
 
137

 
172

 
95

 
101

 
68

Total
 

$2,140

 

$2,087

 

$2,254

 

$2,172

 

$2,190

 
 
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 
 

 
 

 
 

 
 

Residential
 
7,298

 
7,618

 
8,016

 
8,070

 
7,921

Commercial
 
5,825

 
5,988

 
6,020

 
5,934

 
5,929

Industrial
 
7,528

 
6,795

 
6,889

 
6,808

 
6,769

Governmental
 
237

 
237

 
235

 
238

 
241

Total retail
 
20,888

 
20,638

 
21,160

 
21,050

 
20,860

Sales for resale:
 
 

 
 

 
 

 
 

 
 

Associated companies
 
1,782

 
1,609

 
2,239

 
2,299

 
7,918

Non-associated companies
 
6,549

 
7,115

 
7,980

 
8,003

 
1,011

Total
 
29,219

 
29,362

 
31,379

 
31,352

 
29,789



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

2017 Compared to 2016

Net income decreased $305.7 million primarily due to the effect of the enactment of the Tax Cuts and Jobs Act, in December 2017, which resulted in a decrease of $182.6 million in net income in 2017, and the effect of a settlement with the IRS related to the 2010-2011 IRS audit, which resulted in a $136.1 million reduction of income tax expense in 2016. Also contributing to the decrease in net income were higher other operation and maintenance expenses. The decrease was partially offset by higher net revenue and higher other income. See Note 3 to the financial statements for discussion of the effects of the Tax Cuts and Jobs Act and the IRS audit.

2016 Compared to 2015

Net income increased $175.4 million primarily due to the effect of a settlement with the IRS related to the 2010-2011 IRS audit, which resulted in a $136.1 million reduction of income tax expense in 2016. Also contributing to the increase were lower other operation and maintenance expenses, higher net revenue, and higher other income. The increase was partially offset by higher depreciation and amortization expenses, higher interest expense, and higher nuclear refueling outage expenses. See Note 3 to the financial statements for discussion of the IRS audit.

Net Revenue

2017 Compared to 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2017 to 2016.
 
Amount
 
(In Millions)
 
 
2016 net revenue

$2,438.4

Regulatory credit resulting from reduction of the
  federal corporate income tax rate
55.5

Retail electric price
42.8

Louisiana Act 55 financing savings obligation
17.2

Volume/weather
(12.4
)
Other
19.0

2017 net revenue

$2,560.5


The regulatory credit resulting from reduction of the federal corporate income tax rate variance is due to the reduction of the Vidalia purchased power agreement regulatory liability by $30.5 million and the reduction of the Louisiana Act 55 financing savings obligation regulatory liabilities by $25 million as a result of the enactment of the Tax Cuts and Jobs Act, in December 2017, which lowered the federal corporate income tax rate from 35% to 21%. The effects of the Tax Cuts and Jobs Act are discussed further in Note 3 to the financial statements.


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The retail electric price variance is primarily due to an increase in formula rate plan revenues, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station in March 2016 and a provision recorded in 2016 related to the settlement of the Waterford 3 replacement steam generator prudence review proceeding. See Note 2 to the financial statements for further discussion of the formula rate plan revenues and the Waterford 3 replacement steam generator prudence review proceeding.

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge recorded in 2016 for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing.

The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales and decreased usage during the unbilled sales period. The decrease was partially offset by an increase of 1,237 GWh, or 4%, in industrial usage primarily due to an increase in demand from existing customers and expansion projects in the chemicals industry.

2016 Compared to 2015

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2016 to 2015.
 
Amount
 
(In Millions)
 
 
2015 net revenue

$2,408.8

Retail electric price
62.5

Volume/weather
(6.7
)
Louisiana Act 55 financing savings obligation
(17.2
)
Other
(9.0
)
2016 net revenue

$2,438.4


The retail electric price variance is primarily due to an increase in formula rate plan revenues, implemented with the first billing cycle of March 2016, to collect the estimated first-year revenue requirement related to the purchase of Power Blocks 3 and 4 of the Union Power Station. See Note 2 to the financial statements for further discussion.

The volume/weather variance is primarily due to the effect of less favorable weather on residential sales, partially offset by an increase in industrial usage and an increase in volume during the unbilled period. The increase in industrial usage is primarily due to increased demand from new customers and expansion projects, primarily in the chemicals industry.

The Louisiana Act 55 financing savings obligation variance results from a regulatory charge for tax savings to be shared with customers per an agreement approved by the LPSC. The tax savings resulted from the 2010-2011 IRS audit settlement on the treatment of the Louisiana Act 55 financing of storm costs for Hurricane Gustav and Hurricane Ike. See Note 3 to the financial statements for additional discussion of the settlement and benefit sharing.

Included in Other is a provision of $23 million recorded in 2016 related to the settlement of the Waterford 3 replacement steam generator prudence review proceeding, offset by a provision of $32 million recorded in 2015 related to the uncertainty at that time associated with the resolution of the Waterford 3 replacement steam generator prudence

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review proceeding.  See Note 2 to the financial statements for a discussion of the Waterford 3 replacement steam generator prudence review proceeding.

Other Income Statement Variances

2017 Compared to 2016

Other operation and maintenance expenses increased primarily due to:

•
an increase of $17.8 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor, to position the nuclear fleet to meet its operational goals, partially offset by a lower scope of work performed during plant outages in 2017;
•
an increase of $9.5 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to the prior year ;
•
an increase of $4.1 million as a result of the amount of transmission costs allocated by MISO. See Note 2 to the financial statements for further information on the recovery of these costs;
•
an increase of $3.6 million in transmission and distribution expenses due to higher vegetation maintenance costs; and
•
an increase of $3.2 million in write-offs of customer accounts.

Taxes other than income taxes increased primarily due to increases in ad valorem taxes, state franchise taxes, and payroll taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. State franchise taxes increased primarily due to a change in the Louisiana franchise tax law which became effective for 2017.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Blocks 3 and 4 of the Union Power Station purchased in March 2016, and the effects of recording in third quarter 2016 final court decisions in the River Bend and Waterford 3 lawsuits against the DOE related to spent nuclear fuel storage costs. The damages awarded include the reimbursement of approximately $6 million of spent nuclear fuel storage costs previously recorded as depreciation expense. See Note 14 to the financial statements for discussion of the Union Power Station purchase. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017, which includes the St. Charles Power Station project, and higher realized gains in 2017 on the River Bend decommissioning trust fund investments, including portfolio rebalancing to the 30% interest in River Bend formerly owned by Cajun.

Interest expense decreased primarily due to an increase in the allowance for borrowed funds used during construction due to higher construction work in progress in 2017, which includes the St. Charles Power Station project.

2016 Compared to 2015

Nuclear refueling outage expenses increased primarily due to the amortization of higher expenses associated with the refueling outages at Waterford 3.
    
Other operation and maintenance expenses decreased primarily due to:

•
the $45 million write-off recorded in 2015 to recognize the portion of the assets associated with the Waterford 3 replacement steam generator project no longer probable of recovery. See Note 2 to the financial statements for further discussion of the prudence review proceeding; and

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•
a decrease of $35 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement costs as a result of higher discount rates used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs.

The decrease was partially offset by an increase of $19.9 million in nuclear generation expenses primarily due to higher nuclear labor costs, including contract labor.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including Power Blocks 3 and 4 of the Union Power Station purchased in March 2016.

Other income increased primarily due to an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2016, which included the St. Charles Power Station project, and increased distribution and transmission spending. The increase was also due to higher income in 2016 on the River Bend and Waterford 3 decommissioning trust fund investments.

Interest expense increased primarily due to:

•
the issuance in March 2016 of $425 million of 3.25% Series collateral trust mortgage bonds;
•
the issuance in March 2016 of $200 million of 4.95% Series first mortgage bonds; and
•
the issuance in October 2016 of $400 million of 2.40% Series collateral trust mortgage bonds.

The increase was partially offset by the refinancing at lower interest rates of certain first mortgage bonds. See Note 5 to the financial statements for details of long-term debt.

Income Taxes

The effective income tax rates for 2017, 2016, and 2015 were 60.5%, 12.6%, and 28.6%, respectively. The difference in the effective income tax rate of 60.5% for 2017 versus the statutory rate of 35% for 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act, signed by President Trump in December 2017, which changed the federal corporate income tax rate from 35% to 21% effective in 2018. See Note 3 to the financial statements for further discussion of the effects of the Tax Cuts and Jobs Act. The difference in the effective income tax rate of 12.6% for 2016 versus the statutory rate of 35% for 2016 was primarily due to the reversal of a portion of the provision for uncertain tax positions as a result of the settlement of the 2010-2011 IRS audit in the second quarter 2016 and book and tax differences related to the non-taxable income distributions earned on preferred membership interests, partially offset by state income taxes. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the years ended December 31, 2017, 2016, and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Cash and cash equivalents at beginning of period

$213,850

 

$35,102

 

$320,516

 
 
 
 
 
 
Net cash provided by (used in):
 
 
 

 
 

Operating activities
1,337,545

 
1,037,912

 
1,155,516

Investing activities
(1,787,409
)
 
(1,474,065
)
 
(994,208
)
Financing activities
271,921

 
614,901

 
(446,722
)
Net increase (decrease) in cash and cash equivalents
(177,943
)
 
178,748

 
(285,414
)
 
 
 
 
 
 
Cash and cash equivalents at end of period

$35,907

 

$213,850

 

$35,102


Operating Activities

Net cash flow provided by operating activities increased $299.6 million in 2017 primarily due to:
    
•
income tax refunds of $234.2 million in 2017 compared to income tax payments of $156.6 million in 2016. Entergy Louisiana received income tax refunds in 2017 and made income tax payments in 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 resulted from the utilization of Entergy Louisiana’s net operating losses. The income tax payments in 2016 resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit, payments for state taxes resulting from the effect of the final settlement of the 2006-2007 IRS audit, and the effect of net operating loss limitations. See Note 3 to the financial statements for a discussion of the audits;
•
an increase due to the timing of recovery of fuel and purchased power costs; and
•
an interest payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets.

The increase was partially offset by:

•
a refund to customers in January 2017 of approximately $71 million as a result of the settlement approved by the LPSC related to the Waterford 3 replacement steam generator project. See Note 2 to the financial statements for discussion of the settlement and refund;
•
an increase of $62.8 million in spending on nuclear refueling outages; and
•
proceeds of $37.8 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for a discussion of the spent nuclear fuel litigation.

Net cash flow provided by operating activities decreased $117.6 million in 2016 primarily due to:

•
an increase of $67.5 million in income tax payments in 2016. Entergy Louisiana had income tax payments in 2016 and 2015 in accordance with intercompany income tax allocation agreements. The income tax payments in 2016 resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit, payments for state taxes resulting from the effect of the final settlement of the 2006-2007 IRS audit, and the effect of net operating loss limitations. The 2015 income tax payments resulted primarily from adjustments

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associated with the settlement of the 2008-2009 IRS audit. See Note 3 to the financial statements for a discussion of the income tax audits;
•
an increase of $80.7 million in interest paid resulting from an increase in interest expense, including a payment of $60 million made in March 2016 related to the purchase of a beneficial interest in the Waterford 3 leased assets. See Note 10 to the financial statements for a discussion of the purchase of a beneficial interest in the Waterford 3 leased assets;
•
the timing of collections from customers and payments to vendors; and
•
a decrease due to the timing of recovery of fuel and purchased power costs in 2016.

The decrease was partially offset by proceeds of $37.8 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed and a decrease of $30.5 million in spending on nuclear refueling outages in 2016. See Note 8 to the financial statements for a discussion of the spent nuclear fuel litigation.
    
Investing Activities

Net cash flow used in investing activities increased $313.3 million in 2017 primarily due to:

•
an increase of $364.3 million in fossil-fueled generation construction expenditures primarily due to higher spending on the St. Charles Power Station and Lake Charles Power Station projects in 2017;
•
an increase of $148.9 million in transmission construction expenditures due to a higher scope of work performed in 2017;
•
an increase of $144.9 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle;
•
proceeds of $57.9 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation;
•
an increase of $53.6 million in nuclear construction expenditures primarily due to increased spending on various nuclear projects in 2017;
•
an increase of $30.4 million in distribution construction expenditures due to increased spending on digital technology improvements within the customer contact centers;
•
an increase of $19.9 million due to increased spending on advanced metering infrastructure; and
•
an increase of $12.3 million due to various information technology projects and upgrades in 2017.

The increase was partially offset by:

•
the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $475 million in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase;
•
money pool activity; and
•
an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017.

Decreases in Entergy Louisiana’s receivable from the money pool are a source of cash flow, and Entergy Louisiana’s receivable from the money pool decreased by $11.3 million in 2017 compared to increasing by $16.3 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.


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Net cash flow used in investing activities increased $479.9 million in 2016 primarily due to:

•
the purchase of Power Blocks 3 and 4 of the Union Power Station for an aggregate purchase price of approximately $475 million in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase;
•
an increase of $130.7 million in fossil-fueled generation construction expenditures primarily due to spending on the St. Charles Power Station project in 2016;
•
cash proceeds of $59.6 million received in 2015 from the transfer of Algiers assets to Entergy New Orleans in September 2015. See “ State and Local Rate Regulation and Fuel-Cost Recovery - Retail Rates - Electric - Filings with the City Council ” below for further discussion of the transfer;
•
an increase of $52 million in transmission construction expenditures due to a higher scope of work performed in 2016; and
•
an increase of $20.5 million due to various information technology projects and upgrades in 2016.

The increase was partially offset by:

•
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and service deliveries, and the timing of cash payments during the nuclear fuel cycle;
•
proceeds of $57.9 million received in 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation; and
•
a decrease of $16.9 million in nuclear construction expenditures primarily due to decreased spending on compliance with NRC post-Fukushima requirements.

Financing Activities

Net cash flow provided by financing activities decreased $343 million in 2017 primarily due to the net issuance of $325.6 million of long-term debt in 2017 compared to the net issuance of $961.2 million in 2016. The decrease was partially offset by:

•
a decrease of $194.3 million of common equity distributions primarily as a result of higher construction expenditures and higher nuclear fuel purchases in 2017; and
•
net borrowings of $39.7 million on the nuclear fuel company variable interest entities’ credit facilities in 2017 compared to net repayments of $56.6 million in 2016.

Entergy Louisiana’s financing activities provided $614.9 million of cash in 2016 compared to using $446.7 million in 2015 primarily due to the following activity:

•
the net issuance of $961.2 million of long-term debt in 2016 compared to the net retirement of $103.4 million of long-term debt in 2015;
•
the redemption in September 2015 of $100 million of 6.95% Series and $10 million of 8.25% Series preferred membership interests in connection with the Entergy Louisiana and Entergy Gulf States Louisiana business combination;
•
net repayments of borrowings of $56.6 million on the nuclear fuel company variable interest entity’s credit facility in 2016 compared to net borrowings of $14.3 million in 2015; and
•
an increase of $59.5 million in common equity distributions in 2016. Equity distributions were lower in 2015 in anticipation of the purchase of Power Blocks 3 and 4 of the Union Power Station.
            
See Note 5 to the financial statements for details of long-term debt.


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Capital Structure

Entergy Louisiana’s capitalization is balanced between equity and debt, as shown in the following table.
 
December 31,
2017
 
December 31,
2016
Debt to capital
53.8
%
 
53.4
%
Effect of excluding securitization bonds
(0.3
%)
 
(0.5
%)
Debt to capital, excluding securitization bonds (a)
53.5
%
 
52.9
%
Effect of subtracting cash
(0.1
%)
 
(0.9
%)
Net debt to net capital, excluding securitization bonds (a)
53.4
%
 
52.0
%

(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Louisiana.

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Louisiana uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because the securitization bonds are non-recourse to Entergy Louisiana, as more fully described in Note 5 to the financial statements. Entergy Louisiana also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Louisiana’s financial condition because net debt indicates Entergy Louisiana’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Louisiana seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings.  To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure.  To the extent that operating cash flows are insufficient to support planned investments, Entergy Louisiana may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure.  In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure if financed entirely with debt and reducing dividends, Entergy Louisiana may receive equity contributions to maintain the targeted capital structure.

Uses of Capital

Entergy Louisiana requires capital resources for:

•
construction and other capital investments;
•
debt maturities or retirements;
•
working capital purposes, including the financing of fuel and purchased power costs; and
•
distribution and interest payments.


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Following are the amounts of Entergy Louisiana’s planned construction and other capital investments.
 
2018
 
2019
 
2020
 
(In Millions)
Planned construction and capital investment:
 
 
 
 
 
Generation

$875

 

$530

 

$330

Transmission
465

 
350

 
285

Distribution
325

 
395

 
365

Utility Support
165

 
110

 
135

Total

$1,830

 

$1,385

 

$1,115


Following are the amounts of Entergy Louisiana’s existing debt and lease obligations (includes estimated interest payments) and other purchase obligations.
 
2018
 
2019-2020
 
2021-2022
 
After 2022
 
Total
 
(In Millions)
Long-term debt (a)

$940

 

$903

 

$843

 

$6,785

 

$9,471

Operating leases

$22

 

$41

 

$24

 

$19

 

$106

Purchase obligations (b)

$633

 

$1,420

 

$1,366

 

$7,125

 

$10,544


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services.  For Entergy Louisiana, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Vidalia purchased power agreement and the Unit Power Sales Agreement, both of which are discussed in Note 8 to the financial statements.

In addition to the contractual obligations given above, Entergy Louisiana currently expects to contribute approximately $71.9 million to its qualified pension plans and approximately $19 million to its other postretirement health care and life insurance plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018. See “ Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.

Also, in addition to the contractual obligations, Entergy Louisiana has $926.6 million of unrecognized tax benefits and interest net of unused tax attributes for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.

In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Louisiana includes specific investments, such as the St. Charles Power Station and Lake Charles Power Station, each discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering; resource planning, including potential generation projects; system improvements; investments in River Bend and Waterford 3; and other investments.  Entergy’s Utility supply plan initiative will continue to seek to transform its generation portfolio with new or repowered generation resources. Opportunities resulting from the supply plan initiative, including new projects or the exploration of alternative financing sources, could result in increases or decreases in the capital expenditure estimates given above. The estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements,

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environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital.

As a wholly-owned subsidiary of Entergy Utility Holding Company, LLC, Entergy Louisiana pays distributions from its earnings at a percentage determined monthly.

St. Charles Power Station

In August 2015, Entergy Louisiana filed with the LPSC an application seeking certification that the public necessity and convenience would be served by the construction of the St. Charles Power Station, a nominal 980 megawatt combined-cycle generating unit, on land adjacent to the existing Little Gypsy plant in St. Charles Parish, Louisiana. It is currently estimated to cost $869 million to construct, including transmission interconnection and other related costs. The LPSC issued an order approving certification of St. Charles Power Station in December 2016. Construction is in progress and commercial operation is estimated to occur by mid-2019.

Lake Charles Power Station

In November 2016, Entergy Louisiana filed an application with the LPSC seeking certification that the public convenience and necessity would be served by the construction of the Lake Charles Power Station, a nominal 994 megawatt combined-cycle generating unit in Westlake, Louisiana, on land adjacent to the existing Nelson plant in Calcasieu Parish. The current estimated cost of the Lake Charles Power Station is $872 million, including estimated costs of transmission interconnection and other related costs. In May 2017 the parties to the proceeding agreed to an uncontested stipulation finding that construction of the Lake Charles Power Station is in the public interest and authorizing an in-service rate recovery plan. In July 2017 the LPSC issued an order unanimously approving the stipulation and approved certification of the unit. Construction is in progress and commercial operation is expected to occur by mid-2020.

Washington Parish Energy Center

In April 2017, Entergy Louisiana signed a purchase and sale agreement with a subsidiary of Calpine Corporation for the acquisition of a peaking plant. Calpine will construct the plant, which will consist of two natural gas-fired combustion turbine units with a total nominal capacity of approximately 361 MW. The plant, named the Washington Parish Energy Center, will be located in Bogalusa, Louisiana and, subject to permits and approvals, is expected to be completed in 2021. Subject to regulatory approvals, Entergy Louisiana will purchase the plant once it is complete for an estimated total investment of approximately $261 million, including transmission and other related costs. In May 2017, Entergy Louisiana filed an application with the LPSC seeking certification of the plant. A procedural schedule has been established, with the deadlines recently extended and the hearing continued from March 2018 until June 2018 in order to allow the parties an opportunity to reach settlement.

Advanced Metering Infrastructure (AMI)
    
In November 2016, Entergy Louisiana filed an application seeking a finding from the LPSC that Entergy Louisiana’s deployment of advanced electric and gas metering infrastructure is in the public interest. Entergy Louisiana proposed to deploy advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Louisiana’s modernized power grid. The filing included an estimate of implementation costs for AMI of $330 million . The filing identified a number of quantified and unquantified benefits, and Entergy Louisiana provided a cost/benefit analysis showing that its combined electric and gas AMI deployment is expected to produce a nominal net benefit to customers of $607 million. Entergy Louisiana also sought to continue to include in rate base the remaining book value, approximately $92 million at December 31, 2015, of the existing electric meters and also to depreciate those assets using current depreciation rates. Entergy Louisiana proposed a 15-year useful life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. The communications network deployment

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is expected to begin by late-2018, after the necessary information technology infrastructure is in place. Entergy Louisiana proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019 through 2022. The parties reached an uncontested stipulation permitting implementation of Entergy Louisiana’s proposed AMI system, with modifications to the proposed customer charge. In July 2017 the LPSC approved the stipulation. Entergy Louisiana expects to recover the undepreciated balance of its existing meters through a regulatory asset at current depreciation rates.

Sources of Capital

Entergy Louisiana’s sources to meet its capital requirements include:

•
internally generated funds;
•
cash on hand;
•
debt or preferred membership interest issuances; and
•
bank financing under new or existing facilities.

Entergy Louisiana may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interest rates are favorable.
    
All debt and common and preferred membership interest issuances by Entergy Louisiana require prior regulatory approval. Preferred membership interest and debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements. Entergy Louisiana has sufficient capacity under these tests to meet its foreseeable capital needs.

Entergy Louisiana’s receivables from the money pool were as follows as of December 31 for each of the following years.
2017
 
2016
 
2015
 
2014
(In Thousands)
$11,173
 
$22,503
 
$6,154
 
$2,815

See Note 4 to the financial statements for a description of the money pool.

Entergy Louisiana has a credit facility in the amount of $350 million scheduled to expire in August 2022. The credit facility allows Entergy Louisiana to issue letters of credit against $15 million of the borrowing capacity of the facility. As of December 31, 2017, there were no cash borrowings and a $9.1 million letter of credit outstanding under the credit facility. In addition, Entergy Louisiana is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO.  As of December 31, 2017, a $29.7 million letter of credit was outstanding under Entergy Louisiana’s uncommitted letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.

The Entergy Louisiana nuclear fuel company variable interest entities have two separate credit facilities, one in the amount of $105 million and one in the amount of $85 million, both scheduled to expire in May 2019. As of December 31, 2017, $65.7 million of loans were outstanding under the credit facility for the Entergy Louisiana River Bend nuclear fuel company variable interest entity. As of December 31, 2017, $43.5 million in letters of credit to support a like amount of commercial paper issued and $36.4 million in loans were outstanding under the Entergy Louisiana Waterford nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements for additional discussion of the nuclear fuel company variable interest entity credit facilities.


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Entergy Louisiana obtained authorizations from the FERC through October 2019 for the following:

•
short-term borrowings not to exceed an aggregate amount of $450 million at any time outstanding;
•
long-term borrowings and security issuances; and
•
long-term borrowings by its nuclear fuel company variable interest entities.
 
See Note 4 to the financial statements for further discussion of Entergy Louisiana’s short-term borrowing limits.

Hurricane Isaac

In June 2014 the LPSC voted to approve a series of orders which (i) quantified $290.8 million of Hurricane Isaac system restoration costs as prudently incurred; (ii) determined $290 million as the level of storm reserves to be re-established; (iii) authorized Entergy Louisiana to utilize Louisiana Act 55 financing for Hurricane Isaac system restoration costs; and (iv) granted other requested relief associated with storm reserves and Act 55 financing of Hurricane Isaac system restoration costs. Entergy Louisiana committed to pass on to customers a minimum of $30.8 million of customer benefits through annual customer credits of approximately $6.2 million for five years. Approvals for the Act 55 financings were obtained from the Louisiana Utilities Restoration Corporation and the Louisiana State Bond Commission. See Note 2 to the financial statements for a discussion of the August 2014 issuance of bonds under Act 55 of the Louisiana Legislature.

Little Gypsy Repowering Project

In April 2007, Entergy Louisiana announced that it intended to pursue the solid fuel repowering of a 538 MW unit at its Little Gypsy plant. In March 2009 the LPSC voted in favor of a motion directing Entergy Louisiana to temporarily suspend the repowering project and, based upon an analysis of the project’s economic viability, to make a recommendation regarding whether to proceed with the project. This action was based upon a number of factors including the recent decline in natural gas prices, as well as environmental concerns, the unknown costs of carbon legislation and changes in the capital/financial markets. In April 2009, Entergy Louisiana complied with the LPSC’s directive and recommended that the project be suspended for an extended period of time of three years or more. In May 2009 the LPSC issued an order declaring that Entergy Louisiana’s decision to place the Little Gypsy project into a longer-term suspension of three years or more is in the public interest and prudent.
    
In October 2009, Entergy Louisiana made a filing with the LPSC seeking permission to cancel the Little Gypsy repowering project and seeking project cost recovery over a five-year period. In June 2010 and August 2010, the LPSC staff and intervenors filed testimony. The LPSC staff (1) agreed that it was prudent to move the project from long-term suspension to cancellation and that the timing of the decision to suspend on a longer-term basis was not imprudent; (2) indicated that, except for $0.8 million in compensation-related costs, the costs incurred should be deemed prudent; (3) recommended recovery from customers over ten years but stated that the LPSC may want to consider 15 years; (4) allowed for recovery of carrying costs and earning a return on project costs, but at a reduced rate approximating the cost of debt, while also acknowledging that the LPSC may consider ordering no return; and (5) indicated that Entergy Louisiana should be directed to securitize project costs, if legally feasible and in the public interest. In the third quarter 2010, in accordance with accounting standards, Entergy Louisiana determined that it was probable that the Little Gypsy repowering project would be abandoned and accordingly reclassified $199.8 million of project costs from construction work in progress to a regulatory asset. A hearing on the issues, except for cost allocation among customer classes, was held before the ALJ in November 2010. In January 2011 all parties participated in a mediation on the disputed issues, resulting in a settlement of all disputed issues, including cost recovery and cost allocation. The settlement provides for Entergy Louisiana to recover $200 million as of March 31, 2011, and carrying costs on that amount on specified terms thereafter. The settlement also provides for Entergy Louisiana to recover the approved project costs by securitization. In April 2011, Entergy Louisiana filed an application with the LPSC to authorize the securitization of the investment recovery costs associated with the project and to issue a financing order by which Entergy Louisiana could accomplish such securitization. In August 2011 the LPSC issued an order approving the settlement and also

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issued a financing order for the securitization. See Note 5 to the financial statements for a discussion of the September 2011 issuance of the securitization bonds.

State and Local Rate Regulation and Fuel-Cost Recovery

The rates that Entergy Louisiana charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Louisiana is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the LPSC, is primarily responsible for approval of the rates charged to customers.

Retail Rates - Electric

Filings with the LPSC

2014 Formula Rate Plan Filing

In connection with the approval of the business combination of Entergy Gulf States Louisiana and Entergy Louisiana, the LPSC authorized the filing of a single, joint, formula rate plan evaluation report for Entergy Gulf States Louisiana’s and Entergy Louisiana’s 2014 calendar year operations. The joint evaluation report was filed in September 2015 and reflected an earned return on common equity of 9.09% . As such, no adjustment to base formula rate plan revenue was required. The following adjustments were required under the formula rate plan, however: a decrease in the additional capacity mechanism for Entergy Louisiana of $17.8 million ; an increase in the additional capacity mechanism for Entergy Gulf States Louisiana of $4.3 million ; and a reduction of $5.5 million to the MISO cost recovery mechanism to collect approximately $35.7 million on a combined-company basis. Under the order approving the business combination, following completion of the prescribed review period, rates were implemented with the first billing cycle of December 2015, subject to refund. In June 2017 the LPSC staff and Entergy Louisiana filed an unopposed joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of this proceeding with no changes to rates already implemented.

2015 Formula Rate Plan Filing

In May 2016, Entergy Louisiana filed its formula rate plan evaluation report for its 2015 calendar year operations. The evaluation report reflected an earned return on common equity of 9.07% . As such, no adjustment to base formula rate plan revenue was required. The following other adjustments, however, were required under the formula rate plan: an increase in the legacy Entergy Louisiana additional capacity mechanism of $14.2 million ; a separate increase in legacy Entergy Louisiana revenue of $10 million primarily to reflect the effects of the termination of the System Agreement; an increase in the legacy Entergy Gulf States Louisiana additional capacity mechanism of $0.5 million ; a decrease in legacy Entergy Gulf States Louisiana revenue of $58.7 million primarily to reflect the effects of the termination of the System Agreement; and an increase of $11 million to the MISO cost recovery mechanism. Rates were implemented with the first billing cycle of September 2016, subject to refund. Following implementation of the as-filed rates in September 2016, there were several interim updates to Entergy Louisiana’s formula rate plan, including the one submitted in December 2016, reflecting implementation of the settlement of the Waterford 3 replacement steam generator project prudence review described below. In June 2017 the LPSC staff and Entergy Louisiana filed a joint report of proceedings, which was accepted by the LPSC in June 2017, finalizing the results of the May 2016 evaluation report, interim updates, and corresponding proceedings with no changes to rates already implemented.

Extension of MISO Cost Recovery Mechanism Rider

In November 2016, Entergy Louisiana filed with the LPSC a request to extend the MISO cost recovery mechanism rider provision of its formula rate plan. In March 2017 the LPSC staff submitted direct testimony generally supportive of a one-year extension of the MISO cost recovery mechanism and the intervenor in the proceeding did not

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oppose an extension for this period of time. In July 2017 an uncontested joint stipulation authorizing a one-year extension of the MISO cost recovery mechanism rider was approved.

2016 Formula Rate Plan Filing

In May 2017, Entergy Louisiana filed its formula rate plan evaluation report for its 2016 calendar year operations. The evaluation report reflected an earned return on common equity of 9.84% . As such, no adjustment to base formula rate plan revenue was required. Adjustments, however, were required under the formula rate plan; the 2016 formula rate plan evaluation report showed a decrease in formula rate plan revenue of approximately $16.9 million , comprised of a decrease in legacy Entergy Louisiana formula rate plan revenue of $3.5 million , a decrease in legacy Entergy Gulf States Louisiana formula rate plan revenue of $9.7 million , and a decrease in incremental formula rate plan revenue of $3.7 million . Additionally, the formula rate plan evaluation report called for a decrease of $40.5 million in the MISO cost recovery revenue requirement from the present level of $46.8 million to $6.3 million . Rates reflecting these adjustments were implemented with the first billing cycle of September 2017, subject to refund. In September 2017 the LPSC issued its report indicating that no changes to Entergy Louisiana’s original formula rate plan evaluation report were required but reserved for several issues, including Entergy Louisiana’s September 2017 update to its formula rate plan evaluation report.

Formula Rate Plan Extension Request

In August 2017, Entergy Louisiana filed a request with the LPSC seeking to extend its formula rate plan for three years (2017-2019) with limited modifications to its terms.  Those modifications include: a one-time resetting of base rates to the midpoint of the band at Entergy Louisiana’s authorized return on equity of 9.95% for the 2017 test year; narrowing of the formula rate plan bandwidth from a total of 160 basis points to 80 basis points; and a forward-looking mechanism that would allow Entergy Louisiana to recover certain transmission-related costs contemporaneously with when those projects begin delivering benefits to customers.  Entergy Louisiana requested that the LPSC consider its request on an expedited basis, in an effort to maintain Entergy Louisiana’s current cycle for implementing rate adjustments, i.e., September 2018, without the need for filing a full base rate case proceeding. Several parties have intervened in the proceeding and all parties have been participating in settlement discussions.

Waterford 3 Replacement Steam Generator Project

Following the completion of the Waterford 3 replacement steam generator project, the LPSC undertook a prudence review in connection with a filing made by Entergy Louisiana in April 2013 with regard to the following aspects of the replacement project: 1) project management; 2) cost controls; 3) success in achieving stated objectives; 4) the costs of the replacement project; and 5) the outage length and replacement power costs. In July 2014 the LPSC staff filed testimony recommending potential project and replacement power cost disallowances of up to $71 million , citing a need for further explanation or documentation from Entergy Louisiana.  An intervenor filed testimony recommending disallowance of $141 million of incremental project costs, claiming the steam generator fabricator was imprudent.  Entergy Louisiana provided further documentation and explanation requested by the LPSC staff. An evidentiary hearing was held in December 2014. At the hearing the parties maintained the positions reflected in pre-filed testimony. Entergy Louisiana believed that the replacement steam generator costs were prudently incurred and applicable legal principles supported their recovery in rates.  Nevertheless, Entergy Louisiana recorded a write-off of $16 million of Waterford 3’s plant balance in December 2014 because of the uncertainty at the time associated with the resolution of the prudence review. In December 2015 the ALJ issued a proposed recommendation, which was subsequently finalized, concluding that Entergy Louisiana prudently managed the Waterford 3 replacement steam generator project, including the selection, use, and oversight of contractors, and could not reasonably have anticipated the damage to the steam generators. Nevertheless, the ALJ concluded that Entergy Louisiana was liable for the conduct of its contractor and subcontractor and, therefore, recommended a disallowance of $67 million in capital costs. Additionally, the ALJ concluded that Entergy Louisiana did not sufficiently justify the incurrence of $2 million in replacement power costs during the replacement outage. Although the ALJ’s recommendation had not yet been considered by the LPSC, after considering the progress of the proceeding in light of the ALJ recommendation, Entergy

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Louisiana recorded in the fourth quarter 2015 approximately $77 million in charges, including a $45 million asset write-off and a $32 million regulatory charge, to reflect that a portion of the assets associated with the Waterford 3 replacement steam generator project was no longer probable of recovery. Entergy Louisiana maintained that the ALJ’s recommendation contained significant factual and legal errors.

In October 2016 the parties reached a settlement in this matter. The settlement was approved by the LPSC in December 2016. The settlement effectively provided for an agreed-upon disallowance of $67 million of plant, which had been previously written off by Entergy Louisiana, as discussed above. The refund to customers of approximately $71 million as a result of the settlement approved by the LPSC was made to customers in January 2017. Of the $71 million of refunds, $68 million was credited to customers through Entergy Louisiana’s formula rate plan, outside of sharing, and $3 million through its fuel adjustment clause. Entergy Louisiana had previously recorded a provision of $48 million for this refund. The previously-recorded provision included the cumulative revenues recorded through December 2016 related to the $67 million of disallowed plant. An additional regulatory charge of $23 million was recorded in fourth quarter 2016 to reflect the effects of the settlement. The settlement also provided that Entergy Louisiana could retain the value associated with potential service credits agreed to by the project contractor, to the extent they are realized in the future. Following a review by the parties, an unopposed joint report of proceedings was filed by the LPSC staff and Entergy Louisiana in May 2017 and the LPSC accepted the joint report of proceedings resolving the matter.

Ninemile 6

In July 2014, Entergy Gulf States Louisiana and Entergy Louisiana filed an unopposed stipulation with the LPSC, which was subsequently approved, that estimated a first year revenue requirement associated with Ninemile 6 and provided a mechanism to update the revenue requirement as the in-service date approached. In late-December 2014, roughly contemporaneous with the unit's placement in service, a final updated estimated revenue requirement of $26.8 million for Entergy Gulf States Louisiana and $51.1 million for Entergy Louisiana was filed. The December 2014 estimate formed the basis of rates implemented effective with the first billing cycle of January 2015. In July 2015, Entergy Louisiana submitted to the LPSC a compliance filing including an estimate at completion, inclusive of interconnection costs and transmission upgrades, of approximately $648 million , or $76 million less than originally estimated, along with other project details and supporting evidence, to enable the LPSC to review the prudence of Entergy Louisiana’s management of the project. Testimony filed by the LPSC staff generally supported the prudence of the management of the project and recovery of the costs incurred to complete the project. The LPSC staff had questioned the warranty coverage for one element of the project. In October 2016 all parties agreed to a stipulation providing that 100% of Ninemile 6 construction costs was prudently incurred and is eligible for recovery from customers, but reserving the LPSC’s rights to review the prudence of Entergy Louisiana’s actions regarding one element of the project. This stipulation was approved by the LPSC in January 2017.

Union Power Station and Deactivation or Retirement Decisions for Entergy Louisiana Plants

In January 2015, Entergy Gulf States Louisiana filed its application with the LPSC for approval of the acquisition and cost recovery of two power blocks of the Union Power Station for an expected base purchase price of approximately $237 million per power block, subject to adjustments. In September 2015, Entergy Gulf States Louisiana agreed to settlement terms with all parties for Entergy Gulf States Louisiana’s purchase of the two power blocks. In October 2015 the LPSC voted unanimously to approve the uncontested settlement which finds, among other things, that acquisition of Power Blocks 3 and 4 is in the public interest and, therefore, prudent. The business combination of Entergy Gulf States Louisiana and Entergy Louisiana received regulatory approval and closed in October 2015 making Entergy Louisiana the named purchaser of Power Blocks 3 and 4 of the Union Power Station. In March 2016, Entergy Louisiana acquired Power Blocks 3 and 4 of Union Power Station for an aggregate purchase price of approximately $474 million and implemented rates to collect the estimated first-year revenue requirement with the first billing cycle of March 2016.


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As a term of the LPSC-approved settlement authorizing the purchase of Power Blocks 3 and 4 of the Union Power Station, Entergy Louisiana agreed to make a filing with the LPSC to review its decisions to deactivate Ninemile 3 and Willow Glen 2 and 4 and its decision to retire Little Gypsy 1.  In January 2016, Entergy Louisiana made its compliance filing with the LPSC. Entergy Louisiana, LPSC staff, and intervenors participated in a technical conference in March 2016 where Entergy Louisiana presented information on its deactivation/retirement decisions for these four units in addition to information on the current deactivation decisions for the ten-year planning horizon. Parties have requested further proceedings on the prudence of the decision to deactivate Willow Glen 2 and 4.  No party contests the prudence of the decision to deactivate Willow Glen 2 and 4 or suggests reactivation of these units; however, issues have been raised related to Entergy Louisiana’s decision to give up its transmission service rights in MISO for Willow Glen 2 and 4 rather than placing the units into suspended status for the three-year term permitted by MISO. An evidentiary hearing was held in August 2017 and post-hearing briefs were submitted in October 2017. A decision is expected in 2018.

Retail Rates - Gas

In accordance with the settlement of Entergy Gulf States Louisiana’s gas rate stabilization plan for the test year ended September 30, 2012, in August 2014, Entergy Gulf States Louisiana submitted for consideration a proposal for implementation of an infrastructure rider to recover expenditures associated with strategic plant investment and relocation projects mandated by local governments. After review by the LPSC staff and inclusion of certain customer safeguards required by the LPSC staff, in December 2014, Entergy Gulf States Louisiana and the LPSC staff submitted a joint settlement for implementation of an accelerated gas pipe replacement program providing for the replacement of approximately 100 miles of pipe over the next ten years, as well as relocation of certain existing pipe resulting from local government-related infrastructure projects, and for a rider to recover the investment associated with these projects. The rider allows for recovery of approximately $65 million over ten years. The rider recovery will be adjusted on a quarterly basis to include actual investment incurred for the prior quarter and is subject to the following conditions, among others: a ten-year term; application of any earnings in excess of 10.45% as an offset to the revenue requirement of the infrastructure rider; adherence to a specified spending plan, within plus or minus 20% annually; annual filings comparing actual versus planned rider spending with actual spending and explanation of variances exceeding 10% ; and an annual true-up. The joint settlement was approved by the LPSC in January 2015. Implementation of the infrastructure rider commenced with bills rendered on and after the first billing cycle of April 2015.

2014 Rate Stabilization Plan Filing

In January 2015, Entergy Gulf States Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2014.  The filing showed an earned return on common equity of 7.20% , which resulted in a $706 thousand rate increase.  In April 2015 the LPSC issued findings recommending two adjustments to Entergy Gulf States Louisiana’s as-filed results, and an additional recommendation that did not affect the results. The LPSC staff’s recommended adjustments increase the earned return on equity for the test year to 7.24% . Entergy Gulf States Louisiana accepted the LPSC staff’s recommendations and a revenue increase of $688 thousand was implemented with the first billing cycle of May 2015.

2015 Rate Stabilization Plan Filing

In January 2016, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2015. The filing showed an earned return on common equity of 10.22% , which is within the authorized bandwidth, therefore requiring no change in rates. In March 2016 the LPSC staff issued its report stating that the 2015 gas rate stabilization plan filing was in compliance with the exception of several issues that required additional information, explanation, or clarification for which the LPSC staff had reserved the right to further review. In July 2016 the parties to the proceeding filed an unopposed joint report and motion for entry of order accepting the report that indicated no outstanding issues remained in the filing.


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In February 2016, Entergy Louisiana filed a motion requesting to extend the term of the gas rate stabilization plan in substantially similar form for an additional three-year term and included a request for sharing of non-jurisdictional compressed natural gas revenues. Following discovery and the filing of testimony by the LPSC staff, Entergy Louisiana and the LPSC submitted a joint motion for hearing an uncontested stipulated settlement resolving the proceeding. A hearing on the stipulation was held in November 2016. The ALJ issued a report of proceedings that was presented with the parties’ stipulation to the LPSC for consideration. The stipulation approving Entergy Louisiana’s requested extension of the rate stabilization plan was approved by the LPSC in December 2016.

2016 Rate Stabilization Plan Filing

In January 2017, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for the test year ended September 30, 2016. The filing of the evaluation report for test year 2016 reflected an earned return on common equity of 6.37% . As part of the original filing, pursuant to the extraordinary cost provision of the rate stabilization plan, Entergy Louisiana sought to recover approximately $1.5 million in deferred operation and maintenance expenses incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. Entergy Louisiana requested to recover the prudently incurred August 2016 storm restoration costs over ten years, outside of the rate stabilization plan sharing provisions. As a result, Entergy Louisiana’s filing sought an annual increase in revenue of $1.4 million . Following review of the filing, except for the proposed extraordinary cost recovery, the LPSC staff confirmed Entergy Louisiana’s filing was consistent with the principles and requirements of the rate stabilization plan. The extraordinary cost recovery request associated with the 2016 flood-related deferred operation and maintenance expenses incurred for gas operations was removed from the rate stabilization plan pending LPSC consideration in a separate docket. In April 2017 the LPSC approved a joint report of proceedings and Entergy Louisiana submitted a revised evaluation report reflecting a $1.2 million annual increase in revenue with rates implemented with the first billing cycle of May 2017.

In connection with the joint report of proceedings accepted by the LPSC, in May 2017, Entergy Louisiana filed an application to initiate a separate proceeding to recover through the extraordinary cost provision of the gas rate stabilization plan the deferred operation and maintenance expenses of $1.4 million incurred to restore service and repair damage resulting from flooding and widespread rainfall in southeast Louisiana that occurred in August 2016. The LPSC staff submitted its direct testimony in the proceeding recommending recovery of $0.9 million . Entergy Louisiana filed rebuttal testimony responding to the LPSC staff’s recommendation. The procedural schedule was suspended to allow the parties to engage in settlement negotiations, and in February 2018 the LPSC staff and Entergy Louisiana filed an unopposed settlement. If approved by the LPSC, the settlement would provide for Entergy Louisiana to recover, over ten years, the approximately $1.4 million in deferred operation and maintenance expense and related carrying charges. The settlement further provides for recovery to commence in May 2018.

2017 Rate Stabilization Plan Filing

In January 2018, Entergy Louisiana filed with the LPSC its gas rate stabilization plan for test year ended September 30, 2017.  The filing of the evaluation report for the test year 2017 reflected an earned return on common equity of 9.06%.  This earned return is below the earnings sharing band of the rate stabilization plan and results in a rate increase of $0.1 million.  Due to the enactment in late-December 2017 of the Tax Cuts and Jobs Act, Entergy Louisiana did not have adequate time to reflect the effects of this tax legislation in the rate stabilization plan.  As a result, Entergy Louisiana will file a supplement to the January 2018 evaluation report to reflect, among other things, a 21% federal corporate income tax rate.  Any rate change resulting from the revised rate stabilization plan will become effective in rates in May 2018.

Fuel and purchased power recovery

Entergy Louisiana recovers electric fuel and purchased power costs for the billing month based upon the level of such costs incurred two months prior to the billing month. Entergy Louisiana’s purchased gas adjustments include

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estimates for the billing month adjusted by a surcharge or credit that arises from an annual reconciliation of fuel costs incurred with fuel cost revenues billed to customers, including carrying charges.

In April 2010 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings.  The audit included a review of the reasonableness of charges flowed through the fuel adjustment clause by Entergy Louisiana for the period from 2005 through 2009.  The LPSC staff issued its audit report in January 2013.  The LPSC staff recommended that Entergy Louisiana refund approximately $1.9 million , plus interest, to customers and realign the recovery of approximately $1 million from Entergy Louisiana’s fuel adjustment clause to base rates.  The recommended refund was made by Entergy Louisiana in May 2013 in the form of a credit to customers through its fuel adjustment clause filing. In October 2016 the LPSC staff filed testimony affirming the recommendation in its audit report on the lone remaining issue that nuclear dry fuel storage costs should be realigned to base rates. The parties agreed to remove that remaining issue to a separate docket because the same issue was outstanding in the Entergy Gulf States Louisiana audit for the same time period. In November 2016 the LPSC approved the resolution of this audit and the creation of a new docket for the resolution of the proper method of recovery for nuclear dry fuel storage costs. In December 2016 the LPSC opened a new docket in order to resolve the issue regarding the proper methodology for the recovery of nuclear dry fuel storage costs. In October 2017 the LPSC approved the continued recovery of the nuclear dry fuel storage costs through the fuel adjustment clause, resolving the open issue in the audit.

In December 2011 the LPSC authorized its staff to initiate a proceeding to audit the fuel adjustment clause filings of Entergy Gulf States Louisiana and its affiliates.  The audit included a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period 2005 through 2009.  In March 2016 the LPSC staff consultant issued its audit report. In its report, the LPSC staff consultant recommended that Entergy Louisiana refund approximately $8.6 million , plus interest, to customers and realign the recovery of approximately $12.7 million from Entergy Gulf States Louisiana’s fuel adjustment clause to base rates. In September 2016 the LPSC staff filed testimony stating that it was no longer recommending a disallowance of $3.4 million of the $8.6 million discussed above, but otherwise maintained positions from its report. Subsequently, the parties entered into a settlement, which was approved by the LPSC in November 2016. The settlement recognized the dry cask storage recovery method issue, which was addressed in the separate proceeding approved by the LPSC in October 2017, provided for a refund of $5 million , which was made to legacy Entergy Gulf States Louisiana customers in December 2016, and resolved all other issues raised in the audit.

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Gulf States Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Gulf States Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery commenced in July 2015. No report of audit has been issued.

In July 2014 the LPSC authorized its staff to initiate an audit of Entergy Louisiana’s fuel adjustment clause filings. The audit includes a review of the reasonableness of charges flowed by Entergy Louisiana through its fuel adjustment clause for the period from 2010 through 2013. Discovery commenced in July 2015. No report of audit has been issued.

In June 2016 the LPSC staff provided notice of audits of Entergy Louisiana’s fuel adjustment clause filings and purchased gas adjustment clause filings. In recognition of the business combination that occurred in 2015, the audit notice was issued to Entergy Louisiana and will also include a review of charges to legacy Entergy Gulf States Louisiana customers prior to the business combination. The audit includes a review of the reasonableness of charges flowed through Entergy Louisiana’s fuel adjustment clause for the period from 2014 through 2015 and charges flowed through Entergy Louisiana’s purchased gas adjustment clause for the period from 2012 through 2015. Discovery commenced in March 2017. No report of audit has been issued.

Due to higher fuel costs for the operating month of January 2018 resulting in part from recent cold weather, higher Henry Hub prices, and an increase in total fuel and purchased power costs, Entergy Louisiana plans to cap the

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average fuel adjustment charge to be billed in March 2018 at $0.03060 per kWh and to defer billing of all fuel costs in excess of the capped amounts by including such costs in the over- or under-recovery account.

Industrial and Commercial Customers

Entergy Louisiana’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Louisiana’s industrial customer base. Entergy Louisiana responds by working with industrial and commercial customers and negotiating electric service contracts to provide competitive rates that match specific customer needs and load profiles. Entergy Louisiana actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.

Nuclear Matters

Entergy Louisiana owns and, through an affiliate, operates the River Bend and Waterford 3 nuclear power plants. Entergy Louisiana is, therefore, subject to the risks related to owning and operating nuclear plants. These include risks related to: the use, storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushima event; regulatory requirements and potential future regulatory changes, including changes affecting the regulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; the performance and capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete decommissioning of each site when required; and limitations on the amounts and types of insurance commercially available for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident. In the event of an unanticipated early shutdown of River Bend or Waterford 3, Entergy Louisiana may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.
        
Waterford 3’s operating license is currently due to expire in December 2024.  In March 2016, Entergy Louisiana filed an application with the NRC for an extension of Waterford 3’s operating license to 2044. River Bend’s operating license is currently due to expire in August 2025. In May 2017, Entergy Louisiana filed an application with the NRC for an extension of River Bend’s operating license to 2045. In October 2017 an intervenor filed with the NRC a petition to intervene and request for a hearing on the River Bend license renewal application. As provided by NRC procedure, a panel of the Atomic Safety and Licensing Board has been designated to determine whether the intervenor’s three proposed contentions, or allegations of errors or omissions in the license renewal application, are admissible and, if so, to rule on any admitted contentions. In January 2018 the Atomic Safety and Licensing Board denied the petition to intervene and the request for hearing.
  
Environmental Risks

Entergy Louisiana’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Louisiana is in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted in

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Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis


“ Regulation of Entergy’s Business - Environmental Regulation ” in Part I, Item 1. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.

Critical Accounting Estimates

The preparation of Entergy Louisiana’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Louisiana’s financial position or results of operations.

Nuclear Decommissioning Costs

See “ Nuclear Decommissioning Costs ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.

Utility Regulatory Accounting

See “ Utility Regulatory Accounting ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.

Unbilled Revenue

See “ Unbilled Revenue ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the unbilled revenue amounts.

Impairment of Long-lived Assets and Trust Fund Investments

See “ Impairment of Long-lived Assets and Trust Fund Investments ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the impairment of long-lived assets and trust fund investments.

Taxation and Uncertain Tax Positions

See “ Taxation and Uncertain Tax Positions ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

Qualified Pension and Other Postretirement Benefits

Entergy Louisiana’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.   See the “ Qualified Pension and Other Postretirement Benefits ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.  Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.
 

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Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis


Cost Sensitivity

The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Projected Qualified Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$3,737
 
$54,506
Rate of return on plan assets
 
(0.25%)
 
$3,309
 
$—
Rate of increase in compensation
 
0.25%
 
$1,726
 
$8,824

The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated postretirement Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$753
 
$10,727
Health care cost trend
 
0.25%
 
$1,219
 
$8,675

Each fluctuation above assumes that the other components of the calculation are held constant.

Costs and Funding

Total qualified pension cost for Entergy Louisiana in 2017 was $44.3 million.  Entergy Louisiana anticipates 2018 qualified pension cost to be $52.1 million.   In 2016, Entergy Louisiana refined its approach to estimating the service cost and interest cost components of qualified pension costs, which had the effect of lowering qualified pension costs by $14.2 million.  Entergy Louisiana contributed $87.5 million to its pension plans in 2017 and estimates pension contributions will be approximately $71.9 million in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

Total postretirement health care and life insurance benefit costs for Entergy Louisiana in 2017 were $12.6 million.  Entergy Louisiana expects 2018 postretirement health care and life insurance benefit costs of approximately $11.2 million.  In 2016, Entergy Louisiana refined its approach to estimating the service cost and interest cost components of other postretirement costs, which had the effect of lowering qualified other postretirement costs by $3.5 million. Entergy Louisiana contributed $14.4 million to its other postretirement plans in 2017 and estimates that 2018 contributions will be approximately $19 million.

Federal Healthcare Legislation

See “ Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.


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Entergy Louisiana, LLC and Subsidiaries
Management’s Financial Discussion and Analysis


Other Contingencies

See “ Other Contingencies ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and other risks.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements for a discussion of new accounting pronouncements.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the members and Board of Directors of
Entergy Louisiana, LLC and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Entergy Louisiana, LLC and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, comprehensive income, cash flows, and changes in equity (pages 349 through 354 and applicable items in pages 55 through 230), for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Company’s auditor since 2001.

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Table of Contents

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$4,246,020

 

$4,126,343

 

$4,361,524

Natural gas
 
54,530

 
50,705

 
55,622

TOTAL
 
4,300,550

 
4,177,048

 
4,417,146

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
912,060

 
804,433

 
850,869

Purchased power
 
980,070

 
890,058

 
1,129,910

Nuclear refueling outage expenses
 
52,074

 
51,361

 
44,480

Other operation and maintenance
 
969,400

 
923,779

 
997,546

Decommissioning
 
49,457

 
46,944

 
43,445

Taxes other than income taxes
 
175,359

 
165,665

 
167,966

Depreciation and amortization
 
467,369

 
451,290

 
437,036

Other regulatory charges (credits) - net
 
(152,080
)
 
44,131

 
27,562

TOTAL
 
3,453,709

 
3,377,661

 
3,698,814

 
 
 
 
 
 
 
OPERATING INCOME
 
846,841

 
799,387

 
718,332

 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
51,485

 
27,925

 
19,192

Interest and investment income
 
164,550

 
154,778

 
150,168

Miscellaneous - net
 
(11,960
)
 
(11,597
)
 
(13,190
)
TOTAL
 
204,075

 
171,106

 
156,170

 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
275,185

 
273,283

 
259,894

Allowance for borrowed funds used during construction
 
(25,914
)
 
(14,571
)
 
(10,702
)
TOTAL
 
249,271

 
258,712

 
249,192

 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
801,645

 
711,781

 
625,310

 
 
 
 
 
 
 
Income taxes
 
485,298

 
89,734

 
178,671

 
 
 
 
 
 
 
NET INCOME
 
316,347

 
622,047

 
446,639

 
 
 
 
 
 
 
Preferred distribution requirements and other
 
—

 
—

 
5,737

 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$316,347

 

$622,047

 

$440,902

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
Net Income
 

$316,347

 

$622,047

 

$446,639

 
 
 
 
 
 
 
Other comprehensive income
 
 

 
 

 
 

Pension and other postretirement liabilities
 
 

 
 

 
 

(net of tax expense of $234, $5,034, and $14,316)
 
2,042

 
7,970

 
22,811

Other comprehensive income
 
2,042

 
7,970

 
22,811

 
 
 
 
 
 
 
Comprehensive Income
 

$318,389

 

$630,017

 

$469,450

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 

$316,347

 

$622,047

 

$446,639

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
621,018

 
620,211

 
593,635

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
575,804

 
178,549

 
97,461

Changes in working capital:
 
 

 
 

 
 

Receivables
 
(53,829
)
 
(102,200
)
 
(12,795
)
Fuel inventory
 
11,010

 
(2,693
)
 
(887
)
Accounts payable
 
58,880

 
(36,720
)
 
23,641

Prepaid taxes and taxes accrued
 
128,261

 
(235,246
)
 
105,687

Interest accrued
 
(70
)
 
1,218

 
2,933

Deferred fuel costs
 
23,236

 
(17,023
)
 
4,222

Other working capital accounts
 
(30,911
)
 
6,462

 
(41,890
)
Changes in provisions for estimated losses
 
(8,324
)
 
490

 
(8,946
)
Changes in other regulatory assets
 
492,696

 
57,579

 
130,762

Changes in other regulatory liabilities
 
605,453

 
62,351

 
96,234

Deferred tax rate change recognized as regulatory liability/asset
 
(1,207,808
)
 
—

 
—

Changes in pension and other postretirement liabilities
 
(32,309
)
 
(52,559
)
 
(98,695
)
Other
 
(161,909
)
 
(64,554
)
 
(182,485
)
Net cash flow provided by operating activities
 
1,337,545

 
1,037,912

 
1,155,516

INVESTING ACTIVITIES
 
 

 
 

 
 

Construction expenditures
 
(1,662,835
)
 
(1,030,416
)
 
(845,227
)
Allowance for equity funds used during construction
 
51,485

 
27,925

 
19,192

Insurance proceeds
 
5,305

 
10,564

 
—

Nuclear fuel purchases
 
(197,829
)
 
(73,618
)
 
(244,040
)
Proceeds from the sale of nuclear fuel
 
42,634

 
63,304

 
54,595

Payment for purchase of plant
 
—

 
(474,670
)
 
—

Payments to storm reserve escrow account
 
(2,110
)
 
(1,063
)
 
(308
)
Receipts from storm reserve escrow account
 
8,835

 
—

 
—

Changes in securitization account
 
880

 
351

 
(137
)
Proceeds from nuclear decommissioning trust fund sales
 
231,293

 
219,182

 
123,474

Investment in nuclear decommissioning trust funds
 
(266,592
)
 
(257,209
)
 
(158,028
)
Changes in money pool receivable - net
 
11,330

 
(16,349
)
 
(3,339
)
Proceeds from sale of assets
 
—

 
—

 
59,610

Payment for purchase of assets
 
(9,805
)
 
—

 
—

Litigation proceeds for reimbursement of spent nuclear fuel storage costs
 
—

 
57,934

 
—

Net cash flow used in investing activities
 
(1,787,409
)
 
(1,474,065
)
 
(994,208
)
FINANCING ACTIVITIES
 
 

 
 

 
 

Proceeds from the issuance of long-term debt
 
733,344

 
2,450,063

 
77,172

Retirement of long-term debt
 
(407,736
)
 
(1,488,870
)
 
(180,595
)
Redemption of preferred membership interests
 
—

 
—

 
(110,286
)
Changes in credit borrowings - net
 
39,746

 
(56,562
)
 
14,322

Distributions paid:
 
 

 
 

 
 

Common equity
 
(91,250
)
 
(285,500
)
 
(226,000
)
Preferred membership interests
 
—

 
—

 
(6,082
)
Other
 
(2,183
)
 
(4,230
)
 
(15,253
)
Net cash flow provided by (used in) financing activities
 
271,921

 
614,901

 
(446,722
)
Net increase (decrease) in cash and cash equivalents
 
(177,943
)
 
178,748

 
(285,414
)
Cash and cash equivalents at beginning of period
 
213,850

 
35,102

 
320,516

Cash and cash equivalents at end of period
 

$35,907

 

$213,850

 

$35,102

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 

 
 

 
 

Cash paid (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$266,871

 

$324,456

 

$243,745

Income taxes
 

($234,199
)
 

$156,605

 

$89,124

Non-cash financing activities:
 
 
 
 
 
 
Capital contribution from parent
 

$—

 

$—

 

($267,826
)
See Notes to Financial Statements.
 
 

 
 

 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$5,836

 

$49,972

Temporary cash investments
 
30,071

 
163,878

Total cash and cash equivalents
 
35,907

 
213,850

Accounts receivable:
 
 

 
 

Customer
 
254,308

 
213,517

Allowance for doubtful accounts
 
(8,430
)
 
(6,277
)
Associated companies
 
143,524

 
155,794

Other
 
60,893

 
54,186

Accrued unbilled revenues
 
153,118

 
159,176

Total accounts receivable
 
603,413

 
576,396

Fuel inventory
 
39,728

 
50,738

Materials and supplies - at average cost
 
299,881

 
294,421

Deferred nuclear refueling outage costs
 
65,711

 
22,535

Prepaid taxes
 
—

 
110,104

Prepayments and other
 
34,035

 
41,687

TOTAL
 
1,078,675

 
1,309,731

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Investment in affiliate preferred membership interests
 
1,390,587

 
1,390,587

Decommissioning trust funds
 
1,312,073

 
1,140,707

Storm reserve escrow account
 
284,759

 
291,485

Non-utility property - at cost (less accumulated depreciation)
 
245,255

 
217,494

Other
 
18,999

 
28,844

TOTAL
 
3,251,673

 
3,069,117

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
19,678,536

 
18,827,532

Natural gas
 
191,899

 
172,816

Construction work in progress
 
1,281,452

 
670,201

Nuclear fuel
 
337,402

 
249,807

TOTAL UTILITY PLANT
 
21,489,289

 
19,920,356

Less - accumulated depreciation and amortization
 
8,703,047

 
8,420,596

UTILITY PLANT - NET
 
12,786,242

 
11,499,760

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
—

 
470,480

Other regulatory assets (includes securitization property of $71,367 as of December 31, 2017 and $92,951 as of December 31, 2016)
 
1,145,842

 
1,168,058

Deferred fuel costs
 
168,122

 
168,122

Other
 
18,310

 
16,003

TOTAL
 
1,332,274

 
1,822,663

 
 
 
 
 
TOTAL ASSETS
 

$18,448,864

 

$17,701,271

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$675,002

 

$200,198

Short-term borrowings
 
43,540

 
3,794

Accounts payable:
 
 

 
 

Associated companies
 
126,685

 
82,106

Other
 
404,374

 
358,741

Customer deposits
 
150,623

 
148,601

Taxes accrued
 
18,157

 
—

Interest accrued
 
75,528

 
75,598

Deferred fuel costs
 
71,447

 
48,211

Other
 
79,037

 
80,013

TOTAL
 
1,644,393

 
997,262

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
2,050,371

 
2,691,118

Accumulated deferred investment tax credits
 
121,870

 
126,741

Regulatory liability for income taxes - net
 
725,368

 
—

Other regulatory liabilities
 
761,059

 
880,974

Decommissioning
 
1,140,461

 
1,082,685

Accumulated provisions
 
302,448

 
310,772

Pension and other postretirement liabilities
 
748,384

 
780,278

Long-term debt (includes securitization bonds of $77,736 as of December 31, 2017 and $99,217 as of December 31, 2016)
 
5,469,069

 
5,612,593

Other
 
176,637

 
137,039

TOTAL
 
11,495,667

 
11,622,200

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
EQUITY
 
 

 
 

Member’s equity
 
5,355,204

 
5,130,251

Accumulated other comprehensive loss
 
(46,400
)
 
(48,442
)
TOTAL
 
5,308,804

 
5,081,809

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$18,448,864

 

$17,701,271

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
 
 
 
 
Common Equity
 
 
 
Preferred Membership Interests
 
Member’s Equity
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$110,000

 

$4,316,210

 

($79,223
)
 

$4,346,987

Net income
—

 
446,639

 
—

 
446,639

Other comprehensive income
—

 
—

 
22,811

 
22,811

Preferred stock redemption
(110,000
)
 
—

 
—

 
(110,000
)
Non-cash contribution from parent
—

 
267,826

 
—

 
267,826

Distributions to parent
—

 
(226,000
)
 
—

 
(226,000
)
Distributions declared on preferred membership interests
—

 
(5,737
)
 
—

 
(5,737
)
Other
—

 
(5,214
)
 
—

 
(5,214
)
Balance at December 31, 2015

$—

 

$4,793,724

 

($56,412
)
 

$4,737,312

Net income
—

 
622,047

 
—

 
622,047

Other comprehensive income
—

 
—

 
7,970

 
7,970

Distributions to parent
—

 
(285,500
)
 
—

 
(285,500
)
Other
—

 
(20
)
 
—

 
(20
)
Balance at December 31, 2016

$—

 

$5,130,251

 

($48,442
)
 

$5,081,809

Net income
—

 
316,347

 
—

 
316,347

Other comprehensive income
—

 
—

 
2,042

 
2,042

Distributions declared on common equity
—

 
(91,250
)
 
—

 
(91,250
)
Other
—

 
(144
)
 
—

 
(144
)
Balance at December 31, 2017

$—

 

$5,355,204

 

($46,400
)
 

$5,308,804

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Operating revenues

$4,300,550

 

$4,177,048

 

$4,417,146

 

$4,740,504

 

$4,399,511

Net income

$316,347

 

$622,047

 

$446,639

 

$446,022

 

$414,126

Total assets

$18,448,864

 

$17,701,271

 

$16,387,447

 

$16,423,825

 

$15,275,863

Long-term obligations (a)

$5,469,069

 

$5,612,593

 

$4,806,790

 

$4,882,813

 

$4,383,273

 
 
 
 
 
 
 
 
 
 
(a) Includes long-term debt (excluding currently maturing debt).
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(Dollars In Millions)
 
 
 
 
 
 
 
 
 
 
Electric Operating Revenues:
 

 
 

 
 

 
 

 
 

Residential

$1,198

 

$1,196

 

$1,292

 

$1,358

 

$1,304

Commercial
956

 
930

 
989

 
1,044

 
1,003

Industrial
1,534

 
1,350

 
1,420

 
1,569

 
1,457

Governmental
69

 
67

 
67

 
70

 
68

Total retail
3,757

 
3,543

 
3,768

 
4,041

 
3,832

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
278

 
368

 
406

 
427

 
320

Non-associated companies
64

 
50

 
36

 
80

 
48

Other
147

 
165

 
152

 
121

 
140

Total

$4,246

 

$4,126

 

$4,362

 

$4,669

 

$4,340

 
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 

 
 

 
 

 
 

 
 

Residential
13,357

 
13,810

 
14,399

 
14,415

 
14,026

Commercial
11,342

 
11,478

 
11,700

 
11,555

 
11,402

Industrial
29,754

 
28,517

 
27,713

 
27,025

 
25,734

Governmental
790

 
794

 
756

 
732

 
723

Total retail
55,243

 
54,599

 
54,568

 
53,727

 
51,885

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
4,793

 
7,345

 
7,500

 
6,240

 
5,168

Non-associated companies
1,711

 
1,690

 
770

 
1,051

 
979

Total
61,747

 
63,634

 
62,838

 
61,018

 
58,032

 
 
 
 
 
 
 
 
 
 


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ENTERGY MISSISSIPPI, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

2017 Compared to 2016

Net income increased $0.8 million primarily due to higher other income, lower other operation and maintenance expenses, and lower interest expense, substantially offset by higher depreciation and amortization expenses and a higher effective income tax rate.

2016 Compared to 2015

Net income increased $16.5 million primarily due to lower other operation and maintenance expenses, higher net revenues, and a lower effective income tax rate, partially offset by higher depreciation and amortization expenses.

Net Revenue

2017 Compared to 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory credits. Following is an analysis of the change in net revenue comparing 2017 to 2016.
 
Amount
 
(In Millions)
 
 
2016 net revenue

$705.4

Volume/weather
(18.2
)
Retail electric price
13.5

Other
2.4

2017 net revenue

$703.1


The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales.

The retail electric price variance is primarily due to a $19.4 million net annual increase in rates, effective with the first billing cycle of July 2016, and an increase in the energy efficiency rider, effective with the first billing cycle of February 2017, each as approved by the MPSC. The increase was partially offset by decreased storm damage rider revenues due to resetting the storm damage provision to zero beginning with the November 2016 billing cycle. Entergy Mississippi resumed billing the storm damage rider effective with the September 2017 billing cycle. See Note 2 to the financial statements for more discussion of the formula rate plan and the storm damage rider.


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2016 Compared to 2015

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges (credits). Following is an analysis of the change in net revenue comparing 2016 to 2015.
 
Amount
 
(In Millions)
 
 
2015 net revenue

$696.3

Retail electric price
12.9

Volume/weather
4.7

Net wholesale revenue
(2.4
)
Reserve equalization
(2.8
)
Other
(3.3
)
2016 net revenue

$705.4


The retail electric price variance is primarily due to a $19.4 million net annual increase in revenues, as approved by the MPSC, effective with the first billing cycle of July 2016, and an increase in revenues collected through the storm damage rider.  See Note 2 to the financial statements for more discussion of the formula rate plan and the storm damage rider.

The volume/weather variance is primarily due to an increase of 153 GWh, or 1%, in billed electricity usage, including an increase in industrial usage, partially offset by the effect of less favorable weather on residential and commercial sales. The increase in industrial usage is primarily due to expansion projects in the pulp and paper industry, increased demand for existing customers, primarily in the metals industry, and new customers in the wood products industry.

The net wholesale revenue variance is primarily due to Entergy Mississippi’s exit from the System Agreement in November 2015.

The reserve equalization revenue variance is primarily due to the absence of reserve equalization revenue as compared to the same period in 2015 resulting from Entergy Mississippi’s exit from the System Agreement in November 2015.

Other Income Statement Variances

2017 Compared to 2016

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $12 million in fossil-fueled generation expenses primarily due to lower long-term service agreement costs and a lower scope of work done during plant outages in 2017 as compared to the same period in 2016; and
•
a decrease of $3.6 million in storm damage provisions. See Note 2 to the financial statements for a discussion on storm cost recovery.

The decrease was partially offset by an increase of $4.8 million in energy efficiency costs and an increase of $2.7 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to the prior year.


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Depreciation and amortization expenses increased primarily due to additions to plant in service.

Other income increased primarily due to interest income recorded in connection with the opportunity sales proceeding, interest income recorded on the deferred fuel balance, and an increase in the allowance for equity funds used during construction due to higher construction work in progress in 2017 as compared to 2016. See Note 2 to the financial statements for further discussion of the opportunity sales proceeding.

Interest expense decreased primarily due to the refinancing at lower interest rates of certain first mortgage bonds in 2016 and the retirement, at maturity, of $125 million of 3.25% Series first mortgage bonds in June 2016. See Note 5 to the financial statements for details of long-term debt.

2016 Compared to 2015

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $9.4 million in fossil-fueled generation expenses primarily due to a lower scope of work done during plant outages in 2016 as compared to the same period in 2015;
•
a decrease of $6.1 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS - Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs;
•
a decrease of $2 million due to lower write-offs of uncollectible customer accounts in 2016;
•
a decrease of $2 million in energy efficiency costs; and
•
several individually insignificant items.

The decrease was partially offset by an increase of $7.1 million in storm damage provisions and an increase of $6 million in distribution expenses primarily due to higher vegetation maintenance. See Note 2 to the financial statements for a discussion of storm cost recovery.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

Income Taxes

The effective income tax rates for 2017, 2016, and 2015 were 40.2% , 36.9%, and 40.0%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the years ended December 31, 2017 , 2016 , and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Cash and cash equivalents at beginning of period

$76,834

 

$145,605

 

$61,633

 
 
 
 
 
 
Net cash provided by (used in):
 

 
 

 
 

Operating activities
226,585

 
212,280

 
372,279

Investing activities
(417,226
)
 
(289,444
)
 
(245,127
)
Financing activities
119,903

 
8,393

 
(43,180
)
Net increase (decrease) in cash and cash equivalents
(70,738
)
 
(68,771
)
 
83,972

 
 
 
 
 
 
Cash and cash equivalents at end of period

$6,096

 

$76,834

 

$145,605


Operating Activities

Net cash flow provided by operating activities increased $14.3 million in 2017 primarily due to the timing of recovery of fuel and purchased power costs in 2017 as compared to 2016 and an increase of $12.6 million in income tax refunds in 2017 as compared to 2016. Entergy Mississippi had income tax refunds in 2017 and 2016 in accordance with an intercompany income tax allocation agreement. The 2017 income tax refunds were primarily due to the utilization of Entergy Mississippi’s federal net operating losses and state income tax refunds resulting from the carryback of net operating losses. The increase was partially offset by the timing of payments to vendors.

Net cash flow provided by operating activities decreased $160 million in 2016 primarily due to the timing of recovery of fuel and purchased power costs in 2016 as compared to the same period in 2015 and $15.3 million in insurance proceeds received in 2015 related to the unplanned outage event that occurred at the Baxter Wilson (Unit 1) power plant in September 2013. The decrease was partially offset by income tax refunds of $12.5 million in 2016 compared to income tax payments of $61.3 million in 2015. Entergy Mississippi had income tax refunds in 2016 and income tax payments in 2015 in accordance with an intercompany income tax allocation agreement. The 2016 income tax refunds resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit whereas the income tax payments in 2015 were primarily due to the results of operations and the reversal of taxable temporary differences as well as final settlement of amounts outstanding associated with the 2006-2007 IRS audit. See Note 3 to the financial statements for a discussion of the income tax audits.

Investing Activities

Net cash flow used in investing activities increased $127.8 million in 2017 primarily due to:

•
an increase of $48.4 million in transmission construction expenditures primarily due to a higher scope of work performed in 2017 as compared to 2016;
•
an increase of $39.2 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed in 2017 as compared to 2016; and
•
an increase of $30.2 million in distribution construction expenditures primarily due to an increase in storm spending in 2017 as compared to 2016 and increased spending on digital technology improvements within the customer contact centers.


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Net cash flow used in investing activities increased $44.3 million in 2016 primarily due to:

•
an increase of $72.4 million in transmission construction expenditures primarily due to a higher scope of work performed in 2016 as compared to 2015;
•
insurance proceeds of $12.9 million received in 2015 related to the unplanned outage event that occurred at the Baxter Wilson (Unit 1) power plant in September 2013;
•
an increase of $11.4 million in distribution construction expenditures primarily due to a higher scope of non-storm related work performed in 2016 as compared to 2015; and     
•
an increase of $10.1 million due to various information technology projects and upgrades.

The increase was partially offset by a decrease of $20.1 million in fossil-fueled generation construction expenditures primarily due to a decreased scope of work performed during plant outages in 2016 as compared to 2015 and money pool activity.

Decreases in Entergy Mississippi’s receivable from the money pool are a source of cash flow, and Entergy Mississippi’s receivable from the money pool decreased by $15.3 million in 2016 compared to increasing by $25.3 million in 2015. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Financing Activities

Net cash flow provided by financing activities increased $111.5 million in 2017 primarily due to the issuance of $150 million of 3.25% Series first mortgage bonds in November 2017 and the redemption of $30 million of 6.25% Series preferred stock in 2016, partially offset by the net issuance of $61.4 million of long-term debt in 2016.

Entergy Mississippi’s financing activities provided $8.4 million of cash in 2016 compared to using $43.2 million in 2015 primarily due to the net issuance of $61.4 million of long-term debt in 2016 and a decrease of $16 million in common stock dividends paid in 2016, partially offset by the redemption of $30 million of 6.25% Series preferred stock. The decrease in dividends paid was primarily because of lower operating cash flows and higher capital expenditures, each discussed above.

See Note 5 to the financial statements for details on long-term debt.

Capital Structure

Entergy Mississippi’s capitalization is balanced between equity and debt, as shown in the following table. The increase in the debt to capital ratio for Entergy Mississippi is primarily due to the issuance of long-term debt in 2017.
  
 
December 31,
2017
 
December 31,
2016
Debt to capital
51.5
%
 
50.2
%
Effect of subtracting cash
(0.2
%)
 
(1.8
%)
Net debt to net capital
51.3
%
 
48.4
%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings, capital lease obligations, and long-term debt, including the currently maturing portion.  Capital consists of debt, preferred stock without sinking fund, and common equity.  Net capital consists of capital less cash and cash equivalents.  Entergy Mississippi uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Mississippi’s financial condition.  Entergy Mississippi uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors

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and creditors in evaluating Entergy Mississippi’s financial condition because net debt indicates Entergy Mississippi’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Mississippi seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings.  To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure.  To the extent that operating cash flows are insufficient to support planned investments, Entergy Mississippi may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure.  In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure if financed entirely with debt and reducing dividends, Entergy Mississippi may receive equity contributions to maintain the targeted capital structure.

Uses of Capital

Entergy Mississippi requires capital resources for:

•
construction and other capital investments;
•
debt and preferred stock maturities or retirements;
•
working capital purposes, including the financing of fuel and purchased power costs; and
•
dividend and interest payments.
    
Following are the amounts of Entergy Mississippi’s planned construction and other capital investments.
 
2018
 
2019
 
2020
 
(In Millions)
Planned construction and capital investment:
 
 
 
 
 
Generation

$55

 

$45

 

$260

Transmission
145

 
100

 
105

Distribution
125

 
140

 
130

Utility Support
70

 
50

 
35

Total

$395

 

$335

 

$530


Following are the amounts of Entergy Mississippi’s existing debt obligations and lease obligations (includes estimated interest payments) and other purchase obligations.
 
2018
 
2019-2020
 
2021-2022
 
After 2022
 
Total
 
(In Millions)
Long-term debt (a)

$50

 

$234

 

$80

 

$1,784

 

$2,148

Operating leases

$12

 

$19

 

$12

 

$6

 

$49

Purchase obligations (b)

$280

 

$519

 

$490

 

$5,304

 

$6,593


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services.  For Entergy Mississippi, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements. 

In addition to the contractual obligations given above, Entergy Mississippi currently expects to contribute approximately $14.9 million to its qualified pension plans and approximately $110 thousand to other postretirement health care and life insurance plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018  See “ Critical Accounting Estimates

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– Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.
 
In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Mississippi includes amounts associated with specific investments such as transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering; resource planning, including potential generation projects; system improvements; and other investments.  Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.

As a wholly-owned subsidiary, Entergy Mississippi dividends its earnings to Entergy Corporation at a percentage determined monthly.  Provisions in Entergy Mississippi’s articles of incorporation relating to preferred stock restrict the amount of retained earnings available for the payment of cash dividends or other distributions on its common and preferred stock.

Advanced Metering Infrastructure (AMI)

In November 2016, Entergy Mississippi filed an application seeking an order from the MPSC granting a certificate of public convenience and necessity and finding that Entergy Mississippi’s deployment of AMI is in the public interest. Entergy Mississippi proposed to replace existing meters with advanced meters that enable two-way data communication; to design and build a secure and reliable network to support such communications; and to implement support systems. AMI is intended to serve as the foundation of Entergy Mississippi’s modernized power grid. The filing included an estimate of implementation costs for AMI of $132 million . The filing identified a number of quantified and unquantified benefits, and Entergy Mississippi provided a cost benefit analysis showing that its AMI deployment is expected to produce a nominal benefit to customers of $496 million over a 15-year period, which when netted against the costs of AMI results in $183 million of net customer benefits. Entergy Mississippi also sought to continue to include in rate base the remaining book value, approximately $56 million at December 31, 2015, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Mississippi proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019, subject to approval by the MPSC, with deployment of the communications network expected to begin in 2018. Entergy Mississippi proposed to include the AMI deployment costs and the quantified benefits in existing rate mechanisms, primarily through future formula rate plan filings and/or future energy cost recovery rider schedule re-determinations, as applicable. In May 2017 the Mississippi Public Utilities Staff and Entergy Mississippi entered into and filed a joint stipulation supporting Entergy Mississippi’s filing, and the MPSC issued an order approving the filing without material changes, finding that Entergy Mississippi’s deployment of AMI is in the public interest and granting a certificate of public convenience and necessity. The MPSC order also confirmed that Entergy Mississippi shall continue to include in rate base the remaining book value of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates.

Sources of Capital

Entergy Mississippi’s sources to meet its capital requirements include:

•
internally generated funds;
•
cash on hand;
•
debt or preferred stock issuances; and
•
bank financing under new or existing facilities.


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Entergy Mississippi may refinance, redeem, or otherwise retire debt and preferred stock prior to maturity, to the extent market conditions and interest and dividend rates are favorable.

All debt and common and preferred stock issuances by Entergy Mississippi require prior regulatory approval.  Preferred stock and debt issuances are also subject to issuance tests set forth in its corporate charter, bond indenture, and other agreements.  Entergy Mississippi has sufficient capacity under these tests to meet its foreseeable capital needs.

Entergy Mississippi’s receivables from the money pool were as follows as of December 31 for each of the following years.
2017
 
2016
 
2015
 
2014
(In Thousands)
$1,633
 
$10,595
 
$25,930
 
$644

See Note 4 to the financial statements for a description of the money pool.

Entergy Mississippi has four separate credit facilities in the aggregate amount of $102.5 million scheduled to expire May 2018. No borrowings were outstanding under the credit facilities as of December 31, 2017 .  In addition, Entergy Mississippi is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of December 31, 2017 , a $15.3 million letter of credit was outstanding under Entergy Mississippi’s uncommitted letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.

Entergy Mississippi obtained authorizations from the FERC through October 2019 for short-term borrowings not to exceed an aggregate amount of $175 million at any time outstanding and long-term borrowings and security issuances. See Note 4 to the financial statements for further discussion of Entergy Mississippi’s short-term borrowing limits.

State and Local Rate Regulation and Fuel-Cost Recovery

The rates that Entergy Mississippi charges for electricity significantly influence its financial position, results of operations, and liquidity. Entergy Mississippi is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the MPSC, is primarily responsible for approval of the rates charged to customers.

Formula Rate Plan

In March 2016, Entergy Mississippi submitted its formula rate plan 2016 test year filing showing Entergy Mississippi’s projected earned return for the 2016 calendar year to be below the formula rate plan bandwidth. The filing showed a $32.6 million rate increase was necessary to reset Entergy Mississippi’s earned return on common equity to the specified point of adjustment of 9.96% , within the formula rate plan bandwidth. In June 2016 the MPSC approved Entergy Mississippi’s joint stipulation with the Mississippi Public Utilities Staff. The joint stipulation provided for a total revenue increase of $23.7 million . The revenue increase includes a $19.4 million increase through the formula rate plan, resulting in a return on common equity point of adjustment of 10.07% . The revenue increase also includes $4.3 million in incremental ad valorem tax expenses to be collected through an updated ad valorem tax adjustment rider. The revenue increase and ad valorem tax adjustment rider were effective with the July 2016 bills.

In March 2017, Entergy Mississippi submitted its formula rate plan 2017 test year filing and 2016 look-back filing showing Entergy Mississippi’s earned return for the historical 2016 calendar year and projected earned return for the 2017 calendar year to be within the formula rate plan bandwidth, resulting in no change in rates. In June 2017, Entergy Mississippi and the Mississippi Public Utilities Staff entered into a stipulation that confirmed that Entergy

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Mississippi’s earned returns for both the 2016 look-back filing and 2017 test year were within the respective formula rate plan bandwidths. In June 2017 the MPSC approved the stipulation, which resulted in no change in rates.

Fuel and Purchased Power Cost Recovery

Entergy Mississippi’s rate schedules include an energy cost recovery rider that is adjusted annually to reflect accumulated over- or under-recoveries. Entergy Mississippi’s fuel cost recoveries are subject to annual audits conducted pursuant to the authority of the MPSC.

Entergy Mississippi had a deferred fuel over-recovery balance of $58.3 million as of May 31, 2015, along with an under-recovery balance of $12.3 million under the power management rider. Pursuant to those tariffs, in July 2015, Entergy Mississippi filed for interim adjustments under both the energy cost recovery rider and the power management rider to flow through to customers the approximately $46 million net over-recovery over a six-month period. In August 2015, the MPSC approved the interim adjustments effective with September 2015 bills. In November 2015, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included a projected over-recovery balance of $48 million projected through January 31, 2016. In January 2016 the MPSC approved the redetermined annual factor effective February 1, 2016. The MPSC further ordered, however, that due to the significant change in natural gas price forecasts since Entergy Mississippi’s filing in November 2015 Entergy Mississippi should file a revised fuel factor with the MPSC no later than February 1, 2016. Pursuant to that order, Entergy Mississippi submitted a revised fuel factor. Additionally, because Entergy Mississippi’s projected over-recovery balance for the period ending January 31, 2016 was $68 million , in February 2016, Entergy Mississippi filed for another interim adjustment to the energy cost factor effective April 2016 to flow through to customers the projected over-recovery balance over a six-month period. That interim adjustment was approved by the MPSC in February 2016 effective for April 2016 bills.

In November 2016, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included an over-recovery of less than $2 million as of September 30, 2016. In January 2017 the MPSC approved the annual factor effective with February 2017 bills. Also in January 2017 the MPSC certified to the Mississippi Legislature the audit reports of its independent auditors for the fuel year ending September 30, 2016. In its order, the MPSC expressly reserved the right to review and determine the recoverability of any and all purchased power expenditures made during fiscal year 2016. The MPSC hired independent auditors to conduct an annual operations audit and a financial audit. The independent auditors issued their audit reports in December 2017. The audit reports included several recommendations for action by Entergy Mississippi but did not recommend any cost disallowances. In January 2018 the MPSC certified the audit reports to the Mississippi Legislature. In November 2017 the Public Utilities Staff separately engaged a consultant to review the outage at the Grand Gulf Nuclear Station that began in 2016. The review is currently in progress.

In November 2017, Entergy Mississippi filed its annual redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included an under-recovery of approximately $61.5 million as of September 30, 2017. Entergy Mississippi proposed a two-tiered energy cost factor designed to promote overall rate stability throughout 2018 particularly during the summer months. In January 2018 the MPSC approved the proposed energy cost factors effective for February 2018 bills.

Mississippi Attorney General Complaint

The Mississippi attorney general filed a complaint in state court in December 2008 against Entergy Corporation, Entergy Mississippi, Entergy Services, and Entergy Power alleging, among other things, violations of Mississippi statutes, fraud, and breach of good faith and fair dealing, and requesting an accounting and restitution.  The complaint is wide ranging and relates to tariffs and procedures under which Entergy Mississippi purchases power not generated in Mississippi to meet electricity demand.  Entergy believes the complaint is unfounded.  In December 2008 the defendant Entergy companies removed the Attorney General’s lawsuit to U.S. District Court in Jackson, Mississippi.  The Mississippi attorney general moved to remand the matter to state court.  In August 2012 the District

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Court issued an opinion denying the Attorney General’s motion for remand, finding that the District Court has subject matter jurisdiction under the Class Action Fairness Act.

The defendant Entergy companies answered the complaint and filed a counterclaim for relief based upon the Mississippi Public Utilities Act and the Federal Power Act.  In May 2009 the defendant Entergy companies filed a motion for judgment on the pleadings asserting grounds of federal preemption, the exclusive jurisdiction of the MPSC, and factual errors in the Attorney General’s complaint.  In September 2012 the District Court heard oral argument on Entergy’s motion for judgment on the pleadings.

In January 2014 the U.S. Supreme Court issued a decision in which it held that cases brought by attorneys general as the sole plaintiff to enforce state laws were not considered “mass actions” under the Class Action Fairness Act, so as to establish federal subject matter jurisdiction. One day later the Attorney General renewed his motion to remand the Entergy case back to state court, citing the U.S. Supreme Court’s decision. The defendant Entergy companies responded to that motion reiterating the additional grounds asserted for federal question jurisdiction, and the District Court held oral argument on the renewed motion to remand in February 2014. In April 2015 the District Court entered an order denying the renewed motion to remand, holding that the District Court has federal question subject matter jurisdiction. The Attorney General appealed to the U.S. Fifth Circuit Court of Appeals the denial of the motion to remand. In July 2015 the Fifth Circuit issued an order denying the appeal, and the Attorney General subsequently filed a petition for rehearing of the request for interlocutory appeal, which was also denied. In December 2015 the District Court ordered that the parties submit to the court undisputed and disputed facts that are material to the Entergy defendants’ motion for judgment on the pleadings, as well as supplemental briefs regarding the same. Those filings were made in January 2016.

In September 2016 the Attorney General filed a mandamus petition with the U.S. Fifth Circuit Court of Appeals in which the Attorney General asked the Fifth Circuit to order the chief judge to reassign this case to another judge. In September 2016 the District Court denied the Entergy companies’ motion for judgment on the pleadings. The Entergy companies filed a motion seeking to amend the District Court’s order denying the Entergy companies’ motion for judgment on the pleadings and allowing an interlocutory appeal. In October 2016 the Fifth Circuit granted the Attorney General’s motion for writ of mandamus and directed the chief judge to assign the case to a new judge. The case was reassigned in October 2016. In January 2017 the District Court denied the Entergy companies’ motion to amend the order denying the motion for judgment on the pleadings. In June 2017 the District Court issued a case management order setting a trial date in November 2018. Discovery is currently in progress.

Storm Damage Provision

Entergy Mississippi has approval from the MPSC to collect a storm damage provision of $1.75 million per month. If Entergy Mississippi’s accumulated storm damage provision balance exceeds $15 million , the collection of the storm damage provision ceases until such time that the accumulated storm damage provision becomes less than $10 million . As of April 30, 2016, Entergy Mississippi’s storm damage provision balance was less than $10 million , therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with June 2016 bills. As of September 30, 2016, however, Entergy Mississippi’s storm damage provision balance again exceeded $15 million . Accordingly the storm damage provision was reset to zero beginning with November 2016 bills. As of July 31, 2017, the balance in Entergy Mississippi’s accumulated storm damage provision was again less than $10 million, therefore Entergy Mississippi resumed billing the monthly storm damage provision effective with September 2017 bills.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.



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Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Nuclear Matters

See the “ Nuclear Matters ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of nuclear matters.

Environmental Risks

Entergy Mississippi’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters.  Management believes that Entergy Mississippi is in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted in “ Regulation of Entergy’s Business - Environmental Regulation ” in Part I, Item 1.  Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.

Critical Accounting Estimates

The preparation of Entergy Mississippi’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of Entergy Mississippi’s financial position or results of operations.

Utility Regulatory Accounting

See “ Utility Regulatory Accounting ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.

Unbilled Revenue

See “ Unbilled Revenue ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the unbilled revenue amounts.

Impairment of Long-lived Assets and Trust Fund Investments

See “ Impairment of Long-lived Assets and Trust Fund Investments ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the impairment of long-lived assets.

Taxation and Uncertain Tax Positions

See “ Taxation and Uncertain Tax Positions ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

Qualified Pension and Other Postretirement Benefits

Entergy Mississippi’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.   See the “ Qualified

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Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis

Pension and Other Postretirement Benefits ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.  Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.

Cost Sensitivity

The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Projected Qualified Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$874
 

$13,479

Rate of return on plan assets
 
(0.25%)
 
$867
 

$—

Rate of increase in compensation
 
0.25%
 
$381
 

$1,848


The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated Postretirement Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$184
 
$2,561
Health care cost trend
 
0.25%
 
$296
 
$2,024

Each fluctuation above assumes that the other components of the calculation are held constant.

Costs and Funding

Total qualified pension cost for Entergy Mississippi in 2017 was $8.5 million. Entergy Mississippi anticipates 2018 qualified pension cost to be $10.8 million. In 2016, Entergy Mississippi refined its approach to estimating the service cost and interest cost components of qualified pension costs, which had the effect of lowering qualified pension costs by $3.8 million.  Entergy Mississippi contributed $19.1 million to its qualified pension plans in 2017 and estimates 2018 pension contributions will be approximately $14.9 million, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

Total postretirement health care and life insurance benefit income for Entergy Mississippi in 2017 was $1 million. Entergy Mississippi expects 2018 postretirement health care and life insurance benefit income of approximately $1.5 million. In 2016, Entergy Mississippi refined its approach to estimating the service cost and interest cost components of other postretirement costs, which had the effect of lowering qualified other postretirement costs by $770 thousand. In 2017, Entergy Mississippi’s contributions (that is, contributions to the external trusts plus claims payments) were offset by trust claims reimbursements, resulting in a net reimbursement of $2 thousand. Entergy Mississippi estimates that 2018 contributions will be approximately $110 thousand.


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Entergy Mississippi, Inc.
Management’s Financial Discussion and Analysis


Federal Healthcare Legislation

See “ Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.

Other Contingencies

See “ Other Contingencies ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and other risks.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements for a discussion of new accounting pronouncements.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the shareholders and Board of Directors of
Entergy Mississippi, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Entergy Mississippi, Inc. (the “Company”) as of December 31, 2017 and 2016, the related statements of income, cash flows and changes in common equity (pages 370 through 374 and applicable items in pages 55 through 230), for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Company’s auditor since 2001.


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ENTERGY MISSISSIPPI, INC.
INCOME STATEMENTS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$1,198,229

 

$1,094,649

 

$1,396,985

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
185,816

 
95,090

 
291,666

Purchased power
 
328,463

 
297,902

 
389,950

Other operation and maintenance
 
243,480

 
250,443

 
261,255

Taxes other than income taxes
 
95,051

 
94,482

 
94,152

Depreciation and amortization
 
143,479

 
136,214

 
129,029

Other regulatory charges (credits) - net
 
(19,134
)
 
(3,721
)
 
19,027

TOTAL
 
977,155

 
870,410

 
1,185,079

 
 
 
 
 
 
 
OPERATING INCOME
 
221,074

 
224,239

 
211,906

 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
9,667

 
5,801

 
3,095

Interest and investment income
 
85

 
656

 
195

Miscellaneous - net
 
510

 
(3,531
)
 
(4,418
)
TOTAL
 
10,262

 
2,926

 
(1,128
)
 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
51,260

 
57,114

 
57,842

Allowance for borrowed funds used during construction
 
(3,875
)
 
(2,987
)
 
(1,644
)
TOTAL
 
47,385

 
54,127

 
56,198

 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
183,951

 
173,038

 
154,580

 
 
 
 
 
 
 
Income taxes
 
73,919

 
63,854

 
61,872

 
 
 
 
 
 
 
NET INCOME
 
110,032

 
109,184

 
92,708

 
 
 
 


 
 
Preferred dividend requirements and other
 
953

 
2,443

 
2,828

 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON STOCK
 

$109,079

 

$106,741

 

$89,880

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 

$110,032

 

$109,184

 

$92,708

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
143,479

 
136,214

 
129,029

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
84,816

 
60,986

 
18,673

Changes in assets and liabilities:
 
 

 
 

 
 

Receivables
 
(29,528
)
 
(28,819
)
 
50,199

Fuel inventory
 
5,266

 
401

 
(8,537
)
Accounts payable
 
3,595

 
33,733

 
(26,682
)
Taxes accrued
 
18,803

 
20,579

 
(10,104
)
Interest accrued
 
1,248

 
822

 
(2,341
)
Deferred fuel costs
 
(25,487
)
 
(114,711
)
 
105,560

Other working capital accounts
 
5,115

 
(5,222
)
 
(663
)
Provisions for estimated losses
 
(9,676
)
 
6,378

 
(2,080
)
Other regulatory assets
 
(17,412
)
 
(3,626
)
 
39,582

Other regulatory liabilities
 
405,395

 
(2,986
)
 
9,172

     Deferred tax rate change recognized as regulatory liability/asset
 
(452,429
)
 
—

 
—

Pension and other postretirement liabilities
 
(8,055
)
 
(10,648
)
 
(14,939
)
Other assets and liabilities
 
(8,577
)
 
9,995

 
(7,298
)
Net cash flow provided by operating activities
 
226,585

 
212,280

 
372,279

INVESTING ACTIVITIES
 
 

 
 

 
 

Construction expenditures
 
(427,616
)
 
(310,356
)
 
(235,894
)
Allowance for equity funds used during construction
 
9,667

 
5,801

 
3,095

Insurance proceeds
 
—

 
—

 
12,932

Changes in money pool receivable - net
 
8,962

 
15,335

 
(25,286
)
Payment for purchase of assets
 
(6,958
)
 
—

 
—

Other
 
(1,281
)
 
(224
)
 
26

Net cash flow used in investing activities
 
(417,226
)
 
(289,444
)
 
(245,127
)
FINANCING ACTIVITIES
 
 

 
 

 
 

Proceeds from the issuance of long-term debt
 
148,185

 
623,812

 
—

Retirement of long-term debt
 
—

 
(562,400
)
 
—

Redemption of preferred stock
 
—

 
(30,000
)
 
—

Dividends paid:
 
 

 
 

 
 

Common stock
 
(26,000
)
 
(24,000
)
 
(40,000
)
Preferred stock
 
(953
)
 
(2,755
)
 
(2,828
)
Other
 
(1,329
)
 
3,736

 
(352
)
Net cash flow provided by (used in) financing activities
 
119,903

 
8,393

 
(43,180
)
Net increase (decrease) in cash and cash equivalents
 
(70,738
)
 
(68,771
)
 
83,972

Cash and cash equivalents at beginning of period
 
76,834

 
145,605

 
61,633

Cash and cash equivalents at end of period
 

$6,096

 

$76,834

 

$145,605

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 
 
 

 
 

Cash paid (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$47,631

 

$53,693

 

$57,576

Income taxes
 

($25,043
)
 

($12,487
)
 

$61,333

See Notes to Financial Statements.
 
 

 
 

 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$1,607

 

$16

Temporary cash investments
 
4,489

 
76,818

Total cash and cash equivalents
 
6,096

 
76,834

Accounts receivable:
 
 

 
 

Customer
 
72,039

 
51,218

Allowance for doubtful accounts
 
(574
)
 
(549
)
Associated companies
 
45,081

 
45,973

Other
 
9,738

 
12,006

Accrued unbilled revenues
 
54,256

 
51,327

Total accounts receivable
 
180,540

 
159,975

Deferred fuel costs
 
32,444

 
6,957

Fuel inventory - at average cost
 
45,606

 
50,872

Materials and supplies - at average cost
 
42,571

 
41,146

Prepayments and other
 
7,041

 
8,873

TOTAL
 
314,298

 
344,657

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Non-utility property - at cost (less accumulated depreciation)
 
4,592

 
4,608

Escrow accounts
 
31,969

 
31,783

TOTAL
 
36,561

 
36,391

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
4,660,297

 
4,321,214

Property under capital lease
 
125

 
1,590

Construction work in progress
 
149,367

 
118,182

TOTAL UTILITY PLANT
 
4,809,789

 
4,440,986

Less - accumulated depreciation and amortization
 
1,681,306

 
1,602,711

UTILITY PLANT - NET
 
3,128,483

 
2,838,275

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
—

 
38,284

Other regulatory assets
 
397,909

 
342,213

Other
 
2,124

 
2,320

TOTAL
 
400,033

 
382,817

 
 
 
 
 
TOTAL ASSETS
 

$3,879,375

 

$3,602,140

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY MISSISSIPPI, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 

 
 

Associated companies
 

$55,689

 

$43,647

Other
 
77,326

 
80,227

Customer deposits
 
83,654

 
84,112

Taxes accrued
 
82,843

 
64,040

Interest accrued
 
22,901

 
21,653

Other
 
12,785

 
9,554

TOTAL
 
335,198

 
303,233

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
488,806

 
861,331

Accumulated deferred investment tax credits
 
8,867

 
8,667

Regulatory liability for income taxes - net
 
411,011

 
—

Asset retirement cost liabilities
 
9,219

 
8,722

Accumulated provisions
 
44,764

 
54,440

Pension and other postretirement liabilities
 
101,498

 
109,551

Long-term debt
 
1,270,122

 
1,120,916

Other
 
11,639

 
20,108

TOTAL
 
2,345,926

 
2,183,735

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
Preferred stock without sinking fund
 
20,381

 
20,381

 
 
 
 
 
COMMON EQUITY
 
 

 
 

Common stock, no par value, authorized 12,000,000 shares; issued and outstanding 8,666,357 shares in 2017 and 2016
 
199,326

 
199,326

Capital stock expense and other
 
167

 
167

Retained earnings
 
978,377

 
895,298

TOTAL
 
1,177,870

 
1,094,791

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,879,375

 

$3,602,140

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY MISSISSIPPI, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
Common Equity
 
 
 
Common Stock
 
Capital Stock Expense and Other
 
Retained Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$199,326

 

($690
)
 

$763,534

 

$962,170

Net income
—

 
—

 
92,708

 
92,708

Common stock dividends
—

 
—

 
(40,000
)
 
(40,000
)
Preferred stock dividends
—

 
—

 
(2,828
)
 
(2,828
)
Balance at December 31, 2015

$199,326

 

($690
)
 

$813,414

 

$1,012,050

Net income
—

 
—

 
109,184

 
109,184

Common stock dividends
—

 
—

 
(24,000
)
 
(24,000
)
Preferred stock dividends
—

 
—

 
(2,443
)
 
(2,443
)
Preferred stock redemption
—

 
857

 
(857
)
 
—

Balance at December 31, 2016

$199,326

 

$167

 

$895,298

 

$1,094,791

Net income
—

 
—

 
110,032

 
110,032

Common stock dividends
—

 
—

 
(26,000
)
 
(26,000
)
Preferred stock dividends
—

 
—

 
(953
)
 
(953
)
Balance at December 31, 2017

$199,326

 

$167

 

$978,377

 

$1,177,870

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 

 
 



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ENTERGY MISSISSIPPI, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Operating revenues

$1,198,229

 

$1,094,649

 

$1,396,985

 

$1,524,193

 

$1,334,540

Net income

$110,032

 

$109,184

 

$92,708

 

$74,821

 

$82,159

Total assets

$3,879,375

 

$3,602,140

 

$3,477,407

 

$3,358,625

 

$3,234,875

Long-term obligations (a)

$1,290,503

 

$1,141,924

 

$972,058

 

$1,097,182

 

$1,092,786

 
 
 
 
 
 
 
 
 
 
(a) Includes long-term debt (excluding currently maturing debt), non-current capital lease obligations, and preferred stock without sinking fund.
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(Dollars In Millions)
 
 
 
 
 
 
 
 
 
 
Electric Operating Revenues:
 

 
 

 
 

 
 

 
 

Residential

$502

 

$459

 

$565

 

$585

 

$527

Commercial
423

 
374

 
465

 
481

 
432

Industrial
159

 
134

 
164

 
175

 
156

Governmental
41

 
38

 
47

 
47

 
42

Total retail
1,125

 
1,005

 
1,241

 
1,288

 
1,157

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
—

 
1

 
75

 
153

 
92

Non-associated companies
18

 
30

 
10

 
14

 
24

Other
55

 
59

 
71

 
69

 
62

Total

$1,198

 

$1,095

 

$1,397

 

$1,524

 

$1,335

 
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 

 
 

 
 

 
 

Residential
5,308

 
5,617

 
5,661

 
5,672

 
5,629

Commercial
4,783

 
4,894

 
4,913

 
4,821

 
4,815

Industrial
2,536

 
2,493

 
2,283

 
2,297

 
2,265

Governmental
421

 
439

 
433

 
414

 
409

Total retail
13,048

 
13,443

 
13,290

 
13,204

 
13,118

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
—

 
—

 
1,419

 
2,657

 
1,543

Non-associated companies
857

 
1,021

 
261

 
193

 
304

Total
13,905

 
14,464

 
14,970

 
16,054

 
14,965



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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES

MANAGEMENT ’ S FINANCIAL DISCUSSION AND ANALYSIS

Internal Restructuring

In July 2016, Entergy New Orleans filed an application with the City Council seeking authorization to undertake a restructuring that would result in the transfer of substantially all of the assets and operations of Entergy New Orleans, Inc. to a new entity, which would ultimately be owned by an existing Entergy subsidiary holding company. The restructuring was subject to regulatory review and approval by the City Council and the FERC. In May 2017 the City Council adopted a resolution approving the proposed internal restructuring pursuant to an agreement in principle with the City Council advisors and certain intervenors. Pursuant to the agreement in principle, Entergy New Orleans would credit retail customers $10 million in 2017, $1.4 million in the first quarter of the year after the transaction closes, and $117,500 each month in the second year after the transaction closes until such time as new base rates go into effect as a result of the anticipated 2018 base rate case. Entergy New Orleans began crediting retail customers in June 2017. In June 2017 the FERC approved the transaction and, pursuant to the agreement in principle, Entergy New Orleans will provide additional credits to retail customers of $5 million in each of the years 2018, 2019, and 2020.

In November 2017, pursuant to the agreement in principle, Entergy New Orleans undertook a multi-step restructuring, including the following:

•
Entergy New Orleans, Inc. redeemed its outstanding preferred stock at a price of approximately $21 million , which included a call premium of approximately $819,000 , plus any accumulated and unpaid dividends.
•
Entergy New Orleans, Inc. converted from a Louisiana corporation to a Texas corporation.
•
Under the Texas Business Organizations Code (TXBOC), Entergy New Orleans, Inc. allocated substantially all of its assets to a new subsidiary, Entergy New Orleans Power, LLC, a Texas limited liability company (Entergy New Orleans Power), and Entergy New Orleans Power assumed substantially all of the liabilities of Entergy New Orleans, Inc. in a transaction regarded as a merger under the TXBOC. Entergy New Orleans, Inc. remained in existence and held the membership interests in Entergy New Orleans Power.
•
Entergy New Orleans, Inc. contributed the membership interests in Entergy New Orleans Power to an affiliate (Entergy Utility Holding Company, LLC, a Texas limited liability company and subsidiary of Entergy Corporation). As a result of the contribution, Entergy New Orleans Power is a wholly-owned subsidiary of Entergy Utility Holding Company, LLC.

In December 2017, Entergy New Orleans, Inc. changed its name to Entergy Utility Group, Inc., and Entergy New Orleans Power then changed its name to Entergy New Orleans, LLC. Entergy New Orleans, LLC holds substantially all of the assets, and has assumed substantially all of the liabilities, of Entergy New Orleans, Inc. The restructuring was accounted for as a transaction between entities under common control.

Results of Operations

Net Income

2017 Compared to 2016

Net income decreased $4.3 million primarily due to higher taxes other than income taxes, lower net revenue, and a higher effective income tax rate, partially offset by lower other operation and maintenance expenses and higher other income.

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2016 Compared to 2015

Net income increased $3.9 million primarily due to higher net revenue, partially offset by higher depreciation and amortization expenses, higher interest expense, and lower other income.

Net Revenue

2017 Compared to 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2017 to 2016.
 
Amount
 
(In Millions)
 
 
2016 net revenue

$317.2

Retail electric price
(6.4
)
Volume/weather
(4.3
)
Other
5.4

2017 net revenue

$311.9

    
The retail electric price variance is primarily due to a net decrease in the purchased power and capacity acquisition cost recovery rider. There was an increase in the rider primarily due to credits to customers as part of the Entergy New Orleans internal restructuring agreement in principle, effective with the first billing cycle of June 2017, partially offset by lower credits to customers in 2017 related to the retirement of Michoud Units 2 and 3. See Note 2 to the financial statements for further discussion of the credits associated with Entergy New Orleans’s internal restructuring and the Michoud retirement.

The volume/weather variance is primarily due to the effect of less favorable weather on residential and commercial sales, partially offset by an increase in residential and commercial usage resulting from a 1% increase in the average number of residential and commercial electric customers.

2016 Compared to 2015

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2016 to 2015.
 
Amount
 
(In Millions)
 
 
2015 net revenue

$293.9

Retail electric price
39.0

Net gas revenue
(2.5
)
Volume/weather
(5.1
)
Other
(8.1
)
2016 net revenue

$317.2


The retail electric price variance is primarily due to an increase in the purchased power and capacity acquisition cost recovery rider, as approved by the City Council, effective with the first billing cycle of March 2016, primarily

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related to the purchase of Power Block 1 of the Union Power Station. See Note 14 to the financial statements for discussion of the Union Power Station purchase.

The net gas revenue variance is primarily due to the effect of less favorable weather on residential and commercial sales.

The volume/weather variance is primarily due to a decrease of 112 GWh, or 2%, in billed electricity usage, partially offset by the effect of favorable weather on commercial sales and a 2% increase in the average number of electric customers.
    
Other Income Statement Variances

2017 Compared to 2016

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $7.9 million in fossil-fueled generation expenses primarily due to lower outage costs at Power Block 1 of the Union Power Station in 2017 as compared to 2016, the deactivation of Michoud Units 2 and 3 effective May 2016, and asbestos loss provisions in 2016;
•
a decrease of $4.5 million in other loss provisions; and
•
a decrease of $2.8 million due to lower write-offs of uncollectible customer accounts.

The decrease was partially offset by:

•
an increase of $4 million in distribution expenses primarily due to higher labor costs, including contract labor, and higher vegetation maintenance costs; and
•
an increase of $1.3 million in energy efficiency costs.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes and higher local franchise taxes. Ad valorem taxes increased primarily due to higher assessments, including the assessment of Arkansas ad valorem taxes on the Union Power Station beginning in 2017. Local franchise taxes increased primarily due to higher electric retail revenues in 2017 as compared to 2016.

Other income increased primarily due to a decrease in charitable contributions made in 2017 as compared to 2016.

2016 Compared to 2015

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $6.1 million due to lower transmission equalization expenses, as allocated under the System Agreement as compared to the same period in 2015 primarily due to the termination of the System Agreement. See Note 2 to the financial statements for further discussion on the System Agreement termination;
•
a decrease of $4.4 million due to the cessation of storm damage provisions in August 2015. See Note 2 to the financial statements for further discussion of storm cost recovery; and
•
a decrease of $3.1 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ Critical Accounting Estimates ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs.

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The decrease was partially offset by:

•
an increase of $5.7 million in fossil-fueled generation expenses primarily due to an increase as a result of the purchase of Power Block 1 of the Union Power Station in March 2016, partially offset by a decrease as a result of the deactivation of Michoud Units 2 and 3 effective May 2016.  See Note 14 to the financial statements for discussion of the Union Power Station purchase;
•
an increase of $3.1 million in loss provisions; and
•
an increase of $2.8 million due to higher write-offs of uncollectible customer accounts in 2016 as compared to 2015.

Depreciation and amortization expenses increased primarily due to additions to plant in service, including the purchase of Power Block 1 of the Union Power Station in March 2016, partially offset by the retirement of Michoud Units 2 and 3 effective May 2016.
    
Interest expense increased primarily due to the issuance of $110 million of 5.50% Series first mortgage bonds in March 2016 and the issuance of $98.7 million of storm cost recovery bonds in July 2015. See Note 5 to the financial statements for details on long-term debt.

Other income decreased primarily due to an increase in charitable contributions made in 2016 as compared to 2015.
    
Income Taxes

The effective income tax rates for 2017, 2016, and 2015 were 42.8%, 37.0% and 35.9%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the years ended December 31, 2017, 2016, and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Cash and cash equivalents at beginning of period

$103,068

 

$88,876

 

$42,389

 
 
 
 
 
 
Net cash provided by (used in):
 

 
 

 
 

Operating activities
127,797

 
205,211

 
105,068

Investing activities
(109,500
)
 
(322,681
)
 
(173,460
)
Financing activities
(88,624
)
 
131,662

 
114,879

Net increase (decrease) in cash and cash equivalents
(70,327
)

14,192


46,487

 
 
 
 
 
 
Cash and cash equivalents at end of period

$32,741



$103,068



$88,876


Operating Activities

Net cash flow provided by operating activities decreased $77.4 million in 2017 primarily due to a decrease of $77.3 million in income tax refunds in 2017 compared to 2016 and the timing of collections from customers and payments to vendors. Entergy New Orleans had income tax refunds in 2017 and 2016 in accordance with an intercompany income tax allocation agreement. The 2016 income tax refunds resulted primarily from deductible temporary differences. The decrease was partially offset by an increase due to the timing of recovery of fuel and purchased power costs.

Net cash flow provided by operating activities increased $100.1 million in 2016 primarily due to income tax refunds of $86 million in 2016 as compared to income tax payments of $8.1 million in 2015. Entergy New Orleans had income tax refunds in 2016 and income tax payments in 2015 in accordance with an intercompany income tax allocation agreement. The 2016 income tax refunds resulted primarily from deductible temporary differences.

Investing Activities
    
Net cash flow used in investing activities decreased $213.2 million in 2017 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016. See Note 14 to the financial statements for discussion of the Union Power Station purchase. The decrease was partially offset by an increase of $16.7 million in distribution construction expenditures primarily due to a higher scope of work performed in 2017 as compared to 2016.

Net cash flow used in investing activities increased $149.2 million in 2016 primarily due to the purchase of Power Block 1 of the Union Power Station for approximately $237 million in March 2016. The increase was partially offset by a deposit of $63.9 million into the storm reserve escrow account in July 2015 and money pool activity. See Note 14 to the financial statements for discussion of the Union Power Station purchase. See Note 5 to the financial statements for a discussion of the issuance in July 2015 of securitization bonds to recover storm costs.

Decreases in Entergy New Orleans’s receivable from the money pool are a source of cash flow, and Entergy New Orleans’s receivable from the money pool decreased $1.6 million in 2016 compared to increasing $15.4 million in 2015.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings
    

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Financing Activities

Entergy New Orleans’s financing activities used $88.6 million of cash in 2017 compared to providing $131.7 million in 2016 primarily due to the following activity:

•
the issuance of $110 million of 5.50% Series first mortgage bonds in March 2016;
•
an increase of $55.5 million in common equity distributions in 2017 as compared to 2016. Common equity distributions in 2017 increased primarily as a result of Entergy New Orleans’s cash position in excess of its working capital requirements. There were no common equity distributions in first quarter 2016 in anticipation of the purchase of Power Block 1 of the Union Power Station in March 2016;
•
a decrease of $27.8 million in capital contributions received from Entergy Corporation in 2017 compared to 2016. The 2017 contribution was made in consideration of Entergy New Orleans’s upcoming capital requirements. The 2016 contribution was made in anticipation of Entergy New Orleans’s purchase of Power Block 1 of the Union Power Station; and
•
the redemptions of $7.8 million of 4.75% Series preferred stock, $6 million of 5.56% Series preferred stock, and $6 million of 4.36% Series preferred stock in 2017 in connection with the internal restructuring, as discussed above.

See Note 14 to the financial statements for discussion of the Union Power Station purchase.

Net cash flow provided by financing activities increased $16.8 million in 2016 primarily due to:

•
the purchase of Entergy Louisiana’s Algiers assets in September 2015. The cash portion of the purchase is reflected as a repayment of a long-term payable due to Entergy Louisiana in the cash flow statement. See Note 2 to the financial statements and “ Algiers Asset Transfer ” below for further discussion of the Algiers asset transfer and accounting for the transaction;
•
the issuance of $110 million of 5.50% Series first mortgage bonds in March 2016; and
•
the issuance of $85 million of 4% Series first mortgage bonds in May 2016. Entergy New Orleans used the proceeds to pay, prior to maturity, its $33.271 million of 5.6% Series first mortgage bonds due September 2024 and to pay, prior to maturity, its $37.772 million of 5.65% Series first mortgage bonds due September 2029.

The increase was offset by:

•
the issuance of $98.7 million of storm costs recovery bonds in July 2015;
•
a $47.8 million capital contribution received from Entergy Corporation in 2016 as compared to an $87.5 million capital contribution received from Entergy Corporation in 2015, both in anticipation of Entergy New Orleans’s purchase of Power Block 1 of the Union Power Station; and
•
an increase of $11.5 million in common equity distributions in 2016. Common equity distributions were lower in 2015 in anticipation of the purchase of Power Block 1 of the Union Power Station.
        
See Note 5 to the financial statements for more details on long-term debt.


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Capital Structure

Entergy New Orleans’s capitalization is balanced between equity and debt as shown in the following table. The increase in the debt to capital ratio is primarily due to the redemptions of preferred stock in 2017. 
 
December 31, 2017
 
December 31, 2016
Debt to capital
51.3
%
 
50.1
%
Effect of excluding securitization bonds
(4.7
%)
 
(5.2
%)
Debt to capital, excluding securitization bonds (a)
46.6
%
 
44.9
%
Effect of subtracting cash
(2.4
%)
 
(8.0
%)
Net debt to net capital, excluding securitization bonds (a)
44.2
%
 
36.9
%

(a) Calculation excludes the securitization bonds, which are non-recourse to Entergy New Orleans.

Net debt consists of debt less cash and cash equivalents. Debt consists of short-term borrowings, long-term debt, including the currently maturing portion, and the long-term payable to Entergy Louisiana. Capital consists of debt, preferred stock without sinking fund, and common equity. Net capital consists of capital less cash and cash equivalents. Entergy New Orleans uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because the securitization bonds are non-recourse to Entergy New Orleans, as more fully described in Note 5 to the financial statements. Entergy New Orleans also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy New Orleans’s financial condition because net debt indicates Entergy New Orleans’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy New Orleans seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings.  To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure.  To the extent that operating cash flows are insufficient to support planned investments, Entergy New Orleans may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure.  In addition, in certain infrequent circumstances, such as large transactions that would materially alter the capital structure if financed entirely with debt and reducing dividends, Entergy New Orleans may receive equity contributions to maintain the targeted capital structure.

Uses of Capital

Entergy New Orleans requires capital resources for:

•
construction and other capital investments;
•
working capital purposes, including the financing of fuel and purchased power costs;
•
debt maturities or retirements; and
•
distribution and interest payments.


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Following are the amounts of Entergy New Orleans’s planned construction and other capital investments.
 
2018
 
2019
 
2020
 
(In Millions)
Planned construction and capital investment:
 
 
 
 
 
Generation

$115

 

$80

 

$15

Transmission
15

 
10

 
5

Distribution
80

 
85

 
80

Utility Support
20

 
15

 
15

Total

$230

 

$190

 

$115


Following are the amounts of Entergy New Orleans’s existing debt and lease obligations (includes estimated interest payments) and other purchase obligations.
 
2018
 
2019-2020
 
2021-2022
 
After 2022
 
Total
 
(In Millions)
Long-term debt (a)

$31

 

$87

 

$59

 

$674

 

$851

Operating leases

$2

 

$3

 

$1

 

$2

 

$8

Purchase obligations (b)

$245

 

$480

 

$463

 

$3,669

 

$4,857


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services.  For Entergy New Orleans, almost all of the total consists of unconditional fuel and purchased power obligations, including its obligations under the Unit Power Sales Agreement, which is discussed in Note 8 to the financial statements.

In addition to the contractual obligations given above, Entergy New Orleans currently expects to contribute approximately $7.3 million to its qualified pension plan and approximately $3.7 million to other postretirement health care and life insurance plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018. See “ Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.

Also in addition to the contractual obligations, Entergy New Orleans has $238.2 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.

In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy New Orleans includes specific investments such as the New Orleans Power Station discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering; system improvements; and other investments.  Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt and preferred stock maturities in Notes 5 and 6 to the financial statements.

As a wholly-owned subsidiary of Entergy Utility Holding Company, LLC, Entergy New Orleans pays distributions from its earnings at a percentage determined monthly.


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New Orleans Power Station

In June 2016, Entergy New Orleans filed an application with the City Council seeking a public interest determination and authorization to construct the New Orleans Power Station, a 226 MW advanced combustion turbine in New Orleans, Louisiana, at the site of the existing Michoud generating facility, which was retired effective May 31, 2016. In January 2017 several intervenors filed testimony opposing the construction of the New Orleans Power Station on various grounds. In July 2017, Entergy New Orleans submitted a supplemental and amending application to the City Council seeking approval to construct either the originally proposed 226 MW advanced combustion turbine, or alternatively, a 128 MW unit composed of natural gas-fired reciprocating engines and a related cost recovery plan. The application included an updated cost estimate of $232 million for the 226 MW advanced combustion turbine. The cost estimate for the alternative 128 MW unit is $210 million. In addition, the application renewed the commitment to pursue up to 100 MW of renewable resources to serve New Orleans. In testimony filed subsequent to Entergy New Orleans’s supplemental and amending application, several intervenors oppose City Council approval of either alternative, while the City Council advisors and one intervenor support the smaller alternative. A contested hearing was held in December 2017 and post-hearing briefs were filed in January 2018. In February 2018 the City Council Utility Committee adopted a resolution approving construction of the 128 MW unit. The full City Council is expected to vote on the resolution in March 2018. The commercial operation date is dependent on the alternative selected by the City Council and the receipt of other permits and approvals.

Gas Infrastructure Rebuild Plan

In September 2016, Entergy New Orleans submitted to the City Council a request for authorization for Entergy New Orleans to proceed with annual incremental capital funding of $12.5 million for its gas infrastructure rebuild plan, which would replace of all of Entergy New Orleans’s low pressure cast iron, steel, and vintage plastic pipe over a ten-year period commencing in 2017.  Entergy New Orleans also proposed that recovery of the investment to fund its gas infrastructure replacement plan be determined in connection with its next base rate case, which is anticipated to be filed in 2018.  The City Council has authorized Entergy New Orleans to proceed with its replacement plans at the requested pace until such time that rates resulting from the anticipated 2018 rate case are implemented (approximately 13 months after filing).  As a result of the anticipated 2018 rate case, the City Council may establish new overall gas base rates to allow Entergy New Orleans to continue to recover these replacement costs.  The City Council has established a schedule for proceedings in advance of the rate case intended to provide an opportunity for evaluation of the gas infrastructure replacement plan that would best serve the public interest and the effect on customers of the approval of any such plan.

Advanced Metering Infrastructure (AMI)

In October 2016, Entergy New Orleans filed an application seeking a finding from the City Council that Entergy New Orleans’s deployment of advanced electric and gas metering infrastructure is in the public interest.  Entergy New Orleans proposed to deploy advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems.  AMI is intended to serve as the foundation of Entergy New Orleans’s modernized power grid.  The filing included an estimate of implementation costs for AMI of $75 million . The filing identified a number of quantified and unquantified benefits, and Entergy New Orleans provided a cost/benefit analysis showing that its combined electric and gas AMI deployment is expected to produce a nominal net benefit to customers of $101 million.  Entergy New Orleans also sought to continue to include in rate base the remaining book value, approximately $21 million at December 31, 2015, of the existing electric meters and also to depreciate those assets using current depreciation rates.  Entergy New Orleans proposed a 15-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019.  Deployment of the information technology infrastructure began in 2017 and deployment of the communications network is expected to begin in 2018.  Entergy New Orleans proposed to recover the cost of AMI through the implementation of a customer charge, net of certain benefits, phased in over the period 2019 through 2022.  The City Council’s advisors filed testimony in May 2017 recommending the adoption of AMI subject to certain modifications, including the denial of Entergy New Orleans’s proposed customer charge as a cost recovery mechanism. In January 2018 a settlement was reached between

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the City Council’s advisors and Entergy New Orleans. In February 2018 the City Council approved the settlement, which deferred cost recovery to the 2018 Entergy New Orleans rate case, but also stated that an adjustment for 2018-2019 AMI costs can be filed in the rate case and that, for all subsequent AMI costs, the mechanism to be approved in the 2018 rate case will allow for the timely recovery of such costs.

Sources of Capital

Entergy New Orleans’s sources to meet its capital requirements include:

•
internally generated funds;
•
cash on hand;
•
debt and preferred membership interest issuances; and
•
bank financing under new or existing facilities.

Entergy New Orleans may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interest rates are favorable.

Entergy New Orleans’s receivables from the money pool were as follows as of December 31 for each of the following years.
2017
 
2016
 
2015
 
2014
(In Thousands)
$12,723
 
$14,215
 
$15,794
 
$442

See Note 4 to the financial statements for a description of the money pool.

Entergy New Orleans has a credit facility in the amount of $25 million scheduled to expire in November 2018. The credit facility allows Entergy New Orleans to issue letters of credit against $10 million of the borrowing capacity of the facility. As of December 31, 2017, there were no cash borrowings and a $0.8 million letter of credit was outstanding under the facility. In addition, Entergy New Orleans is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO.  As of December 31, 2017, a $1.4 million letter of credit was outstanding under Entergy New Orleans’s letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.

Entergy New Orleans obtained authorization from the FERC through October 2019 for short-term borrowings not to exceed an aggregate amount of $150 million at any time outstanding and long-term borrowings and securities issuances. See Note 4 to the financial statements for further discussion of Entergy New Orleans’s short-term borrowing limits. The long-term securities issuances of Entergy New Orleans are limited to amounts authorized not only by the FERC, but also by the City Council, and the current City Council authorization extends through June 2018.

State and Local Rate Regulation

The rates that Entergy New Orleans charges for electricity and natural gas significantly influence its financial position, results of operations, and liquidity. Entergy New Orleans is regulated and the rates charged to its customers are determined in regulatory proceedings. A governmental agency, the City Council, is primarily responsible for approval of the rates charged to customers.

Retail Rates

See “ Algiers Asset Transfer ” below for discussion of the Algiers asset transfer. As a provision of the settlement agreement approved by the City Council in May 2015 providing for the Algiers asset transfer, it was agreed that, with limited exceptions, no action may be taken with respect to Entergy New Orleans’s base rates until rates are implemented

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from a base rate case that must be filed for its electric and gas operations in 2018. This provision eliminated the formula rate plan applicable to Algiers operations. The limited exceptions included continued implementation of the then-remaining two years of the four-year phased-in rate increase for the Algiers area and certain exceptional cost increases or decreases in the base revenue requirement. An additional provision of the settlement agreement allowed for continued recovery of the revenue requirement associated with the capacity and energy from Ninemile 6 received by Entergy New Orleans under a power purchase agreement with Entergy Louisiana (Algiers PPA). The settlement authorized Entergy New Orleans to recover the remaining revenue requirement related to the Algiers PPA through base rates charged to Algiers customers. The settlement also provided for continued implementation of the Algiers MISO recovery rider.

In addition to the Algiers PPA, Entergy New Orleans has a separate power purchase agreement with Entergy Louisiana for 20% of the capacity and energy from Ninemile 6 (Ninemile PPA), which commenced operation in December 2014. Initially, recovery of the non-fuel costs associated with the Ninemile PPA was authorized through a special Ninemile 6 rider billed only to Entergy New Orleans customers outside of Algiers.

In August 2015, Entergy New Orleans filed an application with the City Council seeking authorization to proceed with the purchase of Union Power Block 1, with an expected base purchase price of approximately $237 million , subject to adjustments, and seeking approval of the recovery of the associated costs. In November 2015 the City Council issued written resolutions and an order approving an agreement in principle between Entergy New Orleans and City Council advisors providing that the purchase of Union Power Block 1 and related assets by Entergy New Orleans is prudent and in the public interest. The City Council authorized expansion of the terms of the purchased power and capacity acquisition cost recovery rider to recover the non-fuel purchased power expense from Ninemile 6, the revenue requirement associated with the purchase of Power Block 1 of the Union Power Station, and a credit to customers of $400 thousand monthly beginning June 2016 in recognition of the decrease in other operation and maintenance expenses that would result with the deactivation of Michoud Units 2 and 3. In March 2016, Entergy New Orleans purchased Power Block 1 of the Union Power Station for approximately $237 million and initiated recovery of these costs with March 2016 bills. In July 2016, Entergy New Orleans and the City Council Utility Committee agreed to a temporary increase in the Michoud credit to customers to a total of $1.4 million monthly for August 2016 through December 2016.

A 2008 rate case settlement included $3.1 million per year in electric rates to fund the Energy Smart energy efficiency programs.  The rate settlement provided an incentive for Entergy New Orleans to meet or exceed energy savings targets set by the City Council and provided a mechanism for Entergy New Orleans to recover lost contribution to fixed costs associated with the energy savings generated from the energy efficiency programs. In January 2015 the City Council approved funding for the Energy Smart program from April 2015 through March 2017 using the remainder of the approximately $12.8 million of 2014 rough production cost equalization funds, with any remaining costs being recovered through the fuel adjustment clause. This funding methodology was modified in November 2015 when the City Council directed Entergy New Orleans to use a combination of guaranteed customer savings related to a prior agreement with the City Council and rough production cost equalization funds to cover program costs prior to recovering any costs through the fuel adjustment clause. In April 2017 the City Council approved an implementation plan for the Energy Smart program from April 2017 through December 2019. The City Council directed that the $11.8 million balance reported for Energy Smart funds be used to continue funding the program for Entergy New Orleans’s legacy customers and that the Energy Smart Algiers program continue to be funded through the Algiers fuel adjustment clause, until additional customer funding is required for the legacy customers. In September 2017, Entergy New Orleans filed a supplemental plan and proposed several options for an interim cost recovery mechanism necessary to recover program costs during the period between when existing funds directed to Energy Smart programs are depleted (estimated to be June 2018) and when new rates from the anticipated 2018 combined rate case, which will include a cost recovery mechanism for Energy Smart funding, take effect (estimated to be August 2019). Entergy New Orleans requested that the City Council approve a cost recovery mechanism prior to June 2018. In December 2017 the City Council approved an energy efficiency cost recovery rider as an interim funding mechanism for Energy Smart, subject to verification that no additional funding sources exist.


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Fuel and Purchased Power Cost Recovery

Entergy New Orleans’s electric rate schedules include a fuel adjustment tariff designed to reflect no more than targeted fuel and purchased power costs, adjusted by a surcharge or credit for deferred fuel expense arising from the monthly reconciliation of actual fuel and purchased power costs incurred with fuel cost revenues billed to customers, including carrying charges.
 
Entergy New Orleans’s gas rate schedules include a purchased gas adjustment to reflect estimated gas costs for the billing month, adjusted by a surcharge or credit similar to that included in the electric fuel adjustment clause, including carrying charges.

Due to higher fuel costs associated in part with the extended Grand Gulf outage and the partially simultaneous Union Power Block 1 planned outage, for the December 2016, January 2017, and February 2017 billing months, the City Council authorized Entergy New Orleans to cap the fuel adjustment charge billed to customers at $0.035 per kWh and to defer billing of all fuel costs in excess of the capped amount by including such costs in the over- or under-recovery account.

Due to higher fuel costs for the operating month of January 2018 resulting in part from recent cold weather, higher Henry Hub prices, and an increase in total fuel and purchased power costs associated in part with certain plant outages, Entergy New Orleans has proposed to cap the fuel adjustment charge to be billed in March 2018 to non-transmission Entergy New Orleans legacy customers and Entergy New Orleans Algiers customers at $0.035323 per kWh and $0.025446 per kWh, respectively. Entergy New Orleans has also proposed to cap the fuel adjustment charge to be billed in March 2018 for Entergy New Orleans legacy transmission customers at $0.034609 per kWh and to defer billing of all fuel costs in excess of the capped amount by including such costs in the over- or under-recovery account.

Algiers Asset Transfer

In October 2014, Entergy Louisiana and Entergy New Orleans filed an application with the City Council seeking authorization to undertake a transaction that would result in the transfer from Entergy Louisiana to Entergy New Orleans of certain assets that supported the provision of service to Entergy Louisiana’s customers in Algiers. In April 2015 the FERC issued an order approving the Algiers assets transfer. In May 2015 the parties filed a settlement agreement authorizing the Algiers assets transfer and the settlement agreement was approved by a City Council resolution in May 2015. On September 1, 2015, Entergy Louisiana transferred its Algiers assets to Entergy New Orleans for a purchase price of approximately $85 million . Entergy New Orleans paid Entergy Louisiana $59.6 million , including final true-ups, from available cash and issued a note payable to Entergy Louisiana in the amount of $25.5 million .

Show Cause Order

In July 2016 the City Council approved the issuance of a show cause order, which directed Entergy New Orleans to make a filing on or before September 29, 2016 to demonstrate the reasonableness of its actions or positions with regard to certain issues in four existing dockets that relate to Entergy New Orleans’s: (i) storm hardening proposal; (ii) 2015 integrated resource plan; (iii) gas infrastructure rebuild proposal; and (iv) proposed sizing of the New Orleans Power Station and its community outreach prior to the filing. In September 2016, Entergy New Orleans filed its response to the City Council’s show cause order. The City Council has not established any further procedural schedule with regard to this proceeding.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.  

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Management’s Financial Discussion and Analysis


Nuclear Matters

See the “ Nuclear Matters ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of nuclear matters.

Environmental Risks

Entergy New Orleans’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous solid wastes, and other environmental matters.  Management believes that Entergy New Orleans is in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted in “ Regulation of Entergy’s Business - Environmental Regulation ” in Part I, Item 1.  Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.

Critical Accounting Estimates

The preparation of Entergy New Orleans’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows.  Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of Entergy New Orleans’s financial position or results of operations.

Utility Regulatory Accounting

See “ Utility Regulatory Accounting ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.

Unbilled Revenue

See “ Unbilled Revenue ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the unbilled revenue amounts.

Impairment of Long-lived Assets and Trust Fund Investments

See “ Impairment of Long-lived Assets and Trust Fund Investments ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the impairment of long-lived assets.

Taxation and Uncertain Tax Positions

See “ Taxation and Uncertain Tax Positions ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

Qualified Pension and Other Postretirement Benefits

Entergy New Orleans’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.  See the “ Qualified

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Pension and Other Postretirement Benefits ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.  Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.

Cost Sensitivity

The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Projected Qualified Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$348
 

$6,153

Rate of return on plan assets
 
(0.25%)
 
$399
 

$—

Rate of increase in compensation
 
0.25%
 
$159
 

$729


The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated Postretirement Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 

($12
)
 
$1,406
Health care cost trend
 
0.25%
 

$54

 
$1,074

Each fluctuation above assumes that the other components of the calculation are held constant.

Costs and Funding

Total qualified pension cost for Entergy New Orleans in 2017 was $5.1 million. Entergy New Orleans anticipates 2018 qualified pension cost to be $5.8 million.  In 2016, Entergy New Orleans refined its approach to estimating the service cost and interest cost components of qualified pension costs, which had the effect of lowering qualified pension costs by $1.7 million.  Entergy New Orleans contributed $9.9 million to its pension plans in 2017 and estimates 2018 pension contributions will be approximately $7.3 million, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

Total postretirement health care and life insurance benefit income for Entergy New Orleans in 2017 was $2.5 million.  Entergy New Orleans expects 2018 postretirement health care and life insurance benefit income of approximately $3.7 million.  In 2016, Entergy New Orleans refined its approach to estimating the service cost and interest cost components of other postretirement costs, which had the effect of lowering qualified other postretirement costs by $548 thousand. Entergy New Orleans contributed $3.7 million to its other postretirement plans in 2017 and estimates 2018 contributions will be approximately $3.7 million.


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Federal Healthcare Legislation

See “ Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.

Other Contingencies

See “ Other Contingencies ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and other risks.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements for a discussion of new accounting pronouncements.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the members and Board of Directors of
Entergy New Orleans, LLC and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Entergy New Orleans, LLC and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, cash flows, and changes in common equity (pages 392 through 396 and applicable items in pages 55 through 230), for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Company’s auditor since 2001.



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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$631,744

 

$586,820

 

$584,322

Natural gas
 
84,326

 
78,643

 
87,124

TOTAL
 
716,070

 
665,463

 
671,446

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
111,082

 
40,489

 
96,307

Purchased power
 
282,178

 
299,551

 
277,851

Other operation and maintenance
 
109,270

 
117,471

 
119,087

Taxes other than income taxes
 
54,590

 
48,078

 
46,660

Depreciation and amortization
 
52,945

 
51,737

 
43,205

Other regulatory charges - net
 
10,889

 
8,258

 
3,366

TOTAL
 
620,954

 
565,584

 
586,476

 
 
 
 
 
 
 
OPERATING INCOME
 
95,116

 
99,879

 
84,970

 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
2,418

 
1,178

 
1,404

Interest and investment income
 
707

 
256

 
73

Miscellaneous - net
 
24

 
(3,144
)
 
339

TOTAL
 
3,149

 
(1,710
)
 
1,816

 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
21,281

 
21,061

 
17,312

Allowance for borrowed funds used during construction
 
(847
)
 
(446
)
 
(641
)
TOTAL
 
20,434

 
20,615

 
16,671

 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
77,831

 
77,554

 
70,115

 
 
 
 
 
 
 
Income taxes
 
33,278

 
28,705

 
25,190

 
 
 
 
 
 
 
NET INCOME
 
44,553

 
48,849

 
44,925

 
 
 
 
 
 
 
Preferred dividend requirements and other
 
841

 
965

 
965

 
 
 
 
 
 
 
EARNINGS APPLICABLE TO COMMON EQUITY
 

$43,712

 

$47,884

 

$43,960

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 




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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 

$44,553

 

$48,849

 

$44,925

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
52,945

 
51,737

 
43,205

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
64,036

 
140,283

 
22,180

Changes in assets and liabilities:
 
 

 
 

 
 

Receivables
 
(18,058
)
 
(3,888
)
 
7,878

Fuel inventory
 
(49
)
 
71

 
1,104

Accounts payable
 
1,874

 
15,434

 
2,738

Prepaid taxes and taxes accrued
 
(22,100
)
 
(1,685
)
 
(1,050
)
Interest accrued
 
44

 
534

 
1,270

Deferred fuel costs
 
12,592

 
(33,839
)
 
(182
)
Other working capital accounts
 
(2,711
)
 
4,165

 
(1,945
)
Provisions for estimated losses
 
(3,430
)
 
4,326

 
58,310

Other regulatory assets
 
16,673

 
(2,784
)
 
(70,471
)
Other regulatory liabilities
 
110,147

 
(3,997
)
 
(7,359
)
Deferred tax rate change recognized as regulatory liability/asset
 
(111,170
)
 
—

 
—

Pension and other postretirement liabilities
 
(15,994
)
 
(6,859
)
 
(18,831
)
Other assets and liabilities
 
(1,555
)
 
(7,136
)
 
23,296

Net cash flow provided by operating activities
 
127,797

 
205,211

 
105,068

INVESTING ACTIVITIES
 
 

 
 

 
 

Construction expenditures
 
(115,584
)
 
(90,512
)
 
(91,928
)
Allowance for equity funds used during construction
 
2,418

 
1,178

 
1,404

Payment for purchase of plant
 
—

 
(237,335
)
 
—

Investments in affiliates
 
—

 
(38
)
 
—

Changes in money pool receivable - net
 
1,492

 
1,579

 
(15,352
)
Payments to storm reserve escrow account
 
(597
)
 
(438
)
 
(68,886
)
Receipts from storm reserve escrow account
 
2,488

 
3

 
5,922

Changes in securitization account
 
283

 
2,882

 
(4,620
)
Net cash flow used in investing activities
 
(109,500
)
 
(322,681
)
 
(173,460
)
FINANCING ACTIVITIES
 
 

 
 

 
 

Proceeds from the issuance of long-term debt
 
—

 
240,604

 
95,367

Retirement of long-term debt
 
(10,600
)
 
(132,526
)
 
—

Repayment of long-term payable due to Entergy Louisiana
 
(2,104
)
 
(4,973
)
 
(59,610
)
Redemption of preferred stock
 
(20,599
)
 
—

 
—

Capital contributions from parent
 
20,000

 
47,750

 
87,500

Distributions/dividends paid:
 
 

 
 

 
 

Common equity
 
(74,250
)
 
(18,720
)
 
(7,250
)
Preferred stock
 
(1,083
)
 
(965
)
 
(965
)
Other
 
12

 
492

 
(163
)
Net cash flow provided by (used in) financing activities
 
(88,624
)
 
131,662

 
114,879

Net increase (decrease) in cash and cash equivalents
 
(70,327
)
 
14,192

 
46,487

Cash and cash equivalents at beginning of period
 
103,068

 
88,876

 
42,389

Cash and cash equivalents at end of period
 

$32,741

 

$103,068

 

$88,876

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 

 
 

 
 

Cash paid (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$20,180

 

$19,317

 

$14,951

Income taxes
 

($8,660
)
 

($85,962
)
 

$8,110

See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
 
 
 
Cash
 

$30

 

$28

Temporary cash investments
 
32,711

 
103,040

Total cash and cash equivalents
 
32,741

 
103,068

Securitization recovery trust account
 
1,455

 
1,738

Accounts receivable:
 
 

 
 

Customer
 
51,006

 
43,536

Allowance for doubtful accounts
 
(3,057
)
 
(3,059
)
Associated companies
 
22,976

 
16,811

Other
 
6,471

 
5,926

Accrued unbilled revenues
 
20,638

 
18,254

Total accounts receivable
 
98,034

 
81,468

Deferred fuel costs
 
—

 
4,818

Fuel inventory - at average cost
 
1,890

 
1,841

Materials and supplies - at average cost
 
10,381

 
8,416

Prepaid taxes
 
26,479

 
4,379

Prepayments and other
 
8,030

 
6,587

TOTAL
 
179,010


212,315

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Non-utility property at cost (less accumulated depreciation)
 
1,016

 
1,016

Storm reserve escrow account
 
79,546

 
81,437

Other
 
2,373

 
7,160

TOTAL
 
82,935

 
89,613

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
1,302,235

 
1,258,934

Natural gas
 
261,263

 
240,408

Construction work in progress
 
46,993

 
24,975

TOTAL UTILITY PLANT
 
1,610,491

 
1,524,317

Less - accumulated depreciation and amortization
 
631,178

 
604,825

UTILITY PLANT - NET
 
979,313

 
919,492

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Deferred fuel costs
 
4,080

 
4,080

Other regulatory assets (includes securitization property of $72,095 as of December 31, 2017 and $82,272 as of December 31, 2016)
 
251,433

 
268,106

Other
 
1,065

 
963

TOTAL
 
256,578

 
273,149

 
 
 
 
 
TOTAL ASSETS
 

$1,497,836

 

$1,494,569

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Payable due to Entergy Louisiana
 

$2,077

 

$2,104

Accounts payable:
 
 

 
 

Associated companies
 
47,472

 
39,260

Other
 
29,777

 
35,920

Customer deposits
 
28,442

 
28,667

Interest accrued
 
5,487

 
5,443

Deferred fuel costs
 
7,774

 
—

Other
 
7,351

 
11,415

TOTAL CURRENT LIABILITIES
 
128,380

 
122,809

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
283,302

 
334,953

Accumulated deferred investment tax credits
 
2,323

 
622

Regulatory liability for income taxes - net
 
119,259

 
9,074

Asset retirement cost liabilities
 
3,076

 
2,875

Accumulated provisions
 
85,083

 
88,513

Pension and other postretirement liabilities
 
20,755

 
36,750

Long-term debt (includes securitization bonds of $74,419 as of December 31, 2017 and $84,776 as of December 31, 2016)
 
418,447

 
428,467

Long-term payable due to Entergy Louisiana
 
16,346

 
18,423

Other
 
5,317

 
5,357

TOTAL NON-CURRENT LIABILITIES
 
953,908

 
925,034

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
Preferred stock without sinking fund
 
—

 
19,780

 
 
 
 
 
EQUITY
 
 

 
 

Member's equity
 
415,548

 
426,946

TOTAL
 
415,548

 
426,946

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$1,497,836

 

$1,494,569

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBER'S EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
 
 
 
Member ’ s Equity
 
 
(In Thousands)
 
 
 
Balance at December 31, 2014
 

$228,025

Net income
 
44,925

Net income attributable to Entergy Louisiana
 
(2,203
)
Capital contributions from parent
 
87,500

Common equity distributions
 
(7,250
)
Preferred stock dividends
 
(965
)
Balance at December 31, 2015
 

$350,032

Net income
 
48,849

Capital contributions from parent
 
47,750

Common equity distributions
 
(18,720
)
Preferred stock dividends
 
(965
)
Balance at December 31, 2016
 

$426,946

Net income
 
44,553

Capital contributions from parent
 
20,000

Common equity distributions
 
(74,250
)
Preferred stock dividends
 
(841
)
Other
 
(860
)
Balance at December 31, 2017
 

$415,548

 
 
 
See Notes to Financial Statements.
 
 



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ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Operating revenues

$716,070

 

$665,463

 

$671,446

 

$735,192

 

$659,746

Net income

$44,553

 

$48,849

 

$44,925

 

$31,030

 

$12,608

Total assets

$1,497,836

 

$1,494,569

 

$1,215,144

 

$1,014,916

 

$964,482

Long-term obligations (a)

$434,793

 

$466,670

 

$357,687

 

$323,280

 

$318,034

 
 
 
 
 
 
 
 
 
 
(a) Includes long-term debt (including the long-term payable to Entergy Louisiana and excluding currently maturing debt) and preferred stock without sinking fund.
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(Dollars In Millions)
 
 
 
 
 
 
 
 
 
 
Electric Operating Revenues:
 

 
 

 
 

 
 

 
 

Residential

$250

 

$231

 

$220

 

$230

 

$221

Commercial
228

 
206

 
186

 
196

 
194

Industrial
36

 
33

 
30

 
33

 
35

Governmental
77

 
69

 
64

 
67

 
69

Total retail
591

 
539

 
500

 
526

 
519

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
—

 
30

 
66

 
78

 
27

Non-associated companies
29

 
3

 
—

 
4

 
—

Other
12

 
15

 
18

 
17

 
19

Total

$632

 

$587

 

$584

 

$625

 

$565

 
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 

 
 

 
 

 
 

Residential
2,155

 
2,231

 
2,301

 
2,262

 
2,152

Commercial
2,248

 
2,268

 
2,257

 
2,181

 
2,130

Industrial
429

 
441

 
463

 
455

 
484

Governmental
790

 
794

 
825

 
783

 
778

Total retail
5,622

 
5,734

 
5,846

 
5,681

 
5,544

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
—

 
1,071

 
1,644

 
1,379

 
517

Non-associated companies
1,703

 
141

 
11

 
18

 
14

Total
7,325

 
6,946

 
7,501

 
7,078

 
6,075

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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ENTERGY TEXAS, INC. AND SUBSIDIARIES

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

Results of Operations

Net Income

2017 Compared to 2016

Net income decreased $31.4 million primarily due to lower net revenue, higher depreciation and amortization expenses, higher other operation and maintenance expenses, and higher taxes other than income taxes.

2016 Compared to 2015

Net income increased $37.9 million primarily due to lower other operation and maintenance expenses, the asset write-off of its receivable associated with the Spindletop gas storage facility in 2015, and higher net revenue.

Net Revenue

2017 Compared to 2016

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2017 to 2016.
 
Amount
 
(In Millions)
 
 

2016 net revenue

$644.2

Net wholesale revenue
(35.1
)
Purchased power capacity
(5.9
)
Transmission revenue
(5.4
)
Reserve equalization
5.6

Retail electric price
19.0

Other
4.4

2017 net revenue

$626.8


The net wholesale revenue variance is primarily due to lower net capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.

The purchased power capacity variance is primarily due to increased expenses due to capacity cost changes
for ongoing purchased power capacity contracts.

The transmission revenue variance is primarily due to a decrease in the amount of transmission revenues allocated by MISO.

The reserve equalization variance is due to the absence of reserve equalization expenses in 2017 as a result of Entergy Texas’s exit from the System Agreement in August 2016. See Note 2 to the financial statements for a discussion of the System Agreement.


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The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider in September 2016 and an increase in the transmission cost recovery factor rider rate in March 2017, each as approved by the PUCT. See Note 2 to the financial statements for further discussion of the transmission cost recovery factor rider filing.

2016 Compared to 2015

Net revenue consists of operating revenues net of: 1) fuel, fuel-related expenses, and gas purchased for resale, 2) purchased power expenses, and 3) other regulatory charges. Following is an analysis of the change in net revenue comparing 2016 to 2015.
 
Amount
 
(In Millions)
 
 

2015 net revenue

$637.2

Reserve equalization
14.3

Purchased power capacity
12.4

Transmission revenue
7.0

Retail electric price
5.4

Net wholesale revenue
(27.8
)
Other
(4.3
)
2016 net revenue

$644.2


The reserve equalization variance is primarily due to a reduction in reserve equalization expense primarily due to changes in the Entergy System generation mix compared to the same period in 2015 as a result of the execution of a new purchased power agreement and Entergy Mississippi’s exit from the System Agreement, each in November 2015, and Entergy Texas’s exit from the System Agreement in August 2016. See Note 2 to the financial statements for a discussion of the System Agreement.

The purchased power capacity variance is primarily due to decreased expenses due to the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016, as well as capacity cost changes for ongoing purchased power capacity contracts.

The transmission revenue variance is primarily due to an increase in Attachment O rates charged by MISO to transmission customers and a settlement of Attachment O rates previously billed to transmission customers by MISO.

The retail electric price variance is primarily due to the implementation of the transmission cost recovery factor rider, as approved by the PUCT and implemented in September 2016, and the increase in the distribution cost recovery rider, as approved by the PUCT and implemented in January 2016. This increase was partially offset by a decrease in energy efficiency revenues. See Note 2 to the financial statements for further discussion of the transmission cost recovery factor rider and distribution cost recovery factor rider filings.

The net wholesale revenue variance is primarily due to lower capacity revenues resulting from the termination of the purchased power agreements between Entergy Louisiana and Entergy Texas in August 2016.


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Other Income Statement Variances

2017 Compared to 2016

Other operation and maintenance expenses increased primarily due to:

•
an increase of $5.1 million in transmission and distribution expenses primarily due to higher vegetation maintenance costs;
•
an increase of $4.3 million in fossil-fueled generation expenses primarily due to a higher scope of work performed during plant outages in 2017 as compared to 2016; and
•
an increase of $2.8 million in compensation and benefits costs primarily due to higher incentive-based compensation accruals in 2017 as compared to 2016.

The increase was partially offset by a decrease of $4.5 million due to the absence of transmission equalization expenses, as allocated under the System Agreement, as a result of Entergy Texas’s exit from the System Agreement in August 2016.

Taxes other than income taxes increased primarily due to an increase in ad valorem taxes resulting from higher assessments and a true-up to the sales and use tax accruals recorded in 2016 resulting from an audit settlement.

Depreciation and amortization expenses increased primarily due to additions to plant in service.

2016 Compared to 2015

Other operation and maintenance expenses decreased primarily due to:

•
a decrease of $11.2 million in fossil-fueled generation expenses primarily due to an overall lower scope of work performed in 2016 as compared to 2015;
•
a decrease of $7 million in transmission expenses primarily due to lower transmission equalization expenses, as allocated under the System Agreement, as compared to the same period in 2015 as a result of Entergy Mississippi’s exit from the System Agreement in November 2015 and Entergy Texas’s exit from the System Agreement in August 2016;
•
a decrease of $5.7 million in compensation and benefits costs primarily due to a decrease in net periodic pension and other postretirement benefits costs as a result of an increase in the discount rate used to value the benefit liabilities and a refinement in the approach used to estimate the service cost and interest cost components of pension and other postretirement costs. See “ Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below and Note 11 to the financial statements for further discussion of pension and other postretirement benefit costs;
•
the write-off in the third quarter 2015 of $4.3 million of rate case expenses and acquisition costs related to the proposed Union Power Station acquisition upon Entergy Texas’s withdrawal of its 2015 rate case and dismissal of its certificate of convenience and necessity filing; and
•
a decrease of $4.2 million in energy efficiency costs.

The asset write-off variance is due to the $23.5 million ($15.3 million net-of-tax) write-off recorded in 2015 of the receivable associated with the Spindletop gas storage facility. See Note 2 to the financial statements for discussion of the write-off.

Income Taxes

The effective income tax rates for 2017, 2016, and 2015 were 38.9%, 37.0%, and 34.9%, respectively. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.

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Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.

Liquidity and Capital Resources

Cash Flow

Cash flows for the years ended December 31, 2017, 2016, and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Cash and cash equivalents at beginning of period

$6,181

 

$2,182

 

$30,441

 
 
 
 
 
 
Net cash provided by (used in):
 

 
 

 
 

Operating activities
301,396

 
306,601

 
284,268

Investing activities
(383,176
)
 
(330,191
)
 
(315,293
)
Financing activities
191,112

 
27,589

 
2,766

Net increase (decrease) in cash and cash equivalents
109,332

 
3,999

 
(28,259
)
 
 
 
 
 
 
Cash and cash equivalents at end of period

$115,513

 

$6,181

 

$2,182


Operating Activities

Net cash flow provided by operating activities decreased $5.2 million in 2017 primarily due to lower net income, the timing of recovery of fuel and purchased power costs, and an increase of $13.7 million in storm spending primarily as a result of Hurricane Harvey. The decrease was partially offset by income tax refunds of $21.1 million in 2017 compared to income tax payments of $28.5 million in 2016. Entergy Texas had income tax refunds in 2017 and income tax payments in 2016 in accordance with an intercompany income tax allocation agreement.  The income tax refunds in 2017 primarily resulted from deductible temporary differences. The income tax payments in 2016 resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit. See Note 3 to the financial statements for a discussion of the income tax audit.
    
Net cash flow provided by operating activities increased $22.3 million in 2016 primarily due to increased net income and a decrease of $31.8 million in income tax payments in 2016. Entergy Texas had income tax payments in 2016 and 2015 in accordance with an intercompany income tax allocation agreement.  The income tax payments in 2016 resulted primarily from adjustments associated with the settlement of the 2010-2011 IRS audit. The income tax payments in 2015 resulted primarily from the results of operations and the reversal of taxable temporary differences. See Note 3 to the financial statements for a discussion of the income tax audit. The increase was partially offset by an increase of $5.2 million in interest paid in 2016 due to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016 and the timing of collections from customers.


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Investing Activities

Net cash flow used in investing activities increased $53 million in 2017 primarily due to:

•
money pool activity;
•
an increase of $34.9 million in distribution construction expenditures primarily due to increased storm spending primarily as a result of Hurricane Harvey and spending on digital technology improvements within the customer contact centers;
•
an increase of $24.4 million in fossil-fueled generation construction expenditures primarily due to a higher scope of work performed in 2017 as compared to 2016; and
•
an increase of $8.5 million in spending on advanced metering infrastructure.

The increase was partially offset by a decrease of $51.7 million in transmission construction expenditures primarily due to a lower scope of work performed in 2017 as compared to 2016.

Increases in Entergy Texas’s receivable from the money pool are a use of cash flow, and Entergy Texas’s receivable from the money pool increased by $44.2 million in 2017 compared to increasing by $0.7 million in 2016. The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.
  
Net cash flow used in investing activities increased $14.9 million in 2016 primarily due to increases of $27.7 million in transmission construction expenditures and $11.7 million in distribution construction expenditures primarily due to a greater scope of projects in 2016 as compared to the same period in 2015. The increase was partially offset by a $21.4 million decrease in fossil-fueled generation construction expenditures primarily due to a decreased scope of work performed during plant outages in 2016 as compared to the same period in 2015.

Financing Activities

Net cash flow provided by financing activities increased $163.5 million in 2017 primarily due to:

•
a $115 million capital contribution received from Entergy Corporation in December 2017 in anticipation of upcoming construction expenditures;
•
the issuance of $150 million of 2.55% Series first mortgage bonds in December 2017 compared to the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016; and
•
money pool activity.

Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased by $22.1 million in 2016.

Net cash flow provided by financing activities increased $24.8 million in 2016 primarily due to the retirement of $200 million of 3.6% Series first mortgage bonds in June 2015 and the issuance of $125 million of 2.55% Series first mortgage bonds in March 2016, partially offset by the issuance of $250 million of 5.15% Series first mortgage bonds in May 2015 and money pool activity.

Decreases in Entergy Texas’s payable to the money pool are a use of cash flow, and Entergy Texas’s payable to the money pool decreased by $22.1 million in 2016 compared to increasing by $22.1 million in 2015.


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Capital Structure

Entergy Texas’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio for Entergy Texas is primarily due to the capital contribution received from Entergy Corporation and an increase in retained earnings.
 
 
December 31,
2017
 
December 31,
2016
Debt to capital
55.7
%
 
58.5
%
Effect of excluding the securitization bonds
(6.3
%)
 
(8.3
%)
Debt to capital, excluding securitization bonds (a)
49.4
%
 
50.2
%
Effect of subtracting cash
(2.5
%)
 
(0.1
%)
Net debt to net capital, excluding securitization bonds (a)
46.9
%
 
50.1
%
(a)
Calculation excludes the securitization bonds, which are non-recourse to Entergy Texas.

Net debt consists of debt less cash and cash equivalents. Debt consists of long-term debt, including the currently maturing portion. Capital consists of debt and common equity. Net capital consists of capital less cash and cash equivalents. Entergy Texas uses the debt to capital ratios excluding securitization bonds in analyzing its financial condition and believes they provide useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because the securitization bonds are non-recourse to Entergy Texas, as more fully described in Note 5 to the financial statements. Entergy Texas also uses the net debt to net capital ratio excluding securitization bonds in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating Entergy Texas’s financial condition because net debt indicates Entergy Texas’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

Entergy Texas seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure. To the extent that operating cash flows are insufficient to support planned investments, Entergy Texas may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure. In addition, Entergy Texas may receive equity contributions to maintain the targeted capital structure for certain circumstances such as large transactions that would materially alter the capital structure if financed entirely with debt and reduced dividends.

Uses of Capital

Entergy Texas requires capital resources for:

•
construction and other capital investments;
•
debt maturities or retirements;
•
working capital purposes, including the financing of fuel and purchased power costs; and
•
dividend and interest payments.


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Following are the amounts of Entergy Texas’s planned construction and other capital investments.
 
2018
 
2019
 
2020
 
(In Millions)
Planned construction and capital investment:
 
 
 
 
 
Generation

$175

 

$385

 

$265

Transmission
195

 
240

 
165

Distribution
105

 
165

 
145

Utility Support
55

 
30

 
30

Total

$530

 

$820

 

$605


Following are the amounts of Entergy Texas’s existing debt and lease obligations (includes estimated interest payments) and other purchase obligations.
 
2018
 
2019-2020
 
2021-2022
 
After 2022
 
Total
 
(In Millions)
Long-term debt (a)

$159

 

$749

 

$385

 

$1,168

 

$2,461

Operating leases (b)

$4

 

$5

 

$2

 

$2

 

$13

Purchase obligations (c)

$279

 

$555

 

$527

 

$1,188

 

$2,549


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Does not include power purchase agreements that are accounted for as leases that are included in purchase obligations.
(c)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services.  For Entergy Texas, it primarily includes unconditional fuel and purchased power obligations.

In addition to the contractual obligations given above, Entergy Texas expects to contribute approximately $10.9 million to its qualified pension plans and approximately $3.2 million to other postretirement health care and life insurance plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018. See “ Critical Accounting Estimates - Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.

Also in addition to the contractual obligations, Entergy Texas has $15.8 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions. See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.

In addition to routine capital spending to maintain operations, the planned capital investment estimate for Entergy Texas includes specific investments such as the Montgomery County Power Station, discussed below; transmission projects to enhance reliability, reduce congestion, and enable economic growth; distribution spending to enhance reliability and improve service to customers, including investment to support advanced metering; system improvements; and other investments. Estimated capital expenditures are subject to periodic review and modification and may vary based on the ongoing effects of regulatory constraints and requirements, environmental compliance, business opportunities, market volatility, economic trends, business restructuring, changes in project plans, and the ability to access capital. Management provides more information on long-term debt in Note 5 to the financial statements.

As discussed above in “ Capital Structure ,” Entergy Texas routinely evaluates its ability to pay dividends to Entergy Corporation from its earnings.
    

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Montgomery County Power Station

In October 2016, Entergy Texas filed an application with the PUCT seeking certification that the public convenience and necessity would be served by the construction of the Montgomery County Power Station, a nominal 993 MW combined-cycle generating unit in Montgomery County, Texas on land adjacent to the existing Lewis Creek plant. The current estimated cost of the Montgomery County Power Station is $937 million, including approximately $111 million of transmission interconnection and network upgrades and other related costs. The independent monitor, who oversaw the request for proposal process, filed testimony and a report affirming that the Montgomery County Power Station was selected through an objective and fair request for proposal process that showed no undue preference to any proposal. In June 2017 parties to the proceeding filed an unopposed stipulation and settlement agreement. The stipulation contemplates that Entergy Texas’s level of cost-recovery for generation construction costs for Montgomery County Power Station is capped at $831 million, subject to certain exclusions such as force majeure events. Transmission interconnection and network upgrades and other related costs are not subject to the $831 million cap. In July 2017 the PUCT approved the stipulation. Subject to the timely receipt of other permits and approvals, commercial operation is estimated to occur by mid-2021.

Advanced Metering Infrastructure (AMI)

In April 2017 the Texas legislature enacted legislation that extends statutory support for AMI deployment to Entergy Texas and directs that if Entergy Texas elects to deploy AMI, it shall do so as rapidly as practicable. In July 2017, Entergy Texas filed an application seeking an order from the PUCT approving Entergy Texas’s deployment of AMI. Entergy Texas proposed to replace existing meters with advanced meters that enable two-way data communication; design and build a secure and reliable network to support such communications; and implement support systems. AMI is intended to serve as the foundation of Entergy Texas’s modernized power grid. The filing included an estimate of implementation costs for AMI of $132 million. The filing identified a number of quantified and unquantified benefits, with Entergy Texas showing that its AMI deployment is expected to produce nominal net operational cost savings to customers of $33 million. Entergy Texas also sought to continue to include in rate base the remaining book value, approximately $41 million at December 31, 2016, of existing meters that will be retired as part of the AMI deployment and also to depreciate those assets using current depreciation rates. Entergy Texas proposed a seven-year depreciable life for the new advanced meters, the three-year deployment of which is expected to begin in 2019. Entergy Texas also proposed a surcharge tariff to recover the reasonable and necessary costs it has and will incur under the deployment plan for the full deployment of advanced meters. Further, Entergy Texas sought approval of fees that would be charged to customers who choose to opt out of receiving service through an advanced meter and instead receive electric service with a non-standard meter. In October 2017, Entergy Texas and other parties entered into and filed an unopposed stipulation and settlement agreement, permitting deployment of AMI with limited modifications. The PUCT approved the stipulation and settlement agreement in December 2017. Consistent with the approval, deployment of the communications network is expected to begin in 2018. Entergy Texas expects to recover the remaining net book value of its existing meters through a regulatory asset to be amortized at current depreciation rates.

Sources of Capital

Entergy Texas’s sources to meet its capital requirements include:

•
internally generated funds;
•
cash on hand;
•
debt or preferred stock issuances; and
•
bank financing under new or existing facilities.

Entergy Texas may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interest and dividend rates are favorable.


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All debt and common and preferred stock issuances by Entergy Texas require prior regulatory approval. Debt issuances are also subject to issuance tests set forth in its bond indenture and other agreements. Entergy Texas has sufficient capacity under these tests to meet its foreseeable capital needs.

Entergy Texas’s receivables from or (payables to) the money pool were as follows as of December 31 for each of the following years.
2017
 
2016
 
2015
 
2014
(In Thousands)
$44,903
 
$681
 
($22,068)
 
$306

See Note 4 to the financial statements for a description of the money pool.

Entergy Texas has a credit facility in the amount of $150 million scheduled to expire in August 2022. The credit facility allows Entergy Texas to issue letters of credit against $30 million of the borrowing capacity of the facility. As of December 31, 2017, there were no cash borrowings and $25.6 million of letters of credit outstanding under the credit facility. In addition, Entergy Texas is a party to an uncommitted letter of credit facility as a means to post collateral to support its obligations to MISO. As of December 31, 2017, a $22.8 million letter of credit was outstanding under Entergy Texas’s letter of credit facility. See Note 4 to the financial statements for additional discussion of the credit facilities.

Entergy Texas obtained authorizations from the FERC through October 2019 for short-term borrowings, not to exceed an aggregate amount of $200 million at any time outstanding, and long-term borrowings and security issuances. See Note 4 to the financial statements for further discussion of Entergy Texas’s short-term borrowing limits.

State and Local Rate Regulation and Fuel-Cost Recovery

The rates that Entergy Texas charges for its services significantly influence its financial position, results of operations, and liquidity. Entergy Texas is regulated and the rates charged to its customers are determined in regulatory proceedings. The PUCT, a governmental agency, is primarily responsible for approval of the rates charged to customers.

Filings with the PUCT

2011 Rate Case

In November 2011, Entergy Texas filed a rate case requesting a $112 million base rate increase reflecting a 10.6% return on common equity based on an adjusted June 2011 test year.  The rate case also proposed a purchased power recovery rider.  On January 12, 2012, the PUCT voted not to address the purchased power recovery rider in the rate case, but the PUCT voted to set a baseline in the rate case proceeding that would be applicable if a purchased power capacity rider is approved in a separate proceeding.  In April 2012 the PUCT Staff filed direct testimony recommending a base rate increase of $66 million and a 9.6% return on common equity.  The PUCT Staff, however, subsequently filed a statement of position in the proceeding indicating that it was still evaluating the position it would ultimately take in the case regarding Entergy Texas’s recovery of purchased power capacity costs and Entergy Texas’s proposal to defer its MISO transition expenses.  In April 2012, Entergy Texas filed rebuttal testimony indicating a revised request for a $105 million base rate increase.  A hearing was held in late-April through early-May 2012.

In September 2012 the PUCT issued an order approving a $28 million rate increase, effective July 2012.  The order included a finding that “a return on common equity (ROE) of 9.80 percent will allow [Entergy Texas] a reasonable opportunity to earn a reasonable return on invested capital.”  The order also provided for increases in depreciation rates and the annual storm reserve accrual.  The order also reduced Entergy Texas’s proposed purchased power capacity costs, stating that they are not known and measurable; reduced Entergy Texas’s regulatory assets associated with Hurricane Rita; excluded from rate recovery capitalized financially-based incentive compensation; included $1.6 million of MISO transition expense in base rates; and reduced Entergy’s Texas’s fuel reconciliation recovery by $4

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million because the PUCT disagreed with the line-loss factor used in the calculation.  After considering the progress of the proceeding in light of the PUCT order, Entergy Texas recorded in the third quarter 2012 an approximate $24 million charge to recognize that assets associated with Hurricane Rita, financially-based incentive compensation, and fuel recovery are no longer probable of recovery.  Entergy Texas believed that it was entitled to recover these prudently incurred costs, however, and it filed a motion for rehearing regarding these and several other issues in the PUCT’s order on October 4, 2012.  Several other parties also filed motions for rehearing of the PUCT’s order.  The PUCT subsequently denied rehearing of substantive issues.  Several parties, including Entergy Texas, appealed various aspects of the PUCT’s order to the Travis County District Court. A hearing was held in July 2014. In October 2014 the Travis County District Court issued an order upholding the PUCT’s decision except as to the line-loss factor issue referenced above, which was found in favor of Entergy Texas. In November 2014, Entergy Texas and other parties, including the PUCT, appealed the Travis County District Court decision to the Third Court of Appeals. Oral argument before the court panel was held in September 2015. In April 2016 the Third Court of Appeals issued its opinion affirming the District Court’s decision on all points. Entergy Texas petitioned the Texas Supreme Court to hear its appeal of the Third Court’s ruling. In September 2017 the Texas Supreme Court denied the petitions for review. Entergy Texas filed a motion for rehearing of the Texas Supreme Court’s denial of the petition for review. In January 2018 the Texas Supreme Court denied Entergy Texas’s motion for rehearing.

Distribution cost recovery factor (DCRF) rider

In September 2015, Entergy Texas filed to amend its DCRF rider. Entergy Texas requested an increase in recovery under the rider of $6.5 million , for a total collection of $10.1 million annually from retail customers. In October 2015 intervenors and PUCT staff filed testimony opposing, in part, Entergy Texas’s request. In November 2015, Entergy Texas and the parties filed an unopposed settlement agreement and supporting documents. The settlement established an annual revenue requirement of $8.65 million for the amended DCRF rider, with the resulting rates effective for usage on and after January 1, 2016. The PUCT approved the settlement agreement in February 2016.

In June 2017, Entergy Texas filed an application to amend its DCRF rider by increasing the total collection from $8.65 million to approximately $19 million. In July 2017, Entergy Texas, the PUCT, and the two other parties in the proceeding entered into an unopposed stipulation and settlement agreement resulting in an amended DCRF annual revenue requirement of $18.3 million, with the resulting rates effective for usage no later than October 1, 2017. In September 2017 the PUCT issued its final order approving the unopposed stipulation and settlement agreement. The amended DCRF rider rates became effective for usage on and after September 1, 2017.
    
Transmission cost recovery factor (TCRF) rider

In September 2015, Entergy Texas filed for a TCRF rider requesting a $13 million increase, incremental to base rates. Testimony was filed in November 2015, with the PUCT staff and other parties proposing various disallowances involving, among other things, MISO charges, vegetation management costs, and bad debt expenses that would reduce the requested increase by approximately $2 million . In addition to those recommended disallowances, a number of parties recommended that Entergy Texas’s request be reduced by an additional $3.4 million to account for load growth since base rates were last set. A hearing on the merits was held in December 2015. In February 2016 a State Office of Administrative Hearings ALJ issued a proposal for decision recommending that the PUCT disallow approximately $2 million from Entergy Texas’s $13 million request, but recommending that the PUCT not accept the load growth offset. In June 2016 the PUCT indicated that it would take up in a future rulemaking project the issue of whether a load growth adjustment should apply to a TCRF. In July 2016 the PUCT issued an order generally accepting the proposal for decision but declining to adjust the TCRF baseline in two instances as recommended by the ALJ, which resulted in a total annual allowance of approximately $10.5 million . The PUCT also ordered its staff and Entergy Texas to track all spare autotransformer transfers going forward so that it could address the appropriate accounting treatment and prudence of such transfers in Entergy Texas’s next base rate case. Entergy Texas implemented the TCRF rider beginning with September 2016 bills.


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In September 2016, Entergy Texas filed with the PUCT a request to amend its TCRF rider. The proposed amended TCRF rider is designed to collect approximately $29.5 million annually from Entergy Texas’s retail customers. This amount includes the approximately $10.5 million annually that Entergy Texas is currently authorized to collect through the TCRF rider, as discussed above. In December 2016, concurrent with the 2016 fuel reconciliation stipulation and settlement agreement discussed above, Entergy Texas and the PUCT reached a settlement agreeing to the amended TCRF annual revenue requirement of $29.5 million . As discussed below, the terms of the two settlements are interdependent. The PUCT approved the settlement and issued a final order in March 2017. Entergy Texas implemented the amended TCRF rider beginning with bills covering usage on and after March 20, 2017.

Fuel and Purchased Power Cost Recovery

Entergy Texas’s rate schedules include a fixed fuel factor to recover fuel and purchased power costs, including interest, not recovered in base rates.   Semi-annual revisions of the fixed fuel factor are made in March and September based on the market price of natural gas and changes in fuel mix.  The amounts collected under Entergy Texas’s fixed fuel factor and any interim surcharge or refund are subject to fuel reconciliation proceedings before the PUCT.

In August 2014, Entergy Texas filed an application seeking PUCT approval to implement an interim fuel refund of approximately $24.6 million for over-collected fuel costs incurred during the months of November 2012 through April 2014. This refund resulted from (i) applying $48.6 million in bandwidth remedy payments that Entergy Texas received in May 2014 related to the June - December 2005 period to Entergy Texas’s $8.7 million under-recovered fuel balance as of April 30, 2014 and (ii) netting that fuel balance against the $15.3 million bandwidth remedy payment that Entergy Texas made related to calendar year 2013 production costs. Also in August 2014, Entergy Texas filed an unopposed motion for interim rates to implement these refunds for most customers over a two-month period commencing with September 2014. The PUCT issued its order approving the interim relief in August 2014 and Entergy Texas completed the refunds in October 2014. Parties intervened in this matter, and all parties agreed that the proceeding should be bifurcated such that the proposed interim refund would become final in a separate proceeding, which refund was approved by the PUCT in March 2015.   In July 2015 certain parties filed briefs in the open proceeding asserting that Entergy Texas should refund to retail customers an additional $10.9 million in bandwidth remedy payments Entergy Texas received related to calendar year 2006 production costs.  In October 2015 an ALJ issued a proposal for decision recommending that the additional $10.9 million in bandwidth remedy payments be refunded to retail customers. In January 2016 the PUCT issued its order affirming the ALJ’s recommendation, and Entergy Texas filed a motion for rehearing of the PUCT’s decision, which the PUCT denied. In March 2016, Entergy Texas filed a complaint in Federal District Court for the Western District of Texas and a petition in the Travis County (State) District Court appealing the PUCT’s decision. The pending appeals did not stay the PUCT’s decision. In April 2016, Entergy Texas filed with the PUCT an application to refund to customers approximately $56.2 million . The refund resulted from (i) $41.8 million of fuel cost recovery over-collections through February 2016, (ii) the $10.9 million in bandwidth remedy payments, discussed above, that Entergy Texas received related to calendar year 2006 production costs, and (iii) $3.5 million in bandwidth remedy payments that Entergy Texas received related to 2006-2008 production costs. In June 2016, Entergy Texas filed an unopposed settlement agreement that added additional over-recovered fuel costs for the months of March and April 2016. The settlement resulted in a $68 million refund. The ALJ approved the refund on an interim basis to be made to most customers over a four-month period beginning with the first billing cycle of July 2016. In July 2016 the PUCT issued an order approving the interim refund. The federal appeal of the PUCT’s January 2016 decision was heard in December 2016, and the Federal District Court granted Entergy Texas’s requested relief. In January 2017 the PUCT and an intervenor filed petitions for appeal to the U.S. Court of Appeals for the Fifth Circuit of the Federal District Court ruling. Oral argument was held before the U.S. Court of Appeals for the Fifth Circuit in February 2018, and a decision is pending. The State District Court appeal of the PUCT’s January 2016 decision also remains pending.

In July 2016, Entergy Texas filed an application to reconcile its fuel and purchased power costs for the period April 1, 2013 through March 31, 2016. Under a recent PUCT rule change, a fuel reconciliation is required to be filed at least once every three years and outside of a base rate case filing. During the reconciliation period, Entergy Texas incurred approximately $1.77 billion in Texas jurisdictional eligible fuel and purchased power expenses, net of certain revenues credited to such expenses and other adjustments. Entergy Texas estimated an over-recovery balance of

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Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis

approximately $19.3 million , including interest, which Entergy Texas requested authority to carry over as the beginning balance for the subsequent reconciliation period beginning Apri1 2016. Entergy Texas also noted, however, that the estimated $19.3 million over collection was being refunded to customers as a portion of the interim fuel refund beginning with the first billing cycle of July 2016, discussed above. Entergy Texas also requested a prudence finding for each of the fuel-related contracts and arrangements entered into or modified during the reconciliation period that have not been reviewed by the PUCT in a prior proceeding. In December 2016, Entergy Texas entered into a stipulation and settlement agreement resulting in a $6 million disallowance not associated with any particular issue raised and a refund of the over-recovery balance of $21 million as of November 30, 2016, to most customers beginning April 2017 through June 2017. This settlement was developed concurrently with the stipulation and settlement agreement in the 2016 transmission cost recovery factor rider amendment discussed above, and the terms and conditions in both settlements are interdependent. The fuel reconciliation settlement was approved by the PUCT in March 2017 and the refunds were made.

In June 2017, Entergy Texas filed an application for a fuel refund of approximately $30.7 million for the months of December 2016 through April 2017. For most customers, the refunds flowed through bills for the months of July 2017 through September 2017. The fuel refund was approved by the PUCT in August 2017.

In December 2017, Entergy Texas filed an application for a fuel refund of approximately $30.5 million for the months of May 2017 through October 2017. Also in December 2017, the PUCT’s ALJ approved the refund on an interim basis. For most customers, the refunds flowed through bills beginning January 2018 and will continue through March 2018. A final decision in this matter remains pending.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.

Nuclear Matters

See the “ Nuclear Matters ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of nuclear matters.

Industrial and Commercial Customers

Entergy Texas’s large industrial and commercial customers continually explore ways to reduce their energy costs. In particular, cogeneration is an option available to a portion of Entergy Texas’s industrial customer base. Entergy Texas responds by working with industrial and commercial customers and negotiating electric service contracts to provide, under existing rate schedules, competitive rates that match specific customer needs and load profiles. Entergy Texas actively participates in economic development, customer retention, and reclamation activities to increase industrial and commercial demand, from both new and existing customers.

Environmental Risks

Entergy Texas’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters. Management believes that Entergy Texas is in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted in “ Regulation of Entergy’s Business - Environmental Regulation ” in Part I, Item 1. Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.



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Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis


Critical Accounting Estimates

The preparation of Entergy Texas’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows. Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and the potential for future changes in the assumptions and measurements that could produce estimates that would have a material effect on the presentation of Entergy Texas’s financial position or results of operations.

Utility Regulatory Accounting

See “ Utility Regulatory Accounting ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.

Unbilled Revenue

See “ Unbilled Revenue ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the unbilled revenue amounts.

Impairment of Long-lived Assets and Trust Fund Investments

See “ Impairment of Long-lived Assets and Trust Fund Investments ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the impairment of long-lived assets.

Taxation and Uncertain Tax Positions

See “ Taxation and Uncertain Tax Positions ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

Qualified Pension and Other Postretirement Benefits

Entergy Texas’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.   See the “ Qualified Pension and Other Postretirement Benefits ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries’ Management’s Financial Discussion and Analysis for further discussion. Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.


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Entergy Texas, Inc. and Subsidiaries
Management’s Financial Discussion and Analysis

Cost Sensitivity

The following chart reflects the sensitivity of qualified pension and qualified projected benefit obligation cost to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Qualified Projected Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$701
 

$11,425

Rate of return on plan assets
 
(0.25%)
 
$868
 

$—

Rate of increase in compensation
 
0.25%
 
$301
 

$1,488

    
The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated Postretirement Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$231
 
$3,481
Health care cost trend
 
0.25%
 
$413
 
$2,907

Each fluctuation above assumes that the other components of the calculation are held constant.

Costs and Funding

Total qualified pension cost for Entergy Texas in 2017 was $3.5 million. Entergy Texas anticipates 2018 qualified pension income to be $4.2 million. In 2016, Entergy Texas refined its approach to estimating the service cost and interest cost components of qualified pension costs, which had the effect of lowering qualified pension costs by $3.6 million. Entergy Texas contributed $17 million to its qualified pension plans in 2017 and estimates 2018 pension contributions will be approximately $10.9 million, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

Total postretirement health care and life insurance benefit income for Entergy Texas in 2017 was $1.8 million. Entergy Texas expects 2018 postretirement health care and life insurance benefit income to approximate $6.2 million. In 2016, Entergy Texas refined its approach to estimating the service cost and interest cost components of other postretirement costs, which had the effect of lowering qualified other postretirement costs by $1.1 million. Entergy Texas contributed $3.1 million to its other postretirement plans in 2017 and estimates 2018 contributions will be approximately $3.2 million.

Federal Healthcare Legislation

See “ Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.

Other Contingencies

See “ Other Contingencies ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and other risks.

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New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements for a discussion of new accounting pronouncements.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the shareholder and Board of Directors of
Entergy Texas, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Entergy Texas, Inc. and Subsidiaries (the “Company”) as of December 31, 2017 and 2016, the related consolidated statements of income, cash flows, and changes in common equity (pages 414 through 418 and applicable items in pages 55 through 230), for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Company’s auditor since 2001.


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$1,544,893

 

$1,615,619

 

$1,707,203

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
225,517

 
271,968

 
277,810

Purchased power
 
610,279

 
616,597

 
709,947

Other operation and maintenance
 
230,616

 
220,566

 
254,731

Asset write-off
 
—

 
—

 
23,472

Taxes other than income taxes
 
79,254

 
70,973

 
72,945

Depreciation and amortization
 
117,520

 
107,026

 
102,410

Other regulatory charges - net
 
82,328

 
82,879

 
82,243

TOTAL
 
1,345,514

 
1,370,009

 
1,523,558

 
 
 
 
 
 
 
OPERATING INCOME
 
199,379

 
245,610

 
183,645

 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
6,722

 
7,617

 
5,678

Interest and investment income
 
981

 
987

 
684

Miscellaneous - net
 
193

 
(746
)
 
(798
)
TOTAL
 
7,896

 
7,858

 
5,564

 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
86,719

 
87,776

 
86,024

Allowance for borrowed funds used during construction
 
(4,098
)
 
(4,943
)
 
(3,690
)
TOTAL
 
82,621

 
82,833

 
82,334

 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
124,654

 
170,635

 
106,875

 
 
 
 
 
 
 
Income taxes
 
48,481

 
63,097

 
37,250

 
 
 
 
 
 
 
NET INCOME
 

$76,173

 

$107,538

 

$69,625

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 

$76,173

 

$107,538

 

$69,625

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation and amortization
 
117,520

 
107,026

 
102,410

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
42,119

 
20,794

 
(23,292
)
Changes in assets and liabilities:
 
 

 
 

 
 

Receivables
 
(15,934
)
 
(9,300
)
 
21,443

Fuel inventory
 
(25,054
)
 
9,765

 
2,960

Accounts payable
 
32,842

 
(22,462
)
 
(16,913
)
Prepaid taxes and taxes accrued
 
30,308

 
10,018

 
3,484

Interest accrued
 
(421
)
 
(3,229
)
 
(551
)
Deferred fuel costs
 
12,758

 
29,419

 
36,985

Other working capital accounts
 
(7,852
)
 
(3,354
)
 
2,468

Provisions for estimated losses
 
2,531

 
(1,735
)
 
(2,899
)
Other regulatory assets
 
184,574

 
74,389

 
125,133

Other regulatory liabilities
 
410,968

 
2,106

 
1,271

Deferred tax rate change recognized as regulatory liability/asset
 
(520,547
)
 
—

 
—

Pension and other postretirement liabilities
 
(49,445
)
 
(10,204
)
 
(33,474
)
Other assets and liabilities
 
10,856

 
(4,170
)
 
(4,382
)
Net cash flow provided by operating activities
 
301,396

 
306,601

 
284,268

INVESTING ACTIVITIES
 
 

 
 

 
 

Construction expenditures
 
(348,027
)
 
(337,963
)
 
(320,408
)
Allowance for equity funds used during construction
 
6,874

 
7,743

 
5,751

Insurance proceeds
 
2,431

 
—

 
—

Changes in money pool receivable - net
 
(44,222
)
 
(681
)
 
306

Changes in securitization account
 
(232
)
 
710

 
(942
)
Net cash flow used in investing activities
 
(383,176
)
 
(330,191
)
 
(315,293
)
FINANCING ACTIVITIES
 
 

 
 

 
 

Proceeds from the issuance of long-term debt
 
148,277

 
123,502

 
246,607

Retirement of long-term debt
 
(71,683
)

(68,593
)

(265,734
)
Capital contributions from parent
 
115,000

 
—

 
—

Change in money pool payable - net
 
—

 
(22,068
)
 
22,068

Other
 
(482
)
 
(5,252
)
 
(175
)
Net cash flow provided by financing activities
 
191,112

 
27,589

 
2,766

Net increase (decrease) in cash and cash equivalents
 
109,332

 
3,999

 
(28,259
)
Cash and cash equivalents at beginning of period
 
6,181

 
2,182

 
30,441

Cash and cash equivalents at end of period
 

$115,513

 

$6,181

 

$2,182

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 

 
 

 
 

Cash paid (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$84,556

 

$88,489

 

$83,290

Income taxes
 

($21,107
)
 

$28,523

 

$60,359

See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$32

 

$1,216

Temporary cash investments
 
115,481

 
4,965

Total cash and cash equivalents
 
115,513

 
6,181

Securitization recovery trust account
 
37,683

 
37,451

Accounts receivable:
 
 

 
 

Customer
 
74,382

 
71,803

Allowance for doubtful accounts
 
(463
)
 
(828
)
Associated companies
 
90,629

 
39,447

Other
 
9,831

 
14,756

Accrued unbilled revenues
 
50,682

 
39,727

Total accounts receivable
 
225,061

 
164,905

Fuel inventory - at average cost
 
42,731

 
37,177

Materials and supplies - at average cost
 
38,605

 
36,631

Prepayments and other
 
19,710

 
18,599

TOTAL
 
479,303

 
300,944

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Investments in affiliates - at equity
 
457

 
600

Non-utility property - at cost (less accumulated depreciation)
 
376

 
376

Other
 
19,235

 
18,801

TOTAL
 
20,068

 
19,777

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
4,569,295

 
4,274,069

Construction work in progress
 
102,088

 
111,227

TOTAL UTILITY PLANT
 
4,671,383

 
4,385,296

Less - accumulated depreciation and amortization
 
1,579,387

 
1,526,057

UTILITY PLANT - NET
 
3,091,996

 
2,859,239

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
—

 
105,816

  Other regulatory assets (includes securitization property of $313,123 as of December 31, 2017 and $384,609 as of December 31, 2016)
 
661,398

 
740,156

Other
 
26,973

 
7,149

TOTAL
 
688,371

 
853,121

 
 
 
 
 
TOTAL ASSETS
 

$4,279,738

 

$4,033,081

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
CURRENT LIABILITIES
 
 
 
 
Accounts payable:
 
 
 
 
Associated companies
 

$59,347

 

$47,867

Other
 
126,095

 
77,342

Customer deposits
 
40,925

 
44,419

Taxes accrued
 
45,659

 
15,351

Interest accrued
 
25,556

 
25,977

Deferred fuel costs
 
67,301

 
54,543

Other
 
8,132

 
9,388

TOTAL
 
373,015

 
274,887

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
544,642

 
1,027,647

Accumulated deferred investment tax credits
 
11,983

 
12,934

Regulatory liability for income taxes - net
 
412,620

 
—

Other regulatory liabilities
 
6,850

 
8,502

Asset retirement cost liabilities
 
6,835

 
6,470

Accumulated provisions
 
10,115

 
7,584

Pension and other postretirement liabilities
 
17,853

 
67,313

Long-term debt (includes securitization bonds of $358,104 as of December 31, 2017 and $429,043 as of December 31, 2016)
 
1,587,150

 
1,508,407

Other
 
48,508

 
50,343

TOTAL
 
2,646,556

 
2,689,200

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
COMMON EQUITY
 
 

 
 

Common stock, no par value, authorized 200,000,000 shares; issued and outstanding 46,525,000 shares in 2017 and 2016
 
49,452

 
49,452

Paid-in capital
 
596,994

 
481,994

Retained earnings
 
613,721

 
537,548

TOTAL
 
1,260,167

 
1,068,994

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$4,279,738

 

$4,033,081

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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ENTERGY TEXAS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN COMMON EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
Common Equity
 
 
 
Common Stock
 
Paid-in Capital
 
Retained Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
 
 
Balance at December 31, 2014

$49,452

 

$481,994

 

$360,385

 

$891,831

Net income
—

 
—

 
69,625

 
69,625

Balance at December 31, 2015

$49,452

 

$481,994

 

$430,010

 

$961,456

Net income
—

 
—

 
107,538

 
107,538

Balance at December 31, 2016

$49,452

 

$481,994

 

$537,548

 

$1,068,994

Net income
—

 
—

 
76,173

 
76,173

Capital contributions from parent
—

 
115,000

 
—

 
115,000

Balance at December 31, 2017

$49,452

 

$596,994

 

$613,721

 

$1,260,167

 
 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 



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ENTERGY TEXAS, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(In Thousands)
 
 
 
 
 
 
 
 
 
 
Operating revenues

$1,544,893

 

$1,615,619

 

$1,707,203

 

$1,851,982

 

$1,728,799

Net income

$76,173

 

$107,538

 

$69,625

 

$74,804

 

$57,881

Total assets

$4,279,738

 

$4,033,081

 

$3,898,582

 

$3,897,989

 

$3,909,470

Long-term obligations (a)

$1,587,150

 

$1,508,407

 

$1,451,967

 

$1,268,835

 

$1,544,549

 
 
 
 
 
 
 
 
 
 
(a) Includes long-term debt (excluding currently maturing debt).
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(Dollars In Millions)
 
 
 
 
 
 
 
 
 
 
Electric Operating Revenues:
 

 
 

 
 

 
 

 
 

Residential

$636

 

$613

 

$633

 

$654

 

$596

Commercial
378

 
356

 
369

 
384

 
327

Industrial
384

 
365

 
372

 
422

 
325

Governmental
25

 
24

 
25

 
26

 
24

Total retail
1,423

 
1,358

 
1,399

 
1,486

 
1,272

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
58

 
178

 
259

 
316

 
369

Non-associated companies
22

 
40

 
14

 
23

 
47

Other
42

 
40

 
35

 
27

 
41

Total

$1,545

 

$1,616

 

$1,707

 

$1,852

 

$1,729

 
 
 
 
 
 
 
 
 
 
Billed Electric Energy Sales (GWh):
 
 
 

 
 

 
 

 
 

Residential
5,716

 
5,836

 
5,889

 
5,810

 
5,726

Commercial
4,548

 
4,570

 
4,548

 
4,471

 
4,402

Industrial
7,521

 
7,493

 
7,036

 
7,140

 
6,404

Governmental
273

 
283

 
276

 
277

 
282

Total retail
18,058

 
18,182

 
17,749

 
17,698

 
16,814

Sales for resale:
 

 
 

 
 

 
 

 
 

Associated companies
1,534

 
4,625

 
5,853

 
4,763

 
6,287

Non-associated companies
729

 
1,086

 
254

 
200

 
712

Total
20,321

 
23,893

 
23,856

 
22,661

 
23,813



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SYSTEM ENERGY RESOURCES, INC.

MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS

System Energy’s principal asset currently consists of an ownership interest and a leasehold interest in Grand Gulf.  The capacity and energy from its 90% interest is sold under the Unit Power Sales Agreement to its only four customers, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans.  System Energy’s operating revenues are derived from the allocation of the capacity, energy, and related costs associated with its 90% interest in Grand Gulf pursuant to the Unit Power Sales Agreement.  Payments under the Unit Power Sales Agreement are System Energy’s only source of operating revenues.

Results of Operations

Net Income

2017 Compared to 2016

Net income decreased $18.1 million primarily due to provisions against revenue recorded in 2017 in connection with the complaint against System Energy’s return on equity and a higher effective income tax rate in 2017. See “ Federal Regulation - Complaint Against System Energy ” below for further discussion of the complaint against System Energy.

2016 Compared to 2015

Net income decreased $14.6 million primarily due to a higher effective income tax rate in 2016.

Income Taxes

The effective income tax rates for 2017, 2016, and 2015 were 47.1%, 42.3%, and 32.3%, respectively. The difference in the effective income tax rate of 47.1% for 2017 versus the statutory rate of 35% for 2017 was primarily due to certain book and tax differences related to utility plant items and state income taxes. See Note 3 to the financial statements for a reconciliation of the federal statutory rate of 35% to the effective income tax rates.

Income Tax Legislation

See the “ Income Tax Legislation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the Tax Cuts and Jobs Act, the federal income tax legislation enacted in December 2017. Note 3 to the financial statements contains additional discussion of the effect of the Act on 2017 results of operations and financial position, the provisions of the Act, and the uncertainties associated with accounting for the Act, and Note 2 to the financial statements discusses proceedings commenced or other responses by Entergy’s regulators to the Act.


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Liquidity and Capital Resources

Cash Flow

Cash flows for the years ended December 31, 2017 , 2016 , and 2015 were as follows:
 
2017
 
2016
 
2015
 
(In Thousands)
Cash and cash equivalents at beginning of period

$245,863

 

$230,661

 

$223,179

 
 
 
 
 
 
Net cash provided by (used in):
 
 
 

 
 

Operating activities
371,278

 
341,939

 
502,536

Investing activities
(174,250
)
 
(232,602
)
 
(137,562
)
Financing activities
(155,704
)
 
(94,135
)
 
(357,492
)
Net increase in cash and cash equivalents
41,324

 
15,202

 
7,482

 
 
 
 
 
 
Cash and cash equivalents at end of period

$287,187

 

$245,863

 

$230,661


Operating Activities

Net cash flow provided by operating activities increased $29.3 million in 2017 primarily due to:

•
a decrease in spending of $35.7 million on nuclear refueling outages in 2017 as compared to the prior year;
•
the timing of collection of receivables; and
•
a decrease of $9.9 million in interest paid in 2017.

The increase was partially offset by:

•
proceeds of $28.4 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for a discussion of the spent nuclear fuel litigation; and
•
a decrease of $21.3 million in income tax refunds in 2017. System Energy received income tax refunds in 2017 and 2016 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2017 and 2016 resulted primarily from the adoption of a new accounting method for income tax purposes in which System Energy will treat its nuclear decommissioning costs as production costs of electricity includable in cost of goods sold. See Note 3 to the financial statements for further discussion of the adoption of the new accounting method.

Net cash flow provided by operating activities decreased $160.6 million in 2016 primarily due to:

•
a decrease of $90.5 million in income tax refunds in 2016. System Energy received income tax refunds in 2016 and 2015 in accordance with an intercompany income tax allocation agreement. The income tax refunds in 2016 and 2015 resulted primarily from the adoption of a new accounting method for income tax purposes in which System Energy will treat its nuclear decommissioning costs as production costs of electricity includable in cost of goods sold. See Note 3 to the financial statements for further discussion of the adoption of the new accounting method; and
•
an increase in spending of $35.1 million on nuclear refueling outages in 2016 as compared to 2015.

The decrease was partially offset by proceeds of $28.4 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously expensed. See Note 8 to the financial statements for a discussion of the spent nuclear fuel litigation.

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Investing Activities

Net cash flow used in investing activities decreased $58.4 million in 2017 primarily due to a decrease of $159.4 million as a result of fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle. The decrease was partially offset by money pool activity and proceeds of $15.8 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

Increases in System Energy’s receivable from the money pool are a use of cash flow and System Energy’s receivable from the money pool increased by $77.9 million in 2017 compared to decreasing by $6.1 million in 2016.  The money pool is an inter-company borrowing arrangement designed to reduce the Utility subsidiaries’ need for external short-term borrowings.

Net cash flow used in investing activities increased $95 million in 2016 primarily due to:

•
fluctuations in nuclear fuel activity because of variations from year to year in the timing and pricing of fuel reload requirements in the Utility business, material and services deliveries, and the timing of cash payments during the nuclear fuel cycle; and
•
an increase in nuclear construction expenditures primarily as a result of a higher scope of work performed in 2016 on Grand Gulf outage projects, partially offset by decreased spending in 2016 on compliance with NRC post-Fukushima requirements.

The increase was partially offset by money pool activity and proceeds of $15.8 million received in August 2016 from the DOE resulting from litigation regarding spent nuclear fuel storage costs that were previously capitalized. See Note 8 to the financial statements for discussion of the spent nuclear fuel litigation.

Decreases in System Energy’s receivable from the money pool are a source of cash flow and System Energy’s receivable from the money pool decreased by $6.1 million in 2016 compared to increasing by $37.6 million in 2015.

Financing Activities

Net cash flow used in financing activities increased $61.6 million in 2017 primarily due to:

•
net repayments of short-term borrowings of $49.1 million on the nuclear fuel company variable interest entity’s credit facility in 2017 as compared to net short-term borrowings of $66.9 million on the nuclear fuel variable interest entity’s credit facility in 2016; and
•
the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s 4.02% Series H notes.

The increase was partially offset by:

•
net long-term borrowings of $50 million in 2017 on the nuclear fuel company variable interest entity’s credit facility;
•
a decrease of $32.4 million in common stock dividends and distributions in 2017 in order to maintain System Energy’s targeted capital structure; and
•
the repayment in May 2016 of $22 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of System Energy.


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Net cash flow used in financing activities decreased $263.4 million in 2016 primarily due to:

•
net borrowings of $66.9 million on the nuclear fuel company variable interest entity’s credit facility in 2016 compared to net repayments of $20.4 million on the nuclear fuel company variable interest entity’s credit facility in 2015;
•
a decrease of $61.8 million in common stock dividends and distributions as a result of lower operating cash flows and higher nuclear fuel purchases in 2016 as compared to the prior year;
•
the redemption in April 2015, at maturity, of $60 million of System Energy nuclear fuel company variable interest entity’s 5.33% Series G notes; and
•
redemption in May 2015 of $35 million and in November 2015 of $25 million of System Energy’s 5.875% Series governmental bonds due 2022.

The decrease was partially offset by the repayment in May 2016 of $22 million of 5.875% pollution control revenue bonds due 2022 issued on behalf of System Energy.

See Note 5 to the financial statements for details of long-term debt.

Capital Structure

System Energy’s capitalization is balanced between equity and debt, as shown in the following table. The decrease in the debt to capital ratio for System Energy is primarily due to the payment in February 2017, at maturity, of $50 million of the System Energy nuclear fuel company variable interest entity’s 4.02% Series H notes.
 
December 31,
2017
 
December 31,
2016
Debt to capital
44.5
%
 
45.5
%
Effect of subtracting cash
(16.0
%)
 
(12.0
%)
Net debt to net capital
28.5
%
 
33.5
%

Net debt consists of debt less cash and cash equivalents.  Debt consists of short-term borrowings and long-term debt, including the currently maturing portion.  Capital consists of debt and common equity.  Net capital consists of capital less cash and cash equivalents.  System Energy uses the debt to capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition.  System Energy uses the net debt to net capital ratio in analyzing its financial condition and believes it provides useful information to its investors and creditors in evaluating System Energy’s financial condition because net debt indicates System Energy’s outstanding debt position that could not be readily satisfied by cash and cash equivalents on hand.

System Energy seeks to optimize its capital structure in accordance with its regulatory requirements and to control its cost of capital while also maintaining equity capitalization at a level consistent with investment-grade debt ratings. To the extent that operating cash flows are in excess of planned investments, cash may be used to reduce outstanding debt or may be paid as a dividend, or both, in appropriate amounts to maintain the targeted capital structure.  To the extent that operating cash flows are insufficient to support planned investments, System Energy may issue incremental debt or reduce dividends, or both, to maintain its targeted capital structure.

Uses of Capital

System Energy requires capital resources for:

•
construction and other capital investments;
•
debt maturities or retirements;

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•
working capital purposes, including the financing of fuel costs; and
•
dividend, distribution, and interest payments.

Following are the amounts of System Energy’s planned construction and other capital investments.
 
2018
 
2019
 
2020
 
(In Millions)
Planned construction and capital investment:
 
 
 
 
 
Generation

$180

 

$130

 

$150

Utility Support
15

 
15

 
10

Total

$195

 

$145

 

$160


Following are the amounts of System Energy’s existing debt and lease obligations (includes estimated interest payments) and other purchase obligations.
 
2018
 
2019-2020
 
2021-2022
 
After 2022
 
Total
 
(In Millions)
Long-term debt (a)

$124

 

$121

 

$199

 

$493

 

$937

Purchase obligations (b)

$38

 

$39

 

$34

 

$—

 

$111


(a)
Includes estimated interest payments.  Long-term debt is discussed in Note 5 to the financial statements.
(b)
Purchase obligations represent the minimum purchase obligation or cancellation charge for contractual obligations to purchase goods or services. For System Energy, it includes nuclear fuel purchase obligations.

In addition to the contractual obligations given above, System Energy expects to contribute approximately $13.8 million to its qualified pension plans and approximately $16 thousand to other postretirement health care and life insurance plans in 2018, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018. See “ Critical Accounting Estimates – Qualified Pension and Other Postretirement Benefits ” below for a discussion of qualified pension and other postretirement benefits funding.

Also in addition to the contractual obligations, System Energy has $433 million of unrecognized tax benefits and interest net of unused tax attributes and payments for which the timing of payments beyond 12 months cannot be reasonably estimated due to uncertainties in the timing of effective settlement of tax positions.  See Note 3 to the financial statements for additional information regarding unrecognized tax benefits.

In addition to routine spending to maintain operations, the planned capital investment estimate includes specific Grand Gulf investments and initiatives.

As a wholly-owned subsidiary, System Energy dividends its earnings to Entergy Corporation at a percentage determined monthly.  

Sources of Capital

System Energy’s sources to meet its capital requirements include:

•
internally generated funds;
•
cash on hand;
•
debt issuances; and
•
bank financing under new or existing facilities.


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System Energy may refinance, redeem, or otherwise retire debt prior to maturity, to the extent market conditions and interest and dividend rates are favorable.

All debt and common stock issuances by System Energy require prior regulatory approval.  Debt issuances are also subject to issuance tests set forth in its bond indentures and other agreements.  System Energy has sufficient capacity under these tests to meet its foreseeable capital needs.

System Energy’s receivables from the money pool were as follows as of December 31 for each of the following years.
2017
 
2016
 
2015
 
2014
(In Thousands)
$111,667
 
$33,809
 
$39,926
 
$2,373

See Note 4 to the financial statements for a description of the money pool.

The System Energy nuclear fuel company variable interest entity has a credit facility in the amount of $120 million scheduled to expire in May 2019. As of December 31, 2017, $17.8 million in letters of credit to support a like amount of commercial paper issued and $50 million in loans were outstanding under the System Energy nuclear fuel company variable interest entity credit facility. See Note 4 to the financial statements for additional discussion of the variable interest entity credit facility.

System Energy obtained authorizations from the FERC through October 2019 for the following:

•
short-term borrowings not to exceed an aggregate amount of $200 million at any time outstanding;
•
long-term borrowings and security issuances; and
•
long-term borrowings by its nuclear fuel company variable interest entity.

See Note 4 to the financial statements for further discussion of System Energy’s short-term borrowing limits.

Federal Regulation

See the “ Rate, Cost-recovery, and Other Regulation – Federal Regulation ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis and Note 2 to the financial statements for a discussion of federal regulation.

Complaint Against System Energy

In January 2017 the APSC and MPSC filed a complaint with the FERC against System Energy. The complaint seeks a reduction in the return on equity component of the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. Entergy Arkansas also sells some of its Grand Gulf capacity and energy to Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans under separate agreements. The current return on equity under the Unit Power Sales Agreement is 10.94% . The complaint alleges that the return on equity is unjust and unreasonable because current capital market and other considerations indicate that it is excessive. The complaint requests the FERC to institute proceedings to investigate the return on equity and establish a lower return on equity, and also requests that the FERC establish January 23, 2017 as a refund effective date. The complaint includes return on equity analysis that purports to establish that the range of reasonable return on equity for System Energy is between 8.37% and 8.67% . System Energy answered the complaint in February 2017 and disputes that a return on equity of 8.37% to 8.67% is just and reasonable. The LPSC and the City Council intervened in the proceeding expressing support for the complaint. System Energy is recording a provision against revenue for the potential outcome of this proceeding. In September 2017 the FERC established a refund effective date of January 23, 2017, consolidated the return on equity complaint with the proceeding described in Unit Power Sales Agreement below, and directed the parties to engage in settlement

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proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.

Unit Power Sales Agreement

In August 2017, System Energy submitted to the FERC proposed amendments to the Unit Power Sales Agreement pursuant to which System Energy sells its Grand Gulf capacity and energy to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy New Orleans. The filing proposes limited amendments to the Unit Power Sales Agreement to adopt (1) updated rates for use in calculating Grand Gulf plant depreciation and amortization expenses and (2) updated nuclear decommissioning cost annual revenue requirements, both of which are recovered through the Unit Power Sales Agreement rate formula. The proposed amendments would result in lower charges to the Utility operating companies that buy capacity and energy from System Energy under the Unit Power Sales Agreement. The proposed changes are based on updated depreciation and nuclear decommissioning studies that take into account the renewal of Grand Gulf’s operating license for a term through November 1, 2044. System Energy requested that the FERC accept the amendments effective October 1, 2017.

In September 2017 the FERC accepted System Energy’s proposed Unit Power Sales Agreement amendments, subject to further proceedings to consider the justness and reasonableness of the amendments. Because the amendments propose a rate decrease, the FERC also initiated an investigation under Section 206 of the Federal Power Act to determine if the rate decrease should be lower than proposed. The FERC accepted the proposed amendments effective October 1, 2017, subject to refund pending the outcome of the further settlement and/or hearing proceedings, and established a refund effective date of October 11, 2017 with respect to the rate decrease. The FERC also consolidated the Unit Power Sales Agreement amendment proceeding with the proceeding described in Complaint Against System Energy above, and directed the parties to engage in settlement proceedings before an ALJ. If the parties fail to come to an agreement during settlement proceedings, a prehearing conference will be held to establish a procedural schedule for hearing proceedings.

Nuclear Matters

System Energy owns and, through an affiliate, operates Grand Gulf.  System Energy is, therefore, subject to the risks related to owning and operating a nuclear plant.  These include risks related to: the use, storage, and handling and disposal of high-level and low-level radioactive materials; the substantial financial requirements, both for capital investments and operational needs, to position Entergy’s nuclear fleet to meet its operational goals, including the financial requirements to address emerging issues like stress corrosion cracking of certain materials within the plant systems and the Fukushima event; regulatory requirements and potential future regulatory changes, including changes affecting the regulations governing nuclear plant ownership, operations, license renewal and amendments, and decommissioning; the performance and capacity factors of these nuclear plants; the availability of interim or permanent sites for the disposal of spent nuclear fuel and nuclear waste, including the fees charged for such disposal; the sufficiency of nuclear decommissioning trust fund assets and earnings to complete decommissioning of each site when required; and limitations on the amounts and types of insurance commercially available for losses in connection with nuclear plant operations and catastrophic events such as a nuclear accident. In the event of an unanticipated early shutdown of Grand Gulf, System Energy may be required to provide additional funds or credit support to satisfy regulatory requirements for decommissioning.  In December 2016, the NRC granted the extension of Grand Gulf’s operating license to 2044.
 
Grand Gulf Outage and NRC review

Grand Gulf began a maintenance outage on September 8, 2016 to replace a residual heat removal pump. Although the pump had been replaced, on September 27, 2016 management decided to keep the plant in an outage for additional training and other steps to support management’s operational goals. Grand Gulf returned to service on January 31, 2017.


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Based on the plant’s performance indicators, in November 2016 the NRC placed Grand Gulf in the “regulatory response column,” or Column 2, of its Reactor Oversight Process Action Matrix. Entergy is implementing a plan to restore Grand Gulf to Column 1, including addressing the issues related to the three very low safety significance non-cited violations identified in the NRC’s report on the results of its October 2016 special inspection. Depending on the success of implementing that plan and the plant’s performance indicators, there is risk that the NRC could move Grand Gulf into the “degraded cornerstone column,” or Column 3, of the NRC’s Reactor Oversight Process Action Matrix.

Environmental Risks

System Energy’s facilities and operations are subject to regulation by various governmental authorities having jurisdiction over air quality, water quality, control of toxic substances and hazardous and solid wastes, and other environmental matters.  Management believes that System Energy is in substantial compliance with environmental regulations currently applicable to its facilities and operations, with reference to possible exceptions noted in “ Regulation of Entergy’s Business - Environmental Regulation ” in Part I, Item 1.  Because environmental regulations are subject to change, future compliance costs cannot be precisely estimated.

Critical Accounting Estimates

The preparation of System Energy’s financial statements in conformity with generally accepted accounting principles requires management to apply appropriate accounting policies and to make estimates and judgments that can have a significant effect on reported financial position, results of operations, and cash flows.  Management has identified the following accounting policies and estimates as critical because they are based on assumptions and measurements that involve a high degree of uncertainty, and there is the potential for future changes in the assumptions and measurements that could produce estimates that would have a material impact on the presentation of System Energy’s financial position or results of operations.
 
Nuclear Decommissioning Costs

See “ Nuclear Decommissioning Costs ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates inherent in accounting for nuclear decommissioning costs.

In the second quarter 2017, System Energy recorded a revision to its estimated decommissioning cost liability for Grand Gulf as a result of a revised decommissioning cost study. The revised estimate resulted in a $35.9 million reduction in its decommissioning cost liability, along with a corresponding reduction in the related asset retirement cost asset that will be depreciated over the remaining life of the unit.

Utility Regulatory Accounting

See “ Utility Regulatory Accounting ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of accounting for the effects of rate regulation.

Impairment of Long-lived Assets and Trust Fund Investments

See “ Impairment of Long-lived Assets and Trust Fund Investments ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for discussion of the estimates associated with the impairment of long-lived assets and trust fund investments.


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Taxation and Uncertain Tax Positions

See “ Taxation and Uncertain Tax Positions ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.

Qualified Pension and Other Postretirement Benefits

System Energy’s qualified pension and other postretirement reported costs, as described in Note 11 to the financial statements, are impacted by numerous factors including the provisions of the plans, changing employee demographics, and various actuarial calculations, assumptions, and accounting mechanisms.  See the “ Qualified Pension and Other Postretirement Benefits ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for further discussion.  Because of the complexity of these calculations, the long-term nature of these obligations, and the importance of the assumptions utilized, Entergy’s estimate of these costs is a critical accounting estimate.

Cost Sensitivity

The following chart reflects the sensitivity of qualified pension cost and qualified projected benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Qualified Pension Cost
 
Impact on 2017 Projected Qualified Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$820
 

$11,922

Rate of return on plan assets
 
(0.25%)
 
$664
 

$—

Rate of increase in compensation
 
0.25%
 
$329
 

$1,473


The following chart reflects the sensitivity of postretirement benefit cost and accumulated postretirement benefit obligation to changes in certain actuarial assumptions (dollars in thousands).
Actuarial Assumption
 
Change in Assumption
 
Impact on 2018 Postretirement Benefit Cost
 
Impact on 2017 Accumulated Postretirement Benefit Obligation
 
 
 
 
Increase/(Decrease)
 
 
Discount rate
 
(0.25%)
 
$154
 
$2,042
Health care cost trend
 
0.25%
 
$239
 
$1,704

Each fluctuation above assumes that the other components of the calculation are held constant.

Costs and Funding

Total qualified pension cost for System Energy in 2017 was $11.7 million.  System Energy anticipates 2018 qualified pension cost to be $14.9 million.  In 2016, System Energy refined its approach to estimating the service cost and interest cost components of qualified pension costs, which had the effect of lowering qualified pension costs by $2.8 million. System Energy contributed $18.2 million to its pension plans in 2017 and estimates 2018 pension contributions will approximate $13.8 million, although the 2018 required pension contributions will be known with more certainty when the January 1, 2018 valuations are completed, which is expected by April 1, 2018.

Total postretirement health care and life insurance benefit cost for System Energy in 2017 was $692 thousand. System Energy expects 2018 postretirement health care and life insurance benefit income to approximate $490 thousand.

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In 2016, System Energy refined its approach to estimating the service cost and interest cost components of other postretirement costs, which had the effect of lowering qualified other postretirement costs by $555 thousand. System Energy contributed $570 thousand to its other postretirement plans in 2017 and expects 2018 contributions to approximate $16 thousand.

Federal Healthcare Legislation

See “ Qualified Pension and Other Postretirement Benefits - Federal Healthcare Legislation ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of Federal Healthcare Legislation.

Other Contingencies

See “ Other Contingencies ” in the “ Critical Accounting Estimates ” section of Entergy Corporation and Subsidiaries Management’s Financial Discussion and Analysis for a discussion of the estimates associated with environmental, litigation, and other risks.

New Accounting Pronouncements

See “ New Accounting Pronouncements ” section of Note 1 to the financial statements for a discussion of new accounting pronouncements.



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the shareholder and Board of Directors of
System Energy Resources, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of System Energy Resources, Inc. (the “Company”) as of December 31, 2017 and 2016, the related statements of income, cash flows, and changes in common equity (pages 431 through 436 and applicable items in pages 55 through 230), for each of the three years in the period ended December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


We have served as the Company’s auditor since 2001.


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SYSTEM ENERGY RESOURCES, INC.
INCOME STATEMENTS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
 
 
 
 
 
 
 
OPERATING REVENUES
 
 
 
 
 
 
Electric
 

$633,458

 

$548,291

 

$632,405

 
 
 
 
 
 
 
OPERATING EXPENSES
 
 

 
 

 
 

Operation and Maintenance:
 
 

 
 

 
 

Fuel, fuel-related expenses, and gas purchased for resale
 
71,700

 
27,416

 
89,598

Nuclear refueling outage expenses
 
17,968

 
19,512

 
21,654

Other operation and maintenance
 
213,534

 
153,064

 
156,552

Decommissioning
 
43,347

 
50,797

 
47,993

Taxes other than income taxes
 
26,180

 
25,195

 
27,281

Depreciation and amortization
 
137,767

 
136,195

 
143,133

Other regulatory credits - net
 
(37,831
)
 
(45,041
)
 
(39,434
)
TOTAL
 
472,665

 
367,138

 
446,777

 
 
 
 
 
 
 
OPERATING INCOME
 
160,793

 
181,153

 
185,628

 
 
 
 
 
 
 
OTHER INCOME
 
 

 
 

 
 

Allowance for equity funds used during construction
 
6,345

 
7,944

 
8,494

Interest and investment income
 
17,538

 
14,793

 
14,437

Miscellaneous - net
 
(521
)
 
(556
)
 
(876
)
TOTAL
 
23,362

 
22,181

 
22,055

 
 
 
 
 
 
 
INTEREST EXPENSE
 
 

 
 

 
 

Interest expense
 
37,141

 
37,529

 
45,532

Allowance for borrowed funds used during construction
 
(1,551
)
 
(2,000
)
 
(2,244
)
TOTAL
 
35,590

 
35,529

 
43,288

 
 
 
 
 
 
 
INCOME BEFORE INCOME TAXES
 
148,565

 
167,805

 
164,395

 
 
 
 
 
 
 
Income taxes
 
69,969

 
71,061

 
53,077

 
 
 
 
 
 
 
NET INCOME
 

$78,596

 

$96,744

 

$111,318

 
 
 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 

 
 


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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CASH FLOWS
 
 
 
 
 
For the Years Ended December 31,
 
 
2017
 
2016
 
2015
 
 
(In Thousands)
OPERATING ACTIVITIES
 
 
 
 
 
 
Net income
 

$78,596

 

$96,744

 

$111,318

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
 
 
Depreciation, amortization, and decommissioning, including nuclear fuel amortization
 
240,962

 
224,879

 
270,514

Deferred income taxes, investment tax credits, and non-current taxes accrued
 
7,827

 
99,531

 
200,797

Changes in assets and liabilities:
 
 

 
 

 
 

Receivables
 
9,210

 
(15,846
)
 
5,879

Accounts payable
 
15,969

 
2,720

 
(352
)
Prepaid taxes and taxes accrued
 
62,466

 
(6,555
)
 
(32,594
)
Interest accrued
 
(660
)
 
(134
)
 
(19,013
)
Other working capital accounts
 
12,083

 
(15,470
)
 
13,576

Other regulatory assets
 
60,012

 
(58,279
)
 
(4,565
)
Other regulatory liabilities
 
331,251

 
33,438

 
(33,686
)
Deferred tax rate change recognized as regulatory liability/asset
 
(325,707
)
 
—

 
—

Pension and other postretirement liabilities
 
4,024

 
5,586

 
(16,888
)
Other assets and liabilities
 
(124,755
)
 
(24,675
)
 
7,550

Net cash flow provided by operating activities
 
371,278

 
341,939

 
502,536

INVESTING ACTIVITIES
 
 

 
 

 
 

Construction expenditures
 
(91,705
)
 
(88,037
)
 
(70,358
)
Allowance for equity funds used during construction
 
6,345

 
7,944

 
8,494

Nuclear fuel purchases
 
(49,728
)
 
(151,068
)
 
(64,977
)
Proceeds from the sale of nuclear fuel
 
69,516

 
11,467

 
57,681

Proceeds from nuclear decommissioning trust fund sales
 
565,416

 
499,252

 
390,371

Investment in nuclear decommissioning trust funds
 
(596,236
)
 
(534,083
)
 
(421,220
)
Changes in money pool receivable - net
 
(77,858
)
 
6,117

 
(37,553
)
Litigation proceeds for reimbursement of spent nuclear fuel storage costs
 
—

 
15,806

 
—

Net cash flow used in investing activities
 
(174,250
)
 
(232,602
)
 
(137,562
)
FINANCING ACTIVITIES
 
 

 
 

 
 

Proceeds from the issuance of long-term debt
 
150,100

 
—

 
—

Retirement of long-term debt
 
(150,103
)
 
(22,002
)
 
(136,310
)
Changes in credit borrowings - net
 
(49,063
)
 
66,893

 
(20,404
)
Common stock dividends and distributions
 
(106,610
)
 
(139,000
)
 
(200,750
)
Other
 
(28
)
 
(26
)
 
(28
)
Net cash flow used in financing activities
 
(155,704
)
 
(94,135
)
 
(357,492
)
Net increase in cash and cash equivalents
 
41,324

 
15,202

 
7,482

Cash and cash equivalents at beginning of period
 
245,863

 
230,661

 
223,179

Cash and cash equivalents at end of period
 

$287,187

 

$245,863

 

$230,661

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
 
 

 
 

 
 

Cash paid (received) during the period for:
 
 

 
 

 
 

Interest - net of amount capitalized
 

$26,251

 

$36,152

 

$47,864

Income taxes
 

($2,227
)
 

($23,565
)
 

($114,092
)
See Notes to Financial Statements.
 
 

 
 

 
 


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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
ASSETS
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents:
 
 
 
 
Cash
 

$78

 

$786

Temporary cash investments
 
287,109

 
245,077

Total cash and cash equivalents
 
287,187

 
245,863

Accounts receivable:
 
 

 
 

Associated companies
 
170,149

 
104,390

Other
 
6,526

 
3,637

Total accounts receivable
 
176,675

 
108,027

Materials and supplies - at average cost
 
88,424

 
82,469

Deferred nuclear refueling outage costs
 
7,908

 
24,729

Prepayments and other
 
2,489

 
20,111

TOTAL
 
562,683

 
481,199

 
 
 
 
 
OTHER PROPERTY AND INVESTMENTS
 
 

 
 

Decommissioning trust funds
 
905,686

 
780,496

TOTAL
 
905,686

 
780,496

 
 
 
 
 
UTILITY PLANT
 
 

 
 

Electric
 
4,327,849

 
4,331,668

Property under capital lease
 
588,281

 
585,084

Construction work in progress
 
69,937

 
43,888

Nuclear fuel
 
207,513

 
259,635

TOTAL UTILITY PLANT
 
5,193,580

 
5,220,275

Less - accumulated depreciation and amortization
 
3,175,018

 
3,063,249

UTILITY PLANT - NET
 
2,018,562

 
2,157,026

 
 
 
 
 
DEFERRED DEBITS AND OTHER ASSETS
 
 

 
 

Regulatory assets:
 
 

 
 

Regulatory asset for income taxes - net
 
—

 
93,127

Other regulatory assets
 
444,327

 
411,212

Other
 
7,629

 
4,652

TOTAL
 
451,956

 
508,991

 
 
 
 
 
TOTAL ASSETS
 

$3,938,887

 

$3,927,712

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 


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SYSTEM ENERGY RESOURCES, INC.
BALANCE SHEETS
LIABILITIES AND EQUITY
 
 
 
 
 
December 31,
 
 
2017
 
2016
 
 
(In Thousands)
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Currently maturing long-term debt
 

$85,004

 

$50,003

Short-term borrowings
 
17,830

 
66,893

Accounts payable:
 
 

 
 

Associated companies
 
16,878

 
5,843

Other
 
62,868

 
50,558

Taxes accrued
 
46,584

 
—

Interest accrued
 
13,389

 
14,049

Other
 
2,434

 
2,957

TOTAL
 
244,987

 
190,303

 
 
 
 
 
NON-CURRENT LIABILITIES
 
 

 
 

Accumulated deferred income taxes and taxes accrued
 
776,420

 
1,112,865

Accumulated deferred investment tax credits
 
39,406

 
41,663

Regulatory liability for income taxes - net
 
246,122

 
—

Other regulatory liabilities
 
455,991

 
370,862

Decommissioning
 
861,664

 
854,202

Pension and other postretirement liabilities
 
121,874

 
117,850

Long-term debt
 
466,484

 
501,129

Other
 
15,130

 
15

TOTAL
 
2,983,091

 
2,998,586

 
 
 
 
 
Commitments and Contingencies
 


 


 
 
 
 
 
COMMON EQUITY
 
 

 
 

Common stock, no par value, authorized 1,000,000 shares; issued and outstanding 789,350 shares in 2017 and 2016
 
658,350

 
679,350

Retained earnings
 
52,459

 
59,473

TOTAL
 
710,809

 
738,823

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 

$3,938,887

 

$3,927,712

 
 
 
 
 
See Notes to Financial Statements.
 
 

 
 



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SYSTEM ENERGY RESOURCES, INC.
STATEMENTS OF CHANGES IN COMMON EQUITY
For the Years Ended December 31, 2017, 2016, and 2015
 
 
 
 
 
Common Equity
 
 
 
Common Stock
 
Retained Earnings
 
Total
 
(In Thousands)
 
 
 
 
 
 
Balance at December 31, 2014

$789,350

 

$81,161

 

$870,511

Net income
—

 
111,318

 
111,318

Common stock dividends and distributions
(70,000
)
 
(130,750
)
 
(200,750
)
Balance at December 31, 2015

$719,350

 

$61,729

 

$781,079

Net income
—

 
96,744

 
96,744

Common stock dividends and distributions
(40,000
)
 
(99,000
)
 
(139,000
)
Balance at December 31, 2016

$679,350

 

$59,473

 

$738,823

Net income
—

 
78,596

 
78,596

Common stock dividends and distributions
(21,000
)
 
(85,610
)
 
(106,610
)
Balance at December 31, 2017

$658,350

 

$52,459

 

$710,809

 
 
 
 
 
 
See Notes to Financial Statements.
 

 
 

 
 



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SYSTEM ENERGY RESOURCES, INC.
SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON
 
 
 
 
 
 
 
 
 
 
 
2017
 
2016
 
2015
 
2014
 
2013
 
(Dollars In Thousands)
 
 
 
 
 
 
 
 
 
 
Operating revenues

$633,458

 

$548,291

 

$632,405

 

$664,364

 

$735,089

Net income

$78,596

 

$96,744

 

$111,318

 

$96,334

 

$113,664

Total assets

$3,938,887

 

$3,927,712

 

$3,728,875

 

$3,826,193

 

$3,537,414

Long-term obligations (a)

$466,484

 

$501,129

 

$572,665

 

$630,603

 

$702,273

Electric energy sales (GWh)
6,675

 
5,384

 
10,547

 
9,219

 
9,794

 
 
 
 
 
 
 
 
 
 
(a) Includes long-term debt (excluding currently maturing debt).


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Item 2.    Properties

Information regarding the registrant’s properties is included in Part I. Item 1. - Entergy’s Business under the sections titled “ Utility - Property and Other Generation Resources ” and “ Entergy Wholesale Commodities - Property ” in this report.

Item 3.    Legal Proceedings

Details of the registrant’s material environmental regulation and proceedings and other regulatory proceedings and litigation that are pending or those terminated in the fourth quarter of 2017 are discussed in Part I. Item 1. - Entergy’s Business under the sections titled “ Retail Rate Regulation ,” “ Environmental Regulation ,” and “ Litigation ” and “ Impairment of Long-lived Assets ” in Note 14 to the financial statements.

Item 4.    Mine Safety Disclosures

Not applicable.

EXECUTIVE OFFICERS OF ENTERGY CORPORATION

Executive Officers
Name
 
Age
 
Position
 
Period
Leo P. Denault (a)
 
58
 
Chairman of the Board and Chief Executive Officer of Entergy Corporation
 
2013-Present
 
 
 
 
Executive Vice President and Chief Financial Officer of Entergy Corporation
 
2004-2013
 
 
 
 
Director of Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, and System Energy
 
2004-2013
 
 
 
 
Director of Entergy Texas
 
2007-2013
 
 
 
 
Director of Entergy New Orleans
 
2011-2013
 
 
 
 
 
 
 
A. Christopher Bakken, III (a)
 
56
 
Executive Vice President and Chief Nuclear Officer of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, and System Energy
 
2016-Present
 
 
 
 
Project Director, Hinkley Point C of EDF Energy
 
2009-2016
 
 
 
 
 
 
 
Marcus V. Brown (a)
 
56
 
Executive Vice President and General Counsel of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
 
2013-Present
 
 
 
 
Senior Vice President and General Counsel of Entergy Corporation, Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
 
2012-2013
 
 
 
 
Vice President and Deputy General Counsel of Entergy Services, Inc.
 
2009-2012
 
 
 
 
Associate General Counsel of Entergy Services, Inc.
 
2007-2009

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Name
 
Age
 
Position
 
Period
Andrew S. Marsh (a)
 
46
 
Executive Vice President and Chief Financial Officer of Entergy Corporation
 
2013-Present
 
 
 
 
Director of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
 
2013-Present
 
 
 
 
Chief Financial Officer of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
 
2014-Present
 
 
 
 
Vice President, System Planning of Entergy Services, Inc.
 
2010-2013
 
 
 
 
Vice President, Planning and Financial Communications of Entergy Services, Inc.
 
2007-2010
 
 
 
 
 
 
 
Roderick K. West (a)
 
49
 
Group President Utility Operations of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, and Entergy Texas
 
2017-Present
 
 
 
 
President, Chief Executive Officer, and Director of System Energy
 
2017-Present
 
 
 
 
Executive Vice President of Entergy Corporation
 
2010-2017
 
 
 
 
Chief Administrative Officer of Entergy Corporation
 
2010-2016
 
 
 
 
President and Chief Executive Officer of Entergy New Orleans
 
2007-2010
 
 
 
 
Director of Entergy New Orleans
 
2005-2011
 
 
 
 
 
 
 
Paul D. Hinnenkamp (a)
 
56
 
Executive Vice President and Chief Operating Officer of Entergy Corporation
 
2017-Present
 
 
 
 
Director of Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
 
2015-Present
 
 
 
 
Senior Vice President and Chief Operating Officer of Entergy Corporation
 
2015-2017
 
 
 
 
Senior Vice President, Capital Project Management and Technology of Entergy Services, Inc.
 
2015
 
 
 
 
Vice President, Capital Project Management and Technology of Entergy Services, Inc.
 
2013-2015
 
 
 
 
Vice President of Fossil Generation Development and Support of Entergy Services, Inc.
 
2010-2013
 
 
 
 
 
 
 
Alyson M. Mount (a)
 
47
 
Senior Vice President and Chief Accounting Officer of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy
 
2012-Present
 
 
 
 
Vice President Corporate Controller of Entergy Services, Inc.
 
2010-2012
 
 
 
 
Director, Corporate Reporting and Accounting Policy of Entergy Services, Inc.
 
2002-2010
 
 
 
 
 
 
 
Andrea Coughlin Rowley (a)
 
52
 
Senior Vice President, Human Resources of Entergy Corporation
 
2016-Present
 
 
 
 
President and Chief Executive Officer of Advance/Evolve LLC
 
2013-2016
 
 
 
 
Vice President, Human Resources of Dover Corporation
 
2012-2013

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Name
 
Age
 
Position
 
Period
Donald W. Vinci (a)
 
59
 
Executive Vice President and Chief Administrative Officer of Entergy Corporation
 
2016-Present
 
 
 
 
Senior Vice President, Human Resources and Chief Diversity Officer of Entergy Corporation
 
2013-2016
 
 
 
 
Vice President, Human Capital Management of Entergy Services, Inc.
 
2013
 
 
 
 
Vice President, Gas Distribution Business of Entergy Services, Inc.
 
2010-2013
 
 
 
 
Vice President, Business Development of Entergy Services, Inc.
 
2008-2010

(a)
In addition, this officer is an executive officer and/or director of various other wholly owned subsidiaries of Entergy Corporation and its operating companies.

Each officer of Entergy Corporation is elected yearly by the Board of Directors. Each officer’s age and title is provided as of December 31, 2017.

PART II

Item 5.   Market for Registrants’ Common Equity and Related Stockholder Matters
 
Entergy Corporation

The shares of Entergy Corporation’s common stock are listed on the New York Stock and Chicago Stock Exchanges under the ticker symbol ETR.

The high and low prices of Entergy Corporation’s common stock for each quarterly period in 2017 and 2016 were as follows:
 
2017
 
2016
 
High
 
Low
 
High
 
Low
 
(In Dollars)
First
77.51
 
69.63
 
79.72
 
65.38
Second
80.61
 
74.88
 
81.36
 
72.67
Third
80.49
 
74.83
 
82.09
 
75.99
Fourth
87.95
 
75.01
 
76.56
 
66.71

Consecutive quarterly cash dividends on common stock were paid to stockholders of Entergy Corporation in 2017 and 2016 .  Quarterly dividends of $0.85 per share were paid through third quarter 2016. In fourth quarter 2016 and through third quarter 2017, dividends of $0.87 per share were paid. In fourth quarter 2017, dividends of $0.89 per share were paid.
 
As of January 31, 2018, there were 26,213 stockholders of record of Entergy Corporation.


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Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities (1)
Period
 
Total Number of Shares Purchased
 
Average Price Paid per Share
 
Total Number of Shares Purchased as Part of a Publicly Announced Plan
 
Maximum $ Amount of Shares that May Yet be Purchased Under a Plan (2)
 
 
 
 
 
 
 
 
 
 
10/01/2017
-10/31/2017
 
—

 

$—

 
—

 

$350,052,918

11/01/2017
-11/30/2017
 
—

 

$—

 
—

 

$350,052,918

12/01/2017
-12/31/2017
 
—

 

$—

 
—

 

$350,052,918

Total
 
 
—

 

$—

 
—

 
 

In accordance with Entergy’s stock-based compensation plans, Entergy periodically grants stock options to key employees, which may be exercised to obtain shares of Entergy’s common stock.  According to the plans, these shares can be newly issued shares, treasury stock, or shares purchased on the open market.  Entergy’s management has been authorized by the Board to repurchase on the open market shares up to an amount sufficient to fund the exercise of grants under the plans.  In addition to this authority, the Board has authorized share repurchase programs to enable opportunistic purchases in response to market conditions. In October 2010 the Board granted authority for a $500 million share repurchase program. The amount of share repurchases under these programs may vary as a result of material changes in business results or capital spending or new investment opportunities.  In addition, in the first quarter 2017, Entergy withheld 1,054 shares of its common stock at $70.58 per share, 122,148 shares of its common stock at $70.61 per share, and 31,243 shares of its common stock at $71.89 per share to pay income taxes due upon vesting of restricted stock granted and payout of performance units as part of its long-term incentive program.

(1)
See Note 12 to the financial statements for additional discussion of the stock-based compensation plans.
(2)
Maximum amount of shares that may yet be repurchased relates only to the $500 million plan does not include an estimate of the amount of shares that may be purchased to fund the exercise of grants under the stock-based compensation plans.

Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy

There is no market for the common equity of the Registrant Subsidiaries.  Cash dividends and distributions on common equity paid by the Registrant Subsidiaries during 2017 and 2016 , were as follows:

 
2017
 
2016
 
(In Millions)
Entergy Arkansas

$15.0

 

$—

Entergy Louisiana

$91.3

 

$285.5

Entergy Mississippi

$26.0

 

$24.0

Entergy New Orleans

$74.3

 

$18.7

Entergy Texas

$—

 

$—

System Energy

$106.6

 

$139.0


Information with respect to restrictions that limit the ability of the Registrant Subsidiaries to pay dividends or distributions is presented in Note 7 to the financial statements.



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Item 6.     Selected Financial Data

Refer to “SELECTED FINANCIAL DATA - FIVE-YEAR COMPARISON OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC. AND SUBSIDIARIES, ENTERGY LOUISIANA, LLC AND SUBSIDIARIES, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES, ENTERGY TEXAS, INC. AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.” which follow each company’s financial statements in this report, for information with respect to selected financial data and certain operating statistics.

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

Refer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES, ENTERGY ARKANSAS, INC. AND SUBSIDIARIES, ENTERGY LOUISIANA, LLC AND SUBSIDIARIES, ENTERGY MISSISSIPPI, INC., ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES, ENTERGY TEXAS, INC. AND SUBSIDIARIES, and SYSTEM ENERGY RESOURCES, INC.”

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk

Refer to “MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS OF ENTERGY CORPORATION AND SUBSIDIARIES - Market and Credit Risk Sensitive Instruments .”

Item 8.   Financial Statements and Supplementary Data

Refer to “TABLE OF CONTENTS - Entergy Corporation, Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, LLC, Entergy Texas, Inc., and System Energy Resources, Inc.”

Item 9.  Changes In and Disagreements With Accountants On Accounting and Financial Disclosure

No event that would be described in response to this item has occurred with respect to Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, or System Energy.

Item 9A.   Controls and Procedures

Disclosure Controls and Procedures

As of December 31, 2017 , evaluations were performed under the supervision and with the participation of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) management, including their respective Principal Executive Officers (PEO) and Principal Financial Officers (PFO).  The evaluations assessed the effectiveness of the Registrants’ disclosure controls and procedures.  Based on the evaluations, each PEO and PFO has concluded that, as to the Registrant or Registrants for which they serve as PEO or PFO, the Registrant’s or Registrants’ disclosure controls and procedures are effective to ensure that information required to be disclosed by each Registrant in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms; and that the Registrant’s or Registrants’ disclosure controls and procedures are also effective in reasonably assuring that such information is accumulated and communicated to the Registrant’s or Registrants’ management, including their respective PEOs and PFOs, as appropriate to allow timely decisions regarding required disclosure.


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Internal Control over Financial Reporting

(Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

The managements of Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy (individually “Registrant” and collectively the “Registrants”) are responsible for establishing and maintaining adequate internal control over financial reporting for the Registrants.  Each Registrant’s internal control system is designed to provide reasonable assurance regarding the preparation and fair presentation of each Registrant’s financial statements presented in accordance with generally accepted accounting principles.

All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Each Registrant’s management assessed the effectiveness of each Registrant’s internal control over financial reporting as of December 31, 2017 .  In making this assessment, each Registrant’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. The 2013 COSO Framework was utilized for management’s assessment.

Based on each management’s assessment and the criteria set forth by the 2013 COSO Framework, each Registrant’s management believes that each Registrant maintained effective internal control over financial reporting as of December 31, 2017 .

The report of Deloitte & Touche LLP, Entergy Corporation’s independent registered public accounting firm, regarding Entergy Corporation’s internal control over financial reporting is included herein. The report of Deloitte & Touche LLP is not applicable to Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy because these Registrants are non-accelerated filers.

Changes in Internal Controls over Financial Reporting

Under the supervision and with the participation of each Registrant’s management, including its respective PEO and PFO, each Registrant evaluated changes in internal control over financial reporting that occurred during the quarter ended December 31, 2017 and found no change that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

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Attestation Report of Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and Board of Directors of
Entergy Corporation and Subsidiaries

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2017, based on criteria established in Internal Control -Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2017 of the Corporation and our report dated February 26, 2018 expressed an unqualified opinion of those consolidated financial statements.

Basis for Opinion

The Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Item 9A, Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

New Orleans, Louisiana
February 26, 2018

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PART III

Item 10.   Directors and Executive Officers of the Registrants (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas)

Information required by this item concerning directors of Entergy Corporation is set forth under the heading “Item 1 – Election of Directors” contained in the Proxy Statement of Entergy Corporation, to be filed in connection with its Annual Meeting of Stockholders to be held May 4, 2018, and is incorporated herein by reference.

All officers and directors listed below held the specified positions with their respective companies as of the date of filing this report, unless otherwise noted.
Name
 
Age
 
Position
 
Period
ENTERGY ARKANSAS, INC.
 
 
 
 
 
 
 
Directors
 
 
 
 
 
 
Richard C. Riley
 
55
 
President and Chief Executive Officer of Entergy Arkansas
 
2016-Present
 
 
 
 
Director of Entergy Arkansas
 
2016-Present
 
 
 
 
Group Vice President, Customer Service and Operations of Entergy Arkansas
 
2015-2016
 
 
 
 
Vice President, Transmission of Entergy Services, Inc.
 
2010-2015
 
 
 
 
 
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
 
 
 
 
 
 
 
Officers
 
 
 
 
 
 
A. Christopher Bakken, III
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Marcus V. Brown
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Leo P. Denault
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Alyson M. Mount
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Richard C. Riley
 
 
 
See information under the Entergy Arkansas Directors Section above.
 
 
Andrea Coughlin Rowley
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Donald W. Vinci
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

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ENTERGY LOUISIANA, LLC
Directors
 
 
 
 
 
 
Phillip R. May, Jr.
 
55
 
President and Chief Executive Officer of Entergy Louisiana
 
2013-Present
 
 
 
 
Director of Entergy Louisiana
 
2013-Present
 
 
 
 
Vice President, Regulatory Services of Entergy Services, Inc.
 
2002-2013
 
 
 
 
 
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
 
 
 
 
 
 
 
Officers
 
 
 
 
 
 
A. Christopher Bakken, III
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Marcus V. Brown
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Leo P. Denault
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Phillip R. May, Jr.
 
 
 
See information under the Entergy Louisiana Directors Section above.
 
 
Alyson M. Mount
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrea Coughlin Rowley
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Donald W. Vinci
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

ENTERGY MISSISSIPPI, INC.
Directors
 
 
 
 
 
 
Haley R. Fisackerly
 
52
 
President and Chief Executive Officer of Entergy Mississippi
 
2008-Present
 
 
 
 
Director of Entergy Mississippi
 
2008-Present
 
 
 
 
 
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

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Officers
 
 
 
 
 
 
Marcus V. Brown
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Leo P. Denault
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Haley R. Fisackerly
 
 
 
See information under the Entergy Mississippi Directors Section above.
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Alyson M. Mount
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrea Coughlin Rowley
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Donald W. Vinci
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

ENTERGY NEW ORLEANS, LLC
Directors
 
 
 
 
 
 
Charles L. Rice, Jr.
 
53
 
President and Chief Executive Officer of Entergy New Orleans
 
2010-Present
 
 
 
 
Director of Entergy New Orleans
 
2010-Present
 
 
 
 
Director, Utility Strategy of Entergy Services, Inc.
 
2009-2010
 
 
 
 
Partner, Barrasso, Usdin, Kupperman, Freeman & Sarver, LLC
 
2005-2009
 
 
 
 
 
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

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Officers
 
 
 
 
 
 
Marcus V. Brown
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Leo P. Denault
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Alyson M. Mount
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Charles L. Rice, Jr.
 
 
 
See information under the Entergy New Orleans Directors Section above.
 
 
Andrea Coughlin Rowley
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Donald W. Vinci
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
ENTERGY TEXAS, INC.
Directors
 
 
 
 
 
 
Sallie T. Rainer
 
56
 
President and Chief Executive Officer of Entergy Texas
 
2012-Present
 
 
 
 
Director of Entergy Texas
 
2012-Present
 
 
 
 
Vice President, Federal Policy of Entergy Services, Inc.
 
2011-2012
 
 
 
 
Director, Regulatory Affairs and Energy Settlements of Entergy Services, Inc.
 
2006-2011
 
 
 
 
 
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

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Officers
 
 
 
 
 
 
Marcus V. Brown
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Leo P. Denault
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Paul D. Hinnenkamp
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Andrew S. Marsh
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Alyson M. Mount
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Sallie T. Rainer
 
 
 
See information under the Entergy Texas Directors Section above.
 
 
Andrea Coughlin Rowley
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Donald W. Vinci
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 
Roderick K. West
 
 
 
See information under the Entergy Corporation Officers Section in Part I.
 
 

Each director and officer of the applicable Entergy company is elected yearly to serve by the unanimous consent of the sole common stockholder with the exception of the directors and officers of Entergy Louisiana, LLC and Entergy New Orleans, LLC, who are elected yearly to serve by the unanimous consent of the sole common membership owner, Entergy Utility Holding Company, LLC. Entergy Corporation’s directors are elected annually at the annual meeting of shareholders.  Entergy Corporation’s officers are elected at the annual organizational meeting of the Board of Directors.

Corporate Governance Guidelines and Committee Charters

Each of the Audit, Corporate Governance, and Personnel Committees of Entergy Corporation’s Board of Directors operates under a written charter.  In addition, the full Board has adopted Corporate Governance Guidelines.  Each charter and the guidelines are available through Entergy’s website (www.entergy.com) or upon written request.

Audit Committee of the Entergy Corporation Board

The following directors are members of the Audit Committee of Entergy Corporation’s Board of Directors:

Patrick J. Condon (Chairman)
Maureen S. Bateman
Philip L. Frederickson
Blanche L. Lincoln
Karen A. Puckett

All Audit Committee members are independent.  In addition to the general independence requirements, all Audit Committee members must meet the heightened independence standards imposed by the SEC and NYSE.  All Audit Committee members possess the level of financial literacy and accounting or related financial management expertise required by the NYSE rules.  The Board has determined that each of Patrick J. Condon and Philip L. Frederickson is an “audit committee financial expert” as such term is defined by the rules of the SEC.


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Code of Ethics

The Board of Directors has adopted a Code of Business Conduct and Ethics for Members of the Board of Directors.  The code is available through Entergy’s website (www.entergy.com) or upon written request.  The Board has also adopted a Code of Business Conduct and Ethics for Employees that includes Special Provisions Relating to Principal Executive Officer and Senior Financial Officers.  The Code of Business Conduct and Ethics for Employees is to be read in conjunction with Entergy’s omnibus code of integrity under which Entergy operates called the Code of Entegrity as well as system policies.  All employees are expected to abide by the Codes.  Non-bargaining employees are required to acknowledge annually that they understand and abide by the Code of Entegrity.  The Code of Business Conduct and Ethics for Employees, including any amendments or any waivers thereto, and the Code of Entegrity are available through Entergy’s website (www.entergy.com) or upon written request.

Source of Nominations to the Board of Directors; Nominating Procedure

The Corporate Governance Committee will consider candidates identified by current directors, management, third-party search firms engaged by the Corporate Governance Committee and Entergy Corporation’s shareholders. Shareholders wishing to recommend a candidate to the Corporate Governance Committee should do so by submitting the recommendation in writing to Entergy Corporation’s Secretary at 639 Loyola Avenue, P.O. Box 61000, New Orleans, LA 70161, and it will be forwarded to the Corporate Governance Committee members for their consideration. Any recommendation should include:

•
the number of shares of Entergy Corporation stock held by the shareholder;
•
the name and address of the candidate;
•
a brief biographical description of the candidate, including his or her occupation for at least the last five years, and a statement of the qualifications of the candidate, taking into account the qualification requirements discussed in the Proxy Statement under “Corporate Governance at Entergy - Our Board Structure - Identifying Director Candidates”; and
•
the candidate’s signed consent to be named in the Proxy Statement and to serve as a director if elected.
    
Once the Corporate Governance Committee receives the recommendation, it may request additional information from the candidate about the candidate’s independence, qualifications, and other information that would assist the Corporate Governance Committee in evaluating the candidate, as well as certain information that must be disclosed about the candidate in the Proxy Statement, if nominated. The Corporate Governance Committee will apply the same standards in considering director candidates recommended by shareholders as it applies to other candidates.

Section 16(a) Beneficial Ownership Reporting Compliance

Information called for by this item concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement of Entergy Corporation to be filed in connection with its Annual Meeting of Stockholders to be held on May 4, 2018, under the heading “Section 16(a) Beneficial Ownership Reporting Compliance,” which information is incorporated herein by reference.


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Item 11.   Executive Compensation

ENTERGY CORPORATION

Information concerning the directors and officers of Entergy Corporation is set forth in the Proxy Statement under the headings “Compensation Discussion and Analysis,” “Executive Compensation Tables,” “Nominees for the Board of Directors,” and “Non-Employee Director Compensation,” all of which information is incorporated herein by reference.

ENTERGY ARKANSAS, ENTERGY LOUISIANA, ENTERGY MISSISSIPPI, ENTERGY NEW ORLEANS, AND ENTERGY TEXAS

COMPENSATION DISCUSSION AND ANALYSIS

In this section, the compensation earned by the following Named Executive Officers in 2017 is discussed. Each officer’s title is provided as of December 31, 2017.
Name (1)
Title
A. Christopher Bakken, III
Executive Vice President and Chief Nuclear Officer
Marcus V. Brown
Executive Vice President and General Counsel
Leo P. Denault
Chairman of the Board and Chief Executive Officer
Haley R. Fisackerly
President and Chief Executive Officer, Entergy Mississippi
Andrew S. Marsh
Executive Vice President and Chief Financial Officer Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, and Entergy Texas
Phillip R. May, Jr.
President and Chief Executive Officer, Entergy Louisiana
Sallie T. Rainer
President and Chief Executive Officer, Entergy Texas
Charles L. Rice, Jr.
President and Chief Executive Officer, Entergy New Orleans
Richard C. Riley
President and Chief Executive Officer, Entergy Arkansas
Roderick K. West
Group President Utility Operations

(1)
Messrs. Bakken, Brown, Denault, Marsh, and West hold the positions referenced above as executive officers
of Entergy Corporation and are members of Entergy Corporation’s Office of the Chief Executive. No additional compensation was paid in 2017 to any of these officers for their service as Named Executive Officers of the Utility operating companies.



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CD&A Highlights
Executive Compensation Programs and Practices
    
Entergy Corporation regularly reviews its executive compensation programs to align them with commonly viewed best practices in the market and to reflect feedback from discussions with investors on executive compensation.

Sound Program Design

Entergy Corporation’s executive compensation programs are designed to:

•
Pay for performance
•
Attract, retain, and motivate key executive officers who drive Entergy Corporation’s success and industry leadership
•
Provide market compensation payout opportunities
•
Align with the interests of Entergy Corporation’s long-term shareholders
•
Reflect best practices in the market

  Executive Compensation Best Practices :

Changes Since 2017 Annual Meeting
*
To align with compensation best practices, and in response to investor feedback, beginning with the 2018-2020 performance period, added a cumulative utility earnings performance measure to the Long-Term Performance Incentive Program supplementing the relative total shareholder return measure historically used in this program
What Entergy Corporation Does
*
Double trigger for severance payments or equity acceleration in the event of a change in control
*
Clawback policy that goes beyond Sarbanes-Oxley requirements
*
Maximum payout capped at 200% of target under the Long-Term Performance Unit Program and under the Annual Incentive Plan for members of the Office of the Chief Executive
*
Minimum vesting periods for equity-based awards
*
Long-term compensation mix weighted more toward performance units than service-based equity awards
*
All long-term performance units settled in shares of Entergy Corporation common stock
*
Rigorous stock ownership requirements
*
Executives required to hold substantially all equity compensation received by Entergy Corporation until stock ownership guidelines are met
*
Annual Say on Pay vote
What Entergy Corporation Doesn’t Do
*
No 280G tax “gross up” payments in the event of a change in control

*
No tax “gross up” payments on any executive perquisites, other than relocation benefits available to all eligible employees, and club dues for some of the Named Executive Officers.
*
No option repricing or cash buy-outs for underwater options
*
No agreements providing for severance payments to executive officers that exceed 2.99 times annual base salary and annual incentive awards without shareholder approval
*
No hedging or pledging of Entergy Corporation common stock
*
No unusual or excessive perquisites
*
New officers are excluded from participation in the System Executive Retirement Plan
*
No grants of supplemental service credit to newly-hired officers under any of Entergy Corporation’s non-qualified retirement plans

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Entergy Corporation’s Pay for Performance Philosophy

Entergy Corporation’s executive compensation programs are based on a philosophy of pay for performance that is embodied in the design of its annual and long-term incentive plans. It believes the executive pay programs described in this section and in the accompanying tables have played a significant role in its ability to drive strong financial and operational results and to attract and retain a highly experienced and successful management team. The Annual Incentive Plan incentivizes and rewards the achievement of financial metrics that are deemed by the Personnel Committee to be consistent with the overall goals and strategic direction that the Entergy Corporation Board has approved for Entergy Corporation. The long-term incentive programs further align the interests of Entergy Corporation’s executives and its shareholders by directly tying the value of the equity awards granted to executives under these programs to Entergy Corporation’s stock price performance and total shareholder return. By incentivizing officers to achieve important financial and operational objectives and create long-term shareholder value, these programs play a key role in creating sustainable value for the benefit of all of Entergy Corporation’s stakeholders, including owners, customers, employees, and communities.

Incentive Programs and 2017 Incentive Pay Outcomes
    
Entergy Corporation believes that the 2017 incentive pay outcomes for the Named Executive Officers demonstrated the application of its pay for performance philosophy.
Annual Incentive Plan
    
Awards under the Executive Annual Incentive Plan, or Annual Incentive Plan, are tied to Entergy Corporation’s financial and operational performance through the Entergy Achievement Multiplier (EAM), which is the performance metric used to determine the maximum funding available for awards under the plan. The 2017 EAM was determined based in equal part on Entergy Corporation’s success in achieving its consolidated operational earnings per share and consolidated operational operating cash flow goals set at the beginning of the year. These goals were approved by the Personnel Committee based on Entergy Corporation’s financial plan and the Board’s overall goals for Entergy Corporation and were consistent with its published earnings guidance.

•
2017 Annual Incentive Plan Payout . For 2017, the Personnel Committee, based on a recommendation of the Finance Committee, determined that management exceeded its consolidated operational earnings per share goal of $5.05 per share by $2.17, but fell short of its consolidated operational operating cash flow goal of $3.000 billion by approximately $227 million. Based on the targets and ranges previously established by the Committee, these results resulted in a calculated EAM of 129%. This determined the maximum funding level for the plan and the maximum award, as a percentage of target, that could be received by any of the executive officers, subject to downward adjustment based on individual performance. After considering individual performance, including the role played by each of the Named Executive Officers, who are members of the Office of the Chief Executive, in advancing Entergy Corporation’s strategies and delivering the strong financial results in 2017, the Personnel Committee approved payouts of 129% of target for each of the Named Executive Officers, who are members of the Office of the Chief Executive.

After the EAM was established to determine overall funding for the Annual Incentive Plan, Entergy Corporation’s Chief Executive Officer allocated incentive award funding to individual business units based on business unit results.  Individual awards were determined for the Named Executive Officers who are not members of the Office of the Chief Executive by their immediate supervisor based on the individual officer’s key accountabilities, accomplishments, and performance. This resulted in payouts that ranged from 79% of target to 204% of target for the Named Executive Officers who are not members of Entergy Corporation’s Office of the Chief Executive.
Long-Term Incentives
    
Long term incentives consist of three components to incentivize long-term value creation - performance units, stock options, and restricted stock. Performance under the Long-Term Performance Unit Program is measured over

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a three-year period by assessing Entergy Corporation’s total shareholder return in relation to the total shareholder return of the companies included in the Philadelphia Utility Index. Payouts, if any, are based on Entergy Corporation’s total shareholder return performance in relation to its peers and are not subject to adjustment by the Personnel Committee. Beginning with the 2018-2020 performance period, Entergy Corporation will be using a cumulative utility earnings measure, as well as relative total shareholder return to assess performance under the Long-Term Performance Unit Program. Entergy Corporation also uses stock options, which reward increases in the market value of its common stock, and restricted stock, which is an effective retention mechanism.

•
Long-Term Performance Unit Program Payout. For the three-year performance period ending in 2017, Entergy Corporation’s total shareholder return was in the third quartile, resulting in a payout of 31% of target for its executive officers. Payouts were made in shares of Entergy Corporation common stock which are required to be held by executive officers until they satisfy the executive stock ownership guidelines.

What Entergy Corporation Pays and Why

How Entergy Corporation Sets Target Pay

To develop a competitive compensation program, the Personnel Committee annually reviews compensation data from two sources:

Use of Competitive Data

The Personnel Committee uses published and private compensation survey data to develop marketplace compensation levels for Entergy Corporation’s executive officers. The data compiled by the Committee’s independent compensation consultant, Pay Governance LLC, compare the current compensation opportunities provided to each of the executive officers against the compensation opportunities provided to executives holding similar positions at companies with corporate revenues similar to Entergy Corporation’s. The Committee reviews:

•
For non-industry specific positions, general industry data for total cash compensation (base salary and annual incentive) since the market for talent is broader than the utility sector.
•
For management positions that are industry-specific, such as Group President, Utility Operations, data from utility companies for total cash compensation.
•
For all positions, utility market data for long-term incentives.

The survey data reviewed by the Committee cover hundreds of companies across a broad range of industries and approximately 60 investor-owned utility companies. In evaluating compensation levels against the survey data, the Committee considers only the aggregated survey data. The identities of the companies participating in the compensation survey data are not disclosed to, or considered by, the Committee in its decision-making process and, thus, are not considered material by the Committee.

The Committee uses this survey data to develop compensation opportunities that are designed to deliver total target compensation at approximately the 50th percentile of the surveyed companies in the aggregate. The survey data are the primary data used for purposes of assessing target compensation. As a result, Mr. Denault, Entergy Corporation’s Chief Executive Officer, is compensated at a higher level than the other Named Executive Officers, reflecting market practices that compensate chief executive officers at greater potential compensation levels with more pay “at risk” than other Named Executive Officers, due to the greater responsibilities and accountability required of a Chief Executive Officer. In most cases, the Committee considers its objectives to have been met if Entergy Corporation’s Chief Executive Officer and the 7 other executive officers who constitute what is referred to as the Office of the Chief Executive each has a target compensation opportunity that falls within the range of 85% - 115% of the 50th percentile of the survey data. Promoted officers or officers who are new to their roles may be transitioned into the targeted market range over time. Actual compensation received by an individual officer may be above or below the targeted range based on an individual officer’s skills, performance, experience, and responsibilities, Entergy Corporation performance, and internal pay equity.

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Proxy Analysis

Although the survey data described above are the primary data used in benchmarking compensation, the Committee reviews data derived from the proxy statements of companies included in the Philadelphia Utility Index as an additional point of comparison. The Personnel Committee identified the Philadelphia Utility Index as the appropriate industry peer group because the companies included in this index, in the aggregate, are comparable to Entergy Corporation in terms of business and scale. The proxy data are used to compare the compensation levels of the Named Executive Officers with the compensation levels of the corresponding top five highest paid executive officers of the companies included in the Philadelphia Utility Index, as reported in their proxy statements. The Personnel Committee uses this analysis to evaluate the overall reasonableness of Entergy Corporation’s compensation programs. The following companies were included in the Philadelphia Utility Index at the time the proxy data from the 2016 filings were compiled:
Ÿ
AES Corporation
Ÿ
El Paso Electric
Ÿ
Ameren Corporation
Ÿ
Eversource Energy
Ÿ
American Electric Power Co. Inc.
Ÿ
Exelon Corporation
Ÿ
American Water Works
Ÿ
FirstEnergy Corporation
Ÿ
CenterPoint Energy Inc.
Ÿ
NextEra Energy
Ÿ
Consolidated Edison Inc.
Ÿ
PG&E Corporation
Ÿ
Dominion Resources Inc.
Ÿ
Public Service Enterprise Group, Inc.
Ÿ
DTE Energy Company
Ÿ
Southern Company
Ÿ
Duke Energy Corporation
Ÿ
Xcel Energy
Ÿ
Edison International
 
 

Executive Compensation Elements

The following table summarizes the elements of total direct compensation (TDC) granted or paid to the executive officers under Entergy Corporation’s 2017 executive compensation program. The program uses a mix of fixed and variable compensation elements and provides alignment with both short- and long-term business goals through annual and long-term incentives. The Personnel Committee establishes the performance measures and ranges of performance for the variable compensation elements. An individual’s award is based primarily on corporate performance, market-based compensation levels, and individual performance.  

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Element
Key Characteristics
Why This Element Is Paid
How This Amount Is Determined
2017 Decisions
Base Salary
Fixed compensation component payable in cash. Reviewed annually and adjusted when appropriate.
Provides a base level of competitive cash compensation for executive talent.
Experience, job scope, market data, individual performance, and internal pay equity.
All of the Named Executive Officers received increases in their base salaries ranging from 1.5% to 7.3%.
Annual Incentive Awards
Variable compensation component payable in cash based on performance against goals established annually.
Motivate and reward executives for performance on key financial and operational measures during the year.
Target opportunity is determined based on job scope, market data, and internal pay equity.
 
For 2017, awards were determined based on success in meeting consolidated operational earnings per share and consolidated operational operating cash flow targets, subject to downward adjustment at the Personnel Committee’s discretion for members of the Office of the Chief Executive.
Mr. Denault's target annual incentive award for 2017 was 135% of base salary, and target awards were in the range of 40% to 70% of base salary for the other Named Executive Officers.

Strong operational and financial performance and a review of individual performance resulted in an award at 129% of target for Entergy Corporation’s Chief Executive Officer, and awards that ranged from 79% to 204% of target for the other Named Executive Officers.
Long-Term
Performance
Unit
Program
Each performance unit equals one share of Entergy Corporation’s common stock. Performance is measured at the end of a three-year performance period. Each unit also earns the equivalent of the dividends paid during the performance period. Performance units granted under the Long-Term Performance Unit Program along with accrued dividend equivalents are settled in shares of Entergy Corporation common stock.
Focuses executive officers on building long-term shareholder value and increases executive officers’ ownership of Entergy Corporation common stock.
Formulaic. payout based on Entergy Corporation’s total shareholder return relative to the total shareholder return of the companies in the Philadelphia Utility Index.

Beginning with the 2018-2020 performance period, payouts will be based on a cumulative utility earnings metric, as well as total shareholder return.
Performance unit grants for the 2017-2019 performance period represented approximately 39% of target TDC for Entergy Corporation’s Chief Executive Officer and approximately 21% to 31% of target for the other Named Executive Officers.

Unfavorable relative total shareholder return in 2015 and 2016, partially offset by strong relative total shareholder return in 2017, resulted in performance in the third quartile with a 6.7% TSR for the 2015-2017 performance period, yielding a payout of 31% of target for the Named Executive Officers.
Stock
Options
Non-qualified stock options are granted at fair market value, have a ten-year term, and vest over 3 years - 33 1/3% on each anniversary of the grant date.
Reward executives for absolute value creation and coupled with restricted stock provide competitive compensation, retain executive talent, and increase the executive officers’ ownership in Entergy Corporation’s common stock.
Job scope, market data, individual performance, and Entergy Corporation performance.
Stock options in 2017 represented approximately 13% of target TDC for Entergy Corporation’s Chief Executive Officer and approximately 7% to 10% for the other Named Executive Officers.

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Restricted
Stock
Awards
Restricted stock awards vest over 3 years - 33 1/3% on each anniversary of the grant date, have voting rights, and accrue dividends during the vesting period.
Coupled with stock options, align interests of executives with long-term shareholder value, provide competitive compensation, retain executive talent, and increase the executive officers’ ownership of Entergy Corporation common stock.
Job scope, market data, individual performance, and Entergy Corporation performance.
Restricted stock in 2017 represented approximately 13% of target TDC for Entergy Corporation’s Chief Executive Officer and approximately 7% - 10% for the other Named Executive Officers.

Fixed Compensation

Base Salary

The Personnel Committee determines the base salaries for all of the Named Executive Officers who are members of the Office of the Chief Executive based on competitive compensation data, performance considerations, and advice provided by the Committee’s independent compensation consultant. For the other Named Executive Officers, their salaries are established by their immediate supervisors using the same criteria. The Committee also considers internal pay equity; however, the Committee has not established any predetermined formula against which the base salary of one Named Executive Officer is measured against another officer or employee.

In 2017, all of the Named Executive Officers received merit increases in their base salaries ranging from approximately 1.5% to 7.3%. The increases in base salary were based on the market data previously discussed in this CD&A under “What Entergy Corporation Pays and Why - How Entergy Corporation Sets Target Pay,” as well as an internal pay equity comparison.

The following table sets forth the 2016 and 2017 base salaries for the Named Executive Officers. Changes in base salaries for 2017 were effective in April 2017.
Named Executive Officer
 
2016 Base Salary
 
2017 Base Salary
A. Christopher Bakken, III
 
$605,000
 
$620,125
Marcus V. Brown
 
$605,000
 
$630,000
Leo P. Denault
 
$1,200,000
 
$1,230,000
Haley R. Fisackerly
 
$350,000
 
$355,300
Andrew S. Marsh
 
$559,408
 
$600,000
Phillip R. May, Jr.
 
$356,650
 
$366,150
Sallie T. Rainer
 
$319,475
 
$328,275
Charles L. Rice, Jr.
 
$280,424
 
$286,424
Richard C. Riley
 
$335,000
 
$344,200
Roderick K. West
 
$659,120
 
$675,598

Variable Compensation

Short-Term Incentive Compensation

Annual Incentive Plan

Entergy Corporation includes performance-based incentives in the Named Executive Officers’ compensation packages because it believes performance-based incentives encourage the Named Executive Officers to pursue objectives consistent with the overall goals and strategic direction that the Board has approved for Entergy Corporation. The EAM is the performance metric used to determine the maximum percentage of target annual plan opportunities that will be paid each year to each Named Executive Officer who are members of the Office of the Chief Executive under the Annual Incentive Plan. Once the EAM has been determined, individual awards for the Office of the Chief

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Executive members may be adjusted downward, but not upward, from the EAM at the Personnel Committee’s discretion, based on individual performance and other factors deemed relevant by the Personnel Committee. For 2017, the target Annual Incentive Plan opportunities for each of the Named Executive Officers, expressed as a percentage of the officer’s base salary, were:

•
135% for Mr. Denault;
•
70% for Mr. Bakken, Mr. Brown, Mr. Marsh, and Mr. West;
•
60% for Mr. May; and
•
40% for Mr. Fisackerly, Ms. Rainer, Mr. Rice, and Mr. Riley.

The target opportunities established for these officers were comparable to the target opportunities historically set for these positions and levels of responsibility. Target opportunities for the Named Executive Officers who are members of the Office of the Chief Executive are established by the Personnel Committee, and these Named Executive Officers may earn a maximum payout ranging from 0% to 200% of their target opportunity, calculated as described in the table below.

Target award opportunities are set based on an executive officer’s position and executive management level within the Entergy organization. Executive management levels at Entergy Corporation range from Level 1 through Level 4. At December 31, 2017, Mr. Denault held a Level 1 position, Messrs. Bakken, Brown, Marsh, and West held positions in Level 2, Mr. May held a Level 3 position, and the remaining Named Executive Officers held positions in Level 4. Accordingly, their respective incentive award opportunities differ from one another based on their management level and the external market data developed by the Committee’s independent compensation consultant.

Each year the Personnel Committee reviews the performance measures used to determine the EAM pool. In December 2016, the Personnel Committee decided to retain consolidated operational earnings per share and consolidated operational operating cash flow, each measure weighted equally, as the performance measures for determining the EAM pool. The Committee considered a variety of other potential measures, but determined that consolidated operational earnings per share and consolidated operational operating cash flow continued to be the best metrics to use because, among other things, they are objective measures that Entergy Corporation’s investors consider to be important in evaluating its financial performance and because Entergy Corporation’s goals in that regard are broadly communicated both internally and externally. This provides both discipline and transparency that the Committee believes are important objectives of any well designed incentive compensation plan.

The Personnel Committee also engages in a rigorous process each year to establish the target achievement levels for each of the EAM performance measures with a goal of establishing target achievement levels that are consistent with Entergy Corporation’s strategy and business objectives for the upcoming year, as reflected in its financial plan, and sufficient to drive results that represent a high level of achievement, taking into consideration the applicable business environment and specific challenges facing it. These targets are approved based on a comprehensive review by the full Board of Entergy Corporation’s financial plan, conducted in December of the preceding year and updated in January to reflect the most current information concerning changes in commodity market conditions and other key drivers of anticipated changes in performance from the preceding year. The Committee also reviews the effects on plan results of various risks and opportunities that are recognized at the time the plan is set, to assure that targets that are determined based on the plan reflect an appropriate balance of risks and opportunities. The Committee further confirms that the earnings target it approves is aligned with the earnings guidance that will be communicated to the financial markets, thus ensuring that the internal earnings target set for purposes of Entergy Corporation’s incentive compensation plans is aligned with the external expectations set and communicated to Entergy Corporation’s shareholders.

In January 2017, after full Board review of management’s 2017 financial plan for Entergy Corporation and engaging in the process discussed above, the Committee determined the Annual Incentive Plan targets to be used for purposes of determining Annual Incentive Plan awards for 2017. In keeping with its past practice, the Committee also determined that for purposes of measuring performance against such targets, the Committee would exclude the effect on reported results of any major storms that may occur during the year. This exclusion was viewed by the Committee

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as appropriate because although Entergy Corporation includes estimates for storm costs in its financial plan, it does not include estimates for a major storm event, such as a hurricane. The Committee also approved exclusions from reported results, for purposes of calculating achievement levels, for the impact of certain longstanding unresolved litigation relating to the System Agreement among the Utility operating companies, and for the potential effects of changes in tax laws, given the possibility that significant unanticipated changes in tax laws might be enacted during the year that could impact reported results. The Committee believed that each of these adjustments was appropriate because of the significant uncertainty around each such item and management’s inability to influence any of the related outcomes.
 
In determining the targets to set for 2017, the Committee reviewed anticipated drivers for consolidated operational earnings per share and consolidated operational operating cash flow for 2017 as set forth in Entergy Corporation’s financial plan and as reflected in its published earnings guidance. Under the plan, consolidated operational earnings per share were expected to decline from 2016 results due primarily to the significant impact on 2016 operational results of certain tax benefits and, to a lesser extent, favorable weather, which were not anticipated to recur in 2017. Together, these factors accounted for $2.06 of consolidated operational earnings per share for 2016. Under the plan, consolidated operational operating cash flow was expected to increase slightly in 2017 from 2016 results.

In evaluating the proposed targets, the Committee considered the potential impact on consolidated operational earnings per share and consolidated operational operating cash flow of certain risks and opportunities, including differences in wholesale energy prices and capacity factors at Entergy Wholesale Commodities, utility sales, operations and maintenance costs, interest expense, and certain tax and regulatory risks. This evaluation indicated that there was significantly more downside risk than upside opportunity in the targets and, as a result, that there was a reasonable degree of challenge embedded in the targets.

After adjusting to eliminate the impact of weather and tax benefits, the 2017 plan targets required management to achieve (i) slight growth in utility operational earnings despite higher nuclear and pension costs and the absence of certain favorable items from 2016 and (ii) modest growth in Entergy Wholesale Commodities operational earnings, despite an expectation for further declines in wholesale energy and capacity revenues due in part to the sale of FitzPatrick in the first quarter of 2017. While the resulting earnings target represented a decline from 2016 operational results, the Committee recognized that in addition to the favorable weather and tax items that were not expected to recur in 2017, management would be challenged in 2017 by significantly higher nuclear costs as they executed on its nuclear strategic plan. Thus, the Committee concluded, based on a careful review of the overall plan, that the targets derived from the plan challenged management appropriately to deliver growth in Entergy Corporation’s core business while continuing to manage the significant risks at Entergy Wholesale Commodities and represented an appropriate balancing of Entergy Corporation’s business risks and opportunities for 2017.

The following table shows the resulting Annual Incentive Plan targets established by the Personnel Committee in January 2017, and 2017 results:
Annual Incentive Plan Targets and Results
 
Performance Goals (1)
 
 
Minimum
Target
Maximum
2017 Results
Consolidated Operational Earnings Per Share
$4.55
$5.05
$5.55
$7.22
Consolidated Operational Operating Cash Flow ($ billion)
$2.600
$3.000
$3.400
$2.773
EAM as % of Target
25%
100%
200%
129%

(1)
Payouts for performance between minimum and target achievement levels and between target and maximum levels are calculated using straight-line interpolation. There is no payout for performance below minimum.


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In January 2018, the Finance and Personnel Committees jointly reviewed Entergy Corporation’s financial results against the performance objectives reflected in the table above. Management discussed with the Committees the consolidated operational earnings per share and consolidated operational operating cash flow results for 2017, including primary factors explaining how those results compared to the 2017 business plan and Annual Incentive Plan targets. Consolidated operational earnings per share exceeded the operational earnings per share goal of $5.05 per share set at the beginning of the year by $2.17, due in large part to a non-cash restructuring tax benefit, but management fell short of achieving its consolidated operational operating cash flow goal of $3.000 billion by approximately $227 million, leading to a calculated EAM of 129%. Operational results excluded the impact of certain special items that were excluded from as-reported (GAAP) earnings per share and operating cash flow to determine consolidated operational earnings per share and consolidated operational operating cash flow, including asset impairments and related write-offs at Entergy Wholesale Commodities related to Entergy Corporation’s 2016 decision to close two nuclear generating plants, and certain costs associated with nuclear plant closings, and charges recorded at the end of 2017 relating to the impact of recently enacted federal income tax law changes. Consistent with determinations made by the Personnel Committee when the targets were set, adjustments were made to the reported results to exclude the impact of Hurricane Harvey and the resolution of certain longstanding System Agreement litigation, but these adjustments had only a negligible impact on the calculated EAM.

     The Committee reviewed certain sensitivities as part of its review of the calculation of the EAM and noted that Entergy Corporation far exceeded its consolidated operational earnings per share goal in 2017, as noted, due in large part to a restructuring tax benefit, partially offset by unfavorable weather at the utility, and that unfavorable weather at the utility also accounted for approximately $128 million of the $227 million shortfall in consolidated operational operating cash flow. Had the EAM been calculated to exclude both the impact of the restructuring tax benefit and unfavorable weather, the calculated EAM would have been 140%. This indicated that the underlying performance of the core business, without regard to the impact of tax items and weather, was significantly stronger than implied by the calculated EAM. However, consistent with the plan design, the Personnel Committee did not make any adjustments for these factors to the consolidated operational earnings per share and consolidated operational operating cash flow results to determine the EAM for 2017. The Committee also noted that its utility, parent, and other adjusted earnings of $4.57 per share for 2017 were slightly above the high end of the guidance range Entergy Corporation had provided to investors at the beginning of the year for this extremely important measure of its core utility earnings.

In determining individual executive officer awards under the Annual Incentive Plan, for Entergy Corporation’s Chief Executive Officers and the Named Executive Officers, who are members of the Office of the Chief Executive, the Committee considered individual performance and, in particular, whether there were additional factors beyond those captured by the EAM measures that should be taken into account in determining whether to exercise negative discretion to reduce awards below the levels determined by the EAM. In determining the extent of negative discretion, if any, that it would exercise with respect to each executive officer, the Committee considered the executive’s key accountabilities and accomplishments, and individual performance executing on Entergy Corporation’s strategies in 2017. Based on these considerations, the Committee decided to award a payout equal to the EAM, or 129% of target, for Entergy Corporation’s Chief Executive Officer and the other Named Executive Officers who are members of the Office of the Chief Executive.

After the EAM was established to determine overall funding for the Annual Incentive Plan, Entergy Corporation’s Chief Executive Officer allocated incentive award funding to individual business units based on business unit results.  Individual awards were determined for the remaining Named Executive Officers who are not members of the Office of the Chief Executive by their immediate supervisor based on the individual officer’s key accountabilities, accomplishments, and performance.  This resulted in payouts that ranged from 79% of target to 204% of target for the Named Executive Officers who are not members of the Office of the Chief Executive.


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Based on the foregoing evaluation of management performance, the Personnel Committee approved the following Annual Incentive Plan payouts to each Named Executive Officer for 2017:
Named Executive Officer
Base Salary
Target as Percentage of Base Salary
Payout as Percentage of Target
2017 Annual
Incentive Award
A. Christopher Bakken, III
$620,125
70%
129%
$559,973
Marcus V. Brown
$630,000
70%
129%
$568,890
Leo P. Denault
$1,230,000
135%
129%
$2,142,045
Haley R. Fisackerly
$355,300
40%
119%
$169,123
Andrew S. Marsh
$600,000
70%
129%
$541,800
Phillip R. May, Jr.
$366,150
60%
137%
$300,000
Sallie T. Rainer
$328,275
40%
119%
$156,259
Charles L. Rice, Jr.
$286,424
40%
79%
$91,000
Richard C. Riley
$344,200
40%
204%
$280,661
Roderick K. West
$675,598
70%
129%
$610,065

  Nuclear Retention Plan

Mr. Bakken participates in the Nuclear Retention Plan, a retention plan for officers and other leaders with expertise in the nuclear industry. The Personnel Committee authorized this plan to attract and retain key management and employee talent in the nuclear power field, a field that requires unique technical and other expertise that is in great demand in the utility industry. The plan provides for bonuses to be paid annually over a three-year employment period with the bonus opportunity dependent on the participant’s management level and continued employment. Each annual payment is equal to an amount ranging from 15% to 30% of the employee’s base salary as of their date of enrollment in the plan. Mr. Bakken’s participation in the plan commenced in May 2016 and in accordance with the terms and conditions of the plan, in May 2017, 2018, and 2019, subject to his continued employment, Mr. Bakken will receive a cash bonus equal to 30% of his base salary as of May 1, 2016. This plan does not allow for accelerated or prorated payout upon termination of any kind. The three-year coverage period and percentage of base salary payable under the plan are consistent with the terms of participation of other senior nuclear officers who participate in this plan. In May 2017, Mr. Bakken received a cash bonus of $181,500 which equaled 30% of his May 1, 2016, base salary of $605,000.

Long-Term Incentive Compensation

Entergy Corporation’s goal for its long-term incentive compensation is to focus the executive officers on building shareholder value and to increase the executive officers’ ownership of Entergy Corporation’s common stock in order to more closely align their interest with those of Entergy Corporation’s shareholders. In its long-term incentive compensation programs, Entergy Corporation uses a mix of performance units, restricted stock, and stock options. Performance units are used to deliver more than a majority of the total target long-term incentive awards. For periods through the end of 2017, performance units reward the Named Executive Officers on the basis of total shareholder return, which is a measure of stock price appreciation and dividend payments, in relation to the companies in the Philadelphia Utility Index. Beginning with the 2018-2020 performance period, a cumulative utility earnings metric has been added to the Long-Term Performance Unit Program to supplement the relative total shareholder return measure that historically has been used in this program with each measure equally weighted. Restricted stock ties the executive officers’ long-term financial interest to the long-term financial interests of Entergy Corporation’s shareholders. Stock options provide a direct incentive to increase the value of Entergy Corporation’s common stock. In general, Entergy Corporation seeks to allocate the total value of long-term incentive compensation 60% to performance units and 40% to a combination of stock options and restricted stock, equally divided in value, based on the value the compensation model seeks to deliver. Awards for individual Named Executive Officers may vary from this target as a result of individual performance, promotions, and internal pay equity.

The performance units for the 2015-2017 performance period were awarded under the 2011 Equity Ownership Plan and Long-Term Cash Incentive Plan (the “2011 Equity Ownership Plan”) and the performance units for the

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2016-2018 and 2017-2019 performance periods and all of the shares of restricted stock and stock options granted to the Named Executive Officers in 2017 were granted pursuant to the 2015 Equity Ownership Plan (the “2015 Equity Ownership Plan,” and together with the 2011 Equity Ownership Plan (the “Equity Ownership Plans”). The Equity Ownership Plans require both a change in control and an involuntary job loss or substantial diminution of duties (a “double trigger”) for the acceleration of these awards upon a change in control.

Performance Unit Program

Entergy Corporation issues performance unit awards to the Named Executive Officers under its Long-Term Performance Unit Program. Each performance unit represents the value of one share of Entergy Corporation common stock at the end of the three-year performance period, plus dividends accrued during the performance period. The Personnel Committee sets payout opportunities for the program at the outset of each performance period, and the program is structured to reward Named Executive Officers only if performance goals approved by the Personnel Committee are met. The Personnel Committee has no discretion to make awards if minimum performance goals are not achieved.

The performance units granted under the Long-Term Performance Unit Program and accrued dividends on any shares earned during the performance period are settled in shares of Entergy Corporation common stock rather than cash. No shares are issued, including shares attributable to accrued dividends, unless performance goals are achieved. All shares paid out under the Long-Term Performance Unit Program are required to be retained by the officers until applicable executive stock ownership requirements are met.

The Long-Term Performance Unit Program specifies a minimum, target, and maximum achievement level, the achievement of which will determine the number of performance units that may be earned by each participant. Entergy Corporation measures performance by assessing Entergy Corporation’s total shareholder return relative to the total shareholder return of the companies in the Philadelphia Utility Index, which Entergy Corporation refers to as it peer companies. The Personnel Committee identified the Philadelphia Utility Index as the appropriate industry peer group for this purpose because the companies included in this index, in the aggregate, are comparable to Entergy Corporation in terms of business and scale. The Personnel Committee chose relative total shareholder return as a measure of performance because it reflects Entergy Corporation’s creation of shareholder value relative to other electric utilities over the performance period. It also takes into account dividends paid by the companies in this index and normalizes certain events that affect the industry as a whole. Minimum, target, and maximum performance levels are determined by reference to the ranking of Entergy Corporation’s total shareholder return against the total shareholder return of the companies in the Philadelphia Utility Index.

Performance Unit Program Grants . At any given time, a participant in the Long-Term Performance Unit Program may be participating in up to three performance periods. During 2017, eligible participants were participating in the 2015-2017, 2016-2018, and 2017-2019 performance periods. Subject to achievement of the applicable performance levels as described below, the Personnel Committee established the following target performance unit payout opportunities for each of the 2015-2017, 2016-2018, and 2017-2019 performance periods.

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Named Executive Officer
2015-2017
Target
2016-2018
Target
2017-2019
 Target
A. Christopher Bakken, III (1)
3,639
7,289
8,300
Marcus V. Brown
6,550
8,200
8,300
Leo P. Denault
33,100
41,700
48,700
Haley R. Fisackerly
1,450
1,800
1,850
Andrew S. Marsh
6,550
8,200
8,300
Phillip R. May, Jr.
2,050
2,700
3,150
Sallie T. Rainer
1,450
1,800
1,850
Charles L. Rice, Jr.
1,450
1,800
1,850
Richard C. Riley
1,450
1,800
1,850
Roderick K. West
6,550
8,200
8,300

(1)
As a new hire in 2016, Mr. Bakken received pro-rated target award opportunities for the 2015-2017 and 2016-2018 performance periods.

The range of potential payouts for the 2015-2017, 2016-2018, and 2017-2019 performance periods under the program is shown below.
Performance Level
Zero
Minimum
Target
Maximum
Total Shareholder Return
Fourth Quartile
Bottom of Third Quartile
Median percentile
Top Quartile
Payout
No Payout
Minimum Payout of 25% of target
100% of target
200% of Target
    
For all performance periods, there is no payout for performance that falls within the lowest quartile of performance of the peer companies, and for top quartile performance a maximum payout of 200% of target is earned. Payouts between minimum and target and between target and maximum are calculated by interpolating between the performance of the company at the top of the fourth quartile of performance of the peer companies and the median or between the median and the performance of the company at the bottom position of the top quartile of performance of the peer companies, respectively.

Payout for the 2015-2017 Performance Period . In January 2018, the Committee reviewed Entergy Corporation’s total shareholder return for the 2015-2017 performance period in order to determine the payout to participants. The Committee compared Entergy Corporation’s total shareholder return against the total shareholder return of the companies that comprise the Philadelphia Utility Index, with the performance measures and range of potential payouts for the 2015-2017 performance period similar to that discussed above. As recommended by the Finance Committee, the Personnel Committee concluded that Entergy Corporation’s relative total shareholder return for the 2015-2017 performance period fell in the bottom of the third quartile, yielding a payout of 31% of target for the Named Executive Officers.


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Named Executive Officer
2015-2017
Target
Number of Shares Issued
Value of Shares Actually Issued (1)
Grant Date Fair Value
A. Christopher Bakken, III (2)
3,639
1,212
$95,154
$360,334
Marcus V. Brown
6,550
2,287
$179,552
$648,581
Leo P. Denault
33,100
11,554
$907,105
$3,277,562
Haley R. Fisackerly
1,450
506
$39,726
$143,579
Andrew S. Marsh
6,550
2,287
$179,552
$648,581
Phillip R. May, Jr.
2,050
716
$56,213
$202,991
Sallie T. Rainer
1,450
506
$39,726
$143,579
Charles L. Rice, Jr.
1,450
506
$39,726
$143,579
Richard C. Riley
1,450
506
$39,726
$143,579
Roderick K. West
6,550
2,287
$179,552
$648,581

(1)
Value determined based on the closing price of Entergy Corporation’s common stock on January 17, 2018 ($78.51), the date the Personnel Committee certified the 2015-2017 performance period results.
(2)
As a new hire in 2016, Mr. Bakken received pro-rated target award opportunities for the 2015-2017 performance period.

Stock Options and Restricted Stock

Entergy Corporation grants stock options and restricted stock as a long-term incentive to its executive officers. As previously discussed, the Personnel Committee considers several factors in determining the number of stock options and shares of restricted stock it will grant to the Named Executive Officers, including Entergy Corporation and individual performance, internal pay equity, prevailing market practice, targeted long-term value created by the use of stock options and restricted stock, and the potential dilutive effect of stock option and restricted stock grants. Of these factors, the Committee’s assessment of individual performance of each Named Executive Officer is the most important factor in determining the number of shares of restricted stock and stock options awarded, except with respect to the Chief Executive Officer for whom comparative market data is the most important factor. The Committee, in consultation with Entergy Corporation’s Chief Executive Officer, reviews each of the other Named Executive Officer’s performance, role and responsibilities, strengths, and developmental opportunities. Stock option and restricted stock awards for Entergy Corporation’s Chief Executive Officer are determined solely by the Personnel Committee on the basis of the same considerations.

The following table sets forth the number of stock options and shares of restricted stock granted to each Named Executive Officer in 2017. The exercise price for each option was $70.53, which was the closing price of Entergy Corporation’s common stock on the date of grant.
Named Executive Officer
Stock Options
Shares of Restricted Stock
A. Christopher Bakken, III
37,600
5,200
Marcus V. Brown
44,000
6,100
Leo P. Denault
179,400
17,000
Haley R. Fisackerly
7,600
850
Andrew S. Marsh
44,000
6,100
Phillip R. May, Jr.
10,500
1,100
Sallie T. Rainer
7,800
900
Charles L. Rice, Jr.
3,900
550
Richard C. Riley
8,000
1,000
Roderick K. West
29,200
3,200

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Benefits and Perquisites

Entergy Corporation’s Named Executive Officers are eligible to participate in or receive the following benefits:
Plan Type
Description
Retirement Plans
Entergy Corporation-sponsored:

Entergy Retirement Plan  - a tax-qualified final average pay defined benefit pension plan that covers a broad group of employees hired before July 1, 2014.
Cash Balance Plan  - a tax-qualified cash balance defined benefit pension plan that covers a broad group of employees hired on or after July 1, 2014.
Pension Equalization Plan  - a non-qualified pension restoration plan for a select group of management or highly compensated employees who participate in the Entergy Retirement Plan.
Cash Balance Equalization Plan  - a non-qualified restoration plan for a select group of management or highly compensated employees who participate in the Cash Balance Plan.
System Executive Retirement Plan  - a non-qualified supplemental retirement plan for individuals who became executive officers before July 1, 2014.

See the 2017 Pension Benefits Table for additional information regarding the operation of the plans described above.
Savings Plan
Entergy Corporation-sponsored 401(k) Savings Plan that covers a broad group of employees.
Health & Welfare Benefits
Medical, dental, and vision coverage, life and accidental death and dismemberment insurance, business travel accident insurance, and long-term disability insurance.

Eligibility, coverage levels, potential employee contributions, and other plan design features are the same for the Named Executive Officers as for the broad employee population.
2017 Perquisites
Corporate aircraft usage, annual physical exams, relocation assistance, and event tickets. The Office of the Chief Executive members do not receive tax gross ups on any benefits, except for relocation assistance.

Named Executive Officers who are not members of the Office of the Chief Executive also were provided in 2017 with club dues and tax gross up payments on some perquisites.

For additional information regarding perquisites, see the “All Other Compensation” column in the 2017 Summary Compensation Table.
Deferred Compensation
The Named Executive Officers are eligible to defer up to 100% of their base salary and Annual Incentive Plan awards into an Entergy Corporation-sponsored Executive Deferred Compensation Plan.
Executive Disability Plan
Eligible individuals who become disabled under the terms of the plan are eligible for 65% of the difference between their annual base salary and $276,923 (i.e. the annual base salary that produces the maximum $15,000 monthly disability payment under the general long-term disability plan).

Entergy Corporation provides these benefits to its Named Executive Officers as part of providing a competitive executive compensation program and because it believes that these benefits are important retention and recruitment tools since many of the companies with which it competes for executive talent provide similar arrangements to their senior executive officers.


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Compensation Arrangements

The Personnel Committee believes that retention and transitional compensation arrangements are an important part of overall compensation. The Committee believes that these arrangements help to secure the continued employment and dedication of the Named Executive Officers, notwithstanding any concern that they might have at the time of a change in control regarding their own continued employment. In addition, the Committee believes that these arrangements are important as recruitment and retention devices, as many of the companies with which Entergy Corporation competes for executive talent have similar arrangements in place for their senior employees.

To achieve these objectives, Entergy Corporation has established a System Executive Continuity Plan under which each of the Named Executive Officers is entitled to receive “change in control” payments and benefits if such officer’s employment is involuntarily terminated in connection with a change in control of Entergy Corporation and its subsidiaries. Severance payments under the System Executive Continuity Plan generally are based on a multiple of the sum of an executive officer’s annual base salary plus his or her average Annual Incentive Plan award for the two calendar years immediately preceding the calendar year in which the termination of employment occurs. Under Entergy Corporation’s policy, under no circumstances can this multiple exceed 2.99 times the sum of the executive officer’s annual base salary and his or her annual incentive, calculated in accordance with this policy. Entergy Corporation strives to ensure that the benefits and payment levels under the System Executive Continuity Plan are consistent with market practices. Entergy Corporation’s executive officers, including the Named Executive Officers, will not receive any tax gross up payments on any severance benefits received under this plan. For more information regarding the System Executive Continuity Plan, see “2017 Potential Payments Upon Termination or Change in Control-System Executive Continuity Plan.”

In certain cases, the Committee may approve the execution of a retention agreement with an individual executive officer. These decisions are made on a case by case basis to reflect specific retention needs or other factors, including market practice. If a retention agreement is entered into with an individual officer, the Committee considers the economic value associated with that agreement in making overall compensation decisions for that officer. Entergy Corporation has voluntarily adopted a policy that any employment or severance agreements providing severance benefits in excess of 2.99 times the sum of an officer’s annual base salary and annual incentive award (other than the value of the vesting or payment of an outstanding equity-based award or the pro rata vesting or payment of an outstanding long-term incentive award) must be approved by Entergy Corporation’s shareholders.

Entergy Corporation currently has a retention agreement with Mr. Denault. In general, Mr. Denault’s retention agreement provides for certain payments and benefits in the event of his termination of employment by his Entergy employer other than for cause, by Mr. Denault for good reason or on account of his death or disability. See “2017 Potential Payments Upon Termination or Change in Control - Mr. Denault’s 2006 Retention Agreement.” Because Mr. Denault has reached age 55, certain severance payment provisions in his retention agreement no longer apply. Mr. Denault will not receive tax gross up payments on any payments or benefits he may receive under his agreement. Mr. Denault’s retention agreement was entered into in 2006 when he was Entergy Corporation’s Chief Financial Officer and was designed to reflect the competition for chief financial officer talent in the marketplace at that time and the Committee’s assessment of the critical role this position played in executing Entergy Corporation’s long-term financial and other strategic objectives. Based on the market data provided by its former independent compensation consultant, the Committee, at the time the agreement was entered into, believed the benefits and payment levels under Mr. Denault’s retention agreement were consistent with market practices.


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Compensation Policies and Practices

Entergy Corporation strives to ensure that its compensation philosophy and practices are in line with the best practices of companies in its industry as well as other companies in the S&P 500. Some of these practices include the following:

Clawback Provisions

Entergy Corporation has adopted a clawback policy that covers all individuals subject to Section 16 of the Securities Exchange Act of 1934 (the Exchange Act), including the members of the Office of the Chief Executive. Under the policy, which goes beyond the requirements of Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), the Committee will require reimbursement of incentives paid to these executive officers where:

•
(i) the payment was predicated upon the achievement of certain financial results with respect to the applicable performance period that were subsequently determined to be the subject of a material restatement other than a restatement due to changes in accounting policy; or (ii) a material miscalculation of a performance award occurs, whether or not the financial statements were restated and, in either such case, a lower payment would have been made to the executive officer based upon the restated financial results or correct calculation; or
•
in the Board of Directors’ view, the executive officer engaged in fraud that caused or partially caused the need for a restatement or caused a material miscalculation of a performance award, in each case, whether or not the financial statements were restated.

The amount the Committee requires to be reimbursed is equal to the excess of the gross incentive payment made over the gross payment that would have been made if the original payment had been determined based on the restated financial results or correct calculation. Further, following a material restatement of Entergy Corporation’s financial statements, it will seek to recover any compensation received by its Chief Executive Officer and Chief Financial Officer that is required to be reimbursed under Sarbanes-Oxley.

Stock Ownership Guidelines and Share Retention Requirements

For many years, Entergy Corporation has had stock ownership guidelines for executives, including the Named Executive Officers. These guidelines are designed to align the executives’ long-term financial interests with those of shareholders. Annually, the Personnel Committee monitors the executive officers’ compliance with these guidelines.

Entergy Corporation’s ownership guidelines are as follows:

Role
Value of Common Stock to be Owned
Chief Executive Officer
6 times base salary
Executive Vice Presidents
3 times base salary
Senior Vice Presidents
2 times base salary
Vice Presidents
1 time base salary

Further, to ensure compliance with the guidelines, until an executive officer satisfies the stock ownership guidelines, the officer must retain:

•
all net after-tax shares paid out under the Long-Term Performance Unit Program;
•
all net after-tax shares of restricted stock and restricted stock units received upon vesting; and
•
at least 75% of the after-tax net shares received upon the exercise of Entergy Corporation stock options, except for stock options granted before January 1, 2014, as to which the executive officer must retain at least 75% of the after-tax net shares until the earlier of achievement of the stock ownership guidelines or five years from the date of exercise.

467

Trading Controls and Anti-Pledging and Anti-Hedging Policies

Executive officers, including the Named Executive Officers, are required to receive the permission of Entergy Corporation’s General Counsel prior to entering into any transaction involving Entergy Corporation securities, including gifts, other than the exercise of employee stock options. Trading is generally permitted only during specified open trading windows beginning immediately following the release of earnings. Employees, who are subject to trading restrictions, including the Named Executive Officers, may enter into trading plans under Rule 10b5-1 of the Exchange Act, but these trading plans may be entered into only during an open trading window and must be approved by Entergy Corporation. The Named Executive Officer bears full responsibility if he or she violates the policy by permitting shares to be bought or sold without pre-approval or when trading is restricted.

Entergy Corporation also prohibits its directors and executive officers, including the Named Executive Officers, from pledging any Entergy Corporation securities or entering into margin accounts involving Entergy Corporation securities. These transactions are prohibited because of the potential that sales of Entergy Corporation securities could occur outside trading periods and without the required approval of the General Counsel.

Entergy Corporation has also adopted an anti-hedging policy that prohibits officers, directors, and employees from entering into hedging or monetization transactions involving Entergy Corporation common stock. Prohibited transactions include, without limitation, zero-cost collars, forward sale contracts, purchase or sale of options, puts, calls, straddles or equity swaps or other derivatives that are directly linked to Entergy Corporation’s common stock or transactions involving “short-sales” of Entergy Corporation’s common stock. The Board adopted this policy to require officers, directors, and employees to continue to own Entergy Corporation’s common stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with those of Entergy Corporation’s other shareholders.

How Entergy Corporation Makes Compensation Decisions

Role of the Personnel Committee

The Personnel Committee has overall responsibility for approving the compensation program for the Named Executive Officers and makes all final compensation decisions regarding Entergy Corporation’s Named Executive Officers. The Committee works with Entergy Corporation’s executive management to ensure that the compensation policies and practices are consistent with its values and support the successful recruitment, development, and retention of executive talent so that Entergy Corporation can achieve its business objectives and optimize its long-term financial returns. Annually, management presents the Personnel Committee with the proposed compensation model for the following year, including the compensation elements, mix of elements, and measures for each element, and consults with Entergy Corporation’s Chief Executive Officer on recommended compensation for senior executives. The Committee evaluates executive pay each year to ensure that Entergy Corporation’s compensation policies and practices are consistent with its philosophy. The Personnel Committee is responsible for, among its other duties, the following actions related to the Named Executive Officers:

•
developing and implementing compensation policies and programs for hiring, evaluating, and setting compensation for executive officers, including any employment agreement with an executive officer;
•
evaluating the performance of Entergy Corporation’s Chairman and Chief Executive Officer; and
•
reporting, at least annually, to the Board on succession planning, including succession planning for the Chief Executive Officer.

Role of the Chief Executive Officer

The Personnel Committee solicits recommendations from Entergy Corporation’s Chief Executive Officer with respect to compensation decisions for the other Named Executive Officers who are members of Entergy Corporation’s Office of the Chief Executive. Entergy Corporation’s Chief Executive Officer provides the Personnel Committee with an assessment of the performance of each of these Named Executive Officers and recommends compensation levels to be awarded to each of them. In addition, the Committee may request that the Chief Executive

468

Officer provide management feedback and recommendations on changes in the design of compensation programs, such as special retention plans or changes in incentive program structure. However, the Chief Executive Officer does not play any role with respect to any matter affecting his own compensation, nor does he have any role determining or recommending the amount or form of director compensation. The Personnel Committee also relies on the recommendations of Entergy Corporation’s Senior Vice President, Human Resources with respect to compensation decisions, policies, and practices.

The Chief Executive Officer may attend meetings of the Personnel Committee only at the invitation of the chair of the Personnel Committee and cannot call a meeting of the Committee. Since he is not a member of the Committee, he has no vote on matters submitted to the Committee. During 2017, Mr. Denault attended 9 meetings of the Personnel Committee.

Role of the Compensation Consultant

Entergy Corporation’s Personnel Committee has the sole authority for the appointment, compensation, and oversight of its outside compensation consultant. The Committee conducts an annual review of the compensation consultant, and in 2017, it retained Pay Governance LLC as its independent compensation consultant to assist it in, among other things, evaluating different compensation programs and developing market data to assess Entergy Corporation’s compensation programs. Also in 2017, the Corporate Governance Committee retained Pay Governance to review and perform a competitive analysis of non-employee director compensation.

During 2017, Pay Governance assisted the Committee with its responsibilities related to Entergy Corporation’s compensation programs for its executives. The Committee directed Pay Governance to: (i) regularly attend meetings of the Committee; (ii) conduct studies of competitive compensation practices; (iii) identify Entergy Corporation’s market surveys and proxy peer group; (iv) review base salary, annual incentives, and long-term incentive compensation opportunities relative to competitive practices; and (v) develop conclusions and recommendations related to the executive compensation programs for consideration by the Committee. A senior consultant from Pay Governance attended all Personnel Committee meetings to which he was invited in 2017.

Compensation Consultant Independence

To maintain the independence of the Personnel Committee’s compensation consultant, the Board has adopted a policy that any consultant (including its affiliates) retained by the Board of Directors or any Committee of the Board of Directors to provide advice or recommendations on the amount or form of executive or director compensation should not be retained by Entergy Corporation or any of its affiliates to provide other services in an aggregate amount that exceeds $120,000 in any year. In 2017, the Personnel Committee’s independent compensation consultant, Pay Governance, did not provide any services to Entergy Corporation other than its services to the Personnel Committee and the Corporate Governance Committee in connection with Entergy Corporation’s non-employee director compensation program. Annually, the Committee reviews the relationship with its compensation consultant, including services provided, quality of those services, and fees associated with services in its evaluation of the executive compensation consultant’s independence. The Committee also assesses Pay Governance’s independence under NYSE rules and has concluded that no conflict of interests exists that would prevent Pay Governance from independently advising the Personnel Committee.

Tax and Accounting Considerations

Section 162(m) of the Internal Revenue Code (the Code) limits the tax deductibility by a publicly-held corporation of compensation in excess of $1 million paid to the Chief Executive Officer and any of its other Section 162(m) covered employees. Historically, an exception was provided for compensation that was “performance-based compensation” within the meaning of Section 162(m).  Effective as of January 1, 2018, this exception no longer applies, other than with respect to certain grandfathered arrangements. In structuring the compensation packages that are provided to the Named Executive Officers, the Personnel Committee takes into account the tax effects of Section 162(m) and considers the financial accounting consequences. However, the Personnel Committee and the Board believe that it is in the best interest of Entergy Corporation that the Personnel Committee retains the discretion

469

to make compensation awards, whether or not deductible. This flexibility is necessary to foster achievement of performance goals established by the Personnel Committee, as well as other corporate goals that the Committee deems important to Entergy Corporation’s success, such as encouraging employee retention and rewarding achievement of key corporate goals.


PERSONNEL COMMITTEE REPORT

The Personnel Committee Report included in the Entergy Corporation Proxy Statement is incorporated by reference, but will not be deemed to be “filed” in this Annual Report on Form 10-K. None of the Subsidiaries has a compensation committee or other board committee performing equivalent functions. The board of directors of each of the Subsidiaries is comprised of individuals who are officers or employees of Entergy Corporation or one of the Subsidiaries. These boards do not make determinations regarding the compensation paid to executive officers of the Subsidiaries.


470

EXECUTIVE COMPENSATION TABLES

2017 Summary Compensation Tables

The following table summarizes the total compensation paid or earned by each of the Named Executive Officers for the fiscal year ended December 31, 2017, and to the extent required by SEC executive compensation disclosure rules, the fiscal years ended December 31, 2016 and 2015.  For information on the principal positions held by each of the Named Executive Officers, see Item 10, “Directors and Executive Officers of the Registrants.”  

The compensation set forth in the table represents the aggregate compensation paid by all Entergy System companies.  For additional information regarding the material terms of the awards reported in the following tables, including a general description of the formula or criteria to be applied in determining the amounts payable, see “Compensation Discussion and Analysis.”
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
 
 
 
 
 
 
Name and Principal Position
(1)
 
 
 
 
 
 
 
Year
 
 
 
 
 
 
 
 
Salary
(2)
 
 
 
 
 
 
 
Bonus
(3)
 
 
 
 
 
 
Stock
Awards
  (4)
 
 
 
 
 
 
Option
Awards
  (5)
 
 
 
 
Non-Equity
Incentive
Plan
Compen-sation
(6)
 
Change in
Pension
Value and
Non-qualified
Deferred
Compen-sation
Earnings
 (7)
 
 
 
 
 
All
Other
Compens-ation  
 (8)
 
 
 
 
 
 
 
Total
 
A. Christopher Bakken, III
 
2017
 

$615,791

 

$181,500

 

$959,376

 

$245,904

 

$559,973

 

$33,000

 

$114,494

 

$2,710,038

Chief Nuclear Officer of Entergy Corp.
 
2016
 

$426,990

 

$650,000

 

$3,292,700

 

$—

 

$529,375

 

$27,900

 

$140,601

 

$5,067,566

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marcus V. Brown
 
2017
 

$622,788

 

$—

 

$1,022,853

 

$287,760

 

$568,890

 

$1,217,200

 

$43,269

 

$3,762,760

General Counsel of Entergy Corp.
 
2016
 

$563,208

 

$—

 

$1,144,648

 

$333,000

 

$550,550

 

$934,600

 

$34,381

 

$3,560,387

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leo P. Denault
 
2017
 

$1,221,346

 

$—

 

$4,676,190

 

$1,173,276

 

$2,142,045

 

$3,819,500

 

$125,863

 

$13,158,220

Chairman of the
 
2016
 

$1,191,462

 

$—

 

$4,632,276

 

$1,235,800

 

$2,154,600

 

$4,166,800

 

$97,786

 

$13,478,724

Board and CEO -
 
2015
 

$1,153,385

 

$—

 

$4,356,362

 

$1,004,080

 

$1,681,875

 

$4,802,400

 

$88,795

 

$13,086,897

Entergy Corp.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Haley R. Fisackerly
 
2017
 

$354,451

 

$—

 

$192,041

 

$49,704

 

$169,123

 

$406,300

 

$35,724

 

$1,207,343

CEO - Entergy
 
2016
 

$320,067

 

$—

 

$229,752

 

$49,580

 

$168,000

 

$268,600

 

$34,243

 

$1,070,242

Mississippi
 
2015
 

$320,131

 

$—

 

$219,994

 

$51,345

 

$190,000

 

$102,300

 

$43,987

 

$927,757

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Andrew S. Marsh
 
2017
 

$588,291

 

$—

 

$1,022,853

 

$287,760

 

$541,800

 

$801,900

 

$51,647

 

$3,294,251

Executive Vice
 
2016
 

$553,284

 

$—

 

$1,144,648

 

$333,000

 

$509,061

 

$593,700

 

$47,484

 

$3,181,177

President and CFO -
 
2015
 

$532,245

 

$—

 

$2,600,401

 

$273,840

 

$508,308

 

$670,200

 

$39,131

 

$4,624,125

Entergy Corp.,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas,
 

























Entergy Louisiana,
 

























Entergy Mississippi,
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Entergy New
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Orleans, Entergy
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Texas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phillip R. May, Jr.
 
2017
 

$363,410

 

$—

 

$302,493

 

$68,670

 

$300,000

 

$503,400

 

$26,981

 

$1,564,954

CEO - Entergy
 
2016
 

$353,690

 

$—

 

$326,988

 

$71,040

 

$224,690

 

$600,000

 

$26,018

 

$1,602,426

Louisiana
 
2015
 

$344,035

 

$—

 

$279,406

 

$57,050

 

$315,000

 

$288,100

 

$25,970

 

$1,309,561


471

(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
 
 
 
 
 
 
Name and Principal Position
(1)
 
 
 
 
 
 
 
Year
 
 
 
 
 
 
 
 
Salary
(2)
 
 
 
 
 
 
 
Bonus
(3)
 
 
 
 
 
 
Stock
Awards
  (4)
 
 
 
 
 
 
Option
Awards
  (5)
 
 
 
 
Non-Equity
Incentive
Plan
Compen-sation
(6)
 
Change in
Pension
Value and
Non-qualified
Deferred
Compen-sation
Earnings
 (7)
 
 
 
 
 
All
Other
Compens-ation  
 (8)
 
 
 
 
 
 
 
Total
 
Sallie T. Rainer
 
2017
 

$325,737

 

$—

 

$195,567

 

$51,012

 

$156,259

 

$435,900

 

$35,785

 

$1,200,260

CEO - Entergy
 
2016
 

$316,003

 

$—

 

$229,752

 

$49,580

 

$153,348

 

$346,300

 

$53,797

 

$1,148,780

Texas
 
2015
 

$304,783

 

$—

 

$211,004

 

$43,358

 

$190,000

 

$189,100

 

$41,565

 

$979,810

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles L. Rice, Jr.
 
2017
 

$284,681

 

$—

 

$170,882

 

$25,506

 

$91,000

 

$221,200

 

$30,842

 

$824,111

CEO - Entergy New
 
2016
 

$276,998

 

$—

 

$229,752

 

$49,580

 

$67,302

 

$177,600

 

$33,807

 

$835,039

Orleans
 
2015
 

$266,752

 

$—

 

$211,004

 

$51,345

 

$173,000

 

$104,500

 

$33,416

 

$840,017

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Richard C. Riley
 
2017
 

$341,723

 

$—

 

$202,620

 

$52,320

 

$280,661

 

$437,700

 

$38,695

 

$1,353,719

CEO - Entergy
 
2016
 

$325,020

 

$—

 

$226,224

 

$34,780

 

$167,500

 

$277,900

 

$102,112

 

$1,133,536

Arkansas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roderick K. West
 
2017
 

$670,876

 

$—

 

$818,316

 

$190,968

 

$610,065

 

$867,200

 

$52,220

 

$3,209,645

Group President
 
2016
 

$654,514

 

$—

 

$1,116,424

 

$303,400

 

$461,384

 

$601,000

 

$73,706

 

$3,210,428

Utility Operations of
 
2015
 

$638,876

 

$—

 

$1,071,111

 

$262,430

 

$607,677

 

$543,900

 

$71,790

 

$3,195,784

Entergy Corp.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(1)
Mr. Bakken was named Executive Vice President and Chief Nuclear Officer in April 2016. Mr. Brown was not a Named Executive Officer in 2015. Mr. Riley was named Chief Executive Officer, Entergy Arkansas in May 2016.
(2)
The amounts in column (c) represent the actual base salary paid to the Named Executive Officers.  The 2017 changes in base salaries noted in the Compensation Discussion and Analysis were effective in April 2017.
(3)
The amount in column (d) in 2017 for Mr. Bakken represents the cash bonus paid to him pursuant to the Nuclear Retention Plan. See “Nuclear Retention Plan” in Compensation Discussion and Analysis. The amount in column (d) in 2016 represents a cash sign-on bonus paid to Mr. Bakken in connection with his commencement of employment with Entergy Corporation.
(4)
The amounts in column (e) represent the aggregate grant date fair value of restricted stock, performance units, and restricted stock units granted under the Equity Ownership Plans, each calculated in accordance with FASB ASC Topic 718, without taking into account estimated forfeitures.  The grant date fair value of the restricted stock and restricted stock units is based on the closing price of Entergy Corporation common stock on the date of grant.  The grant date fair value of performance units is based on the probable outcome of the applicable performance conditions, measured using a Monte Carlo simulation valuation model.  The simulation model applies a risk-free interest rate and an expected volatility assumption.  The risk-free interest rate is assumed to equal the yield on a three-year treasury bond on the grant date.  Volatility is based on historical volatility for the 36-month period preceding the grant date.  If the highest achievement level is attained, the maximum amounts that will be received with respect to the performance units granted in 2017 are as follows:  Mr. Bakken, $1,170,798; Mr. Brown, $1,170,798; Mr. Denault, $6,869,622; Mr. Fisackerly, $260,961; Mr. Marsh, $1,170,798; Mr. May, $444,339; Ms. Rainer, $260,961; Mr. Rice, $260,961; Mr. Riley, $260,961; and Mr. West, $1,170,798. The amount in 2016 for Mr. Bakken includes restricted stock units granted to him in connection with his commencement of employment as Chief Nuclear Officer.
(5)
The amounts in column (f) represent the aggregate grant date fair value of stock options granted under the Equity Ownership Plans calculated in accordance with FASB ASC Topic 718.  For a discussion of the relevant assumptions used in valuing these awards, see Note 12 to the financial statements.
(6)
The amounts in column (g) represent cash payments made under the Annual Incentive Plan.

472

(7)
For all Named Executive Officers, the amounts in column (h) include the annual actuarial increase in the present value of these Named Executive Officers’ benefits under all pension plans established by Entergy Corporation using interest rate and mortality rate assumptions consistent with those used in Entergy Corporation’s financial statements and include amounts which the Named Executive Officers may not currently be entitled to receive because such amounts are not vested (see “2017 Pension Benefits”).  None of the increases for any of the Named Executive Officers is attributable to above-market or preferential earnings on non-qualified deferred compensation (see “2017 Non-qualified Deferred Compensation”).
(8)
The amounts in column (i) for 2017 include (a) matching contributions by Entergy Corporation under the Savings Plan to each of the Named Executive Officers; (b) dividends paid on restricted stock when vested; (c) life insurance premiums; (d) tax gross up payments on club dues and relocation expenses; and (e) perquisites and other compensation.  The amounts are listed in the following table:
Named Executive Officer
Company Contribution – Savings Plan
Dividends Paid on Restricted Stock
Life Insurance Premium
Tax Gross Up Payments
Perquisites and Other Compensation
 
 
Total
A. Christopher Bakken, III

$16,200


$—


$11,887


$1,299


$85,108


$114,494

Marcus V. Brown

$—


$35,517


$7,482


$—


$270


$43,269

Leo P. Denault

$11,340


$93,206


$7,482


$—


$13,835


$125,863

Haley R. Fisackerly

$11,340


$7,907


$2,306


$4,082


$10,089


$35,724

Andrew S. Marsh

$11,139


$35,517


$4,991


$—


$—


$51,647

Phillip R. May, Jr.

$11,340


$9,673


$5,279


$—


$689


$26,981

Sallie T. Rainer

$11,340


$7,696


$6,477


$2,952


$7,320


$35,785

Charles L. Rice, Jr.

$11,340


$6,849


$4,874


$2,637


$5,142


$30,842

Richard C. Riley

$11,340


$8,756


$5,040


$4,832


$8,727


$38,695

Roderick K. West

$11,340


$38,270


$2,610


$—


$—


$52,220


Perquisites and Other Compensation

The amounts set forth in column (i) include perquisites and other personal benefits that Entergy Corporation provides to its Named Executive Officers as part of providing a competitive executive compensation program and for employee retention. The following perquisites were provided to the Named Executive Officers in 2017.
Named Executive Officer
Relocation
Personal Use of Corporate Aircraft
Club Dues
Executive Physical Exams
Event Tickets
A. Christopher Bakken, III
X
X
 
X
 
Marcus V. Brown
 
 
 
X
X
Leo P. Denault
 
X
 
X
 
Haley R. Fisackerly
 
 
X
X
 
Andrew S. Marsh
 
 
 
X
 
Phillip R. May, Jr.
 
 
 
 
X
Sallie T. Rainer
 
 
X
 
 
Charles L. Rice, Jr.
 
 
X
 
 
Richard C. Riley
 
 
X
 
 
Roderick K. West
 
 
 
X
 

For security and business reasons, Entergy Corporation permits its Chief Executive Officer to use its corporate aircraft for personal use at the expense of Entergy Corporation.  The other Named Executive Officers may use the corporate aircraft for personal travel subject to the approval of Entergy Corporation’s Chief Executive Officer.  The Personnel

473

Committee reviews the level of usage throughout the year. Entergy Corporation believes that its officers’ ability to use its plane for limited personal use saves time and provides additional security for them, thereby benefiting Entergy Corporation. The amounts included in column (i) for the personal use of corporate aircraft, reflect the incremental cost to Entergy Corporation for use of the corporate aircraft, determined on the basis of the variable operational costs of each flight, including fuel, maintenance, flight crew travel expense, catering, communications, and fees, including flight planning, ground handling, and landing permits. In addition, Entergy Corporation offers its executives comprehensive annual physical exams at Entergy Corporation’s expense. Tickets to cultural and sporting events are purchased for business purposes, and if not utilized for business purposes, the tickets are made available to the employees, including the Named Executive Officers, for personal use.

Entergy Corporation also provides relocation benefits to a broad base of employees which include assistance with moving expenses, purchase and sale of homes, and transportation of household goods. In connection with his employment, and in accordance with its relocation policies and pursuant to certain additional relocation benefits including the purchase of his home, Entergy Corporation paid $77,897 in relocation expenses for Mr. Bakken in 2017. The relocation assistance amounts reported above represent the amounts paid to Entergy Corporation’s relocation service provider or Mr. Bakken, as applicable.

None of the other perquisites referenced above exceeded $25,000 for any of the other Named Executive Officers.
 
2017 Grants of Plan-Based Awards

The following table summarizes award grants during 2017 to the Named Executive Officers.
 
 
 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards  (1)
 
Estimated Future Payouts under Equity Incentive Plan Awards  (2)
 
 
 
 
 
 
 
 
(a)
 
(b)
 
(c)
(d)
(e)
 
(f)
(g)
(h)
 
(i)
 
(j)
 
(k)
 
(l)
Name
 
Grant Date
 
Thresh-old
Target
Maximum
 
Thresh-old
Target
Maximum
 
All Other Stock Awards: Number of Shares of Stock or Units
 
All Other Option Awards: Number of Securities Under-lying Options
 
Exercise or Base Price of Option Awards
 
Grant Date Fair Value of Stock and Option Awards
 
 
 
 
($)
($)
($)
 
(#)
(#)
(#)
 
(#)
(3)
 
(#)
(4)
 
($/Sh)
 
($)
(5)
A. Christopher
 
1/26/17
 
$-
$434,088
$868,175
 
 
 
 
 
 
 
 
 
 
 
 
Bakken, III
 
1/26/17
 
 
 
 
 
2,075

8,300

16,600

 
 
 
 
 
 
 
$592,620
 
 
1/26/17
 
 
 
 
 


 


 
5,200

 
 
 
 
 
$366,756
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
37,600

 
$70.53
 
$245,904
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marcus V.
 
1/26/17
 
$-
$441,000
$882,000
 
 
 
 
 
 
 
 
 
 
 
 
Brown
 
1/26/17
 
 
 
 
 
2,075

8,300

16,600

 
 
 
 
 
 
 
$592,620
 
 
1/26/17
 
 
 
 
 
 
 
 
 
6,100

 
 
 
 
 
$430,233
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
44,000

 
$70.53
 
$287,760
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leo P.
 
1/26/17
 
$-
$1,660,500
$3,321,000
 
 
 
 
 
 
 
 
 
 
 
 
Denault
 
1/26/17
 
 
 
 
 
12,175

48,700

97,400

 
 
 
 
 
 
 
$3,477,180
 
 
1/26/17
 
 
 
 
 
 
 
 
 
17,000

 
 
 
 
 
$1,199,010
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
179,400

 
$70.53
 
$1,173,276



474

 
 
 
 
Estimated Future Payouts Under Non-Equity Incentive Plan Awards  (1)
 
Estimated Future Payouts under Equity Incentive Plan Awards  (2)
 
 
 
 
 
 
 
 
(a)
 
(b)
 
(c)
(d)
(e)
 
(f)
(g)
(h)
 
(i)
 
(j)
 
(k)
 
(l)
Name
 
Grant Date
 
Thresh-old
Target
Maximum
 
Thresh-old
Target
Maximum
 
All Other Stock Awards: Number of Shares of Stock or Units
 
All Other Option Awards: Number of Securities Under-lying Options
 
Exercise or Base Price of Option Awards
 
Grant Date Fair Value of Stock and Option Awards
 
 
 
 
($)
($)
($)
 
(#)
(#)
(#)
 
(#)
(3)
 
(#)
(4)
 
($/Sh)
 
($)
(5)
Haley R.
 
1/26/17
 
$-
$142,120
$284,240
 
 
 
 
 
 
 
 

 
 
 
 
Fisackerly
 
1/26/17
 
 
 
 
 
463

1,850

3,700

 
 
 
 
 
 
 
$132,090
 
 
1/26/17
 
 
 
 
 
 
 
 
 
850

 
 
 
 
 
$59,951
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
7,600

 
$70.53
 
$49,704
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Andrew S.
 
1/26/17
 
$-
$420,000
$840,000









 
 
 
 
 
 
Marsh
 
1/26/17
 




2,075

8,300

16,600




 
 
 
 
 
$592,620
 
 
1/26/17
 
 
 
 
 
 
 
 
 
6,100

 
 
 
 
 
$430,233
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
44,000

 
$70.53
 
$287,760
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phillip R.
 
1/26/17
 
$-
$219,690
$439,380
 
 
 
 
 
 
 
 
 
 
 
 
May, Jr.
 
1/26/17
 
 
 
 
 
788

3,150

6,300

 
 
 
 
 
 
 
$224,910
 
 
1/26/17
 
 
 
 
 
 
 
 
 
1,100

 
 
 
 
 
$77,583
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
10,500

 
$70.53
 
$68,670
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sallie T.
 
1/26/17
 
$-
$131,310
$262,620
 
 
 
 
 
 

 
 

 
 
 
 
Rainer
 
1/26/17
 
 
 
 
 
463

1,850

3,700

 
 
 
 
 
 
 
$132,090
 
 
1/26/17
 
 
 
 
 
 
 
 
 
900

 
 
 
 
 
$63,477
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
7,800

 
$70.53
 
$51,012
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles L.
 
1/26/17
 
$-
$114,570
$229,140
 
 
 
 
 
 
 
 
 
 
 
 
Rice, Jr.
 
1/26/17
 
 
 
 
 
463

1,850

3,700

 
 
 
 
 
 
 
$132,090
 
 
1/26/17
 
 
 
 
 
 
 
 
 
550

 
 
 
 
 
$38,792
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
3,900

 
$70.53
 
$25,506
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Richard C.
 
1/26/17
 
$-
$137,680
$275,360
 
 
 
 
 
 
 
 
 
 
 
 
Riley
 
1/26/17
 
 
 
 
 
463

1,850

3,700

 
 
 
 
 
 
 
$132,090
 
 
1/26/17
 
 
 
 
 
 
 
 
 
1,000

 
 
 
 
 
$70,530
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
8,000

 
$70.53
 
$52,320
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Roderick K.
 
1/26/17
 
$-
$472,919
$945,837
 
 
 
 
 
 
 
 
 
 
 
 
West
 
1/26/17
 
 
 
 
 
2,075

8,300

16,600

 
 
 
 
 
 
 
$592,620
 
 
1/26/17
 
 
 
 
 
 
 
 
 
3,200

 
 
 
 
 
$225,696
 
 
1/26/17
 
 
 
 
 
 
 
 
 
 
 
29,200

 
$70.53
 
$190,968

(1)
The amounts in columns (c), (d), and (e) represent minimum, target, and maximum payment levels under the Annual Incentive Plan.  The actual amounts awarded are reported in column (g) of the Summary Compensation Table.

475

(2)
The amounts in columns (f), (g), and (h) represent the minimum, target, and maximum payment levels under the Long-Term Performance Unit Program.  Performance under the program is measured by Entergy Corporation’s total shareholder return relative to the total shareholder returns of the companies included in the Philadelphia Utility Index.  There is no payout under the program if Entergy Corporation’s total shareholder return falls within the lowest quartile of the peer companies in the Philadelphia Utility Index.  Subject to the achievement of performance targets, each unit will be converted into one share of Entergy Corporation’s common stock on the last day of the performance period (December 31, 2019.)  Accrued dividends on the shares earned will also be paid in Entergy Corporation common stock.
(3)
The amounts in column (i) represent shares of restricted stock granted under the 2015 Equity Ownership Plan.  Shares of restricted stock vest one-third on each of the first through third anniversaries of the grant date, have voting rights, and accrue dividends during the vesting period.
(4)
The amounts in column (j) represent options to purchase shares of Entergy Corporation’s common stock.  The options vest one-third on each of the first through third anniversaries of the grant date and have a ten-year term from the date of grant. The options were granted under the 2015 Equity Ownership Plan.
(5)
The amounts in column (l) are valued based on the aggregate grant date fair value of the award calculated in accordance with FASB ASC Topic 718 and, in the case of the performance units, are based on the probable outcome of the applicable performance conditions.  See Notes 4 and 5 to the 2017 Summary Compensation Table for a discussion of the relevant assumptions used in calculating the grant date fair value.

2017 Outstanding Equity Awards at Fiscal Year-End

The following table summarizes, for each Named Executive Officer, unexercised options, restricted stock that has not vested, and equity incentive plan awards outstanding as of December 31, 2017.
 
 
Option Awards
 
Stock Awards
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
Name
 
Number of Securities Underlying Unexercised Options Exercisable
 
Number of Securities Underlying Unexercised Options Unexercisable
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
 
Option Exercise Price
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
 
Market Value of Shares or Units of Stock That Have Not Vested
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
 
 
(#)
 
(#)
 
(#)
 
($)
 
 
 
(#)
 
($)
 
(#)
 
($)
A. Christopher Bakken, III
 
—

 
37,600 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,300 (4)
 
$675,537
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7,289 (5)
 
$593,252
 
 
 
 
 
 
 
 
 
 
 
 
5,200 (6)
 
$423,228
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,000 (9)
 
$2,441,700
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Marcus V. Brown
 
—

 
44,000 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
15,000

 
30,000 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
16,000

 
8,000 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
30,500

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
16,000

 
—

 
 
 
$64.60
 
1/31/2023
 
 
 
 
 
 
 
 
 
 
4,600

 
—

 
 
 
$71.30
 
1/26/2022
 
 
 
 
 
 
 
 


476

 
 
Option Awards
 
Stock Awards
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
Name
 
Number of Securities Underlying Unexercised Options Exercisable
 
Number of Securities Underlying Unexercised Options Unexercisable
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
 
Option Exercise Price
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
 
Market Value of Shares or Units of Stock That Have Not Vested
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
 
 
(#)
 
(#)
 
(#)
 
($)
 
 
 
(#)
 
($)
 
(#)
 
($)
 
 
2,800

 
—

 
 
 
$72.79
 
1/27/2021
 
 
 
 
 
 
 
 
 
 
7,500

 
—

 
 
 
$77.10
 
1/28/2020
 
 
 
 
 
 
 
 
 
 
4,300

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,300 (4)
 
$675,537
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,200 (5)
 
$667,398
 
 
 
 
 
 
 
 
 
 
 
 
6,100 (6)
 
$496,479
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,267 (7)
 
$347,291
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,667 (8)
 
$135,677
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leo P. Denault
 
—

 
179,400 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
55,666

 
111,334 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
58,666

 
29,334 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
106,000

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
50,000

 
—

 
 
 
$64.60
 
1/31/2023
 
 
 
 
 
 
 
 
 
 
30,000

 
—

 
 
 
$71.30
 
1/26/2022
 
 
 
 
 
 
 
 
 
 
25,000

 
—

 
 
 
$72.79
 
1/27/2021
 
 
 
 
 
 
 
 
 
 
50,000

 
—

 
 
 
$77.10
 
1/28/2020
 
 
 
 
 
 
 
 
 
 
45,000

 
—

 
 
 
$77.53
 
1/29/2019
 
 
 
 
 
 
 
 
 
 
50,000

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
48,700 (4)
 
$3,963,693
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
41,700 (5)
 
$3,393,963
 
 
 
 
 
 
 
 
 
 
 
 
17,000 (6)
 
$1,383,630
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10,467 (7)
 
$851,909
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,000 (8)
 
$325,560
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Haley R. Fisackerly
 
—

 
7,600 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
2,233

 
4,467 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
3,000

 
1,500 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
1,534

 
—

 
 
 
$71.30
 
1/26/2022
 
 
 
 
 
 
 
 
 
 
2,900

 
—

 
 
 
$72.79
 
1/27/2021
 
 
 
 
 
 
 
 
 
 
6,000

 
—

 
 
 
$77.10
 
1/28/2020
 
 
 
 
 
 
 
 
 
 
5,000

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,850 (4)
 
$150,572
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,800 (5)
 
$146,502

477

 
 
Option Awards
 
Stock Awards
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
Name
 
Number of Securities Underlying Unexercised Options Exercisable
 
Number of Securities Underlying Unexercised Options Unexercisable
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
 
Option Exercise Price
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
 
Market Value of Shares or Units of Stock That Have Not Vested
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
 
 
(#)
 
(#)
 
(#)
 
($)
 
 
 
(#)
 
($)
 
(#)
 
($)
 
 
 
 
 
 
 
 
 
 
 
 
850 (6)
 
$69,182
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
734 (7)
 
$59,740
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
284 (8)
 
$23,115
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Andrew S. Marsh
 
—

 
44,000 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
15,000

 
30,000 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
16,000

 
8,000 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
35,000

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
32,000

 
—

 
 
 
$64.60
 
1/31/2023
 
 
 
 
 
 
 
 
 
 
10,000

 
—

 
 
 
$71.30
 
1/26/2022
 
 
 
 
 
 
 
 
 
 
4,000

 
—

 
 
 
$72.79
 
1/27/2021
 
 
 
 
 
 
 
 
 
 
9,100

 
—

 
 
 
$77.10
 
1/28/2020
 
 
 
 
 
 
 
 
 
 
8,000

 
—

 
 
 
$77.53
 
1/29/2019
 
 
 
 
 
 
 
 
 
 
10,000

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,300 (4)
 
$675,537
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8,200 (5)
 
$667,398
 
 
 
 
 
 
 
 
 
 
 
 
6,100 (6)
 
$496,479
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,267 (7)
 
$347,291
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,667 (8)
 
$135,677
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
21,100 (10)
 
$1,717,329
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Phillip R. May, Jr.
 
—

 
10,500 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
3,200

 
6,400 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
3,333

 
1,667 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
8,000

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
6,000

 
—

 
 
 
$64.60
 
1/31/2023
 
 
 
 
 
 
 
 
 
 
4,600

 
—

 
 
 
$71.30
 
1/26/2022
 
 
 
 
 
 
 
 
 
 
2,900

 
—

 
 
 
$72.79
 
1/27/2021
 
 
 
 
 
 
 
 
 
 
6,000

 
—

 
 
 
$77.10
 
1/28/2020
 
 
 
 
 
 
 
 
 
 
4,700

 
—

 
 
 
$77.53
 
1/29/2019
 
 
 
 
 
 
 
 
 
 
6,500

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,150 (4)
 
$256,379
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,700 (5)
 
$219,753
 
 
 
 
 
 
 
 
 
 
 
 
1,100 (6)
 
$89,529
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
934 (7)
 
$76,018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
284 (8)
 
$23,115
 
 
 
 

478

 
 
Option Awards
 
Stock Awards
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
Name
 
Number of Securities Underlying Unexercised Options Exercisable
 
Number of Securities Underlying Unexercised Options Unexercisable
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
 
Option Exercise Price
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
 
Market Value of Shares or Units of Stock That Have Not Vested
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
 
 
(#)
 
(#)
 
(#)
 
($)
 
 
 
(#)
 
($)
 
(#)
 
($)
Sallie T. Rainer
 
—

 
7,800 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
2,233

 
4,467 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
2,533

 
1,267 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
2,000

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
2,000

 
—

 
 
 
$64.60
 
1/31/2023
 
 
 
 
 
 
 
 
 
 
2,300

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
1,850 (4)
 
$150,572
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,800 (5)
 
$146,502
 
 
 
 
 
 
 
 
 
 
 
 
900 (6)
 
$73,251
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
734 (7)
 
$59,740
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250 (8)
 
$20,348
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charles L. Rice, Jr.
 
—

 
3,900 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
2,233

 
4,467 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
3,000

 
1,500 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
1,850 (4)
 
$150,572
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
1,800 (5)
 
$146,502
 
 
 

 
 

 
 
 
 
 
 
 
550 (6)
 
$44,765
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
734 (7)
 
$59,740
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250 (8)
 
$20,348
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Richard C. Riley
 
—

 
8,000 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
1,566

 
3,134 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
3,000

 
1,500 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
5,334

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
1,334

 
—

 
 
 
$64.60
 
1/31/2023
 
 
 
 
 
 
 
 
 
 
4,000

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
1,850 (4)
 
$150,572
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
1,800 (5)
 
$146,502
 
 
 

 
 

 
 
 
 
 
 
 
1,000 (6)
 
$81,390
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
700 (7)
 
$56,973
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
367 (8)
 
$29,870
 
 
 
 

479

 
 
Option Awards
 
Stock Awards
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
(g)
 
(h)
 
(i)
 
(j)
Name
 
Number of Securities Underlying Unexercised Options Exercisable
 
Number of Securities Underlying Unexercised Options Unexercisable
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
 
Option Exercise Price
 
Option Expiration Date
 
Number of Shares or Units of Stock That Have Not Vested
 
Market Value of Shares or Units of Stock That Have Not Vested
 
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
 
 
(#)
 
(#)
 
(#)
 
($)
 
 
 
(#)
 
($)
 
(#)
 
($)
Roderick K. West
 
—

 
29,200 (1)

 
 
 
$70.53
 
1/26/2027
 
 
 
 
 
 
 
 
 
 
13,666

 
27,334 (2)

 
 
 
$70.56
 
1/28/2026
 
 
 
 
 
 
 
 
 
 
15,333

 
7,667 (3)

 
 
 
$89.90
 
1/29/2025
 
 
 
 
 
 
 
 
 
 
12,000

 
—

 
 
 
$63.17
 
1/30/2024
 
 
 
 
 
 
 
 
 
 
30,000

 
—

 
 
 
$71.30
 
1/26/2022
 
 
 
 
 
 
 
 
 
 
7,000

 
—

 
 
 
$77.10
 
1/28/2020
 
 
 
 
 
 
 
 
 
 
5,000

 
—

 
 
 
$77.53
 
1/29/2019
 
 
 
 
 
 
 
 
 
 
8,000

 
—

 
 
 
$108.20
 
1/24/2018
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
8,300 (4)
 
$675,537
 
 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
8,200 (5)
 
$667,398
 
 
 

 
 

 
 
 
 
 
 
 
3,200 (6)
 
$260,448
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
4,000 (7)
 
$325,560
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
1,567 (8)
 
$127,538
 
 
 
 
 
 
 

 
 

 
 
 
 
 
 
 
21,000 (11)
 
$1,709,190
 
 
 
 

(1)
Consists of options that vested or will vest as follows: 1/3 of the remaining unexercisable options vest on each of January 26, 2018, January 26, 2019, and January 26, 2020.
(2)
Consists of options that vested or will vest as follows: 1/2 of the remaining unexercisable options vest on each of January 28, 2018 and January 28, 2019.
(3)
The remaining unexercisable options vested on January 29, 2018.
(4)
Consists of performance units that will vest on December 31, 2019 based on Entergy Corporation’s total shareholder return performance over the 2017-2019 performance period, as described under “What Entergy Corporation Pays and Why- Executive Compensation Elements - Variable - Long-Term Incentive Compensation - Performance Unit Program” in Compensation Discussion and Analysis.
(5)
Consists of performance units that will vest on December 31, 2018 based on Entergy Corporation’s total shareholder return performance over the 2016-2018 performance period.
(6)
Consists of shares of restricted stock that vested or will vest as follows:  1/3 of the shares of restricted stock granted vest on each of January 26, 2018, January 26, 2019, and January 26, 2020.
(7)
Consists of shares of restricted stock that vested or will vest as follows:  1/2 of the shares of restricted stock granted vest on each of January 28, 2018 and January 28, 2019.
(8)
Consists of shares of restricted stock that vested on January 29, 2018.
(9)
Consists of restricted stock units granted under the 2015 Equity Ownership Plan which will vest one third on April 6, 2019, April 6, 2022, and April 6, 2025.
(10)
Consists of restricted stock units granted under the 2015 Equity Ownership Plan which will vest on August 3, 2020.
(11)
Consists of restricted stock units granted under the 2011 Equity Ownership Plan which will vest on May 1, 2018.


480

2017 Option Exercises and Stock Vested

The following table provides information concerning each exercise of stock options and each vesting of stock during 2017 for the Named Executive Officers.

 
 
Options Awards
 
Stock Awards
(a)
 
(b)
 
(c)
 
(d)
 
(e)
Name
 
Number of Shares Acquired on Exercise
 
Value Realized on Exercise
 
Number of Shares Acquired on Vesting
 
Value Realized on Vesting  (1)
 
 
(#)
 
($)
 
(#)
 
($)
A. Christopher Bakken, III
 
—

 

$—

 
1,212

 

$95,154

 
 
 
 
 
 
 
 
 
Marcus V. Brown
 
5,000

 

$35,850

 
8,224

 

$598,764

 
 
 
 
 
 
 
 
 
Leo P. Denault
 
—

 

$—

 
26,741

 

$1,979,459

 
 
 
 
 
 
 
 
 
Haley R. Fisackerly
 
10,734

 

$134,837

 
1,734

 

$126,435

 
 
 
 
 
 
 
 
 
Andrew S. Marsh
 
—

 

$—

 
8,224

 

$598,764

 
 
 
 
 
 
 
 
 
Phillip R. May, Jr.
 
—

 

$—

 
2,202

 

$161,139

 
 
 
 
 
 
 
 
 
Sallie T. Rainer
 
11,300

 

$169,289

 
1,698

 

$123,893

 
 
 
 
 
 
 
 
 
Charles L. Rice, Jr.
 
9,234

 

$147,762

 
1,603

 

$117,185

 
 
 
 
 
 
 
 
 
Richard C. Riley
 
4,500

 

$67,559

 
1,847

 

$134,414

 
 
 
 
 
 
 
 
 
Roderick K. West
 
—

 

$—

 
8,396

 

$610,908


(1)
Represents the value of performance units for the 2015-2017 performance period (payable solely in shares based on the closing stock price of Entergy Corporation on the date of vesting) under the Performance Unit Program and the vesting of shares of restricted stock in 2017.


481

2017 Pension Benefits

The following table shows the present value as of December 31, 2017, of accumulated benefits payable to each of the Named Executive Officers, including the number of years of service credited to each Named Executive Officer, under the retirement plans sponsored by Entergy Corporation, determined using interest rate and mortality rate assumptions set forth in Note 11 to the financial statements.  Additional information regarding these retirement plans follows this table. 
Name
 
Plan Name
 
Number of Years Credited Service
 
Present Value of Accumulated Benefit
 
Payments During 2017
A. Christopher Bakken, III
 
Cash Balance Equalization Plan
 
1.74

 

$30,600

 

$—

 
 
Cash Balance Plan
 
1.74

 

$30,300

 

$—

 
 
 
 
 
 
 
 
 
Marcus V. Brown (1)
 
System Executive Retirement Plan
 
22.74

 

$4,793,900

 

$—

 
 
Entergy Retirement Plan
 
22.74

 

$907,400

 

$—

 
 
 
 
 
 
 
 
 
Leo P. Denault  (1)(2)
 
System Executive Retirement Plan
 
33.83

 

$22,072,300

 

$—

 
 
Entergy Retirement Plan
 
18.83

 

$802,000

 

$—

 
 
 
 
 
 
 
 
 
Haley R. Fisackerly
 
System Executive Retirement Plan
 
22.08

 

$1,370,100

 

$—

 
 
Entergy Retirement Plan
 
22.08

 

$789,100

 

$—

 
 
 
 
 
 
 
 
 
Andrew S. Marsh
 
System Executive Retirement Plan
 
19.37

 

$3,493,700

 

$—

 
 
Entergy Retirement Plan
 
19.37

 

$548,400

 

$—

 
 
 
 
 
 
 
 
 
Phillip R. May, Jr. (1)
 
System Executive Retirement Plan
 
31.56

 

$2,398,400

 

$—

 
 
Entergy Retirement Plan
 
31.56

 

$1,227,800

 

$—

 
 
 
 
 
 
 
 
 
Sallie T. Rainer (1)(3)
 
System Executive Retirement Plan
 
33.38

 

$1,356,000

 

$—

 
 
Entergy Retirement Plan
 
33.00

 

$1,415,200

 

$—

 
 
 
 
 
 
 
 
 
Charles L. Rice, Jr.
 
System Executive Retirement Plan
 
8.47

 

$609,100

 

$—

 
 
Entergy Retirement Plan
 
8.47

 

$307,800

 

$—

 
 
 
 
 
 
 
 
 
Richard C. Riley (1)(4)
 
System Executive Retirement Plan
 
28.01

 

$1,688,200

 

$—

 
 
Entergy Retirement Plan
 
22.55

 

$866,000

 

$—

 
 
 
 
 
 
 
 
 
Roderick K. West
 
System Executive Retirement Plan
 
18.75

 

$4,636,200

 

$—

 
 
Entergy Retirement Plan
 
18.75

 

$594,100

 

$—


(1)
As of December 31, 2017, Mr. Brown, Mr. Denault, Mr. May, Ms. Rainer, and Mr. Riley were retirement eligible.
(2)
In 2006, Mr. Denault entered into a retention agreement granting him an additional 15 years of service and permission to retire under the non-qualified System Executive Retirement Plan in the event his employment is terminated by his Entergy employer other than for cause (as defined in the retention agreement), by Mr. Denault for good reason (as defined in the retention agreement), or on account of his death or disability. His retention agreement also provides that if he terminates employment for any other reason, he shall be entitled to the additional 15 years of service under the non-qualified System Executive Retirement Plan only if his Entergy employer grants him permission to retire. The additional 15 years of service increases the present value of his benefit by $3,967,700.
(3)
Service under the non-qualified System Executive Retirement Plan is granted from the date of hire. Qualified plan benefit service is granted from the later of the date of hire or the plan participation date.

482

(4)
Mr. Riley separated from Entergy Corporation and was subsequently rehired in June 1995. The Entergy Retirement Plan does not include any credit service prior to his rehire date, however, the System Executive Retirement Plan reflects a net credited service date of December 28, 1989.
The tables below contain summaries of the pension benefit plans sponsored by Entergy Corporation that the Named Executive Officers participated in during 2017. Benefits for the Named Executive Officers who participate in these plans are determined using the same formulas as for other eligible employees.

Qualified Retirement Benefits

 
Entergy Retirement Plan
Cash Balance Plan
Eligible Named Executive Officers
Marcus V. Brown
Haley R. Fisackerly
Leo P. Denault
Andrew S. Marsh
Phillip R. May, Jr.
Sallie T. Rainer
Charles L. Rice, Jr.
Richard C. Riley
Roderick K. West

A. Christopher Bakken, III
Eligibility
Non-bargaining employees hired on or before July 1, 2014
Non-bargaining employees hired on or after July 1, 2014
Vesting
A participant becomes vested in the Entergy Retirement Plan upon attainment of at least 5 years of vesting service or upon attainment of age 65 while actively employed by an Entergy system company.
A participant becomes vested in the Cash Balance Plan upon attainment of at least 3 years of vesting service or upon attainment of age 65 while actively employed by an Entergy system company.
Form of Payment Upon Retirement
Benefits are payable as an annuity. For employees who separate from service on or after January 1, 2018, a single lump sum distribution may be elected by the participant if eligibility criteria are met.
Benefits are payable as an annuity or single lump sum distribution.
Retirement Benefit Formula
Benefits are calculated as a single life annuity payable at age 65 and generally are equal to 1.5% of a participant’s Final Average Monthly Earnings (FAME) multiplied by years of service (not to exceed 40).

“Earnings” for the purpose of calculating FAME generally includes the employee’s base salary and eligible annual incentive awards subject to Internal Revenue Code limitations, and excludes all other bonuses. Executive Annual Incentive Awards are not eligible for inclusion in Earnings under this plan.

FAME is calculated using the employee’s average monthly Earnings for the 60 consecutive months in which the employee’s earnings were highest during the 120 month
 period immediately preceding the employee’s retirement and includes up to 5 eligible annual incentive awards paid during the 60 month period.



The normal retirement benefit at age 65 is determined by converting the sum of an employee’s annual pay credits and his or her annual interest credits, into an actuarially equivalent annuity.

Pay credits ranging from 4-8% of an employee’s eligible Earnings are allocated annually to a notional account for the employee based on an employee’s age and years of service. Earnings for purposes of calculating an employee’s pay credit include the employee’s base salary and annual incentive awards subject to Code limitations and exclude all other bonuses. Executive Annual Incentive Awards are eligible for inclusion in Earnings under this plan.

Interest credits are calculated based upon the annual rate of interest on 30-year U.S. Treasury securities, as specified by the Internal Revenue Service, for the month of August preceding the first day of the applicable calendar year subject to a minimum rate of 2.6% and a maximum rate of 9%.


483

Benefit Timing
Normal retirement age under the plan is 65.

A reduced vested benefit may be commenced as early as age 55. The amount of this benefit is determined by reducing the normal retirement benefit by 7% per year for the first 5 years commencement precedes age 65, and 6% per year for each additional year commencement precedes age 65.

A subsidized early retirement benefit may be commenced by employees who are at least age 55 with 10 years of service at the time they separate from service. The amount of this benefit is determined by reducing the normal retirement benefit by 2% per year for each year that early retirement precedes age 65.
Normal retirement age under the plan is 65.

A vested cash balance benefit can be commenced as early as the first day of the month following separation from service. The amount of the benefit is determined in the same manner as the normal retirement benefit described above in the “Retirement Benefit Formula” section.

Non-qualified Retirement Benefits
The Named Executive Officers are eligible to participate in certain non-qualified retirement benefit plans that provide retirement income, including the Pension Equalization Plan, the Cash Balance Equalization Plan, and the System Executive Retirement Plan. Each of these plans is an unfunded non-qualified defined benefit pension plan that provides benefits to key management employees. In these plans, as described below, an executive is typically enrolled in one or more non-qualified plans, but is only paid the amount due under the plan that provides the highest benefit. In general, upon disability, participants in the Pension Equalization Plan and the System Executive Retirement Plan remain eligible for continued service credits until the earlier of recovery, separation from service due to disability, or retirement eligibility. Generally, spouses of participants who die before commencement of benefits may be eligible for a portion of the participant’s accrued benefit.
 
Pension Equalization Plan
Cash Balance Equalization Plan
System Executive Retirement Plan
Eligible Named Executive Officers
Marcus V. Brown
Haley R. Fisackerly
Leo P. Denault
Andrew S. Marsh
Phillip R. May, Jr.
Sallie T. Rainer
Charles L. Rice, Jr.
Richard C. Riley
Roderick K. West

A. Christopher Bakken, III
Marcus V. Brown
Haley R. Fisackerly
Leo P. Denault
Andrew S. Marsh
Phillip R. May, Jr.
Sallie T. Rainer
Charles L. Rice, Jr.
Richard C. Riley
Roderick K. West

Eligibility
Management or highly compensated employees who participate in the Entergy Retirement Plan
Management or highly compensated employees who participate in the Cash Balance Plan
Certain individuals who became executive officers before July 1, 2014
Form of Payment Upon Retirement
Single lump sum distribution
Single lump sum distribution
Single lump sum distribution
Retirement Benefit Formula
Benefits generally are equal to the actuarial present value of the difference between (1) the amount that would have been payable as an annuity under the Entergy Retirement Plan, including Executive Annual Incentive Awards as eligible earnings and without applying Internal Revenue Code limitations on pension benefits and earnings that may be considered in calculating tax-qualified pension benefits, and (2) the amount actually payable as an annuity under the Entergy Retirement Plan.
Benefits generally are equal to the difference between the amount that would have been payable as a lump sum under the Cash Balance Plan, but for Internal Revenue Code limitations on pension benefits and earnings that may be considered in calculating tax-qualified cash balance plan benefits, and the amount actually
Benefits generally are equal to the actuarial present value of a specified percentage, based on the participant’s years of service (including supplemental service granted under the plan) and management level of the participant’s “Final Average Monthly Compensation” (which is generally 1/36th of the sum of the participant’s base salary and Annual Incentive Plan award for the 3 highest years during the last 10 years preceding separation from service), after first being reduced by the

484

 
Pension Equalization Plan
Cash Balance Equalization Plan
System Executive Retirement Plan
 
Executive Annual Incentive Awards are taken into account as eligible earnings under this plan.
payable as a lump sum under the Cash Balance Plan.
value of the participant’s Entergy Retirement Plan benefit.
Benefit timing
Payable at age 65

Benefits payable prior to age 65 are subject to the same reduced terminated vested or early retirement reduction factors as benefits payable under the Entergy Retirement Plan as described above.

An employee with supplemental credited service who terminates employment prior to age 65 must receive prior written consent of the Entergy employer in order to receive the portion of their benefit attributable to their supplemental credited service agreement.

Benefits payable upon separation from service subject to the 6 month delay required under Code Section 409A.
Payable upon separation from service subject to 6 month delay required under Code Section 409A.
Payable at age 65

Prior to age 65, vesting is conditioned on the prior written consent of the officer’s Entergy employer.

Benefits payable prior to age 65 are subject to the same reduced terminated vested or subsidized early retirement reduction factors as benefits payable under the Entergy Retirement Plan as described above.

Benefits payable upon separation from service subject to the 6 month delay required under Code Section 409A.

Additional Information

(1)
Effective July 1, 2014, (a) no new grants of supplemental service may be provided to participants in the Pension Equalization Plan; (b) supplemental credited service granted prior to July 1, 2014 was grandfathered; and (c) participants in Entergy Corporation’s Cash Balance Plan are not eligible to participate in the Pension Equalization Plan and instead may be eligible to participate in the Cash Balance Equalization Plan.
(2)
Benefits already accrued under the System Executive Retirement Plan, Pension Equalization Plan, and Cash Balance Equalization Plan, if any, will become fully vested if a participant is involuntarily terminated without cause or terminates his or her employment for good reason in connection with a change in control with payment generally made in a lump-sum payment as soon as reasonably practicable following the first day of the month after the termination of employment, unless delayed 6 months under Code Section 409A.
(3)
The System Executive Retirement Plan was closed to new executive officers effective July 1, 2014.


485

2017 Non-qualified Deferred Compensation

As of December 31, 2017, Mr. May had a deferred account balance under a frozen Defined Contribution Restoration Plan.  The amount is deemed invested, as chosen by the participant, in certain T. Rowe Price investment funds that are also available to the participant under the Savings Plan.  Mr. May has elected to receive the deferred account balance after he retires. The Defined Contribution Restoration Plan, until it was frozen in 2005, credited eligible employees’ deferral accounts with employer contributions to the extent contributions under the qualified savings plan in which the employee participated were subject to limitations imposed by the Code.

Defined Contribution Restoration Plan
Name
 
Executive Contributions in 2017
 
Registrant Contributions in 2017
 
Aggregate Earnings in 2017 (1)
 
Aggregate Withdrawals/Distributions
 
Aggregate Balance at December 31, 2017
(a)
 
(b)
 
(c)
 
(d)
 
(e)
 
(f)
 
 
 
 
 
 
 
 
 
 
 
Phillip R. May, Jr.
 

$—

 

$—

 

$362

 

$—

 

$2,113


(1)
Amounts in this column are not included in the Summary Compensation Table.


486

2017 Potential Payments Upon Termination or Change in Control

Entergy Corporation has plans and other arrangements that provide compensation to a Named Executive Officer if his or her employment terminates under specified conditions, including following a change in control of Entergy Corporation or its subsidiaries. The tables below reflect the amount of compensation each of the Named Executive Officers would have received if his or her employment with an Entergy employer had been terminated under various scenarios as of December 31, 2017. For purposes of these tables, a stock price of $81.39 was used, which was the closing market price on December 29, 2017, the last trading day of the year.

Benefits and Payments Upon Termination
Voluntary Resignation
For Cause
Termination for Good Reason or Not for Cause
Retirement
Disability
Death
Termination Related to a Change in Control
A. Christopher Bakken, III (1)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$2,511,506

Performance Units (7)
—

—

—

—


$620,680


$620,680


$1,530,132

Stock Options (8)
—

—

—

—


$408,336


$408,336


$408,336

Restricted Stock (9)
—

—

—

—


$442,029


$442,029


$442,029

Welfare Benefits (10)
—

—

—

—

—

—


$20,358

Unvested Restricted Stock Units (12)
—

—


$813,900

—


$813,900


$813,900


$2,441,700

 
 
 
 
 
 
 
 
Marcus V. Brown (2)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$3,213,000

Performance Units (7)
—

—

—

$670,165


$670,165


$670,165


$1,530,132

Stock Options (8)
—

—

—


$802,740


$802,740


$802,740


$802,740

Restricted Stock (9)
—

—

—

—


$1,041,711


$1,041,711


$1,054,082

Welfare Benefits (11)
—

—

—

—

—

—

—

 
 
 
 
 
 
 
 
Leo P. Denault (3)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$10,119,954

Performance Units (6)(7)
—

—


$3,174,210

$3,583,846


$3,583,846


$3,583,846


$6,511,200

Stock Options (8)
—

—


$3,154,024


$3,154,024


$3,154,024


$3,154,024


$3,154,024

Restricted Stock (9)
—

—


$2,750,413

—


$2,750,413


$2,750,413


$2,750,413

Welfare Benefits (11)
—

—

—

—

—

—

—

 
 
 
 
 
 
 
 
Haley R. Fisackerly (4)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$497,420

Performance Units (7)
—

—

—

—


$147,886


$147,886


$358,116

Stock Options (8)
—

—

—

—


$130,910


$130,910


$130,910

Restricted Stock (9)
—

—

—

—


$161,966


$161,966


$164,163

Welfare Benefits (10)
—

—

—

—

—

—


$18,252

 
 
 
 
 
 
 
 
Andrew S. Marsh (4)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$3,060,000

Performance Units (7)
—

—

—

—


$670,165


$670,165


$1,530,132

Stock Options (8)
—

—

—

—


$802,740


$802,740


$802,740

Restricted Stock (9)
—

—

—

—


$1,041,711


$1,041,711


$1,054,082

Welfare Benefits (10)
—

—

—

—

—

—


$27,378

Unvested Restricted Stock Units (13)
—

—

—

—


$1,717,329


$1,717,329


$1,717,329

 
 
 
 
 
 
 
 

487

Benefits and Payments Upon Termination
Voluntary Resignation
For Cause
Termination for Good Reason or Not for Cause
Retirement
Disability
Death
Termination Related to a Change in Control
Phillip R. May, Jr. (2)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$1,171,680

Performance Units (7)
—

—

—


$231,962


$231,962


$231,962


$504,618

Stock Options (8)
—

—

—


$183,342


$183,342


$183,342


$183,342

Restricted Stock (9)
—

—

—

—


$201,034


$201,034


$203,231

Welfare Benefits (11)
—

—

—

—

—

—

—

 
 
 
 
 
 
 
 
Sallie T. Rainer (2)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$459,585

Performance Units (7)
—

—

—


$147,886


$147,886


$147,886


$358,116

Stock Options (8)
—

—

—


$133,082


$133,082


$133,082


$133,082

Restricted Stock (9)
—

—

—

—


$163,269


$163,269


$165,222

Welfare Benefits (11)
—

—

—

—

—

—

—

 
 
 
 
 
 
 
 
Charles R. Rice, Jr (4)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$400,993

Performance Units (7)
—

—

—

—


$147,886


$147,886


$358,116

Stock Options (8)
—

—

—

—


$90,728


$90,728


$90,728

Restricted Stock (9)
—

—

—

—


$133,480


$133,480


$135,433

Welfare Benefits (10)
—

—

—

—

—

—


$18,252

 
 
 
 
 
 
 
 
Richard C. Riley (2)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$481,880

Performance Units (7)
—

—

—


$147,886


$147,886


$147,886


$358,116

Stock Options (8)
—

—

—


$120,814


$120,814


$120,814


$120,814

Restricted Stock (9)
—

—

—

—


$178,896


$178,896


$181,663

Welfare Benefits (11)
—

—

—

—

—

—

—

 
 
 
 
 
 
 
 
Roderick K. West (4)
 
 
 
 
 
 
 
Severance Payment (5 )
—

—

—

—

—

—


$3,434,065

Performance Units (7)
—

—

—

—


$670,165


$670,165


$1,530,132

Stock Options (8)
—

—

—

—


$613,132


$613,132


$613,132

Restricted Stock (9)
—

—

—

—


$762,624


$762,624


$774,344

Welfare Benefits (10)
—

—

—

—

—

—


$27,378

Unvested Restricted Stock Units (14)
—

—


$1,709,190

—

—

—


$1,709,190


Pension Benefits

1)
In addition to the payments and benefits in the table, if Mr. Bakken’s employment were terminated under certain conditions relating to a change in control, on the first day of the month following the Qualifying Event (as defined in the Cash Balance Equalization Plan) he would have become vested in and would have been entitled to receive his vested pension benefits accumulated in the Cash Balance Equalization Plan as of the date of the Qualifying Event so long as a forfeiture event does not occur as described in the plan. For a description of the pension benefits under the Cash Balance Equalization Plan, see “2017 Pension Benefits.”

2)
As of December 31, 2017, Messrs. Brown, May, and Riley and Ms. Rainer are retirement eligible and would retire rather than voluntarily resign, and in addition to the payments and benefits in the table, each also would be entitled to receive his or her vested pension benefits under the Entergy Retirement Plan. For a description of the pension

488

benefits available, see “2017 Pension Benefits.” In the event their termination by their Entergy employer without cause or by Mr. Brown, Mr. May, Ms. Rainer, or Mr. Riley for good reason in connection with a change in control, each would be eligible for subsidized early retirement benefits under the System Executive Retirement Plan even if they do not have company permission to separate from employment. If Mr. Brown’s, Mr. May’s, Ms. Rainer’s, or Mr. Riley’s employment were terminated for cause in connection with a change in control, they would not be entitled to receive a benefit under the System Executive Retirement Plan. If their employment were terminated for any reason not in connection with a change in control, or they were to retire from their Entergy employer before age 65 without the permission of their Entergy employer, they would not be entitled to receive a benefit under the System Executive Retirement Plan.

3)
As of December 31, 2017, Mr. Denault is retirement eligible and would retire rather than voluntarily resign, and in addition to the payments and benefits in the table, Mr. Denault also would be entitled to receive his vested pension benefits under the Entergy Retirement Plan. For a description of the pension benefits available, see “2017 Pension Benefits.” If Mr. Denault’s employment was terminated by his Entergy employer other than for cause, by Mr. Denault for good reason or on account of his death or disability, he would also be eligible for certain additional retirement benefits. For a description of these benefits, see “2017 Pension Benefits.” Otherwise, if Mr. Denault’s employment was terminated for cause or he was to retire from his Entergy employer before age 65 without the permission of his Entergy employer, he would not receive a benefit under the System Executive Retirement Plan.

4)
In addition to the payments and benefits in the table, if Mr. Fisackerly’s, Mr. Marsh’s, Mr. Rice’s, or Mr. West’s employment were terminated under certain conditions relating to a change in control, each also would have been entitled to receive his vested pension benefits upon attainment of age 55 under the Entergy Retirement Plan and would have been eligible for early retirement benefits under the System Executive Retirement Plan calculated using early retirement reduction factors. For a description of the pension benefits, see “2017 Pension Benefits.” Mr. Fisackerly’s, Mr. Marsh’s, Mr. Rice’s, or Mr. West’s employment were terminated for cause in connection with a change in control, he would not be entitled to receive a benefit under the System Executive Retirement Plan. If his employment were terminated for any reason not in connection with a change in control, or each were to resign from his Entergy employer before age 65 without the permission of his Entergy employer, each would not be entitled to receive a benefit under the System Executive Retirement Plan.

Severance Payments:

5)
In the event of a termination by the executive for good reason or by his or her Entergy system employer not for cause during the period beginning upon the occurrence of a “potential change in control” (as defined in the System Executive Continuity Plan) and ending on the 2 nd anniversary of a change in control, each Named Executive Officer would be entitled to receive pursuant to the System Executive Continuity Plan a lump sum severance payment equal to a multiple of the sum of (1) his or her annual base salary as in effect at any time within one year prior to the commencement of a change of control period or, if higher, immediately prior to a circumstance constituting good reason plus (2) his or her annual incentive, calculated using the average annual target opportunity derived under the Annual Incentive Plan for 2015 and 2016 (the two calendar years immediately preceding the calendar year in which termination occurs), but in no event shall the severance payment exceed the product of 2.99 times the sum of (a) his or her annual base salary as in effect at any time within one year prior to the commencement of a change in control period or, if higher, immediately prior to a circumstance constituting good reason plus (b) the higher of his or her actual annual incentive payment under the Annual Incentive Plan for the 2016 performance year or his or her annual incentive, calculated using the average annual target opportunity derived under the Annual Incentive Plan for 2015 and 2016 (the two calendar years immediately preceding the calendar year in which termination occurs). For purposes of this table, the following target opportunity and base salary were assumed:

489

Named Executive Officer
Target Opportunity
Base Salary
A. Christopher Bakken III
35%
$620,125
Marcus V. Brown
70%
$630,000
Leo P. Denault
130%
$1,230,000
Haley R. Fisackerly
40%
$355,300
Andrew S. Marsh
70%
$600,000
Phillip R. May Jr,
60%
$366,150
Sallie T. Rainer
40%
$328,275
Charles L. Rice, Jr.
40%
$286,424
Richard C. Riley
40%
$344,200
Roderick K. West
70%
$675,598

Performance Units:

6)
With respect to Mr. Denault, in the event of a Termination Event (as defined in Mr. Denault’s 2006 retention agreement), he is entitled to a Target LTIP Award, as defined in his 2006 retention agreement, calculated by using the average annual number of performance units with respect to the two most recent performance periods preceding the calendar year in which his employment termination occurs, assuming all performance goals were achieved at target. For purposes of the table, the value of Mr. Denault’s retention payment was calculated by taking an average of the target performance units from the 2013-2015 Performance Unit Program (38,000) and from the 2014-2016 Performance Unit Program (40,000). This average number of units (39,000) multiplied by the closing price of Entergy Corporation’s common stock on December 29, 2017 ($81.39) would equal a payment of $3,174,210. In the event of death or disability, Mr. Denault receives the greater of the Target LTIP Award calculated as described above or the sum of the amount that would be payable under the provisions of each open Performance Unit Program as described in Note 7 below.

7)
In the event of a qualifying termination related to a change in control, each Named Executive Officer would have forfeited his or her performance units for the 2016-2018 and 2017-2019 performance periods and would have been entitled to receive, pursuant to the 2015 Equity Ownership Plan, a single-lump sum payment in lieu of any payment for each performance award that would not be based on any outstanding performance period. The payments for the 2016-2018 and the 2017-2019 performance periods would have been calculated using the most recent performance period preceding (but not including) the calendar year in which his or her termination occurs. For purposes of the table, the value of Mr. Denault’s payments was calculated by multiplying the target performance units for the 2014-2016 Performance Unit Program (40,000) by the closing price of Entergy Corporation’s common stock on December 29, 2017 ($81.39), which would equal a payment of $3,255,600 for the forfeited performance units for each performance period. The value of the payments for the other Named Executive Officers was calculated by multiplying the target performance units for the 2014-2016 Performance Unit Program (9,400) by the closing price of Entergy Corporation’s common stock on December 29, 2017 ($81.39), which would equal a payment of $765,066 for the forfeited performance units for each performance period. In the event his death or disability, Mr. Denault would receive the greater of the target Long-Term Performance Incentive award as described in note 6 above or a pro-rated number of performance units for all open performance periods, based on the number of months of his participation in each open performance period.

In the event of retirement in the case of Mr. Brown, Mr. Denault, Mr. May, Ms. Rainer, or Mr. Riley, or upon death or disability, other than Mr. Denault, each Named Executive Officer would not have forfeited his or her performance units for all open performance periods, but rather such performance unit awards would have been pro-rated based on his or her number of months of participation in each open Performance Unit Program performance period, in accordance with his grant agreement under the Performance Unit Program. The amount of the award is based on actual performance achieved, with a stock price set as of the end of the performance period, and payable in the form of a lump sum after the completion of the performance period. For purposes of the table, the values of the awards were calculated as follows:

490

Mr. Denault’s:
2016 - 2018 Plan - 27,800 (24/36*41,700) performance units at target, assuming a stock price of $81.39
2017 - 2019 Plan - 16,233 (12/36*48,700) performance units at target, assuming a stock price of $81.39
Mr. Bakken’s:
2016 - 2018 Plan - 4,859 (24/36*7,289) performance units at target, assuming a stock price of $81.39
2017 - 2019 Plan - 2,767 (12/36*8,300) performance units at target, assuming a stock price of $81.39
Messrs. Brown’s, Marsh’s, and West’s:
2016 - 2018 Plan - 5,467 (24/36*8,200) performance units at target, assuming a stock price of $81.39
2017 - 2019 Plan - 2,767 (12/36*8,300) performance units at target, assuming a stock price of $81.39

Mr. May’s:
2016 - 2018 Plan - 1,800 (24/36*2,700) performance units at target, assuming a stock price of $81.39
2017 - 2019 Plan - 1,050 (12/36*3,150) performance units at target, assuming a stock price of $81.39

Messrs. Fisackerly’s, Rice’s, Riley’s, and Ms. Rainer’s:

2016 - 2018 Plan - 1,200 (24/36*1,800) performance units at target, assuming a stock price of $81.39
2017 - 2019 Plan - 617 (12/36*1,850) performance units at target, assuming a stock price of $81.39

Stock Options:

8)
In the event of death or disability or qualifying termination related to a change in control, or retirement in the case of Mr. Brown, Mr. Denault, Mr. May, Ms. Rainer, or Mr. Riley, all of the unvested stock options of each Named Executive Officer would immediately vest pursuant to the Equity Ownership Plans. In addition, with respect to grants under the 2011 Equity Ownership Plan, each Named Executive Officer would be entitled to exercise his or her stock options for the remainder of the ten-year period extending from the grant date of the options, and with respect to grants under the 2015 Equity Ownership Plan, within the lesser of five years or the remaining term of the option grant. For purposes of this table, it is assumed that the Named Executive Officers exercised their options immediately upon vesting and received proceeds equal to the difference between the closing price of common stock on December 29, 2017, and the applicable exercise price of each option share.

In the event of a Termination Event as defined in his 2006 retention agreement, Mr. Denault will immediately vest in all unvested stock options.

Restricted Stock:

9)
In the event of death or disability pursuant to the 2011 Equity Ownership Plan, each Named Executive Officer would immediately vest in a pro-rated portion of his or her unvested restricted stock that was otherwise scheduled to become vested on the immediately following 12-month grant date anniversary date, as well as dividends declared on the pro-rated portion of such restricted stock pursuant to the 2011 Equity Ownership Plan. The pro-rated vested portion would be determined based on the number of days between the most recent preceding 12-month grant date anniversary date and the date of his or her death or disability. In the event of his or her qualifying termination related to a change in control, a Named Executive Officer would immediately vest in all of their unvested restricted stock, as well as dividends declared on such restricted stock granted pursuant the 2011 Equity Ownership Plan. In the event of death, disability, or qualifying termination related to a change in control, each Named Executive Officer would vest in all of their unvested restricted stock as well as dividends declared pursuant to the 2015 Equity Ownership Plan.


491

In the event of a Termination Event as defined in his 2006 retention agreement, Mr. Denault will immediately vest in all unvested restricted stock.

Welfare Benefits:

10)
Pursuant to the System Executive Continuity Plan, in the event of a termination related to a change in control, Mr. Bakken, Mr. Marsh, and Mr. West would be eligible to receive Entergy-sponsored COBRA benefits for 18 months and Mr. Fisackerly and Mr. Rice would be eligible to receive Entergy-sponsored COBRA benefits for 12 months.

11)
Upon retirement, Mr. Brown, Mr. Denault, Mr. May, Ms. Rainer, and Mr. Riley would be eligible for retiree medical and dental benefits, the same as all other retirees.

Unvested Restricted Stock Units:

12)
Mr.Bakken’s 30,000 restricted stock units vest 1/3 rd on each of April 6, 2019, April 6, 2022, and April 6, 2025. Pursuant to his restricted stock unit agreement, if Mr. Bakken’s employment terminates due to total disability or death or, prior to April 6, 2019, Mr. Bakken’s employment is terminated by his Entergy employer other than for cause, then he will vest in and be paid the 10,000 restricted stock units that otherwise would have vested had he satisfied the vesting conditions of the restricted stock unit agreement through the next vesting date to occur following his date of total disability, death, or termination other than for cause prior to April 6, 2019 subject, in the case of a termination without cause, to Mr. Bakken timely executing and not revoking a release of claims against Entergy Corporation and its affiliates. In the event of a change in control, the unvested restricted stock units will fully vest upon Mr. Bakken’s termination of employment by his Entergy employer without cause or by Mr. Bakken with good reason during a change in control period (as defined in the 2015 Equity Ownership Plan). Otherwise, if Mr. Bakken voluntarily resigns or is terminated, he would forfeit these units. Pursuant to his restricted stock unit agreement, Mr. Bakken is subject to certain restrictions on his ability to compete with Entergy Corporation and its affiliates or solicit its employees or customers during and for 12 months after his employment with his Entergy employer. In addition, the restricted stock unit agreement limits Mr. Bakken’s ability to disparage Entergy Corporation and its affiliates. In the event of a breach of these restrictions, other than following certain constructive terminations of his employment, Mr. Bakken will forfeit any restricted stock units that are not yet vested and paid, and must repay to Entergy Corporation any shares of Entergy Corporation’s common stock paid to him in respect of the restricted stock units and any amounts he received upon the sale or transfer of any such shares.

13)
Mr. Marsh’s 21,100 restricted stock units vest 100% in 2020. Pursuant to his restricted stock unit agreement, any unvested restricted stock units will vest immediately in the event of his termination of employment due to Mr. Marsh’s total disability or death. In the event of a change in control, the units will vest upon termination of Mr. Marsh’s employment by his Entergy employer without cause or by Mr. Marsh with good reason during a change in control period (as defined in the 2015 Equity Ownership Plan). Otherwise, if Mr. Marsh voluntarily resigns or is terminated, he would forfeit these units. Pursuant to his restricted stock unit agreement, Mr. Marsh is subject to certain restrictions on his ability to compete with Entergy Corporation and its affiliates during and for 12 months after his employment with Entergy Corporation, or to solicit its employees or customers during and for 24 months after his employment with it. In addition, the restricted stock unit agreement limits Mr. Marsh’s ability to disparage Entergy Corporation and its affiliates. In the event of a breach of these restrictions, Mr. Marsh will forfeit any restricted stock units that are not yet vested and paid, and must repay to Entergy Corporation any shares of Entergy Corporation’s common stock paid to him in respect of the restricted stock units and any amounts he received upon the sale or transfer of any such shares.

14)
Mr. West’s 21,000 restricted stock units vest 100% in 2018. Pursuant to his restricted stock unit agreement, any unvested restricted stock units will vest immediately in the event of a termination other than for cause. In the event of a change in control, the units will vest upon termination of Mr. West’s employment by his Entergy employer without cause or by Mr. West with good reason during a change in control period (as defined in the 2011 Equity Ownership Plan). Otherwise, if Mr. West voluntarily resigns, is terminated for cause, dies, or becomes disabled, he would forfeit these units.

492

Mr. Denault’s 2006 Retention Agreement
Under the terms of his 2006 retention agreement, Mr. Denault’s employment may be terminated for cause upon Mr. Denault’s:

•
continuing failure to substantially perform his duties (other than because of physical or mental illness or after he has given notice of termination for good reason) that remains uncured for 30 days after receiving a written notice from the Personnel Committee;
•
willfully engaging in conduct that is demonstrably and materially injurious to Entergy Corporation;
•
conviction of or entrance of a plea of guilty or nolo contendere to a felony or other crime that has or may have a material adverse effect on his ability to carry out his duties or upon Entergy Corporation’s reputation;
•
material violation of any agreement that he has entered into with Entergy Corporation; or
•
unauthorized disclosure of Entergy Corporation’s confidential information.

Mr. Denault may terminate his employment for good reason upon:

•
the substantial reduction in the nature or status of his duties or responsibilities from those in effect immediately prior to the date of the retention agreement, other than de minimis acts that are remedied after notice from Mr. Denault;
•
a reduction of 5% or more in his base salary as in effect on the date of the retention agreement;
•
the relocation of his principal place of employment to a location other than the corporate headquarters;
•
the failure to continue to allow him to participate in programs or plans providing opportunities for equity awards, stock options, restricted stock, stock appreciation rights, incentive compensation, bonus and other plans on a basis not materially less favorable than enjoyed at the time of the retention agreement (other than changes similarly affecting all senior executives);
•
the failure to continue to allow him to participate in programs or plans with opportunities for benefits not materially less favorable than those enjoyed by him under any of Entergy Corporation’s pension, savings, life insurance, medical, health and accident, disability, or vacation plans or policies at the time of the retention agreement (other than changes similarly affecting all senior executives); or
•
any purported termination of his employment not taken in accordance with his retention agreement.

System Executive Continuity Plan

Termination Related to a Change in Control

Entergy Corporation’s Named Executive Officers will be entitled to the benefits described in the tables above under the System Executive Continuity Plan in the event of a termination related to a change in control if a change in control occurs and their employment is terminated by their Entergy employer other than for cause or if they terminate their employment for good reason, in each case within a period beginning on the occurrence of a potential change in control and ending 24 months following the effective date of a change in control.

A change in control includes the following events:

•
the purchase of 30% or more of either Entergy Corporation’s common stock or the combined voting power of Entergy Corporation’s voting securities;
•
the merger or consolidation of Entergy Corporation (unless its Board members constitute at least a majority of the board members of the surviving entity);
•
the liquidation, dissolution, or sale of all or substantially all of Entergy Corporation’s assets; or
•
a change in the composition of Entergy Corporation’s Board such that, during any two-year period, the individuals serving at the beginning of the period no longer constitute a majority of Entergy Corporation’s Board at the end of the period.


493

A potential change in control includes the following events:

•
Entergy Corporation or an affiliate enters into an agreement the consummation of which would constitute a change in control;
•
the Entergy Corporation Board adopts resolutions determining that, for purposes of the System Executive Continuity Plan, a potential change in control has occurred;
•
a System Company or other person or entity publicly announces an intention to take actions that would constitute a change in control; or
•
any person or entity becomes the beneficial owner (directly or indirectly) of outstanding shares of Entergy Corporation’s common stock constituting 20% or more of the voting power or value of Entergy Corporation’s outstanding common stock.

A Named Executive Officer’s employment may be terminated for cause under the System Executive Continuity Plan if he or she:

•
willfully and continuously fails to substantially perform his or her duties after receiving a 30-day written demand for performance from Entergy Corporation’s Board;
•
engages in conduct that is materially injurious to Entergy Corporation or any of its subsidiaries;
•
is convicted or pleads guilty or nolo contendere to a felony or other crime that materially and adversely affects his or her ability to perform his or her duties or Entergy Corporation’s reputation;
•
materially violates any agreement with Entergy Corporation or any of its subsidiaries; or
•
discloses any of Entergy Corporation’s confidential information without authorization.

A Named Executive Officer may terminate his or her employment with his or her Entergy employer for good reason under the System Executive Continuity Plan if, without his or her consent:

•
the nature or status of his or her duties and responsibilities is substantially altered or reduced compared to the period prior to the change in control;
•
his or her salary is reduced by 5% or more;
•
he or she is required to be based outside of the continental United States at somewhere other than his or her primary work location prior to the change in control;
•
any of his or her compensation plans are discontinued without an equitable replacement;
•
his or her benefits or number of vacation days are substantially reduced; or
•
his or her Entergy employer purports to terminate his or her employment other than in accordance with the System Executive Continuity Plan.

In addition to participation in the System Executive Continuity Plan, benefits already accrued under the System Executive Retirement Plan, Pension Equalization Plan, and Cash Balance Equalization Plan, if any, will become fully vested if the executive is involuntarily terminated without cause or the executive terminates his or her employment for good reason within two years after the occurrence of a change in control. Any awards granted under the Equity Ownership Plans will become fully vested if the executive is involuntarily terminated without cause or terminates employment for good reason within two years after the occurrence of a change in control.

Under certain circumstances described below, the payments and benefits received by a Named Executive Officer pursuant to the System Executive Continuity Plan may be forfeited and, in certain cases, subject to repayment. Benefits are no longer payable under the System Executive Continuity Plan, and unvested performance units under the Performance Unit Program are subject to forfeiture, if the executive:

•
accepts employment with Entergy Corporation or any of its subsidiaries;
•
elects to receive the benefits of another severance or separation program;
•
removes, copies or fails to return any property belonging to Entergy Corporation or any of its subsidiaries;
•
discloses non-public data or information concerning Entergy Corporation or any of its subsidiaries; or
•
violates his or her non-compete provision, which generally runs for two years but extends to three years if permissible under applicable law.

494

Furthermore, if the executive discloses non-public data or information concerning Entergy Corporation or any of its subsidiaries or violates his or her non-compete provision, he or she will be required to repay any benefits previously received under the System Executive Continuity Plan.

Voluntary Resignation

If a Named Executive Officer voluntarily resigns from his or her Entergy employer:

•
all unvested stock options, shares of restricted stock and restricted stock units as well as any perquisites to which he or she is entitled as an officer are forfeited;
•
incentive payments under any outstanding performance periods under the Long-Term Performance Unit Program or the Annual Incentive Plan are forfeited; provided however, if an officer resigns after the completion of an Annual Incentive Plan or Long-Term Performance Unit Program performance period, he or she could receive a payout under the Long-Term Performance Unit Program based on the outcome of the performance period and could, at Entergy Corporation’s discretion, receive an annual incentive payment under the Annual Incentive Plan;
•
any vested stock options held by the officer as of the separation date will expire the earlier of ten years from date of grant or 90 days from the last day of active employment; and
•
he or she is entitled to all vested accrued benefits and compensation as of the separation date, including qualified pension benefits (if any) and other post-employment benefits on terms consistent with those generally available to other salaried employees.

Termination for Cause

If a Named Executive Officer’s employment is terminated for “cause” (as defined in the System Executive Continuity Plan and described above under “Termination Related to a Change in Control”), he or she is generally entitled to the same compensation and separation benefits described above under “Voluntary Resignation,” except that all options are no longer exercisable.

Retirement

Upon a Named Executive Officer’s retirement:

•
the annual incentive payment under the Annual Incentive Plan is generally pro-rated based on the actual number of days employed during the performance year in which the retirement date occurs, subject to negative discretion that may be applied to reduce or disallow the payment; payments are delivered at the conclusion of the annual period, consistent with the timing of payments to active participants in the Annual Incentive Plan;
•
payments under the Long-Term Performance Unit Program for those retiring with a minimum of 12 months of participation are pro-rated based on the actual full months of participation in each outstanding performance period in which the retirement date occurs, and payments are delivered at the conclusion of each performance period, consistent with the timing of payments to active participants in the Long-Term Performance Unit Program;
•
unvested stock options issued under the 2011 Equity Ownership Plan vest on the retirement date and expire ten years from the grant date of the options;
•
unvested stock options issued under the 2015 Equity Ownership Plan vest on the retirement date and expire the earlier of five years from the grant date of the options or the original term of ten years;
•
any unvested restricted stock and restricted stock units held by the executive upon his retirement are forfeited; and
•
he or she is generally entitled to all vested accrued benefits and compensation as of the separation date, including qualified pension benefits and other post-employment benefits consistent with those generally available to salaried employees.

495

Disability

If a Named Executive Officer’s employment is terminated due to disability, he or she generally is entitled to the same compensation and separation benefits described above under “Retirement,” except that unvested restricted stock and restricted stock units may be subject to specific disability benefits as noted, where applicable, in the tables above.

Death

If a Named Executive Officer dies while actively employed by an Entergy employer, he or she generally is entitled to the same compensation and separation benefits described above under “Retirement,” except that unvested restricted stock and restricted stock units may be subject to specific death benefits as noted, where applicable, in the tables above. 

Pay Ratio

As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the following disclosure is being provided about the relationship of the annual total compensation of the employees of each of the Utility operating companies to the annual total compensation of their respective Presidents and Chief Executive Officers.

Identification of Median Employee

For each of the Utility operating companies, October 6, 2017 was selected as the date on which to determine the median employee. To identify the median employee from each of the Utility operating companies’ employee population base, all compensation included in Box 5 of Form W-2 was considered with all before-tax deductions added back to this compensation (Box 5 Compensation). For purposes of determining the median employee of each Utility operating company, Box 5 Compensation was selected as it is believed it is representative of the compensation received by the employees of each respective Utility operating company and is readily available. The calculation of annual total compensation of the median employee for each Utility operating company is the same calculation used to determine total compensation for purposes of the 2017 Summary Compensation Table with respect to each of the Named Executive Officers.

Entergy Arkansas Ratio

For 2017,
•
Mr. Riley’s annual total compensation, as reported in the Total column of the 2017 Summary Compensation Table, was $1,353,719.
•
The annual total compensation of the median employee was $127,560.
•
Based on this information, the ratio of the annual total compensation of Mr. Riley to the median employee is estimated to be 11:1.

Entergy Louisiana Ratio

For 2017,
•
Mr. May’s annual total compensation, as reported in the Total column of the 2017 Summary Compensation Table, was $1,564,954.
•
The annual total compensation of the median employee was $144,954.
•
Based on this information, the ratio of the annual total compensation of Mr. May to the median employee is estimated to be 11:1.
 

496

Entergy Mississippi Ratio

For 2017,
•
Mr. Fisackerly’s annual total compensation, as reported in the Total column of the 2017 Summary Compensation Table, was $1,207,343.
•
The annual total compensation of the median employee was $112,110.
•
Based on this information, the ratio of the annual total compensation of Mr. Fisackerly to the median employee is estimated to be 11:1.
 
Entergy New Orleans Ratio

For 2017,
•
Mr. Rice’s annual total compensation, as reported in the Total column of the 2017 Summary Compensation Table, was $824,111.
•
The annual total compensation of the median employee was $91,346.
•
Based on this information, the ratio of the annual total compensation of Mr. Rice to the median employee is estimated to be 9:1.
 
Entergy Texas Ratio

For 2017,
•
Ms. Rainer’s annual total compensation, as reported in the Total column of the 2017 Summary Compensation Table, was $1,200,260.
•
The annual total compensation of the median employee was $129,877.
•
Based on this information, the ratio of the annual total compensation of Ms. Rainer to the median employee is estimated to be 9:1.


497

Item 12.   Security Ownership of Certain Beneficial Owners and Management

Entergy Corporation owns 100% of the outstanding common stock of registrants Entergy Arkansas, Entergy Mississippi, Entergy Texas, and indirectly 100% of the outstanding common membership interests of registrant Entergy Louisiana and Entergy New Orleans.  The information with respect to persons known by Entergy Corporation to be beneficial owners of more than 5% of Entergy Corporation’s outstanding common stock is included under the heading “Entergy Share Ownership - Beneficial Owners of More Than Five Percent” in the Proxy Statement, which information is incorporated herein by reference.  The registrants know of no contractual arrangements that may, at a subsequent date, result in a change in control of any of the registrants.

The following table sets forth the beneficial ownership of common stock of Entergy Corporation and stock-based units as of January 31, 2018 for all non-employee directors and Named Executive Officers.  Unless otherwise noted, each person had sole voting and investment power over the number of shares of common stock and stock-based units of Entergy Corporation set forth across from his or her name.


498
Table of Contents

Name
 
Shares (1)(2)
 
Options Exercisable Within 60 Days
 
Stock Units (3)
Entergy Corporation
 
 
 
 
 
 
A. Christopher Bakken, III**
 
10,710

 
12,533

 
—

Maureen S. Bateman*
 
22,716

 
—

 
—

Marcus V. Brown**
 
27,803

 
130,066

 
—

Patrick J. Condon*
 
4,460

 
—

 
—

Leo P. Denault***
 
133,457

 
565,133

 
—

Kirkland H. Donald*
 
5,736

 
—

 
1,389

Philip L. Frederickson*
 
2,775

 
—

 
805

Alexis M. Herman*
 
12,581

 
—

 
—

Donald C. Hintz*
 
15,096

 
—

 
3,942

Stuart L. Levenick*
 
18,047

 
—

 
—

Blanche L. Lincoln*
 
11,004

 
—

 
—

Andrew S. Marsh**
 
60,425

 
166,766

 
—

Karen A. Puckett*
 
4,460

 
—

 
—

W. J. Tauzin*
 
17,809

 
—

 
—

Roderick K. West**
 
42,475

 
114,066

 
—

All directors and executive officers as a group (19 persons)
 
444,591

 
1,112,495

 
6,136

 
 
 
 
 
 
 
Entergy Arkansas
 
 

 
 

 
 

A. Christopher Bakken, III**
 
10,710

 
12,533

 
—

Marcus V. Brown**
 
27,803

 
130,066

 
—

Leo P. Denault**
 
133,457

 
565,133

 
—

Andrew S. Marsh***
 
60,425

 
166,766

 
—

Richard C. Riley***
 
11,169

 
16,967

 
—

Roderick K. West***
 
42,475

 
114,066

 
—

All directors and executive officers as a group (10 persons)
 
341,076

 
1,129,462

 
—

 
 
 
 
 
 
 
Entergy Louisiana
 
 
 
 
 
 
A. Christopher Bakken, III**
 
10,710

 
12,533

 
—

Marcus V. Brown**
 
27,803

 
130,066

 
—

Leo P. Denault**
 
133,457

 
565,133

 
—

Andrew S. Marsh***
 
60,425

 
166,766

 
—

Phillip R. May, Jr.***
 
18,203

 
47,100

 
12

Roderick K. West***
 
42,475

 
114,066

 
—

All directors and executive officers as a group (10 persons)
 
348,110

 
1,159,595

 
12



499
Table of Contents

Name
 
Shares (1)(2)
 
Options Exercisable Within 60 Days
 
Stock Units (3)
Entergy Mississippi
 
 
 
 
 
 
Marcus V. Brown**
 
27,803

 
130,066

 
—

Leo P. Denault**
 
133,457

 
565,133

 
—

Haley R. Fisackerly***
 
6,605

 
21,933

 
—

Andrew S. Marsh***
 
60,425

 
166,766

 
—

Roderick K. West***
 
42,475

 
114,066

 
—

All directors and executive officers as a group (9 persons)
 
325,802

 
1,121,895

 
—

 
 
 
 
 
 
 
Entergy New Orleans
 
 
 
 
 
 
Marcus V. Brown**
 
27,803

 
130,066

 
—

Leo P. Denault**
 
133,457

 
565,133

 
—

Andrew S. Marsh***
 
60,425

 
166,766

 
—

Charles L. Rice, Jr.***
 
5,855

 
10,266

 
—

Roderick K. West***
 
42,475

 
114,066

 
—

All directors and executive officers as a group (9 persons)
 
325,052

 
1,110,228

 
—

 
 
 
 
 
 
 
Entergy Texas
 
 
 
 
 
 
Marcus V. Brown**
 
27,803

 
130,066

 
—

Leo P. Denault**
 
133,457

 
565,133

 
—

Andrew S. Marsh***
 
60,425

 
166,766

 
—

Sallie T. Rainer***
 
7,884

 
14,866

 
—

Roderick K. West***
 
42,475

 
114,066

 
—

All directors and executive officers as a group (9 persons)
 
327,081

 
1,114,828

 
—

*
Director of the respective Company
**
Named Executive Officer of the respective Company
***
Director and Named Executive Officer of the respective Company

(1)
The number of shares of Entergy Corporation common stock owned by each individual and by all non-employee directors and executive officers as a group does not exceed one percent of the outstanding shares of Entergy Corporation common stock.
(2)
For the non-employee directors, the balances include phantom units that are issued under the Service Recognition Program. All non-employee directors are credited with phantom units for each year of service on the Entergy Corporation Board. These phantom units do not have voting rights, accrue dividends, and will be settled in shares of Entergy Corporation common stock following the non-employee director’s separation from the Board.
(3)
Represents the balances of phantom units each executive holds under the defined contribution restoration plan and the deferral provisions of the Equity Ownership Plan.  These units will be paid out in either Entergy Corporation Common Stock or cash equivalent to the value of one share of Entergy Corporation common stock per unit on the date of payout, including accrued dividends.  The deferral period is determined by the individual and is at least two years from the award of the bonus.  Messrs. Donald, Hintz, and Frederickson have deferred receipt of some of their quarterly stock grants.  The deferred shares will be settled in cash in an amount equal to the market value of Entergy Corporation common stock at the end of the deferral period.


500
Table of Contents

Equity Compensation Plan Information

The following table summarizes the equity compensation plan information as of December 31, 2017. Information is included for equity compensation plans approved by the stockholders and equity compensation plans not approved by the stockholders.

Plan
 
Number of Securities to be Issued Upon Exercise of Outstanding Options (a)
 
Weighted Average Exercise Price (b)
 
Number of Securities Remaining Available for Future Issuance (excluding securities reflected in column (a))(c)
Equity compensation plans approved by security holders (1)
 
5,164,854

 
$83.26
 
3,498,788

Equity compensation plans not approved by security holders (2)
 
—

 
—

 
—

Total
 
5,164,854

 
$83.26
 
3,498,788


(1)
Includes the 2007 Equity Ownership Plan, the 2011 Equity Ownership Plan, and the 2015 Equity Ownership Plan.  The 2007 Equity Ownership Plan was approved by Entergy Corporation shareholders on May 12, 2006, and only applied to awards granted between January 1, 2007 and May 5, 2011. The 2011 Equity Ownership Plan was approved by Entergy Corporation shareholders on May 6, 2011, and only applied to awards granted between May 6, 2011 and May 7, 2015.  The 2015 Equity Ownership Plan was approved by Entergy Corporation shareholders on May 8, 2015, and 6,900,000 shares of Entergy Corporation common stock can be issued from the 2015 Equity Ownership Plan, with no more than 1,500,000 shares available for incentive stock option grants.  The 2015 Plan applies to awards granted on or after May 8, 2015. The 2007 Equity Ownership Plan, the 2011 Equity Ownership Plan, and the 2015 Equity Ownership Plan (the “Plans”) are administered by the Personnel Committee of the Board of Directors (other than with respect to awards granted to non-employee directors, which awards are administered by the entire Board of Directors).  Eligibility under the Plans is limited to the non-employee directors and to the officers and employees of an Entergy employer and any corporation 80% or more of whose stock (based on voting power) or value is owned, directly or indirectly, by Entergy Corporation.  The Plans provide for the issuance of stock options, restricted stock, equity awards (units whose value is related to the value of shares of the common stock but do not represent actual shares of common stock), performance awards (performance shares or units valued by reference to shares of common stock or performance units valued by reference to financial measures or property other than common stock), restricted stock unit awards, and other stock-based awards.
(2)
Entergy has a Board-approved stock-based compensation plan. However, effective May 9, 2003, the Board has directed that no further awards be issued under that plan. As of December 31, 2017, all options outstanding under the plan were either exercised or expired.


501
Table of Contents

Item 13.   Certain Relationships and Related Party Transactions and Director Independence

For information regarding certain relationship, related transactions and director independence of Entergy Corporation, see the Proxy Statement under the headings “Corporate Governance at Entergy - Director Independence” and “Corporate Governance at Entergy - Governance Policies - Our Transactions with Related Party Persons Policy.”

Entergy Corporation’s Board of Directors has adopted written policies and procedures for the review, approval or ratification of any transaction involving an amount in excess of $120,000 in which any director or executive officer of Entergy Corporation, any nominee for director, or any immediate family member of the foregoing has or will have a material interest as contemplated by Item 404(a) of Regulation S-K (“Related Person Transactions”). Under these policies and procedures, Entergy Corporation’s Corporate Governance Committee or a subcommittee of its Board of Directors consisting entirely of independent directors reviews the transaction and either approves or rejects the transaction after taking into account the following factors:

•
Whether the proposed transaction is on terms that are at least as favorable to Entergy Corporation as those achievable with an unaffiliated third party;
•
Size of the transaction and amount of consideration;
•
Nature of the interest;
•
Whether the transaction involves a conflict of interest;
•
Whether the transaction involves services available from unaffiliated third parties; and
•
Any other factors that the Corporate Governance Committee or subcommittee deems relevant.

The policy does not apply to (a) compensation and related person transactions involving a director or an executive officer solely resulting from that person’s service as a director or employment with Entergy Corporation so long as the compensation is approved by the Board of Directors (or an appropriate committee), (b) transactions involving public utility services at rates or charges fixed in conformity with law or governmental authority, or (c) any other categories of transactions currently or in the future excluded from the reporting requirements of Item 404(a) of Regulation S-K.

Related Party Transactions
 
Since January 1, 2017, neither Entergy Corporation nor any of its affiliates has participated in any Related Person Transaction.


502
Table of Contents

Item 14.   Principal Accountant Fees and Services (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)

Aggregate fees billed to Entergy Corporation (consolidated), Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy for the years ended December 31, 2017 and 2016 by Deloitte & Touche LLP were as follows:

 
2017
 
2016
Entergy Corporation (consolidated)
 
 
 
Audit Fees

$8,401,895

 

$8,932,000

Audit-Related Fees (a)
875,000

 
865,000

Total audit and audit-related fees
9,276,895

 
9,797,000

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$9,276,895

 

$9,797,000

Entergy Arkansas
 
 
 
Audit Fees

$1,018,860

 

$1,056,881

Audit-Related Fees (a)
—

 
—

Total audit and audit-related fees
1,018,860

 
1,056,881

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$1,018,860

 

$1,056,881

Entergy Louisiana
 
 
 
Audit Fees

$1,887,719

 

$2,138,762

Audit-Related Fees (a)
500,000

 
450,000

Total audit and audit-related fees
2,387,719

 
2,588,762

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$2,387,719

 

$2,588,762

Entergy Mississippi
 
 
 
Audit Fees

$933,860

 

$971,881

Audit-Related Fees (a)
—

 
—

Total audit and audit-related fees
933,860

 
971,881

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$933,860

 

$971,881


503
Table of Contents

 
2017
 
2016
Entergy New Orleans
 
 
 
Audit Fees

$953,860

 

$1,056,881

Audit-Related Fees (a)
—

 
—

Total audit and audit-related fees
953,860

 
1,056,881

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$953,860

 

$1,056,881

Entergy Texas
 
 
 
Audit Fees

$1,093,860

 

$1,076,881

Audit-Related Fees (a)
—

 
—

Total audit and audit-related fees
1,093,860

 
1,076,881

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$1,093,860

 

$1,076,881

System Energy
 
 
 
Audit Fees

$868,860

 

$861,881

Audit-Related Fees (a)
—

 
—

Total audit and audit-related fees
868,860

 
861,881

Tax Fees
—

 
—

All Other Fees
—

 
—

Total Fees (b)

$868,860

 

$861,881


(a)
Includes fees for employee benefit plan audits, consultation on financial accounting and reporting, and other attestation services.
(b)
100% of fees paid in 2017 and 2016 were pre-approved by the Entergy Corporation Audit Committee.

504
Table of Contents

Entergy Audit Committee Guidelines for Pre-approval of Independent Auditor Services

The Audit Committee has adopted the following guidelines regarding the engagement of Entergy’s independent auditor to perform services for Entergy:

1.
The independent auditor will provide the Audit Committee, for approval, an annual engagement letter outlining the scope of services proposed to be performed during the fiscal year, including audit services and other permissible non-audit services (e.g. audit-related services, tax services, and all other services).
2.
For other permissible services not included in the engagement letter, Entergy management will submit a description of the proposed service, including a budget estimate, to the Audit Committee for pre-approval.  Management and the independent auditor must agree that the requested service is consistent with the SEC’s rules on auditor independence prior to submission to the Audit Committee.  The Audit Committee, at its discretion, will pre-approve permissible services and has established the following additional guidelines for permissible non-audit services provided by the independent auditor:
•
Aggregate non-audit service fees are targeted at fifty percent or less of the approved audit service fee.
•
All other services should only be provided by the independent auditor if it is a highly qualified provider of that service or if the Audit Committee pre-approves the independent audit firm to provide the service.
3.
The Audit Committee will be informed quarterly as to the status of pre-approved services actually provided by the independent auditor.
4.
To ensure prompt handling of unexpected matters, the Audit Committee delegates to the Audit Committee Chair or its designee the authority to approve permissible services and fees.  The Audit Committee Chair or designee will report action taken to the Audit Committee at the next scheduled Audit Committee meeting.
5.
The Vice President and General Auditor will be responsible for tracking all independent auditor fees and will report quarterly to the Audit Committee.


505
Table of Contents

PART IV

Item 15.   Exhibits and Financial Statement Schedules

(a)1.
Financial Statements and Independent Auditors’ Reports for Entergy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Table of Contents.
 
 
(a)2.
Financial Statement Schedules
 
 
 
Report of Independent Registered Public Accounting Firm (see page 530)
 
 
 
Financial Statement Schedules are listed in the Index to Financial Statement Schedules (see page S-1)
 
 
(a)3.
Exhibits
 
 
 
Exhibits for Entergy, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy are listed in the Exhibit Index (see page 507).  Each management contract or compensatory plan or arrangement required to be filed as an exhibit hereto is identified as such by footnote in the Exhibit Index.

Item 16.   Form 10-K Summary (Entergy Corporation, Entergy Arkansas, Entergy Louisiana, Entergy Mississippi, Entergy New Orleans, Entergy Texas, and System Energy)
   
None.


506
Table of Contents

EXHIBIT INDEX

The following exhibits indicated by an asterisk preceding the exhibit number are filed herewith.  The balance of the exhibits have heretofore been filed with the SEC as the exhibits and in the file numbers indicated and are incorporated herein by reference.  The exhibits marked with a (+) are management contracts or compensatory plans or arrangements required to be filed herewith and required to be identified as such by Item 15 of Form 10-K.

Some of the agreements included or incorporated by reference as exhibits to this Form 10-K contain representations and warranties by each of the parties to the applicable agreement.  These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from the standard of “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

Entergy acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Form 10-K not misleading.

(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession

Entergy Louisiana

(3) Articles of Incorporation and By-laws

Entergy Corporation

System Energy

507

Entergy Arkansas

Entergy Louisiana

Entergy Mississippi

Entergy New Orleans

Entergy Texas

(4) Instruments Defining Rights of Security Holders, Including Indentures

Entergy Corporation

508

(a) 5 --
 
 
(a) 6 --
 
 
(a) 7 --
 
 
(a) 8 --
 
 
(a) 9 --
 
 
(a) 10 --
 
 
(a) 11 --

 
 
(a) 12 --
 
 
(a) 13 --

System Energy


509

Entergy Arkansas
(c) 1 --
Mortgage and Deed of Trust, dated as of October 1, 1944, as amended by the following Supplemental Indentures: (7(d) in 2-5463 (Mortgage); 7(b) in 2-7121 (First); 4(a)-7 in 2-10261 (Seventh); 2(b)-10 in 2-15767 (Tenth); 2(c) in 2-28869 (Sixteenth); 2(c) in 2-35107 (Eighteenth); 2(d) in 2-36646 (Nineteenth); 2(c) in 2-39253 (Twentieth); * Filed herewith (Thirtieth) ; * Filed herewith (Thirty-first) ; * Filed herewith (Thirty-ninth) ; * Filed herewith (Forty-first) ; 4(d)(2) in 33-54298 (Forty-sixth); C-2 to Form U5S for the year ended December 31,1995 (Fifty-third) ; 4.06 to Form 8-K filed October 8, 2010 in 1-10764 (Sixty-ninth) ; 4.06 to Form 8-K filed November 12, 2010 in 1-10764 (Seventieth) ; 4.06 to Form 8-K filed December 13, 2012 in 1-10764 (Seventy-first) ; 4(e) to Form 8-K filed January 9, 2013 in 1-10764 (Seventy-second) ; 4.06 to Form 8-K filed May 30, 2013 in 1-10764 (Seventy-third) ; 4.06 to Form 8-K filed June 4, 2013 in 1-10764 (Seventy-fourth) ; 4.05 to Form 8-K filed March 14, 2014 in 1-10764 (Seventy-sixth) ; 4.05 to Form 8-K filed December 9, 2014 in 1-10764 (Seventy-seventh) ;  4.05 to Form 8-K filed January 8, 2016 in 1-10764 (Seventy-eighth) ; and 4.05 to Form 8-K filed August 16, 2016 in 1-10764 (Seventy-ninth) ).
 
 
(c) 2 --
 
 
(c) 3 --
 
 
(c) 4 --
 
 
(c) 5 --
 
 
(c) 6 --
 
 
(c) 7 --
 
 
(c) 8--
 
 
*(c) 9 --
 
 
(c) 10 --


510

Entergy Louisiana
(d) 1 --
Mortgage and Deed of Trust, dated as of April 1, 1944, as amended by the following Supplemental Indentures: (7(d) in 2-5317 (Mortgage); 7(b) in 2-7408 (First); * Filed herewith (Sixth) ; 2(c) in 2-34659 (Twelfth); * Filed herewith (Thirteenth) ; 2(b)-2 in 2-38378 (Fourteenth); * Filed herewith (Twenty-first) ; * Filed herewith (Twenty-fifth) ; * Filed herewith (Twenty-ninth) ; * Filed herewith (Forty-second) ; A-2(a) to Rule 24 Certificate filed April 4, 1996 in 70-8487 (Fifty-first) ; B-4(i) to Rule 24 Certificate filed January 10, 2006 in 70-10324 (Sixty-third) ; B-4(ii) to Rule 24 Certificate filed January 10, 2006 in 70-10324 (Sixty-fourth) ; 4(a) to Form 10-Q for the quarter ended September 30, 2008 in 1-32718 (Sixty-fifth) ; 4(e)1 to Form 10-K for the year ended December 31, 2009 in 1-132718 (Sixty-sixth) ; 4.08 to Form 8-K filed September 24, 2010 in 1-32718 (Sixty-eighth) ; 4.08 to Form 8-K filed March 24, 2011 in 1-32718 (Seventy-first) ; 4(a) to Form 10-Q for the quarter ended June 30, 2011 in 1-32718 (Seventy-second) ; 4.08 to Form 8-K filed July 3, 2012 in 1-32718 (Seventy-fifth) ; 4.08 to Form 8-K filed December 4, 2012 in 1-32718 (Seventy-sixth) ; 4.08 to Form 8-K filed May 21, 2013 in 1-32718 (Seventy-seventh) ; 4.08 to Form 8-K filed August 23, 2013 in 1-32718 (Seventy-eighth) ; 4.08 to Form 8-K filed June 24, 2014 in 1-32718 (Seventy-ninth) ; 4.08 to Form 8-K filed July 1, 2014 in 1-32718 (Eightieth) ; 4.08 to Form 8-K filed November 21, 2014 (Eighty-first) ; 4.1 to Form 8-K12B filed October 1, 2015 (Eighty-second) ; 4(g) to Form 8-K filed March 18, 2016 in 1-32718 (Eighty-third) ; 4.33 to Form 8-K filed March 24, 2016 in 1-32718 (Eighty-fourth) ; 4.33 to Form 8-K filed August 17, 2016 in 1-32718 (Eighty-sixth) ; 4.33 to Form 8-K filed October 4, 2016 in 1-32718 (Eighty-seventh) ; and 4.43 to Form 8-K filed May 23, 2017 in 1-32718 (Eighty-eighth) ).
 
 
(d) 2 --
 
 
(d) 3 --
 
 
(d) 4 --
 
 
(d) 5 --
 
 
(d) 6 --
 
 
(d) 7 --
 
 

511

(d) 8 --
 
 
(d) 9 --
 
 
*(d) 10 --
 
 
*(d) 11 --
 
 
*(d) 12 --
 
 
(d) 13 --
 
 
(d) 14 --
 
 
(d) 15 --
Indenture of Mortgage, dated September 1, 1926, as amended by the following Supplemental Indentures: (7-A-9 in Registration No. 2-6893 (Seventh);  * Filed herewith (Eighteenth) ; 2-A-8 in Registration No. 2-66612 (Thirty-eighth); 4(b) to Form 10-Q for the quarter ended March 31,1999 in 1-27031 (Fifty-eighth) ; 4(a) to Form 10-Q for the quarter ended June 30, 2008 in 333-148557 (Seventy-sixth) ; 4(a) to Form 10-Q for the quarter ended September 30, 2009 in 0-20371 (Seventy-seventh) ; 4.07 to Form 8-K filed October 1, 2010 in 0-20371 (Seventy-eighth) ; 4.07 to Form 8-K filed July 1, 2014 in 0-20371 (Eighty-first) ;  4.2 to Form 8-K12B filed October 1, 2015 in 1-32718 (Eighty-second) ; 4.3 to Form 8-K12B filed October 1, 2015 in 1-32718 (Eighty-third);   4.42 to Form 8-K filed March 24, 2016 in 1-32718 (Eighty-fourth) ; 4.42 to Form 8-K filed May 19, 2016 in 1-32718 (Eighty-fifth) ; 4.42 to Form 8-K filed August 17, 2016 in 1-32718 (Eighty-sixth) ; 4.42 to Form 8-K filed October 4, 2016 in 1-32718 (Eighty-seventh) ; and 4.42 to Form 8-K filed May 23, 2017 in 1-32718 (Eighty-eighth) ).
 
 
(d) 16 --
 
 
(d) 17 --
 
 
(d) 18 --
 
 
(d) 19 --
 
 
(d) 20 --

512


Entergy Mississippi

Entergy New Orleans
(f) 1 --
 
 
(f) 2 --
 
 
(f) 3 --
 
 
(f) 4 --
 
 
(f) 5 --

Entergy Texas

513

(g) 2 --
 
 
(g) 3 --
 
 
*(g) 4 --
 
 
(g) 5 --
 
 
(g) 6 --
 
 
(g) 7 --
 
 
(g) 8 --
 
 
(g) 9 --
 
 
(g) 10 --
 
 
(g) 11 --
 
 
(g) 12 --
 
 
(g) 13 --
 
 

514


(10)  Material Contracts

Entergy Corporation
+(a) 1 --
 
 
+(a) 2 --
 
 
+(a) 3 --
 
 
+(a) 4 --
 
 
+(a) 5 --
 
 
+(a) 6 --
 
 
+(a) 7 --
 
 
+(a) 8 --
 
 
+(a) 9 --
 
 
+(a) 10 --
 
 
+(a) 11 --
 
 
+(a) 12 --
 
 
+(a) 13 --
 
 
+(a) 14 --
 
 

515

+(a) 15 --
 
 
+(a) 16 --
 
 
+(a) 17 --
 
 
+(a) 18 --
 
 
+(a) 19 --
 
 
+(a) 20 --
 
 
+(a) 21 --
 
 
+(a) 22 --
 
 
+(a) 23 --
 
 
+(a) 24 --
 
 
+(a) 25 --
 
 
+(a) 26 --
 
 
+(a) 27 --
 
 
+(a) 28 --
 
 
+(a) 29 --
 
 
+(a) 30 --
 
 
+(a) 31 --
 
 
+(a) 32 --
 
 

516

+(a) 33 --
 
 
+(a) 34 --
 
 
+(a) 35 --
 
 
+(a) 36 --
 
 
+(a) 37 --
 
 
+(a) 38 --
 
 
+(a) 39 --
Retention Agreement effective August 3, 2006 between Leo P. Denault and Entergy Corporation (10(b) to Form 10-Q for the quarter ended June 30, 2006 in 1-11299).
 
 
+(a) 40 --
 
 
+(a) 41 --
 
 
+(a) 42 --
 
 
+(a) 43 --
 
 
+(a) 44 --
 
 
+(a) 45 --
 
 
*+(a) 46 --
 
 
*+(a) 47 --
 
 
*+(a) 48 --
 
 
*+(a) 49 --
 
 
+(a) 50 --
 
 
+(a) 51 --
 
 

517

+(a) 52 --
 
 
+(a) 53 --
 
 
+(a) 54 --
 
 
+(a) 55 --

System Energy
*(b) 1 --
 
 
*(b) 2 --
 
 
*(b) 3 --
 
 
*(b) 4 --
 
 
*(b) 5 --
 
 
(b) 6 --
 
 
(b) 7 --
 
 
*(b) 8 --
 
 
*(b) 9 --
 
 
(b) 10 --
 
 
*(b) 11 --
 
 
(b) 12 --
 
 
*(b) 13 --
 
 
(b) 14 --
 
 
*(b) 15 --

518



(12) Statement Re Computation of Ratios
*(a)
 
 
*(b)
 
 
*(c)
 
 
*(d)
 
 
*(e)
 
 
*(f)


(23)  Consents of Experts and Counsel

 
(31)  Rule 13a-14(a)/15d-14(a) Certifications

519


(32)  Section 1350 Certifications
*(a)
 
 
*(b)
 
 
*(c)
 
 
*(d)
 
 
*(e)
 
 
*(f)
 
 
*(g)
 
 
*(h)
 
 
*(i)
 
 
*(j)
 
 
*(k)
 
 
*(l)
 
 
*(m)
 
 
*(n)



520

(101)  XBRL Documents

Entergy Corporation
*INS -
XBRL Instance Document.
 
 
*SCH -
XBRL Taxonomy Extension Schema Document.
 
 
*CAL -
XBRL Taxonomy Extension Calculation Linkbase Document.
 
 
*DEF -
XBRL Taxonomy Extension Definition Linkbase Document.
 
 
*LAB -
XBRL Taxonomy Extension Label Linkbase Document.
 
 
*PRE -
XBRL Taxonomy Extension Presentation Linkbase Document.
_________________
 
*
Filed herewith.
 
+ 
Management contracts or compensatory plans or arrangements.


521

ENTERGY CORPORATION

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
ENTERGY CORPORATION
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Leo P. Denault (Chairman of the Board, Chief Executive Officer and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President and Chief Financial Officer; Principal Financial Officer); Maureen S. Bateman, Patrick J. Condon, Kirkland H. Donald, Philip L. Frederickson, Alexis M. Herman, Donald C. Hintz, Stuart L. Levenick, Blanche L. Lincoln, Karen A. Puckett, and W. J. Tauzin (Directors).

By:  /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 


522

ENTERGY ARKANSAS, INC.

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
ENTERGY ARKANSAS, INC.
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Richard C. Riley (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp and Roderick K. West (Directors).

By:  /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 


523

ENTERGY LOUISIANA, LLC

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
ENTERGY LOUISIANA, LLC
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Phillip R. May, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp and Roderick K. West (Directors).

By:  /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 

524

ENTERGY MISSISSIPPI, INC.

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
ENTERGY MISSISSIPPI, INC.
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Haley R. Fisackerly (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp and Roderick K. West (Directors).

By:  /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 

525

ENTERGY NEW ORLEANS, LLC

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
ENTERGY NEW ORLEANS, LLC
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Charles L. Rice, Jr. (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp and Roderick K. West (Directors).

By:  /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 

526

ENTERGY TEXAS, INC.

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
ENTERGY TEXAS, INC.
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Sallie T. Rainer (Chair of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); Paul D. Hinnenkamp and Roderick K. West (Directors).

By:   /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 

527

SYSTEM ENERGY RESOURCES, INC.

SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  The signature of the undersigned company shall be deemed to relate only to matters having reference to such company and any subsidiaries thereof.

 
SYSTEM ENERGY RESOURCES, INC.
 
 
 
By   /s/ Alyson M. Mount
 
Alyson M. Mount
 
Senior Vice President and Chief Accounting Officer
 
 
 
Date: February 26, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.  The signature of each of the undersigned shall be deemed to relate only to matters having reference to the above-named company and any subsidiaries thereof.

Signature
Title
Date
 
 
 
/s/ Alyson M. Mount 
Alyson M. Mount
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
February 26, 2018

Roderick K. West (Chairman of the Board, President, Chief Executive Officer, and Director; Principal Executive Officer); Andrew S. Marsh (Executive Vice President, Chief Financial Officer, and Director; Principal Financial Officer); A. Christopher Bakken, III and Steven C. McNeal (Directors).

By:  /s/ Alyson M. Mount
February 26, 2018
(Alyson M. Mount, Attorney-in-fact)
 


528

EXHIBIT 23(a)

CONSENTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We consent to the incorporation by reference in Registration Statement No. 333-213335 on Form S-3 and in Registration Statements Nos. 333-140183, 333-174148, 333-204546, and 333-206556 on Form S-8 of our reports dated February 26, 2018, relating to the consolidated financial statements and financial statement schedule of Entergy Corporation and Subsidiaries, and the effectiveness of Entergy Corporation and Subsidiaries’ internal control over financial reporting, appearing in this Annual Report on Form 10-K of Entergy Corporation for the year ended December 31, 2017.

We consent to the incorporation by reference in Registration Statement No. 333-213335-06 on Form S-3 of our reports dated February 26, 2018, relating to the consolidated financial statements and financial statement schedule of Entergy Arkansas, Inc. and Subsidiaries appearing in this Annual Report on Form 10-K of Entergy Arkansas, Inc. for the year ended December 31, 2017.

We consent to the incorporation by reference in Registration Statement No. 333-213335-03 on Form S-3 of our reports dated February 26, 2018, relating to the consolidated financial statements and financial statement schedule of Entergy Louisiana, LLC and Subsidiaries appearing in this Annual Report on Form 10‑K of Entergy Louisiana, LLC for the year ended December 31, 2017.

We consent to the incorporation by reference in Registration Statement No. 333-213335-05 on Form S-3 of our reports dated February 26, 2018, relating to the consolidated financial statements and financial statement schedule of Entergy Texas, Inc. and Subsidiaries appearing in this Annual Report on Form 10-K of Entergy Texas, Inc. for the year ended December 31, 2017.

We consent to the incorporation by reference in Registration Statement No. 333-213335-04 on Form S-3 of our report dated February 26, 2018, relating to the financial statements of System Energy Resources, Inc. appearing in this Annual Report on Form 10-K of System Energy Resources, Inc. for the year ended December 31, 2017.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018

529

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the shareholders and Board of Directors of
Entergy Corporation and Subsidiaries


Opinion on the Financial Statement Schedule


We have audited the consolidated financial statements of Entergy Corporation and Subsidiaries (the “Corporation”) as of December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and the Corporation’s internal control over financial reporting as of December 31, 2017, and have issued our reports thereon dated February 26, 2018. Our audits also included the consolidated financial statement schedule of the Corporation listed in Item 15. This consolidated financial statement schedule is the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s consolidated financial statement schedule based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018



530

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the shareholders and Board of Directors of
Entergy Arkansas, Inc. and Subsidiaries
Entergy Mississippi, Inc.
Entergy Texas, Inc. and Subsidiaries

To the members and Board of Directors of
Entergy Louisiana, LLC and Subsidiaries
Entergy New Orleans, LLC and Subsidiaries


Opinion on the Financial Statement Schedules


We have audited the consolidated financial statements of Entergy Arkansas, Inc. and Subsidiaries, Entergy Louisiana, LLC and Subsidiaries, Entergy New Orleans, LLC and Subsidiaries, and Entergy Texas, Inc. and Subsidiaries, and we have also audited the financial statements of Entergy Mississippi, Inc. (collectively the “Companies”) as of December 31, 2017 and 2016, and for each of the three years in the period ended December 31, 2017, and have issued our reports thereon dated February 26, 2018. Our audits also included the financial statement schedules of the respective Companies listed in Item 15. These financial statement schedules are the responsibility of the respective Companies’ management. Our responsibility is to express an opinion on the Companies’ financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.


/s/ DELOITTE & TOUCHE LLP


New Orleans, Louisiana
February 26, 2018


531

INDEX TO FINANCIAL STATEMENT SCHEDULES




Schedules other than those listed above are omitted because they are not required, not applicable, or the required information is shown in the financial statements or notes thereto.

Columns have been omitted from schedules filed because the information is not applicable.


S-1

ENTERGY CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2017, 2016, and 2015
(In Thousands)
Column A
 
Column B
 
Column C
 
Column D
 
Column E
 
 
 
 
 
 
Other
 
 
 
 
Balance at
 
Additions
 
Changes
 
Balance
Description
 
Beginning of Period
 
Charged to Income
 
Deductions (1)
 
at End of Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
2017
 

$11,924

 

$4,211

 

$2,548

 

$13,587

2016
 

$39,895

 

$7,505

 

$35,476

 

$11,924

2015
 

$35,663

 

$6,926

 

$2,694

 

$39,895

Notes:
 
 

 
 

 
 

 
 

(1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.


S-2
Table of Contents

ENTERGY ARKANSAS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2017, 2016, and 2015
(In Thousands)
Column A
 
Column B
 
Column C
 
Column D
 
Column E
 
 
 
 
 
 
Other
 
 
 
 
Balance at
 
Additions
 
Changes
 
Balance
Description
 
Beginning of Period
 
Charged to Income
 
Deductions (1)
 
at End of Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
2017
 

$1,211

 

$503

 

$651

 

$1,063

2016
 

$34,226

 

$902

 

$33,917

 

$1,211

2015
 

$32,247

 

$2,759

 

$780

 

$34,226

Notes:
 
 

 
 

 
 

 
 

(1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.


S-3
Table of Contents

ENTERGY LOUISIANA, LLC AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2017, 2016, and 2015
(In Thousands)
Column A
 
Column B
 
Column C
 
Column D
 
Column E
 
 
 
 
 
 
Other
 
 
 
 
Balance at
 
Additions
 
Changes
 
Balance
Description
 
Beginning of Period
 
Charged to Income
 
Deductions (1)
 
at End of Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
2017
 

$6,277

 

$3,108

 

$955

 

$8,430

2016
 

$4,209

 

$2,942

 

$874

 

$6,277

2015
 

$1,609

 

$3,464

 

$864

 

$4,209

Notes:
 
 

 
 

 
 

 
 

(1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.


S-4
Table of Contents

ENTERGY MISSISSIPPI, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2017, 2016, and 2015
(In Thousands)
Column A
 
Column B
 
Column C
 
Column D
 
Column E
 
 
 
 
 
 
Other
 
 
 
 
Balance at
 
Additions
 
Changes
 
Balance
Description
 
Beginning
of Period
 
Charged to Income
 
Deductions (1)
 
at End of Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
2017
 

$549

 

$255

 

$230

 

$574

2016
 

$718

 

$259

 

$428

 

$549

2015
 

$873

 

$247

 

$402

 

$718

Notes:
 
 

 
 

 
 

 
 

(1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.


S-5
Table of Contents

ENTERGY NEW ORLEANS, LLC AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2017, 2016, and 2015
(In Thousands)
Column A
 
Column B
 
Column C
 
Column D
 
Column E
 
 
 
 
 
 
Other
 
 
 
 
Balance at
 
Additions
 
Changes
 
Balance
Description
 
Beginning
of Period
 
Charged to Income
 
Deductions (1)
 
at End of Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
2017
 

$3,059

 

$152

 

$154

 

$3,057

2016
 

$268

 

$2,872

 

$81

 

$3,059

2015
 

$262

 

$217

 

$211

 

$268

Notes:
 
 

 
 

 
 

 
 

(1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.


S-6
Table of Contents

ENTERGY TEXAS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2017, 2016, and 2015
(In Thousands)
Column A
 
Column B
 
Column C
 
Column D
 
Column E
 
 
 
 
 
 
Other
 
 
 
 
Balance at
 
Additions
 
Changes
 
Balance
Description
 
Beginning
of Period
 
Charged to Income
 
Deductions (1)
 
at End of Period
Allowance for doubtful accounts
 
 
 
 
 
 
 
 
2017
 

$828

 

$192

 

$557

 

$463

2016
 

$474

 

$531

 

$177

 

$828

2015
 

$672

 

$239

 

$437

 

$474

Notes:
 
 

 
 

 
 

 
 

(1) Deductions represent write-offs of accounts receivable balances and are reduced by recoveries of amounts previously written off.



S-7


Exhibit 3(b)1
SYSTEM ENERGY RESOURCES, INC.

Amended and Restated Articles of Incorporation

April 28, 1989
The following Amended and Restated Articles of Incorporation, duly adopted pursuant to the authority and provisions of Title 4, Chapter 27 of the Arkansas Code of 1987 Annotated, as amended, further amend, restate and integrate and supersede the existing Articles of Incorporation of the Corporation consisting of the Articles of Incorporation of Middle South Energy, Inc. dated February 11, 1974, and all amendments thereto:
FIRST:         Name . The name of the Corporation is System Energy Resources, Inc.
SECOND:     Adoption of Arkansas Business Corporation Act . The provisions of Title 4, Chapter 27 of the Arkansas Code of 1987 Annotated, as amended, and as may be amended or otherwise modified (the “Arkansas Business Corporation Act”), shall apply to the Corporation and to these Amended and Restated Articles of Incorporation.
THIRD:     Registered Agent and Office . The address of the current registered office of the Corporation and the name of its current registered agent at such address are as follows:
Registered Agent :
Registered Office :
The Corporation Company
417 Spring Street
Little Rock, AR 72201
FOURTH:     Purposes . The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Arkansas Business Corporation Act. The primary purposes for which the Corporation is organized, which are provided for informational purposes only and shall not limit the purposes provided in the Arkansas Business Corporation Act, are as follows:
(a)
To generate and to sell or otherwise dispose of electric power and energy;
(b)
To acquire, operate or engage in any business which may be necessary, appropriate, convenient or incidental to either of the foregoing;
(c)
To conduct business, have one or more offices, hold, acquire by purchase, lease or otherwise, and to construct, extend, own, finance, deal in, sell, mortgage or otherwise dispose of, maintain, manage and operate all property, real, personal and mixed, which may be necessary, appropriate, convenient or incidental to such business or businesses in the State of Arkansas and in any of the several states, territories, possessions and dependencies of the United States, the District of Columbia and in foreign countries;




(d)
To act as agent, operator, manager, broker or factor for any person, individual, firm, corporation or other bodies; and
(e)
To do any and all things herein set forth, to the same extent and as fully as natural persons might or could do, in any part of the world, as principal, agent, contractor or otherwise, and either alone or in conjunction with any other person, firm, association or corporation.
FIFTH:     Powers . The Corporation shall have and exercise all of the powers conferred upon corporations by virtue of their existence under, and as authorized by, the Arkansas Business Corporation Act.
SIXTH:     Authorized Shares . The maximum number of shares of stock which the Corporation is authorized to issue and to have outstanding at any time is 1,000,000, all of which shall be Common Stock having no par value.
SEVENTH:     No Preemptive Right . No holder of any stock of the Corporation shall be entitled as of right to purchase or subscribe for any part of any stock of the Corporation authorized by these Amended and Restated Articles of Incorporation or of any additional stock of any class to be issued by reason of any increase of the authorized capital stock of the corporation or of any bonds, certificates of indebtedness, debentures or other securities convertible into stock of the Corporation.
EIGHTH:     Director Conflict of Interest . (i) A conflict of interest transaction is a transaction with the Corporation in which a director of the Corporation has a direct or indirect interest. A conflict of interest transaction is not voidable by the Corporation solely because of the director’s interest in the transaction if any one of the following is true:
(a) The material facts of the transaction and the director’s interest were disclosed or known to the Board of Directors or a committee of the Board of Directors and the Board of Directors or committee authorized, approved, or ratified the transaction;
(b) The material facts of the transaction and the director’s interest were disclosed or known to the holders of Common Stock and the transaction was authorized, approved, or ratified by the vote of the holders of a majority of the Common Stock; or
(c) The transaction was fair to the corporation.
(ii) For purposes of this Article EIGHTH, a director of the Corporation has an indirect interest in the transaction and the transaction should be considered by the Board of Directors of the Corporation if:
(a) Another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction; or
(b) Another entity of which the director is a director, officer or trustee is a party to the transaction.




NINTH:     Rights of Shareholders . Except as otherwise required by the laws of the State of Arkansas, the shares of Common Stock of the Corporation shall exclusively possess all voting power for the election of Directors and for all other purposes and are entitled to vote on each matter to be voted on at a shareholders’ meeting. Each holder of Common Stock of the Corporation shall be entitled to one vote for each share of Common Stock standing in his name on the books of the Corporation. Any action which might otherwise be required to be taken at a meeting of shareholders of the Corporation may be taken by a consent in writing setting forth the action so taken and signed by all the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall have the same force and effect as a unanimous vote of the shareholders. Except as otherwise provided by law, the presence in person or by proxy at any meeting of shareholders of the holders of a majority of the outstanding shares of Common Stock of the Corporation shall be requisite and shall constitute a quorum. If, however, such majority shall not be represented at any meeting of the shareholders regularly called, the holders of a majority of the shares of Common Stock present or represented shall have power to adjourn the meeting to another time without notice other than announcement of adjournment at the meeting, and there may be successive adjournments for like cause and in like manner until the requisite amount of shares of Common Stock shall be represented. At such adjourned meeting at which the requisite amount of shares of Common Stock shall be represented, any business may be transacted which might have been transacted at the meeting originally noticed. Any holder of shares of Common Stock may vote by proxy provided that the instrument authorizing such proxy to act shall have been executed in writing by the shareholder himself or by his duly authorized attorney. No proxy shall be valid, however, after the expiration of 11 months from the date of its execution unless the persons executing it shall have specified therein the length of time it is to continue in force, which shall be for some limited period. Prior to the exercise thereof, every proxy shall be revocable at the pleasure of the person executing it or of his personal representatives or assigns. At all meetings of shareholders, except as otherwise required by law, all matters shall be decided by the vote of the holders of a majority of the outstanding shares of Common Stock present or represented at the meeting.
TENTH:     Board of Directors . (i) The affairs and business of the Corporation shall be conducted and controlled by a Board of Directors, and the number of directors which shall constitute the whole Board shall be such as from time to time shall be fixed by resolution adopted by holders of the Common Stock, but in no case shall the number of directors be less than three (3) nor more than eighteen (18). The Directors shall be elected by the Common Stock at each annual meeting of the Common Stock and each Director so elected shall hold office until the next annual meeting of the shareholders or until his successor is elected and qualified, except as herein provided. All holders of Common Stock may cumulate their votes for directors at any election of directors. Any and all directors, however elected, may




at any time be removed, without cause assigned by the vote of the holders of the shares of Common Stock of the Corporation given at a meeting called for the purpose of considering such action, and the successor of any director so removed shall be elected by the holders of shares of Common Stock present in person or by proxy at such meeting or at a later meeting; provided, however, a director may not be removed without cause assigned if the number of votes sufficient to elect him under cumulative voting is voted against his removal. Vacancies occurring among the directors shall (other than in the case of removal of a director) be filled by a majority vote of the directors then in office with the consent of the holders of the outstanding Common Stock, or by a sole remaining director with the consent of the holders of the outstanding Common Stock, or by resolution duly adopted by the holders of the outstanding Common Stock at a special meeting held for such purpose, or by action taken in lieu of such meeting, or at the next annual meeting of Common shareholders following any vacancy. If the number of directors is decreased, then to the extent that the decrease does not exceed the number of vacancies in the Board then existing, such resolution may provide that it shall become effective forthwith, and to the extent that the decrease does exceed such number of vacancies, such resolution shall provide that it shall not become effective until the next election of Directors by the holders of Common Stock. The Board of Directors shall have power to hold their meetings, to have one or more offices and to keep the corporate books (except such books as are required by law to be kept within the state of Arkansas) outside of the state of Arkansas at such places as may from time to time be designated by them.
(ii) The Board of Directors shall have power to authorize the payment of compensation and reimbursement of expenses to the Directors for services to the Corporation, including fees for attendance at meetings of the Board of Directors or the Executive Committee and all other committees and to determine the amount of such compensation and fees.
(iii) One-third of the Directors duly elected and qualified shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time without notice other than announcement of the adjournment, and at such adjourned meeting at which a quorum is present any business may be transacted which might have been transacted at the meeting as originally notified.
(iv) The Board of Directors shall have the power to authorize and cause to be executed mortgages and deeds of trust which may cover and create a lien upon, or otherwise encumber, all or any part of the property of the Corporation of whatsoever kind and wheresoever situated whether then owned or thereafter acquired and to provide in any such mortgage or deed of trust that the amount of bonds or other evidences of indebtedness to be issued thereunder and to be secured thereby shall be limited to a




definite amount or limited only by the conditions therein specified and to issue or cause to be issued by the Corporation the bonds or other evidences of indebtedness to be secured thereby.
ELEVENTH:     Limitation of Liability . (i) To the fullest extent permitted by the Arkansas Business Corporation Act, or any other applicable law presently or hereafter in effect, no director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for or with respect to any acts or omissions in the performance of his duties.
(ii) Any repeal or modification of the foregoing paragraph by the shareholders of the Corporation shall not adversely affect any right or protection of a Director of the Corporation existing at the time of such repeal or modification.
TWELFTH:     Sale of Assets . The Corporation may, on terms and conditions and for the consideration determined by the Board of Directors, and, except as otherwise provided in subparagraph (iv) of Article TENTH of these Amended and Restated Articles of Incorporation, upon approval by the holders of a majority of the outstanding shares of Common Stock of the Corporation, sell, lease, exchange or otherwise dispose of all, or substantially all, of its property, or transfer any and all of its property to a corporation all of the shares of which are owned by the Corporation. The Corporation may, on the terms and conditions and for such consideration determined by the Board of Directors, without Common shareholder approval, sale, lease, exchange or otherwise dispose of its property in the usual and regular course of business.
THIRTEENTH:     Indemnification . (i) Every person who is or was an officer or director of the Corporation and who also is or was a party or is threatened to be made a party to or is involved in any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative or by or in the right of the Corporation, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, or as its representative in a partnership, joint venture, trust, or other enterprise, shall be indemnified and held harmless to the fullest extent legally permissible under and pursuant to the Arkansas Business Corporation Act, as currently in effect or as hereafter may be amended or modified, but in the case of any such amendment, only to the extent that such amendment permits the Corporation to give broader indemnification rights than said law permitted the Corporation to provide prior to such amendment. Such right of indemnification shall be a contract right that may be enforced in any lawful manner by such person. Such right of indemnification shall not be exclusive of any other right which such director or officer may have or hereafter acquire and, without limiting the generality of such statement, he shall be entitled to his rights of indemnification under any agreement, vote of shareholders, provision of law, or otherwise, as well as his rights under this Article THIRTEENTH.




(ii) Expenses incurred by any person who is or was an officer or director of the Corporation in defending a civil, criminal, administrative, or investigative action, suit or proceeding by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or was serving at the Corporation’s request as a director, officer, employee or agent of another corporation or as its representative in a partnership, joint venture, trust or other enterprise shall be paid by the Corporation in advance of the final disposition of such action, suit or proceeding to the fullest extent legally permissible under and pursuant to the Arkansas Business Corporation Act, as currently in effect or as hereafter may be amended or modified, but in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader rights to payment of expenses than said law permitted the Corporation to provide prior to such amendment. Such right to payment of expenses shall be a contract right that may be enforced in any lawful manner by such person.
(iii) The indemnification rights granted by this Article THIRTEENTH, without any limitation whatsoever upon the generality thereof, shall be deemed to include indemnification rights with respect to penalties and fines imposed by the Nuclear Regulatory Commission (the “NRC”) pursuant to Section 206 of the Energy Reorganization Act of 1974 and Part 21 of NRC Regulations thereunder, as they may be amended from time to time, and any other penalties and fines, whether similar or dissimilar, imposed by the NRC.
(iv) The indemnification and advancement of expenses provided by paragraphs (i), (ii) and (iii) of this Article THIRTEENTH shall continue as to a person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of the heirs, executors and administrators of such person.
(v) The indemnification and advancement of expenses provided for in paragraphs (i), (ii) and (iii) of this Article THIRTEENTH shall apply in all respects to an employee or agent of the Corporation to the same extent and as fully as if such employee or agent were an officer or director of the Corporation where the Board of Directors determines that such indemnification and advancement of expenses should be authorized in a specific case, and such determination shall be made by the Board of Directors by a majority vote.
(vi) If any provision of this Article THIRTEENTH or the application thereof to any person or circumstance is adjudicated invalid, such invalidity shall not affect other provisions or applications of this Article THIRTEENTH which lawfully can be given without the valid provision or application.
FOURTEENTH:     By-Laws . The Board of Directors is empowered to ordain and establish all by-laws and regulations necessary to manage the business of the Corporation, and alter and repeal the same; provided that the holders of a majority of the outstanding shares of Common Stock may alter, amend or repeal by-laws adopted or altered by the Board of Directors.




FIFTEENTH:     Subscriber . The name of the subscriber to the Articles of Incorporation of Middle South Energy, Inc. dated February 11, 1974, described in the first paragraph of these Amended and Restated Articles of Incorporation, which information is provided herein for informational purposes only, was W. H. Jewell.
The number of shares of the Corporation’s Common Stock issued, outstanding and entitled to vote on April 28, 1989 was 789,350. On such date, the holder of all such Common Stock of the Corporation considered and approved the proposal to amend and restate the Corporation’s existing Articles of Incorporation to adopt the Arkansas Business Corporation Act as the corporate law which shall govern the affairs of the Corporation, which consent resulted in the adoption of these Amended and Restated Articles of Incorporation.
IN WITNESS WHEREOF, we have set our hands hereunto this 28th day of April, 1989.
/s/ William Cavanaugh, III     
WILLIAM CAVANAUGH, III
President and Chief Executive Officer
ATTEST:

/s/ Joseph L. Blount     
JOSEPH L. BLOUNT
Vice President-Legal and External Affairs
and Assistant Secretary




ACKNOWLEDGEMENT
STATE OF MISSISSIPPI

COUNTY OF HINDS
On this 28th day of April, 1989, before me, a notary public duly commissioned, qualified and acting within and for the County and State aforesaid, appeared in person the within named WILLIAM CAVANAUGH, III and JOSEPH L. BLOUNT, President and Chief Executive Officer, and Vice President-Legal and External Affairs and Assistant Secretary, respectively of System Energy Resources, Inc., an Arkansas corporation, to me personally known, who stated that they were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of the Corporation, and further stated and acknowledged that they had so signed, executed and delivered the foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal.



/s/ Margaret Lack Stroud     
NOTARY PUBLIC


My Commission Expires:

My Commission Expires Feb. 28, 1993




STATEMENT OF CANCELLATION

Pursuant to Section 64-603
of the Arkansas Business Corporation Act
a.
The name of the Corporation is:
Middle South Energy, Inc.
b.
Number of treasury shares cancelled by resolution duly adopted by the board of directors on June 18, 1974:
One Share: Common Stock, no par value.
c.
The aggregate number of issued shares, after giving effect to such cancellation:
40,000 Shares: Common Stock, no par value.
d.
The amount of stated capital of the Corporation after giving effect to such cancellation:
$39,999,000.00
e.
See Attachment A for resolution effecting cancellation from June 18, 1974 minutes of MSEI.

MIDDLE SOUTH ENERGY, INC.


By      /s/ D. J. Winfield     
Vice President
Finance


By      /s/ C.A. Kule     
Assistant Secretary



Dated: June 25, 1974




ATTACHMENT A
After discussion, upon motion duly made and seconded, the following resolution was adopted:
RESOLVED, that following the issuance and sale of 40,000 shares of the Common Stock, no par value, of the Corporation to Middle South Utilities, Inc., the officers of the Corporation be, and they hereby are, authorized and directed for and on behalf of the Corporation to purchase from W. H. Jewell for a cash consideration of $1,000, the share of Common Stock, no par value, heretofore issued and sold to W. H. Jewell; and further
RESOLVED, that upon the purchase from W. H. Jewell of said share of Common Stock, no par value, of the Corporation, the officers of the Corporation be, and they hereby are, authorized and directed to cancel and extinguish said share, and that upon such cancellation and extinguishment, said share shall have the status of authorized but unissued Common Stock, no par value, of the Corporation and shall be subject to issuance and sale in the same manner and upon the same terms as other authorized but unissued Common Stock, no par value, of the Corporation; and further
RESOLVED, that the proper officers of the Corporation be and they hereby are, authorized and directed to take such further action as may be required by law to effect the cancellation of said share; and further
RESOLVED, that following and upon the due cancellation of said share according to law, any and all capital surplus of the Corporation shall be transferred to and deemed a part of the stated capital account of the Corporation without the necessity of any further action by the Corporation or any officer or - director thereof.




STATE OF NEW YORK      )
)      ss.:
COUNTY OF NEW YORK      )





VERIFICATION
I, Donald J. Winfield, on oath state that I have read the foregoing Statement of Cancellation and the statements contained therein are true and correct to the best of my knowledge and belief.
Subscribed and sworn to before me this 25th day of June 1974.



/s/ Mary Skaarlerud     
Notary Public


My Commission
Expires: March 30, 1975                  MARY SKAARLERUD
Notary Public, State of New York
No. 24-3693400 - Qualified in Kings Co
Certificate filed in New York County
Commission Expires March 30, 1975





Exhibit 4(b)3
FUEL LEASE
Dated as of February 24, 1989
between
RIVER FUEL FUNDING COMPANY #3, INC.
as Lessor
and
SYSTEM ENERGY RESOURCES, INC.,
as Lessee
AS OF THE DATE OF THIS LEASE, THE LESSOR UNDER THIS LEASE (THE “LESSOR”) HAS GRANTED TO MORGAN GUARANTY TRUST COMPANY OF NEW YORK A SECURITY INTEREST IN THIS LEASE AND IN ALL OF LESSOR’S RIGHTS AND INTERESTS UNDER THIS LEASE, INCLUDING, WITHOUT LIMITATION, ALL LESSOR’S RIGHTS TO AND INTERESTS IN NUCLEAR FUEL AS DEFINED IN THIS LEASE.
THIS LEASE HAS BEEN MANUALLY EXECUTED IN FIFTEEN COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 15. NO SECURITY INTEREST IN THIS LEASE OR IN ANY OF LESSOR’S RIGHTS AND INTERESTS UNDER THIS LEASE MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN COUNTERPART NO. 1.
Counterpart No. 12.








TABLE OF CONTENTS
Section      Page

1.
Defined Terms      1
2.
Representations and Warranties of Lessee      7
3.
Lease of Nuclear Fuel; Term      8
4.
Title to Remain in the Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used for Generation; Location; Contract Assignment      9
5.
Basic Rent and Additional Rent; Procedure for Paying Basic Rent      10
6.
Payment of Costs by the Lessor      11
7.
Taxes      12
8.
Condition and Use of Nuclear Fuel; Quiet Enjoyment      12
9.
Maintenance of the Nuclear Fuel      13
10.
Removals; Transfer to the Lessee; Commingling; Substitution; Location      14
11.
Indemnification by the Lessee      16
12.
Inspection; Right to Enter Generating Facility      17
13.
Payment of Impositions; Recording      17
14.
Compliance with Legal and Insurance Requirements, and with Instruments      17
15.
Liens      18
16.
Permitted Contests      18
17.
Insurance      19
18.
Damage or Destruction      19
19.
Condemnation or Eminent Domain      20
20.
Termination After Certain Events      21
21.
Conditions of Termination and Conveyance      24
22.
Estoppel Certificates; Information      25
23.
Rights to Perform the Lessee’s Covenants      25
24.
Assignments      25
25.
Events of Default and Remedies      26
26.
Permanent Storage or Disposal      28
27.
No Merger      29
28.
Notices      29
29.
Allocation of Amounts      29
30.
Amendments      30
31.
Severability      30




32.
Job Incentive Credit and Investment Credit      30
33.
Miscellaneous      31


Attachments
Schedule A --
Description of Nuclear Fuel
Schedule B --
Quarterly Rent Schedule
Schedule C --
Bill of Sale to River Fuel Funding Company #3, Inc.
Schedule D --
Fuel Schedule No. __
Schedule E --
Bill of Sale from River Fuel Funding Company #3, Inc. to System Energy Resources, Inc.
Schedule F --
Form of Assignment Agreement






FUEL LEASE
FUEL LEASE dated as of February 24, 1989 (as the same may be amended from time to time, “this Lease”), between SYSTEM ENERGY RESOURCES, INC., an Arkansas corporation (the “Lessee”), and RIVER FUEL FUNDING COMPANY #3, INC., a Delaware corporation (the “Lessor”).
Section 1.
Defined Terms .
Unless the context otherwise specifies or requires, each term defined in this Section 1 shall, when used in this Lease, have the meaning indicated:
“ Acquisition Cost ” shall mean the purchase price paid by the Lessor in order to acquire any portion of the Nuclear Fuel including progress payments, if any, made by the Lessor in respect of Nuclear Fuel, together with costs of milling, conversion, enrichment, fabrication, installation, delivery, containerization, transportation, storage, processing, Reprocessing and any other direct costs with respect to acquiring, recovering or preparing such portion of the Nuclear Fuel for use in or for cycling or recycling thereof or for management thereof through any stage of its Nuclear Fuel Cycle, and costs with respect to repairs, replacements and renewals or Restoration of any portion of the Nuclear Fuel but excluding therefrom all Capitalized Cost with respect thereto. The purchase price for any part of the Nuclear Fuel acquired by the Lessor from the Lessee shall include all payments made by the Lessee to the Manufacturers for such Nuclear Fuel plus all costs, expenses and allowances which have been incurred or made by Lessee in connection with such Nuclear Fuel and which are properly includible as a cost of such Nuclear Fuel in Lessee’s books of account in accordance with Lessee’s normal accounting practice.
“ Additional Rent ” shall mean all amounts (other than Basic Rent and Advance Rent) that the Lessee agrees to pay in this Lease (including, without limitation, indemnification payable under this Lease) and interest at the rate incurred by the Lessor or the Assignee as a result of any delay in payment by the Lessee to meet obligations that would have been satisfied out of prompt payment by the Lessee.
“ Advance Rent ” shall have the meaning assigned to that term in Section 5(g) of this Lease.
“ Affiliate ” of any person means any other person controlling, controlled by or under direct or indirect common control with such person. For the purposes of this definition, “ control, ” when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.
“ Assignee ” shall mean each person, firm, corporation or other entity to which any part of the Lessor’s interest under this Lease, or any rents or other rights of the Lessor under this Lease, shall at the time have been assigned, conditionally or otherwise, by the Lessor. Until the Lessee shall be otherwise notified by the Lessor, the Assignee shall be Morgan Guaranty Trust Company of New York (“Morgan”), as collateral agent under the Security and Collateral Agency Agreement, dated as of February 24, 1989 between the Lessor and Morgan.
“ Atomic Energy Act ” shall mean the Atomic Energy Act of 1954, as amended, as the same may be further amended from time to time (42 U.S.C. § 2011 et seq.).
“ Basic Rent ” payable on any Basic Rent Payment Date shall mean the sum of the Quarterly Lease Charge, less those Daily Lease Charges included in Capitalized Cost, plus the Burn-Up Charge, in each case with respect to the quarter prior to such Basic Rent Payment Date.




“ Basic Rent Payment Date ” shall have the meaning assigned to that term in Section 5(a) of this Lease.
“ Bill of Sale ” shall mean a bill of sale in substantially the form of either Schedule C or Schedule E attached to and made a part of this Lease, pursuant to which title to all or any portion of the Nuclear Fuel is transferred to the Lessor or to the Lessee.
“ Burn-Up Charge ” shall mean the amount shown as Total Burn-Up Charge on Annex I to the Quarterly Rent Schedule delivered to the Lessor pursuant to Section 5(c) hereof in respect of such Basic Rent Payment Date.
“ Business Day ” shall mean any day other than a day on which banking institutions in the State of New York or in the State of Mississippi are authorized by law to close.
“ Capitalized Cost ” shall mean the sum of all legal, printing, reproduction, closing and other normally capitalizable administrative fees and expenses actually paid by the Lessor in connection with any acquisition of the Nuclear Fuel and in connection with the transactions contemplated by a Credit Agreement (including interest expense and amortization of debt discount with respect to Commercial Paper and loans under a Credit Agreement and all commitment and other fees, costs and expenses, including the issuing agent’s fees, relating to liabilities of the Lessor under a Credit Agreement) or contemplated by a Secured Note Agreement (including interest expense and amortization of discount with respect to Secured Notes and other fees, costs and expenses incurred in connection with a Secured Note Agreement), and Daily Lease Charges accrued pursuant to this Lease which, in the Lessee’s sole judgment, are allocable to such Nuclear Fuel (i) during any stage of its Nuclear Fuel Cycle other than its Heat Production stage or (ii) during the period beginning on the Termination Notice Date and ending on the Termination Settlement Date (in each case as defined in Section 20(b) of this Lease) if and to the extent that the Lessee elects to capitalize any such Daily Lease Charges; provided, however, that Daily Lease Charges may be allocated to and included in Capitalized Cost by the Lessee only so long as the commitment under a Credit Agreement and the aggregate principal amount of Secured Notes outstanding shall exceed the sum of the Stipulated Loss Value of all of the Nuclear Fuel (including such Daily Lease Charges in the computation of Capitalized Cost for purposes of determining the amount of Investment) and $5,000,000.
“ Collateral Account ” shall have the meaning specified in the Security Agreement.
“ Commercial Paper ” shall mean commercial paper notes issued by the Lessor pursuant to a Credit Agreement.
“ Cooling ” shall mean the stage of the Nuclear Fuel Cycle pursuant to which Nuclear Fuel is placed in underwater storage upon completion of the Heat Production stage of the Nuclear Fuel Cycle.
“ Credit Agreement ” shall mean that certain credit agreement, dated as of February 24, 1989, between the Lessor and Union Bank of Switzerland, Houston Agency, as the same may from time to time be amended, modified or supplemented, and any other successor credit agreement entered into between the Lessor and any bank or other entity for use in financing the cost of Nuclear Fuel.
“ Daily Lease Charge ” shall mean for any calendar day (whether or not a Business Day) during the term of this Lease the sum of:
(i)      an accrual for such day of all interest expense and of the amortization of debt discount, whether or not paid, with respect to (A) all Commercial Paper issued, (B) all other




indebtedness incurred pursuant to a Credit Agreement and (C) all Secured Notes issued, which, in each case, is outstanding at the close of business on such day (net of Lessor’s earnings on such day on investment of moneys received in connection with the transactions contemplated by this Lease, a Credit Agreement or a Secured Note Agreement), and
(ii)      an accrual for such day with respect to (A) all commitment and other fees, costs and expenses (including, without limitation, issuing agent’s and commercial paper dealer’s fees) relating to the liabilities of the Lessor under a Credit Agreement, (B) all fees, costs and expenses incurred by the Lessor in connection with a Secured Note Agreement and (C) all fees, costs and expenses incurred by the Lessor under any Security Agreement.
Any figure used in the computation of any component of the Daily Lease Charge shall be stated to ten decimal places. No accrual, charge or other item which would constitute a part of the Acquisition Cost shall be included in the computation of Daily Lease Charge.
“ Event of Default ” shall mean any Event of Default referred to in Section 25 hereof.
“ Fuel Management ” shall mean the design of, contracting for, setting the price and terms of acquisition of, management, movement, removal, disengagement and other activities in connection with the utilization of the Nuclear Fuel, and sometimes referred to as “management”.
“ Fuel Schedule ” shall mean an instrument in substantially the form of Schedule D attached hereto and made a part hereof, pursuant to which Schedule A to this Lease is amended in connection with a request by the Lessee for payment with respect to Nuclear Fuel pursuant to Section 6 hereof or in connection with a removal or a replacement of Nuclear Fuel pursuant to Section 10, 18(a) or 19(b) hereof.
“ Generating Facility ” shall mean the Lessee’s boiling water reactor nuclear electric generating facilities located near Grand Gulf, Mississippi, known as Unit No. 1 of the Grand Gulf Generating Station.
“ Guarantor ” shall mean any Person guaranteeing the obligations of the Lessee under this Lease.
“ Guaranty ” shall mean any agreement providing for the guaranty of the obligations of the Lessee under this Lease by a Guarantor.
“ Heat Production ” shall mean the stage of the Nuclear Fuel Cycle in which the Nuclear Fuel or any portion thereof is engaged in a reactor core of the Generating Facility and is being consumed to produce heat, pursuant to the process of nuclear fission, in the production of electric energy.
“ Impositions ” shall mean all payments required by public or governmental authority in respect of any property subject to this Lease or any transaction pursuant to this Lease or any right or interest held by virtue of this Lease.
“ Insurance Requirements ” shall mean all terms of any insurance policy covering or applicable to the Nuclear Fuel or any portion thereof, all requirements of the issuer of any such policy, and all orders, rules, regulations and other requirements of the Nuclear Regulatory Commission, the National Board of Fire Underwriters, or any other body exercising similar functions with respect to electric utility properties or any other body hereafter constituted exercising similar functions, which are applicable to or affect insurance with respect to the Generating Facility, the Nuclear Fuel or any portion thereof or any operation, use or condition of the Generating Facility, the Nuclear Fuel or any portion thereof.
“ Insured Person ” shall have the meaning assigned to that term in Section 17 of this Lease.




“ Investment ” shall mean with respect to any portion of the Nuclear Fuel, the sum of (i) the Acquisition Cost for such portion plus (ii) the Capitalized Cost for such portion.
“ Legal Requirements ” shall mean all requirements having the force of law applicable to the Lessee (as owner and operator of the Generating Facility), the Generating Facility or the Nuclear Fuel.
“ Lessee ” shall mean System Energy Resources, Inc., an Arkansas corporation, or any successor or successors to its rights and obligations as lessee hereunder.
“ Lessor ” shall mean River Fuel Funding Company #3, Inc., a Delaware corporation, or any successor or successors to the rights and obligations of River Fuel Funding Company #3, Inc. as lessor hereunder, including at any time after the date hereof, the then owner of the Nuclear Fuel.
“ Manufacturers ” shall mean any supplier of Nuclear Fuel, or any component thereof, or of Reprocessing or other service in connection therewith (including for the purpose of this definition Prulease, Inc. and Port Gibson Energy, Inc.).
“ Mortgage and Deed of Trust ” shall mean the Lessee’s Mortgage and Deed of Trust, dated as of June 15, 1977 to United States Trust Company of New York and Malcolm J. Hood (Gerard F. Ganey, successor), as Trustees, as supplemented and any general and refunding mortgage entered into in the ordinary course of the Lessee’s business.
“ MWhr Factor ” shall mean a factor determined by deducting (i) the estimated residual value stated in dollars of each assembly of the Nuclear Fuel after it shall have completed Heat Production from (ii) the Stipulated Loss Value for each such assembly and dividing the remainder by the estimated amount of heat remaining, measured in thermal megawatt hours, that such assembly will produce during Heat Production. The quotient shall be computed to the nearest fifth decimal place.
“ Nuclear Fuel ” shall mean the separate assemblies of Nuclear Fuel and components thereof more particularly described in Schedule A hereto, as amended from time to time by means of a Fuel Schedule, in the respective forms in which such assemblies and components exist at each stage of the Nuclear Fuel Cycle, beginning with Nuclear Fuel in the form of ore which has already been mined, consisting of substances and equipment which, when loaded into a nuclear reactor, are intended to produce heat through the fission process, together with all replacements thereof and additions thereto. But “Nuclear Fuel” shall not include any assemblies, components or other items purchased and paid for by the Lessee, or sold by the Lessor to a third party, pursuant to the terms hereof.
“ Nuclear Fuel Contract ” shall mean any contract entered into by the Lessee with one or more Manufacturers relating to the acquisition of any Nuclear Fuel or service in connection therewith.
“ Nuclear Fuel Cycle ” shall mean the various stages herein defined in the process, whether physical or chemical, by which the component parts of the Nuclear Fuel are processed, enriched, designed, fabricated into assemblies utilizable for Heat Production, loaded into a reactor core, utilized, disengaged, cooled, stored and/or reprocessed, together with all incidental processes with respect to the Nuclear Fuel at any stage of said Nuclear Fuel Cycle.
“ Nuclear Incident ” shall have the meaning specified in the Atomic Energy Act.
“ Nuclear Regulatory Commission ” shall mean the independent regulatory commission of the United States government existing under the authority of the Energy Reorganization Act of 1974, as




amended, or any successor organization or organizations or administrator or administrators performing any identical or substantially identical licensing and related regulatory functions.
“ Person ” shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
“ Quarterly Lease Charge ” shall mean the sum, for any quarter ending on the last day of each March, June, September and December, of the aggregate of the Daily Lease Charges incurred with respect to all portions of the Nuclear Fuel subject to this Lease at any time during such quarter.
“ Quarterly Rent Schedule ” shall mean an instrument in substantially the form of Schedule B attached hereto and made a part hereof from time to time executed by the Lessor and the Lessee for the purpose of setting forth and confirming the S.L.V. of the Nuclear Fuel and the Burn-Up Charges and Daily Lease Charges for the Nuclear Fuel.
“ Reprocessing ” shall mean the stage of the Nuclear Fuel Cycle in which the Nuclear Fuel, after it has completed Heat Production and Cooling, is transported to a reprocessing plant, mechanically disassembled, dissolved in acidic solution and separated into recovered forms of uranium, plutonium and other radioactive materials, or any process or processes used in place thereof.
“ Restoration ” shall mean the repair, reconstruction or replacement of all or any portion of the Nuclear Fuel which has been damaged or destroyed or lost or stolen or which has been affected by a Taking, as nearly as possible to the value, condition and character of such portion, and in its location, immediately prior to such damage, destruction, loss, theft or Taking, or the replacement of any assembly of the Nuclear Fuel so damaged, destroyed or lost or stolen or affected by a Taking, with Nuclear Fuel having an equivalent value and Heat Production capacity with only such alterations and additions as may be made at the Lessee’s election and as will not diminish the fair market value or usefulness of the Nuclear Fuel so repaired, reconstructed or replaced.
“ Secured Note ” shall mean each promissory note of the Lessor having a maturity date more than 270 days from its date of issuance, issued pursuant to a Secured Note Agreement and the proceeds of which are used to pay Acquisition Cost or Capitalized Cost or to pay borrowings previously incurred by the Lessor in connection with the financing of its acquisition or ownership of Nuclear Fuel and the holder of which is entitled to the benefit of the security interest granted to the Assignee pursuant to a Security Agreement.
“ Secured Note Agreement ” shall mean each note agreement, dated as of February 24, 1989, between the Lessor and lenders with respect to the sale by the Lessor of Secured Notes, Series A, and any similar agreement entered into between the Lessor and institutional investors relating to the issuance and sale by the Lessor of any other series of Secured Notes.
“ Security Agreement ” shall mean an agreement from the Lessor to the Assignee, which creates a security interest in the Nuclear Fuel, as the same may be entered into and/or amended from time to time.
“ Stipulated Loss Value ” or “ S.L.V. ” shall mean with respect to any portion of the Nuclear Fuel at any time leased hereunder, the excess of the amount of the Investment in such portion over the aggregate amount of the Burn-Up Charges theretofore paid by the Lessee to the Lessor in respect of such portion.
“ Taking ” shall mean a loss, during the term hereof, of the title to, ownership of or use and possession of the Nuclear Fuel, or any material portion thereof, or any material interest therein or right accruing thereto, as the result of or in lieu of or in anticipation of the exercise of the rights of




condemnation or eminent domain pursuant to any law, general or special, or by reason of the temporary requisition of the use of the Nuclear Fuel, or any material portion thereof, by any governmental authority, civil or military.
“ Termination Event Date ” shall have the meaning assigned to that term in Section 20(b) of this Lease.
“ Termination Rent ” shall mean an amount which, when added to the Stipulated Loss Value then payable by the Lessee pursuant to Section 20(b) or Section 25(b) hereof, as the case may be, will be sufficient to enable the Lessor (i) to retire, at their respective maturities, all of Lessor’s then outstanding obligations under (A) any Credit Agreement, including all Commercial Paper issued thereunder and all loans obtained thereunder and (B) any Secured Note Agreement, including all Secured Notes issued pursuant thereto, and (ii) to pay all charges, premiums and fees owed to any lender under a Credit Agreement or Secured Note Agreement or to the Assignee.
“ Termination Settlement Date ” shall have the meaning assigned to that term in Section 20(b) of this Lease.
“ Unavoidable Delays ” shall mean delays due to strikes, acts of God, governmental restrictions or regulatory delays, enemy action, civil commotion, fire, unavoidable casualty causes affecting the integrity of generating or transmission systems, or other causes beyond the control of the Lessee.
Section 2.
Representations and Warranties of Lessee .
The Lessee represents and warrants to the Lessor:
(a) Organization, Standing, etc . The Lessee is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas, is duly qualified to do business in Mississippi and has all requisite corporate power and authority, and has obtained all necessary governmental licenses and permissions, to carry on its business and to execute, deliver and perform this Lease.

(b) Financial Statements . The Lessee has furnished to the Lessor copies of its Annual Report on Form 10-K for the year ended December 31, 1987, its Annual Report to Shareholders for the year 1987, its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1988, June 30, 1988 and September 30, 1988 and its Current Reports on Form 8-K dated December 1, 1988, December 28, 1988 and January 9, 1989. The financial statements contained in such documents fairly present the financial condition and results of operations of the Lessee as of the dates and for the periods indicated therein and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be otherwise disclosed in the footnotes thereto).

(c) Changes, etc . Since September 30, 1988, no change has occurred in the condition or business of the Lessee which is continuing and which in any way impairs the ability of the Lessee to perform its obligations under the Lease.

(d) Litigation, etc . Except as may be disclosed in or contemplated by the Lessee’s Annual Report on Form 10-K for the year ended December 31, 1987 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1988, June 30, 1988 and September 30, 1988, its Current Reports on Form 8-K dated December 1, 1988, December 28, 1988 and January 9, 1989, as supplemented by any information separately provided to the Lessor, and its Annual Report to Shareholders for the year ended December 31, 1987, there is no action, suit, proceeding or investigation at law or in equity or by or before




any governmental instrumentality or other agency now pending or, to the knowledge of the Lessee, threatened (or any basis therefor) against or affecting the Lessee or any property or rights of the Lessee which questions the validity of this Lease or which is reasonably likely to be adversely determined, and which, if so determined, would impair the ability of the Lessee to perform its obligations hereunder.

(e) Compliance with Other Instruments, etc . The execution, delivery and performance of this Lease will not result in any violation of any term of the Articles of Incorporation, as amended, or the By-Laws, as amended, of the Lessee or of any material agreement, indenture or similar instrument, license, judgment, decree, order, law, statute, ordinance or governmental rule or regulation applicable to the Lessee, including, without limitation, the Lessee’s Mortgage and Deed of Trust.

(f) Governmental Consent, etc . No consent, license, order, authorization or approval of, or registration, declaration or filing with, any governmental or public body or authority on the part of the Lessee is required in connection with the valid execution, delivery and performance of this Lease, except the approving Order of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended, which has heretofore been applied for and obtained and which remains in full force and effect and the filing of a certificate pursuant to Rule 24 of the Public Utility Holding Company Act of 1935, as amended, following the execution and delivery of this Lease.

Section 3. Lease of Nuclear Fuel; Term .

(a) The Lessor hereby leases to the Lessee, and the Lessee hereby leases from the Lessor, the Nuclear Fuel for the term provided in this Lease and subject to the terms and provisions hereof.

(b) The term of this Lease shall begin at 12:01 A.M., New York City time, on February 24, 1989, and unless extended as herein provided or unless sooner terminated as hereunder provided pursuant to Section 20, shall end at the later to occur of (i) if any Secured Notes are issued, the final maturity date of one or more Secured Notes on a date on which no other Secured Notes are outstanding or (ii) the close of business in New York City on February 28, 1994; provided, however, that unless either the Lessor or the Lessee shall have given notice to the other by February 1 in 1992, or in any subsequent year, stating that this Lease shall terminate at the close of business in New York City on February 28, or in the case of a leap year, February 29 of the second following year, then the term of this Lease shall thereupon automatically be extended for one additional year, without the necessity of any action by the Lessor or the Lessee. Not less than 15 and not more than 30 days prior to each date on which the parties could give such notice of termination, Lessor shall in writing inform Lessee of its right to give such notice and of the automatic extension of this Lease if neither Lessee nor Lessor gives such notice of termination. This Lease shall in any event terminate at the close of business in New York City on February 28, 2039, if the term shall be extended until then.

Section 4. Title to Remain in the Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used for Generation; Location; Contract Assignment .

(a) Title to and ownership of the Nuclear Fuel shall at all times remain in the Lessor and at no time become vested in the Lessee, except in accordance with an express provision of this Lease. This is a lease only, and shall not give or grant to the Lessee any right, title or interest in or to the Nuclear Fuel, or any portion thereof, except the rights of a lessee in accordance with the provisions hereof.

(b) So long as no Event of Default shall have occurred and be continuing and the Lessor shall not have elected to exercise any of its remedies under Section 25 hereof, the Lessee shall have full right




and lawful authority to engage in Fuel Management. The Lessee is hereby designated the lawful representative of the Lessor in all dealings with Manufacturers and any regulatory agency having jurisdiction over the ownership or possession of the Nuclear Fuel.

(c) The Nuclear Fuel is personal property and the Lessee shall, at its expense, take all such action as may be required to cause the Nuclear Fuel to retain its character as personal property and to refrain from taking any action that would cause it to lose its character as personal property. The Nuclear Fuel shall not become part of any real property on which it or any portion thereof may from time to time be situated, notwithstanding the means by which it is installed or attached thereto and notwithstanding any law or custom or the provision of any lease, mortgage or other instrument applicable to any such real property. The Lessee agrees to indemnify the Lessor against and to hold the Lessor harmless from, all losses, costs and expenses resulting from any of the Nuclear Fuel becoming part of real property, and such indemnification shall survive the termination of this Lease, in whole or in part.

(d) The Lessee represents and warrants to the Lessor that the Nuclear Fuel location will be limited to: (x) a Manufacturer’s facilities, (y) transit between Manufacturers’ facilities and other Manufacturers’ facilities or the Generating Facility and (z) the Generating Facility. Each assembly of the Nuclear Fuel will be located during its Heat Production or Cooling stage in the Generating Facility. The Lessee shall advise the Lessor and the Assignee of the States in which Nuclear Fuel may be located during the Nuclear Fuel Cycle. The Lessee shall advise the Lessor and the Assignee of any additional State and location in which the Nuclear Fuel may be located thirty days prior to its movement to such State and location.

(e) Except to the extent otherwise agreed to by the Lessor, prior to obtaining pursuant to Section 6 hereof any payment by the Lessor to a Manufacturer pursuant to a Nuclear Fuel Contract, the Lessee shall deliver to the Lessor an executed Assignment Agreement (in substantially the form attached as Schedule F hereto) with respect to such Contract (thereafter an “Assigned Nuclear Fuel Contract”) together with a Consent and Agreement (substantially in the form attached to Schedule F hereto) insofar as it relates to Nuclear Fuel executed by the Manufacturer that is a party to said Assigned Nuclear Fuel Contract.

Section 5. Basic Rent and Additional Rent; Procedure for Paying Basic Rent .

(a) The Lessee covenants to pay to the Lessor or, if so directed by the Lessor, the Assignee, on April 30, 1989 and on the last day of each January, April, July and October thereafter (or if such day is not a Business Day, on the next preceding Business Day) (each such date being herein called a “Basic Rent Payment Date”), at not later than 11:00 A.M., New York City time, the respective amounts of Basic Rent shown on Annex I to the Quarterly Rent Schedule delivered to the Lessor in accordance with clause (i) of Section 5(c) hereof in respect of such Basic Rent Payment Date.

(b) The Lessee hereby covenants and agrees that it will not cause or suffer any assembly of the Nuclear Fuel to be engaged in any nuclear reactor until the Lessee delivers to the Lessor a certificate, dated the date of delivery and signed by a qualified engineer, who may be an employee of the Lessee, describing all assemblies of Nuclear Fuel then being engaged in any nuclear reactor in substantially the form described in Schedule A hereto; provided that such a certificate for assemblies initially listed in Schedule A shall be delivered to the Lessor at the time of execution of this Lease.





(c) At least 15 days before each Basic Rent Payment Date, the Lessor shall deliver to the Lessee a Quarterly Rent Schedule completed as to Columns 1, 2, 3 and 4 and as to Annex I/ thereto. On such Basic Rent Payment Date, the Lessee shall

(i) deliver to the Lessor the Quarterly Rent Schedule so received duly completed as to the remaining Columns and as to Annex I; and

(ii) pay to the Lessor or the Assignee as the Lessor may direct in writing the amount shown for Basic Rent in such Annex I for the calendar quarter ended on the last day of the month preceding the month during which such Basic Rent Payment Date occurs.

Each such Quarterly Rent Schedule shall be signed and delivered in triplicate.
(d) All sums payable by the Lessee to the Lessor shall be payable in Federal funds and shall be paid to the Lessor at the Lessor’s address for purposes of notices hereunder or to such other Person or at such other address as the Lessor may from time to time designate.

(e) In addition to the Basic Rent, the Lessee shall also pay from time to time as provided in this Lease or on demand of the Lessor, all Additional Rent as and when due and payable. In the event of any failure by the Lessee to pay any Additional Rent, the Lessor shall have all the rights, powers and remedies as in the case of failure to pay Basic Rent.

(f) The Lessee may prepay Basic Rent at any time. Such payment shall be credited against subsequent amounts owed by the Lessee on account of Basic Rent.

(g) In addition to Basic Rent and Additional Rent, the Lessee will also pay, from time to time, upon demand of the Lessor or the Assignee (to the extent the Assignee may exercise the Lessor’s rights hereunder), advance rent (the “Advance Rent”) in such amounts as may be required to permit the Lessor to pay in full the amount of any component of Daily Lease Charge which is then due and payable by the Lessor to the extent that funds for the payment of such component may not then be obtainable by the Lessor by effecting borrowings permitted by a Credit Agreement or any Secured Note Agreement. Any such payment of Advance Rent shall be credited against subsequent amounts owed by the Lessee on account of Basic Rent. In the event of any failure by the Lessee to pay any Advance Rent, the Lessor shall have all of the rights, powers and remedies as in the case of a failure to pay Basic Rent.

(h) The obligations of the Lessee to pay Basic Rent, Additional Rent, Advance Rent, Termination Rent and the amounts specified in Section 10(c), Section 20(b) and Section 25(b)(ii) shall be absolute and unconditional and the payment of such amounts shall not be subject to any right of set-off, counterclaim, recoupment, defense, abatement, suspension, deferment or reduction. The foregoing agreement by the Lessee is without prejudice to its right to pursue, by separate action, any claim which the Lessee may have against any Person, including, without limitation, the Lessor, the Assignee or each Person who is a lender under a Credit Agreement or a Secured Note Agreement.

Section 6. Payment of Costs by the Lessor .

So long as no Event of Default or event which, with the giving of notice or the lapse of time or both, would be an Event of Default has occurred and is then continuing and the Lessee’s representations and warranties set forth in Section 2 are true, whenever the Lessee desires the Lessor to acquire title to property which, upon such acquisition, shall become part of the Nuclear Fuel and to pay any Acquisition




Cost relating thereto, or the Lessee desires to obtain payment to a Manufacturer or payment to the Lessee of any Acquisition Cost or Capitalized Cost or both of any portion of the Nuclear Fuel, including Nuclear Fuel acquired after the date of this Lease either as additional Nuclear Fuel or as replacement Nuclear Fuel, the Lessee may deliver to the Lessor a Fuel Schedule in substantially the form of Schedule D, dated as of the date of delivery and fully executed by the Lessee, which shall (i) describe in Annex II thereto, in the same manner as in Schedule A hereto, such portion of the Nuclear Fuel, (ii) set forth in Annex I thereto, in the manner specified in Section 29 hereof, the Acquisition Cost and Capitalized Cost payable to such Manufacturer or incurred by the Lessee as of the date of such Fuel Schedule with respect to such portion of the Nuclear Fuel and (iii) set forth in item 2 of the Fuel Schedule that portion of such Acquisition Cost and Capitalized Cost which has not previously been the basis of payment to such Manufacturer or payment to the Lessee pursuant to this Section 6, and with respect to which the Lessee desires payment. At such time as a Nuclear Fuel Contract provides for transfer of title to any portion of the Nuclear Fuel for which a Fuel Schedule has been or is being submitted to the Lessor by the Lessee, the Lessee shall cause the appropriate Manufacturer to deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing such portion of the Nuclear Fuel unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale; and at such time as a Fuel Schedule is delivered the Lessee shall deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing any portion of the Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such Bill or Bills of Sale. Not earlier than five days nor later than ten days after the Lessor shall have received a Fuel Schedule hereunder, the Lessor shall pay to the Manufacturer designated in the Fuel Schedule or, as the case may be, to the Lessee the amount of the requested payment and shall complete such Fuel Schedule so delivered to it by (y) setting forth in Annex I thereto the Investment in such portion of the Nuclear Fuel as of the date of such payment and (z) executing such Fuel Schedule and delivering copies thereof to the Lessee, provided, however, that the Lessor shall not be required to make any payment pursuant to this Section 6 if and to the extent that such payment exceeds (a) the amount of the proceeds of borrowings which would be available to it under any Credit Agreement and any Secured Note Agreement then in effect under which the Lessor could make borrowings for such purpose contemporaneously with such payment, minus (b) $5,000,000.
Section 7.
Taxes .

The Lessee agrees that it will promptly pay all taxes, assessments and other governmental charges and fees levied or assessed upon the interest of the Lessee during the term of this Lease in the Nuclear Fuel or any part thereof and against the Lessor on account of the transactions, including investments, contemplated by this Lease, including without limitation, any Federal or state income, excess profits or franchise taxes against the Lessor on or measured by any moneys payable hereunder or the net income therefrom; provided, that this Section 7 shall not be deemed to obligate the Lessee to pay any taxes, assessments and other governmental charges and fees which may have been included in the Capitalized Cost of any Nuclear Fuel. The Lessee further agrees at its expense to do all things required to be done by the Lessor in connection with the levy, assessment, billing or payment of any such taxes (other than Federal or state income, excess profits or franchise taxes) and is hereby authorized by the Lessor to act for and on behalf of the Lessor in any and all such respects, and to file, on behalf of the Lessor, all required tax returns and reports (other than returns and reports in respect of Federal or state income, excess profits or franchise taxes) concerning the Nuclear Fuel. The obligations of the Lessee under this Section 7 shall survive any termination of this Lease, in whole or in part.




Section 8.
Condition and Use of Nuclear Fuel; Quiet Enjoyment .

(a) Each assembly of the Nuclear Fuel is leased subject to the rights of any parties in possession thereof and the state of the title thereto and the rights of ownership therein whenever the same first becomes subject to this Lease, and to all applicable zoning regulations, restrictions, rules, licenses and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction, and in the state and condition thereof when the same first becomes subject to this Lease, without representations or warranties of any kind by the Lessor, the Assignee, or any Person acting on behalf of any of them. THE LESSEE ACKNOWLEDGES AND AGREES THAT THE TYPE AND DESIGN OF THE NUCLEAR FUEL HAS NOT BEEN SELECTED BY THE LESSOR, THAT THE LESSOR OR THE ASSIGNEE HAVE NOT SUPPLIED ANY SPECIFICATIONS WITH RESPECT TO THE MANUFACTURE OF ANY PORTION THEREOF AND THAT NEITHER THE LESSOR, THE ASSIGNEE, EACH PERSON WHO IS A LENDER UNDER A CREDIT AGREEMENT OR A SECURED NOTE AGREEMENT NOR ANY PERSON (EXCEPT THE LESSEE) ACTING ON BEHALF OF ANY THEREOF (I) IS A MANUFACTURER OF, OR DEALER IN, NUCLEAR MATERIAL OF ANY KIND OR HAS ANY LICENSE TO USE OR POSSESS SUCH MATERIAL, (II) HAS MADE ANY RECOMMENDATION, GIVEN ANY ADVICE OR TAKEN ANY OTHER ACTION WITH RESPECT TO (A) THE CHOICE OF ANY SUPPLIER, VENDOR, PROCESSOR, DESIGNER, FABRICATOR OR TRANSPORTER OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO, THE NUCLEAR FUEL OR ANY PORTION THEREOF OR (B) ANY ACTION TAKEN OR TO BE TAKEN WITH RESPECT TO THE NUCLEAR FUEL OR ANY PORTION THEREOF AT ANY STAGE OF THE NUCLEAR FUEL CYCLE, (III) HAS AT ANY TIME HAD PHYSICAL POSSESSION OF ANY PORTION OF THE NUCLEAR FUEL OR MADE ANY INSPECTION THEREOF OR (IV) HAS MADE ANY WARRANTY OR OTHER REPRESENTATION, EXPRESS OR IMPLIED, THAT THE NUCLEAR FUEL (X) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY, (Y) HAS BEEN PROPERLY DESIGNED OR FABRICATED OR WILL ACCOMPLISH THE RESULTS WHICH THE LESSEE INTENDS THEREFOR OR (Z) IS SAFE IN ANY MANNER OR RESPECT. NO WARRANTY HAS BEEN OR IS MADE BY THE LESSOR, THE ASSIGNEE OR ANY PERSON ACTING ON BEHALF OF ANY OF THEM, EXPRESS OR IMPLIED, RELATING TO THE NUCLEAR FUEL OR ANY PORTION THEREOF, WITH RESPECT TO MERCHANTABILITY, FITNESS OR OTHERWISE, WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER PRESENT OR FUTURE LAW, OR OTHERWISE.

(b) So long as no Event of Default shall have occurred and be continuing, the Lessor hereby authorizes the Lessee at the Lessee’s cost and expense, to assert all rights and claims, and to bring suits, actions and proceedings, in its own name or in the name of the Lessor, in respect of any seller’s, Manufacturer’s (including miller’s, converter’s, enricher’s or reprocessor’s), transporter’s, designer’s or fabricator’s warranties or undertakings, express or implied, relating to any portion of the Nuclear Fuel and to retain the proceeds of any such suits, actions and proceedings.

(c) The Lessee has investigated the state of the title to and rights of ownership in the Nuclear Fuel subject to this Lease at the commencement of the term hereof, and has made a physical inspection of the Nuclear Fuel subject to this Lease at the commencement of the term hereof or reasonably prior thereto, and is satisfied with and has approved the same for all purposes hereof. The Lessee will, from time to time after such commencement, make a similar investigation and inspection of each portion of the Nuclear Fuel as the same becomes subject to this Lease, and will not permit any such portion to become subject to this Lease unless the Lessee is similarly satisfied with and has similarly approved the same for all




purposes thereof. No approval by the Lessee pursuant to this Section 8(c) shall affect or impair any of the Lessee’s rights under Section 8(b).

(d) So long as no Event of Default shall have occurred and be continuing, the Lessee shall have exclusive possession and use of the Nuclear Fuel. The Nuclear Fuel may be used for any lawful purpose. The Lessee will not do or permit any act or thing which is contrary to any Legal Requirement or Insurance Requirement or which might impair the value or usefulness of the Nuclear Fuel or any part thereof other than in the normal usage thereof in the production of electric energy.

Section 9. Maintenance of the Nuclear Fuel .

The Lessee will (i) at its own expense (without limiting the Lessee’s right to request payment by the Lessor of such expense provided in Section 6) keep the Nuclear Fuel in good condition and will promptly make or cause to be made all necessary or appropriate repairs, replacements and renewals or Restoration thereof, and (ii) at its own expense (without limiting the Lessee’s rights to request payment by the Lessor of such expense provided in Section 6) arrange for the proper Fuel Management. All repairs, replacements and renewals shall be done in a workmanlike manner. The Lessee will be responsible for all actions and expense necessary or appropriate for the proper utilization, preservation and safety of the Nuclear Fuel. The Lessor shall not be required to perform any construction, or to alter, repair, rebuild or replace the Nuclear Fuel or any portion thereof, or to maintain, service or manage the Nuclear Fuel or any portion thereof in any way, and the Lessee hereby expressly waives the right to perform any construction or to make such alterations or repairs or to effect any such Fuel Management at the expense of the Lessor which may be required by any law now in effect or hereafter enacted.
Section 10.
Removals; Transfer to the Lessee; Commingling; Substitution; Location .

(a) If no Event of Default under this Lease shall have occurred and be continuing, the Lessee shall have the right at any time and from time to time during the continuance of this Lease, at the Lessee’s expense (without limiting the Lessee’s rights to request payment by the Lessor of such expense provided in Section 6) to move any assembly of the Nuclear Fuel from the Generating Facility to any other location in the continental United States for the purpose of having services performed thereon in connection with any stage of the Nuclear Fuel Cycle other than the Heat Production and Cooling stages, provided that no such action shall materially reduce the then fair market value of such assembly, and provided, further, that unless such assembly shall have been released from this Lease pursuant to Section 10(b), (i) such assembly shall be and remain the property of the Lessor, subject to this Lease and the Security Agreement, and (ii) as a condition to such removal and relocation, all necessary governmental approvals and licenses with respect thereto shall have been procured and shall be in full force and effect, all necessary recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) shall have been duly made in the public offices in which such recordings and filings must be made in order to publish notice, or otherwise protect the validity and effectiveness, of this Lease and the security interest created by the Security Agreement, and all fees, taxes and charges payable in connection with such recordings and filings shall have been paid in full by the Lessee. Any such removal shall constitute the agreement of the Lessee that the Lessee will continue to be obligated in respect of such assembly as provided in this Lease notwithstanding such removal, that the Lessee will pay or cause to be paid (except as provided in Section 6) all taxes and expenses incurred or to be incurred by the Lessor, the Lessee and the Assignee by reason of such removal and relocation, and that the indemnities by the Lessee contained in Section 11 shall extend to the use, possession, conduct or management, or any work, improvement, demolition or thing done in or about or in respect, of such assembly so removed to the same extent as if its place of relocation were the Generating Facility. The provisions of this Section 10(a) shall




be applicable to each subsequent removal of any assembly of the Nuclear Fuel so removed from the place of relocation to which it was removed after its initial removal from the Generating Facility.

(b) At any time and from time to time, the Lessee shall have the right to purchase any portion, but not all, of the Nuclear Fuel. Whenever the Lessee desires to purchase any portion, but not all, of the Nuclear Fuel regardless of the then present stage of its Nuclear Fuel Cycle, then the Lessee shall deliver to the Lessor a certificate in the form of Schedule B hereto showing the Stipulated Loss Value of such portion of the Nuclear Fuel at the date of such certificate and shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. Thereupon the Lessor shall execute and deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon such portion of the Nuclear Fuel shall cease to be Nuclear Fuel and shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

(c) The Lessee shall, upon (i) the regularly scheduled final maturity of the Lessor’s borrowings under a Credit Agreement following a determination by the lenders under such Credit Agreement not to extend the maturity of such borrowings and (ii) the regularly scheduled final maturity date of one or more Secured Notes of the Lessor, in each case under circumstances where the Lessor cannot obtain funds to meet such maturities through the proceeds of borrowings which would be available to the Lessor under any Credit Agreement and any Secured Note Agreement then in effect, purchase an amount of Nuclear Fuel to be designated by the Lessee not less than 15 days prior to such purchase, by delivering to the Lessor a certificate in the form of Schedule B hereto showing that the Stipulated Loss Value of the designated Nuclear Fuel is not less than the amount of the Lessor’s borrowings maturing under the circumstances set forth above. The Lessor shall give the Lessee at least 60 days’ notice of the above maturities and circumstances. The Lessee shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. In addition, the Lessee shall at such time pay all Additional Rent and Advance Rent then due and payable to the Lessor. Thereupon, the Lessor shall deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration, all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon such portion of the Nuclear Fuel shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

(d) The Lessor and the Lessee recognize that during the processing and reprocessing of Nuclear Fuel leased hereunder before and after its utilization in the Generating Facility, a Manufacturer performing services on such Nuclear Fuel may require that title thereto be transferred to such Manufacturer and such Nuclear Fuel be commingled with other nuclear fuel, with an obligation on such Manufacturer, upon completion of the services to reconvey a specified amount of Nuclear Fuel. Accordingly, the Lessor and the Lessee agree that (i) Nuclear Fuel leased hereunder may become subject to such a contract notwithstanding any provision of this Lease to the contrary, (ii) as between the Lessor and the Lessee, such Nuclear Fuel shall be deemed to be and remain leased hereunder while title thereto is in such Manufacturer and (iii) title to the Nuclear Fuel delivered by such Manufacturer upon completion of its services automatically shall vest in the Lessor and such Nuclear Fuel automatically shall be leased hereunder in substitution for the Nuclear Fuel originally delivered to such Manufacturer.





(e) After the utilization of the Nuclear Fuel leased hereunder in the Generating Facility, the Lessor will at the Lessee’s request, and upon approval of such request by the Lessor, which approval shall not be unreasonably withheld, transfer title to Nuclear Fuel leased hereunder in accordance with Section 21 hereof to a third party in exchange for the simultaneous transfer to the Lessor of clear and unencumbered title to replacement Nuclear Fuel having a fair market value not less than that of the Nuclear Fuel conveyed to such third party. The Nuclear Fuel received by the Lessor pursuant to any such exchange shall be automatically substituted for the Nuclear Fuel delivered by the Lessor and shall be deemed to be subject to this Lease. Subject to the limitation on payment contained in Section 6, the Lessor shall pay any additional amounts required to effect such exchange. Such payments shall increase the Acquisition Cost of the substituted Nuclear Fuel and a new Fuel Schedule reflecting transfers and such increased Acquisition Cost shall be executed and delivered by the Lessor and the Lessee.

Section 11. Indemnification by the Lessee .

The Lessee shall pay, and shall protect, indemnify and save harmless the Lessor, any Affiliate of the Lessor, United States Trust Company of New York, the Assignee, each Person who is a lender under a Credit Agreement or a Secured Note Agreement, Merrill Lynch & Co., Inc., Merrill Lynch Money Markets Inc., and their respective officers, directors, incorporators, shareholders, partners, employees, affiliates, agents and servants from and against, all Impositions, all liabilities, taxes, losses, obligations, claims, damages, penalties, causes of action, suits, costs and expenses (including, without limitation, attorneys’ fees and expenses) or judgments of any nature arising from any and all of the following during the term of this Lease and thereafter arising in connection with this Lease: (a) any injury to or disease, sickness or death of persons, or loss of or damage to property, occurring through or resulting from any Nuclear Incident involving or connected in any way with the Nuclear Fuel or any portion thereof, or in any manner growing out of or relating to the acquisition, ownership, possession, disposition, sale, use, nonuse, misuse, fabrication, design, cycling, recycling, transportation, containerization, cooling, processing, reprocessing, storing, condition, operation, construction, maintenance, management, repair or rebuilding of the Nuclear Fuel or any portion thereof or resulting from the condition of the land underlying the Nuclear Fuel, (b) any use, nonuse or condition of the Generating Facility or the land underlying the Generating Facility, (c) any violation, or alleged violation, of this Lease, or of any contracts or agreements to which the Lessee is a party or by which it is bound, or any Legal Requirements, (d) performance of any labor or services or the furnishing of any materials or other property in respect of the Nuclear Fuel or any portion thereof, (e) any infringement or alleged infringement of any patent, copyright, trade secret or other similar right relating to the Nuclear Fuel or any portion thereof and (f) qualification to do business in any jurisdiction necessary in connection with its obligations under this Lease; provided that, Lessee shall not be required to indemnify any of the above parties with respect to any of the above arising out of such party’s gross negligence or willful misconduct. In the event that any action, suit or proceeding is brought against the Lessor, the Assignee or any other Person indemnified or intended to be indemnified pursuant to this Section 11 by reason of any such occurrence, the Lessee will, at the Lessee’s expense, resist and defend such action, suit or proceeding or cause the same to be resisted and defended by counsel designated by the Lessee and reasonably acceptable to the Person or Persons indemnified or intended to be indemnified under this Section 11. The obligations of the Lessee under this Section 11 shall survive any termination of the Lease, in whole or in part.
Section 12.
Inspection; Right to Enter Generating Facility .

The Lessor and its authorized representatives may enter the Generating Facility at reasonable times for the purpose of inspecting the Nuclear Fuel and the reactor in which it may be loaded from time




to time (subject to availability for inspection) and discussing its condition and performance with the responsible officers, agents and employees of the Lessee. The Lessee agrees, subject to applicable state and Federal laws and regulations, to make the Nuclear Fuel and the reactor in which it may be loaded from time to time available (to the extent practicable) for such inspection and to provide customary protective procedures and devices in connection therewith, and to make such officers, agents and employees available for such discussion promptly after receiving notice thereof. The Lessor shall not have any duty to make any such inspection or conduct any such discussion and shall not incur any liability or obligation for not making any such inspection or for not conducting any such discussion.
Section 13.
Payment of Impositions; Recording .

(a) Subject to the provisions of Section 16 hereof, the Lessee will pay all Impositions before any fine, penalty, interest or cost may be added for non-payment, and will furnish to the Lessor, upon request, copies of official receipts or other satisfactory proof evidencing such payment.

(b) The Lessee, at its expense, shall execute, acknowledge and deliver from time to time such further counterparts of this Lease or such affidavits, certificates, Bills of Sale, financing and continuation statements and other instruments as may be reasonably requested by the Lessor in order to evidence the respective interests of the Lessor and the Lessee in the Nuclear Fuel or any portion thereof and in order to establish the character thereof as personal property, and shall, at its expense, cause such documents and any Credit Agreement and any Security Agreement if so requested by the Lessor to be recorded, filed or registered and to be re-recorded, refiled or re-registered in such manner and at such times and in such places as may be required by any present or future law applicable to the Nuclear Fuel or any portion thereof in order to publish notice and perfect the validity of such interests.

Section 14. Compliance with Legal and Insurance Requirements, and with Instruments .

Subject to the provisions of Section 16 hereof, the Lessee at its expense will promptly (i) comply in all material respects with all Legal Requirements and Insurance Requirements, whether or not compliance therewith shall require structural or basic mechanical changes in the Generating Facility, or in any design or fabrication of the Nuclear Fuel or any portion thereof, and whether or not such compliance will interfere with the use and enjoyment of the Nuclear Fuel or any portion thereof, (ii) procure, maintain and comply with all permits, licenses and other authorizations required for the ownership of the Nuclear Fuel or any portion thereof by the Lessor, or for any operation or use of the Nuclear Fuel or any portion thereof then being made and for the proper maintenance thereof, and for the taking of all necessary and proper steps in the management of the Nuclear Fuel through each stage of the Nuclear Fuel Cycle, and (iii) comply with any other instruments of record or any contract or agreement at the time in force affecting title to or ownership of the Nuclear Fuel or any portion thereof.
Section 15.
Liens .

The Lessee will not directly or indirectly create or permit to be created or to remain, and will discharge, any mortgage, lien, encumbrance or charge on, security interest in, or conditional sale or other title retention agreement with respect to, the Nuclear Fuel or any portion thereof, or upon the Lessee’s leasehold interest therein, or upon the Basic Rent, Additional Rent, Advance Rent or any other sum payable under this Lease, other than (i) this Lease and any assignment hereof permitted hereby, (ii) liens for Impositions not yet payable, or payable without the addition of any fine, penalty, interest or cost for nonpayment, or being contested as permitted by Section 16 hereof, (iii) liens and security interests created by any Security Agreement and other liens, charges or encumbrances resulting from acts of the Lessor or




securing obligations of the Lessor which the Lessee is not obligated to pay or discharge under the terms of this Lease, (iv) the title transfer and commingling of the Nuclear Fuel contemplated by Section 10(d) hereof, and (v) liens of mechanics, laborers, materialmen, suppliers or vendors, or rights thereto, incurred in the ordinary course of business for sums of money which under the terms of the related contracts are not at the time due, provided that such reserve or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made in respect thereto.
Section 16.
Permitted Contests .

The Lessee, at its expense, may contest after prior notice to the Lessor, by appropriate legal proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Imposition or lien therefor, or any Legal Requirement, or any other mortgage, lien, encumbrance, charge, security interest, conditional sale or other contract or agreement referred to in Section 15 hereof; provided that (i) in the case of an unpaid Imposition or lien therefor, such proceedings shall suspend the collection thereof from the Lessor, (ii) neither the Nuclear Fuel nor any portion thereof or interest therein would be subject to being sold, forfeited, confiscated, condemned or lost, (iii) neither the use of the Nuclear Fuel or any portion thereof, nor the taking of any step necessary or proper with respect thereto in the management thereof through any stage of the Nuclear Fuel Cycle, nor the performance of any other act required to be performed by the Lessee under this Lease would be enjoined, prevented or otherwise interfered with, (iv) the Lessor would not be subject to any additional civil liability (other than interest which the Lessee agrees to pay), or any criminal liability, for failure to pay any such Imposition or to comply with any such Legal Requirement or any such other mortgage, lien, encumbrance, charge, contract or agreement, and (v) the Lessee shall have set aside on its books adequate reserves (in accordance with generally accepted accounting principles) with respect thereto and shall have furnished such security, if any, as may be required in the proceedings or reasonably requested by the Lessor. The Lessee will pay, and save the Lessor harmless against, all losses, judgments, decrees and costs, including reasonable attorneys’ fees and expenses, in connection with any such contest and will, promptly after the determination of such contest, pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable therein, together with all penalties, fines, interest, costs and expenses thereon or in connection therewith, and such indemnification by the Lessee shall survive the termination of this Lease, in whole or in part.
Section 17.
Insurance .

The Lessee shall, at its own cost and expense, procure and maintain, or cause to be procured and maintained, liability insurance and indemnification agreements with respect to the Generating Facility, including Nuclear Fuel insuring and indemnifying the respective interests of the Lessor, United States Trust Company of New York, the Lessee, each Person who is a lender under a Credit Agreement or a Secured Note Agreement and the Assignee (each of the foregoing is hereinafter sometimes called an “Insured Person”) to the full extent required under the Atomic Energy Act, or under any other law, rule or regulation. In the event the provisions of the Atomic Energy Act with respect to liability insurance and the indemnification of owners, licensees and operators of Nuclear Fuel thereunder shall change, then the Lessee shall use its best efforts to obtain equivalent insurance and indemnification from the Nuclear Regulatory Commission or from such other governmental, public and/or private sources from which such coverage is available. The Lessee shall, at its own cost and expense, procure and maintain, or cause to be procured and maintained, physical damage insurance with respect to the Nuclear Fuel insuring the Lessor and the Assignee against loss or damage to the Nuclear Fuel in a manner and in amounts which are consistent at all times with then current prudent utility industry practice in the United States and in any case to the full extent required by law or rules or regulations having the force of law. Such liability and




physical damage insurance may be subject to such deductible amounts and to the extent the Lessor and the Assignee may consent in writing, which consent will not be unreasonably withheld, the Lessee may self-insure with respect to such liability and physical damage insurance, provided that such deductible amounts and such self-insurance are permitted under all applicable laws, rules and regulations. The Lessor and the Assignee shall be additional insureds where possible, and, with respect to physical damage coverage, the Lessor and the Assignee shall be loss payees, as their interests may appear under this Lease, in all insurance policies and indemnification agreements required under this Section 17. All such policies and indemnification agreements, where possible, shall provide for at least ten days prior written notice to the Lessor and the Assignee of any cancellation of or any material adverse change in such policies by the insurer. The Lessee will advise the Lessor and the Assignee of all expirations (including any expiration upon cancellation by the Lessee) and renewals of policies and will upon request of the Lessor and the Assignee provide the Lessor and the Assignee with insurance certificates from its insurance brokers in respect of the insurance procured pursuant to the provisions of this Section 17. Upon execution of this Lease and at yearly intervals thereafter, the Lessee will furnish to the Lessor and the Assignee a detailed statement as to the insurance coverage provided pursuant to this Section 17 and will further give notice as soon as practicable as to any material adverse change in the nature or availability of such coverage, including any material adverse change of which the Lessee has knowledge in the provisions of the Atomic Energy Act or any other applicable law, rule or regulation with respect to liability insurance and indemnification agreements, or any material adverse change in the application, interpretation or enforcement thereof. The Lessor and the Assignee shall be under no duty to examine such insurance policies or indemnification agreements or to advise the Lessee in case the insurance or indemnification is not in compliance herewith.
Section 18.
Damage or Destruction .

(a) If any incident of damage to or destruction of the Generating Facility, the Nuclear Fuel or any portion thereof should occur, which damage or destruction (i) is in excess of $10,000,000 and (ii) is of such a nature as to prevent Heat Production by the Nuclear Fuel, the Lessee will promptly give notice thereof to the Lessor, generally describing the nature and extent of such damage or destruction, and unless the Lessee shall have delivered to the Lessor the certificate described in Section 20(a)(i) hereof or shall have exercised its right to obtain a release of such Nuclear Fuel or portion thereof pursuant to Section 10(b) within 90 days after the happening of such incident, the Lessee, at its cost and expense (without limiting the Lessee’s right to request payment by the Lessor of such expenses provided in Section 6), will promptly commence and will complete (subject to Unavoidable Delays but in any event within 18 months after the happening of such incident) the Restoration of the Generating Facility, the Nuclear Fuel or such portion thereof, as the case may be, whether or not the insurance proceeds, if any, on account of such damage or destruction shall be sufficient for the purpose. Upon completion of the Restoration, the Lessee shall execute and deliver to the Lessor a Fuel Schedule and shall cause the relevant Manufacturer of the replacement Nuclear Fuel to execute and deliver to the Lessor a Bill of Sale substantially in the form of Schedule C, unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the appropriate Manufacturer of a Bill of Sale; and the Lessor shall accept such Bill or Bills of Sale. As to any damaged or destroyed Nuclear Fuel originally included on Schedule A, as amended, and replaced by such Restoration, the Lessor shall deliver to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of Schedule E hereto.

(b) If no Event of Default shall have occurred and be then continuing, all insurance proceeds received by the Lessor or the Assignee on account of any damage to or destruction of the Nuclear Fuel or any portion thereof (less the actual costs, fees and expenses incurred in the collection thereof for which the Person incurring the same shall be reimbursed from such proceeds) shall be paid to the Lessee.




Section 19. Condemnation or Eminent Domain .

(a) In case of a Taking or the commencement of any proceedings or negotiations which might result in any Taking, the Lessee will promptly give notice thereof to the Lessor, generally describing the nature and extent of such Taking which might result therefrom, as the case may be. The Lessee hereby assigns to the Lessor any award or payment on account of any Taking of the Nuclear Fuel or any portion thereof which is payable to the Lessee. The Lessor shall have the right to participate fully in any proceedings or negotiations in connection with any such Taking of the Nuclear Fuel or any portion thereof, provided that Lessee shall be entitled to control such proceedings or negotiations as long as no Event of Default shall have occurred and be then continuing. The Lessee will pay all reasonable costs, fees and expenses incurred by the Lessor in connection with any Taking of the Nuclear Fuel or any portion thereof and seeking and obtaining any award or payment on account thereof.

(b) In the case of any Taking, (i) the provisions of this Lease shall remain in effect, except as expressly provided below in this Section 19, without any abatement or reduction of Basic Rent, Additional Rent, Advance Rent or any other sum payable hereunder, and (ii) unless the Lessee shall have exercised within 90 days after the happening of such Taking its right to obtain a release of such Nuclear Fuel or portion thereof pursuant to Section 10(b), the Lessee, whether or not the awards or payments, if any, on account of such Taking shall be sufficient for the purpose, at its cost and expense (without limiting the Lessee’s right to request payment by the Lessor of such expenses provided in Section 6) will promptly commence and will complete (subject to Unavoidable Delays but in any event within 18 months after the happening of such Taking) Restoration of the Nuclear Fuel or the portion thereof affected by such Taking, unless the Lessee shall have delivered to the Lessor the certificate described in Section 20(a)(i) hereof within 90 days after the happening of such Taking, provided that in the case of a Taking for temporary use the Lessee shall not be required to effect such Restoration until such Taking has terminated. A Taking for temporary use shall mean a requisition of the use of the Nuclear Fuel, or any portion thereof, which by its terms does not exceed the original term of this Lease or the then current extended term. Upon completion of Restoration, the Lessee shall execute and deliver to the Lessor a Fuel Schedule, shall cause the relevant Manufacturer of the replacement Nuclear Fuel to execute and deliver to the Lessor a Bill of Sale substantially in the form of Schedule C, unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the appropriate Manufacturer of a Bill of Sale, and shall deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing any portion of the Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such Bill or Bills of Sale. As to any condemned or requisitioned (or otherwise taken) Nuclear Fuel originally included on Schedule A, as amended, and replaced by such Restoration, the Lessor shall deliver to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of Schedule E hereto.

(c) If no Event of Default shall have occurred and be then continuing, all awards and payments received by the Lessor on account of any Taking of the Nuclear Fuel or any portion thereof (less the actual costs, fees and expenses incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such awards or payments) shall be paid to the Collateral Account and, at the Lessee’s option, credited against the purchase price of Nuclear Fuel released pursuant to Sections 10(b) and 19(b) or paid to the Lessee in reimbursement of the cost of Restoration, as contemplated by Section 19(b).

(d) For purposes of this Lease, all amounts paid pursuant to any agreement with any condemning authority which has been made in connection with any Taking shall be deemed to constitute an award on account of such Taking.





Section 20. Termination After Certain Events .

(a) This Lease shall terminate in the manner and with the effect hereinafter set forth in Section 20(b) upon the happening of any of the following events:

(i) The Lessee shall have delivered to the Lessor a certificate of the Lessee, signed by its President or any Vice President stating that the Lessee desires to terminate this Lease and the Lessor is permitted to prepay at or prior to the Termination Settlement Date all Secured Notes then outstanding pursuant to the terms of such Secured Notes;

(ii) Any change in, or new interpretation by a governmental authority having jurisdiction relating to the Price-Anderson Act, as amended, or the Atomic Energy Act, or the regulations of the Nuclear Regulatory Commission thereunder, in each case as in effect on the date of this Lease, as a result of which, in the opinion of independent counsel to the Lessor, the Lessor is prohibited from asserting any material right, protection or defense available under applicable law as of the date of this Lease with respect to civil or criminal actions brought in connection with a Nuclear Incident;

(iii) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by the Securities and Exchange Commission to be, an “electric utility company” as defined in the Public Utility Holding Company Act of 1935, as amended, or its officers, directors, shareholders, partners or employees shall become subject to regulation under such Act;

(iv) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by the Federal Energy Regulatory Commission to be a “public utility” as defined in the Federal Power Act, as amended, or its officers, directors, shareholders, partners or employees shall become subject to regulation under such Act;

(v) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by any appropriate governmental body to be, a public utility or similar entity under the laws of any state or its officers, directors, shareholders, partners or employees shall become subject to regulation under any such laws;

(vi) A change in any law or regulation or interpretation of any law or regulation as in effect on the date of this Lease shall be adopted or enforced by any governmental or regulatory authority (including, without limitation, the Nuclear Regulatory Commission, the Arkansas Public Service Commission, the Mississippi Public Service Commission, the Securities and Exchange Commission, the Federal Energy Regulatory Commission and the New York Stock Exchange), and as a result of such adoption or enforcement, approval of the transactions contemplated by this Lease shall be required and shall not have been obtained within any grace period after such adoption or enforcement, or as a .result of which adoption or enforcement this Lease or any transaction contemplated hereby, including any payments to be made by the Lessee or the ownership of the Nuclear Fuel by the Lessor, shall be or become unlawful or the performance of this Lease shall be rendered impracticable in any material way;





(vii) The occurrence of a Nuclear Incident at the Generating Facility as a result of which the Generating Facility ceases to operate (or if the Generating Facility is not in operation immediately prior to such Nuclear Incident, the failure to resume operation as a result of such Nuclear Incident) for a period of 24 consecutive months;

(viii) If the Generating Facility shall not be operated for a period of 24 consecutive months, and the Lessor shall have given notice to the Lessee that the Lessor desires to terminate this Lease on such account;

(ix) The permanent suspension, revocation or expiration of the Nuclear Regulatory Commission operating license relating to the Generating Facility, or any portion thereof, with the result that the operation of the Generating Facility is no longer permitted; or

(x) If the Lessor or the Lessee shall have given to the other the notice of termination provided for in Section 3(b) hereof and the termination date stated in such notice shall have occurred or the termination date of February 28, 2039 provided for in Section 3(b) shall have occurred by lapse of time.

(b) Upon the date of occurrence of any of the events listed in Section 20(a) hereof (the earliest such date being herein called the “Termination Event Date”), this Lease shall cease and terminate, except with respect to obligations and liabilities of the Lessee, actual or contingent, which arose under this Lease on or prior to the Termination Event Date and except for the Lessee’s obligations set forth in Sections 5, 7, 9, 13, 14 and 17 hereof, and in this Section 20(b), all of which obligations will continue until the delivery of documentation by the Lessor and the payment by the Lessee provided for below in this Section 20(b), and except that Lessee’s obligations under Section 11 hereof shall continue as set forth therein, and forthwith also upon such termination, title to, and the entire interest of the Lessor in, the Nuclear Fuel shall automatically transfer to and be vested in the Lessee, without the necessity of any action by either the Lessor or the Lessee, but subject to the rights of the Assignee under a Security Agreement and to the lien and security interest created thereby, provided, that title to, and the entire interest of the Lessor in, the Nuclear Fuel or any portion thereof shall, forthwith upon such termination, automatically transfer to and be vested in any Person or Persons designated by the Lessee and approved by the Lessor in writing, rather than transferring to and being vested in the Lessee as aforesaid, if but only if (i) any such Person shall, upon such termination, be lawfully entitled to accept and be vested with title to the Nuclear Fuel and (ii) prior to such termination, any such Person shall have delivered an instrument to the Lessor, in form and substance satisfactory to it, executed and acknowledged by such Person and by the Lessee, pursuant to which such Person shall irrevocably (A) undertake to accept title to, and the entire interest of the Lessor in, the Nuclear Fuel forthwith upon such termination, subject to the rights of the Assignee under a Security Agreement and to the lien and security interest created thereby, (B) agree that the transfer to and the vesting in such Person of such title and interest shall occur automatically upon such termination without the necessity of any action by either the Lessor or the Lessee or such Person, and (C) undertake to execute, upon such termination, the instrument referred to below in this Section 20(b) acknowledging, among other things, that title to and ownership of the Nuclear Fuel has transferred to and vested in such Person. As soon as possible after either the Lessor or the Lessee shall learn of the happening of any of the events listed in Section 20(a) hereof, such party shall give notice thereof to the other party hereto (and in the case of such a notice to the Lessor, signed also by such other Person in whom title to the Nuclear Fuel shall have vested as aforesaid), which notice shall (X) acknowledge that this Lease has terminated, subject to the continuing obligations of the Lessee mentioned above, and that title to and ownership of the Nuclear Fuel has transferred to and vested in the Lessee or such other Person, as the case may be, subject as aforesaid, (Y) state that on a settlement date occurring not less than 30 nor more than 120 days after the




giving of notice pursuant to Section 20(a)(i) hereof and not less than 90 nor more than 120 days after the giving of notice pursuant to Sections 20(a)(ii)-(ix) hereof and on the termination date provided in Section 3(b) in the case of notice pursuant to Section 20(a)(x), which settlement date shall be specified therein (such date being herein called the “Termination Settlement Date”), the Lessee shall be obligated to pay or cause to be paid to the Lessor as the purchase price for the Nuclear Fuel an amount equal to the sum of (1) the Stipulated Loss Value of the Nuclear Fuel as of the Termination Settlement Date plus (2) the Termination Rent on the Termination Settlement Date, provided that in the case of a termination arising by virtue of the Lessor’s exercise of its rights under Section 25(b)(i) hereof, the Termination Settlement Date shall in no event be later than the termination date provided for under Section 3(b) hereof, and (Z) state that on the Termination Settlement Date, the Lessor shall be obligated to deliver to the Lessee or such other Person as the Lessee may have designated as aforesaid both a confirmatory Bill of Sale acknowledging the above-described transfer and vesting of title and ownership of the Nuclear Fuel, and an appropriate instrument or appropriate instruments duly executed by the Assignee, cancelling and discharging such Security Agreement and the liens and security interest created thereby upon the Nuclear Fuel. Upon the delivery of such notice, the Lessor and the Lessee shall become obligated to make the payment and to deliver the documentation referred to therein on such Termination Settlement Date to the same extent as if each had acknowledged in writing its obligation so to do. The Lessee’s obligation to make such payment shall be unconditional and unaffected by any event or matter whatsoever including, without limitation, failure of the Lessor to deliver such confirmatory documentation, or the quality, condition, existence, utility or title of or to the Nuclear Fuel. Any such payment made by the Lessee shall not prejudice, or constitute a waiver of, any right, claim or cause of action which the Lessee shall have against the Lessor. Such payment and delivery of documentation shall be made in accordance with Section 21 hereof.

Section 21. Conditions of Termination and Conveyance .

(a) Upon the purchase by the Lessee or such other Person pursuant to this Lease of the Lessor’s interest in the Nuclear Fuel or any portion thereof or of the Lessor’s interest in any insurance proceeds or condemnation awards (or the right to receive the same) which the Lessee is entitled to receive in connection with any such purchase by it, the Lessor will transfer the same title thereto or ownership interest therein that existed on the respective dates when the various items of property so sold first became subject to this Lease, and the Lessee or such other Person, as the case may be, shall accept the same subject to all liens, encumbrances, charges, exceptions and restrictions attaching thereto on or after the date of this Lease which have not been created by voluntary act of the Lessor or for the discharge of which the Lessee is responsible under this Lease, and to all applicable laws, regulations and ordinances, but free and clear of the lien of any Security Agreement.

(b) Upon the Termination Settlement Date specified in the notice delivered by the Lessor or the Lessee, the Lessee shall pay to the Lessor at its address for purposes of notices hereunder or to such other Person at such other place designated by the Lessor, the purchase price therefor specified herein, in Federal funds, and the Lessor shall deliver to the Lessee a confirmatory Bill of Sale acknowledging the transfer and vesting of ownership of the Nuclear Fuel and an appropriate instrument duly executed by the Assignee and/or any other necessary Person or Persons, cancelling and discharging all Security Agreements and the liens and security interests created thereby upon the Nuclear Fuel. The Lessee shall pay all expenses in connection with such transfer, including all escrow fees, search and recording and filing fees, reasonable attorneys’ fees and all applicable Federal, state and local sales, use and other taxes which may be incurred or imposed by reason of the transfer then being made by the Lessor, or by reason of the delivery of said instrument or instruments of transfer.





(c) Notwithstanding any other provision of this Lease, whenever the Lessee has the right or obligation to purchase the Nuclear Fuel or any portion thereof or any other property pursuant to any provision of this Lease (other than Section 20(b)), the Lessee may cause such purchase to be effected by, and the Lessor shall transfer title and ownership to the subject matter of such purchase to, any other Person specified by the Lessee in a notice to the Lessor given at least 15 days prior to the date of such purchase, provided, however, that nothing specified in this subsection (c) shall in any way impair or affect the obligations of the Lessee under this Lease in connection with such purchase and provided, further, that, at the time of any such transfer to such other Person, the Lessee shall deliver to the Lessor the undertaking of the Lessee indemnifying and holding the Lessor harmless from and against any loss or liability incurred by the Lessor by reason of such transfer.

Section 22. Estoppel Certificates; Information .

The Lessee will from time to time deliver to the Lessor, promptly upon reasonable request of the Lessor, (i) a statement, executed by any Vice President of the Lessee, certifying the dates to which Basic Rent, Additional Rent, Advance Rent and other sums payable hereunder have been paid, that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and identifying such modifications) and that no Event of Default has occurred and is continuing (or, if any Event of Default has occurred and is continuing, specifying the nature and period of existence thereof and what action the Lessee is taking or proposes to take with respect thereto), and (ii) such information with respect to the Nuclear Fuel or any portion thereof, including the amounts of Stipulated Loss Value of the Nuclear Fuel or portions thereof in accordance with the Lessee’s records, as from time to time may reasonably be requested, it being intended that any such statement delivered pursuant to this Section 22 may be relied upon by the Lessor.
Section 23.
Rights to Perform the Lessee’s Covenants .

If the Lessee shall fail to make any payment or perform any act required to be made or performed by it hereunder, the Lessor, without notice to or demand upon the Lessee and without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Lessee therefor. All payments so made by the Lessor and all costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred in connection therewith or in connection with the performance by the Lessor of any such act shall constitute Additional Rent hereunder and the Lessee agrees to pay the same as provided in Section 5 hereof.
Section 24.
Assignments .

The interest of the Lessee in this Lease may be assigned, provided that such assignment shall expressly be made subject to the provisions of this Lease, and provided, further, that no such assignment shall affect or reduce any obligations of the Lessee or rights of the Lessor hereunder, and all obligations of the Lessee hereunder shall continue in full effect as the obligations of a principal, to the same extent as though no assignment had been made.
The Lessor may assign to an Assignee. Upon written request of the Lessor, the Lessee agrees to acknowledge notice of any such assignment or the granting of a security interest in the Nuclear Fuel.




Section 25.
Events of Default and Remedies .

(a) Any of the following events of default by the Lessee shall constitute an “Event of Default” and give rise to the rights on the part of the Lessor described in Section 25(b) hereof:

(i) default in the payment of any amount payable by the Lessee under Section 10(c); or

(ii) default in the payment of any other amount payable by the Lessee hereunder and the continuance of such default for 5 days; or

(iii) default in the payment or performance of any other liability or other obligation or covenant of the Lessee to the Lessor hereunder and the continuance of such default for 30 days after the occurrence thereof; or

(iv) the Lessee or any Guarantor admits insolvency or bankruptcy or is unable to pay its debts as they mature, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee or receiver for the Lessee or for any Guarantor, or for the major part of its property other than the trustees pursuant to the Mortgage and Deed of Trust; or

(v) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors, are instituted by or against the Lessee or any Guarantor, and if instituted against the Lessee or any Guarantor are allowed against the Lessee or any Guarantor or are consented to or are not dismissed, stayed or otherwise nullified within 60 days after such institution; or

(vi) any representation or warranty made by the Lessee in this Lease or by any Guarantor in its Guaranty, or in any related instrument, or in any report, certificate, financial statement or other instrument furnished in connection with this Lease or any Guaranty shall prove to be false or misleading in any material respect; or

(vii) a default or event of default under any instrument evidencing indebtedness for borrowed money (or under the provisions of any agreement pursuant to which such instrument was issued) in excess of $10,000,000 and providing the holder thereof with recourse against the Lessee or any Guarantor shall cause such indebtedness to become due prior to its stated maturity; or

(viii) one or more final judgments for the payment of money shall be rendered against the Lessee or any Guarantor in an aggregate amount in excess of $10,000,000 and the same shall remain undischarged for a period of 30 days during which execution of such judgment shall not be effectively stayed.

The references to the Guarantor set forth in Section 25(a)(iv)-(viii) hereof shall have no force and effect with respect to a Guarantor under any Guaranty which shall have been terminated.
(b) Upon the occurrence of any Event of Default, the Lessor may in its discretion do any one or more of the following:

(i) treat the Event of Default as an event under Section 20(a) hereof, entitling Lessor to the consequent benefits of Section 20(b) hereof and in general proceed by appropriate judicial




proceedings, either at law or in equity, to enforce performance or observance by the Lessee of the applicable provisions of this Lease, or to recover damages for the breach of any thereof; or

(ii) by notice to the Lessee terminate this Lease, whereupon the Lessee’s interest and all rights of the Lessee and Persons claiming through or under the Lessee to the use of the Nuclear Fuel shall forthwith terminate but the Lessee shall remain liable with respect to obligations and liabilities, actual or contingent, which arose under this Lease on or prior to the date of such termination and the Lessee’s obligations set forth in Section 11 and this Section 25(b)(ii) and, until the earlier of (1) Lessor’s taking possession of the Nuclear Fuel or Lessee’s delivering the Nuclear Fuel as set forth below or (2) final and uncontested payment of the amounts referred to in (A) and (B) below, Sections 9, 13, 14 and 17; and upon such termination the Lessor shall have the immediate right of possession of the Nuclear Fuel (to the extent not prohibited by law) and the right, at the Lessor’s election, either to enter the Generating Facility or any other premises where the Nuclear Fuel or any portion thereof is located and remove the Nuclear Fuel or such portion thereof there located (to the extent not prohibited by law) or cause the same to be done by any Person entitled by law so to do, in which case the Lessor shall not be responsible for any damage to the Generating Facility or such premises, except for damage resulting from the Lessor’s willful misconduct or gross negligence (the Lessee hereby agreeing to indemnify and hold the Lessor harmless from all losses and liabilities in respect of any such damage to the Generating Facility, such premises or the Nuclear Fuel or injury to the Lessor’s, the Lessee’s or such other Person’s employees sustained in the course of such removal, except any such damage resulting from the Lessor’s willful misconduct or gross negligence, provided that the Lessee hereby further agrees that the misconduct or negligence of the Assignee shall not be imputed to the Lessor), or to require the Lessee, at the Lessee’s expense, to deliver the Nuclear Fuel or any portion thereof, properly containerized and insulated for shipping, at the Generating Facility and consigned to a Person specified by the Lessor and licensed to receive such Nuclear Fuel, in which case the risk of loss shall be upon the Lessee until such delivery is made; and the Lessor may thenceforth hold, possess and enjoy the Nuclear Fuel (to the extent not prohibited by law) and may sell the Lessor’s interest in the Nuclear Fuel or any portion thereof upon any terms deemed satisfactory to the Lessor, free from any rights of the Lessee and any Person claiming through or under the Lessee; but the Lessor shall, nevertheless, have the right to recover forthwith from the Lessee:

(A) any and all Basic Rent, Additional Rent, Advance Rent and all other amounts payable by the Lessee hereunder which may be due and unpaid immediately prior to such termination or which may then be accrued and unpaid;

(B) as liquidated damages for loss of the bargain and not as a penalty, an amount equal to the excess of (x) the sum of (i) the Stipulated Loss Value of the Nuclear Fuel as of the date of such termination of this Lease plus (ii) the Termination Rent, over (y) the amount, if any, realized by the Lessor in a sale of the Nuclear Fuel (at which the Lessor may be a purchaser), without set-off, defense or reduction other than a deduction from the sale price of all the costs of such sale, including reasonable legal fees, commissions, sales taxes and other customary charges; it being understood that the Lessor shall have no obligation to conduct any such sale, and that the Lessor may, in lieu of conducting such sale, transfer and convey title to, and its entire ownership interest in, the Nuclear Fuel to the Lessee or any trustee or liquidator therefor upon the terms and conditions set forth in Section 21, but that, if the Lessor conducts such sale, the Nuclear Fuel may be sold free and clear of all rights of the Lessee; and





(C) any and all other damages and expenses (including, without limitation, reasonable attorneys’ fees and expenses), which the Lessor shall have sustained by reason of the breach of any provision of this Lease.

The Lessee hereby waives, to the full extent not prohibited by law, any right it may now or hereafter have to require the sale, in mitigation of damages, of the Nuclear Fuel or any portion thereof consequent to an Event of Default.
(c) Pending Lessor’s exercise of any available remedy to take or deliver to a third party possession of any Nuclear Fuel, the Lessee shall be responsible for the storage of the Nuclear Fuel.

(d) The remedies herein provided in favor of the Lessor in case of an Event of Default as hereinabove set forth shall not be deemed to be exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law, in equity or in bankruptcy.

Section 26. Permanent Storage or Disposal .

(a) Any other provisions of this Lease to the contrary notwithstanding, provided that the Lessor has not exercised its rights to sell such Nuclear Fuel after an Event of Default has occurred, the Lessee shall be obligated to, at its expense, either store, dispose of or Reprocess Nuclear Fuel which has completed Heat Production. The Lessee shall be entitled to choose whether to store, dispose of or Reprocess the Nuclear Fuel at its discretion. If required by the Lessee in connection with such permanent storage, disposal or Reprocessing of such Nuclear Fuel, the Lessor shall transfer title to such Nuclear Fuel to the Lessee at the Lessee’s request, pursuant to a Bill of Sale in the form of Schedule E hereto, and the Lessor and the Lessee shall execute a Fuel Schedule reflecting such transfer.

(b) When any assembly of Nuclear Fuel is no longer useful for Heat Production, the Lessor shall be entitled to transfer title to such assembly of Nuclear Fuel to the Lessee pursuant to a Bill of Sale in the form of Schedule E hereto. A Fuel Schedule reflecting such transfer shall be executed and delivered by the Lessor and the Lessee.

(c) Any provision of this Lease to the contrary notwithstanding, the Lessee will not move any assembly of Nuclear Fuel which has been in Heat Production from the Generating Facility unless it shall notify the Lessor, and shall, if requested by the Lessor, have repurchased such assembly. A Fuel Schedule reflecting such transfer shall be executed and delivered by the Lessor and the Lessee.

Section 27. No Merger .

There shall be no merger of this Lease or of the leasehold interest created by this Lease with the absolute ownership interest in the Nuclear Fuel or any portion thereof by reason of the fact that the same Person may acquire or own or hold, directly or indirectly, (i) this Lease or the leasehold interest created by this Lease or any interest in this Lease or in any such leasehold interest and (ii) the absolute ownership or other interest in the Nuclear Fuel or any portion thereof, and no such merger shall occur unless and until all Persons, including the Assignee, having any interest in (y) this Lease or the leasehold interest created by this Lease and (z) the absolute ownership or other interest in the Nuclear Fuel or any portion thereof shall join in an instrument effecting such merger and shall duly record the same.




Section 28.
Notices .

Any notices provided for in this Lease shall be in writing and shall be deemed to have been duly given when delivered personally or otherwise actually received or five days after the same have been deposited in the United States mail, registered, postage prepaid, addressed as follows:
If to the Lessor:
(with a copy to
the Assignee)
 
River Fuel Funding Company #3, Inc.
c/o United States Trust Company
of New York
45 Wall Street
New York, New York 10005
Attention: Corporate Trust and Agency Division; Department B
 
 
 
If to the Lessee:
 
System Energy Resources, Inc.
P.O. Box 23070
Jackson, Mississippi 39225-3070
Attention: Treasurer

and if to the Assignee, then at such address as shall have been designated by such Assignee by notice duly given to the Lessee, or at such other place as any of the parties may designate by notice duly given in accordance with this Section.
Section 29.
Allocation of Amounts .

The Lessee agrees to cooperate in good faith with the Lessor in determining appropriate accruals and allocations pursuant to the terms of this Lease and to provide any other calculations and information which are necessary or appropriate in order to assist the Lessor in performing its obligations. Whenever, under Section 1, 5, 6, 10, 18(a), 19(b) or 22, computations are required to be made involving a cost, price, payment, charge, factor, discount or any other amount relating to a single assembly of the Nuclear Fuel, such cost, price, payment, charge, factor, discount or other amount shall be determined in the reasonable judgment of the Lessee. Unless the Lessee shall have informed the Lessor otherwise in writing or unless otherwise set forth in any of the Schedules attached hereto or furnished pursuant to this Lease, allocation shall be made by dividing the aggregate of all such costs, prices, payments, charges, discounts or any other amounts which are known to have been incurred, paid, accrued or arisen, at approximately the same time and in the same general transaction or computation, with respect to such assembly and one or more other assemblies of the Nuclear Fuel, into as many equal parts as there are such assemblies, and allocating one of the parts so divided to each such assembly. In the event that any such cost, price, payment, charge, discount or any other amount must be certified pursuant to this Lease, the Person making such certification shall be the sole judge of the propriety of making any such allocation, and such Person need only place the term “(allocated)” before or after any cost, price, payment, charge, discount, or any other amount so certified in order to (i) establish the propriety of making such an allocation and (ii) give the warranty of such Person as to the accuracy of the allocation so certified and its compliance with the provisions of this Section 29.
Section 30.
Amendments .

This Lease may not be amended, modified or terminated, nor may any obligation hereunder be waived, orally, and no amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing, signed by the party against whom enforcement thereof is sought, except that




amendments of Schedule A hereto pursuant to Section 6, 10, 18(a) or 19(b) hereof shall be made in accordance with the provisions of such Sections.
Section 31.
Severability .

Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the Lessor and Lessee hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.
Section 32.
Job Incentive Credit and Investment Credit .

To the extent that the Nuclear Fuel is or becomes eligible for the job incentive credit or the investment credit or service credit under the Internal Revenue Code as in effect on the date of this Lease or thereafter as amended from time to time, the Lessor at the Lessee’s request shall elect to treat the Lessee as having acquired the Nuclear Fuel, and shall provide the Lessee with an appropriate credit election. The Lessee shall provide the Lessor with a report or statement with respect to all Nuclear Fuel as to which such credit election is applicable, and such report or statement shall be in such form as may be required for Internal Revenue Service reporting.
Section 33.
Miscellaneous .

(a) The Lessor’s obligations hereunder are intended to be the corporate obligations of the Lessor only and no recourse for the payment of any amount due under this Lease, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future of the Lessor or of any successor corporation, or against any direct or indirect parent corporation of the Lessor or any other subsidiary or Affiliate of any such direct or indirect parent corporation or any incorporator, shareholder, officer or director, as such, past, present or future, of any such parent or other subsidiary or Affiliate, it being understood that the Lessor is a special purpose corporation formed for the purpose of the transactions involved in and relating to this Lease on the express understanding aforesaid. Nothing contained in this Section 33(a) shall be construed to limit the exercise or enforcement, in accordance with the terms of this Lease and any other documents referred to herein, of rights and remedies against the Lessor or the assets of the Lessor.

(b) The Lessor agrees that (i) the Lessor will not enter into any Credit Agreement, Secured Note Agreement or Security Agreement or amend or modify or consent to any amendment or modification of a Credit Agreement, Secured Note Agreement or Security Agreement without the prior written consent of the Lessee, and (ii) the Lessor shall at all times use its best efforts to comply with, observe and perform all of the covenants and agreements required to be complied with, observed or performed by the Lessor under a Credit Agreement, Secured Note Agreement or Security Agreement. The Lessee agrees to furnish such documents and certificates as may be required in this regard.

(c) The terms and provisions of this Lease supersede all prior negotiations and oral understandings, if any, between the Lessor and the Lessee with respect to the transactions contemplated hereby. The captions in this Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. This Lease shall in all respects be governed by, and construed in




accordance with, the laws of the State of New York including all matters of construction, validity and performance.



    
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed by their respective officers thereunto duly authorized, as of the day and year first above written.
RIVER FUEL FUNDING COMPANY #3, INC.


By /s/ Louis P. Young     


SYSTEM ENERGY RESOURCES, INC.

By /s/ Glenn E. Harder     
Vice President
LESSEE




STATE OF New York        )
) ss.:
COUNTY OF New York      )
On this 23rd day of February, 1989, before me, a Notary Public in the State of New York personally appeared Louis P. Young, to me personally known, who being by me duly sworn did say that he is an officer of River Fuel Funding Company #3, Inc., and that said instrument was signed on behalf of the said corporation and the said officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
/s/ Michael Stolfi     
Notary Public

Michael R. Stolfi
Notary Public, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires: October 05, 1989

[NOTARIAL SEAL]




STATE OF New York          )
) ss.:
COUNTY OF New York      )
On this 23rd day of February, 1989, before me, a Notary Public in the State of New York personally appeared Glenn Harder, to me personally known, who being by me duly sworn did say that he is a V.P. of SYSTEM ENERGY RESOURCES, INC., and that said instrument was signed on behalf of the said corporation by authority of its Board of Directors and the said Vice President acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
/s/  Michael R. Stolfi                 
Notary Public

Michael R. Stolfi
Notary Public, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires: October 05, 1989


[NOTARIAL SEAL]

    




SCHEDULE A
DESCRIPTION OF NUCLEAR FUEL
Date:                
Revision:                
Assembly Serial No.
Contained Uranium in Kg. U.
at B.O.L. **  B.O.L. = Beginning of Life.
Average Enrichment
(Weight Percentage U235)
Allocated Acquisition Cost
Allocated Capitalized Cost
Allocated Investment
 
 
 
 
 
 
 
 
 
 
 
 






SCHEDULE B
QUARTERLY RENT SCHEDULE
STIPULATED LOSS VALUE CONFIRMATION
Cost Attributable to Quarter Ending
Date:                
Revision:                
1
2
3
4
5
6
7
8
Assembly Serial No.
S.L.V.
as of the End of Prior Quarter
Allocated Acquisition Costs
Allocated Capitalized Costs (other than Allocated Capitalized Daily Lease Charges)
Daily Lease Charges   to be Allocated to and Included in Capitalized Cost
Burn-Up Charges
S.L.V.
At the Date   Hereof (to be Used Only if Fuel is Being Added or Removed)
S.L.V.
at the End of this Quarter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


                                                               
(Lessor)                              (Lessee)
By:                               By:                          
Title                              Title
(acknowledging acceptance)                      (acknowledging acceptance)


NOTES:
Columns 1.2.3 and 4 filled in by the Lessor when it forwards quarterly Daily Lease Charges to Lessee.
Columns 5.6.7 and 8-inserted by the Lessee.
Column 5 - represents that portion of Daily Lease Charges attributable to a period during
which Nuclear Fuel is not in commercial operation or in Heat Production.
Column 6 - the Lessee’s calculation of Burn-Up Charge.
Column 7 - used only when Fuel is added or removed.
Annexes I and II are a part hereof.
Any allocation shall be made in the sole judgment of Lessee.





ANNEX I TO SCHEDULE B
(To be filled in by the Lessee)
Calculation of Burn-Up Charges and Basic Rent
1
2
3
4
5
6
7
 
Fill in only if first time or  
if MWhr Factor being revised
 
 
 
Assembly Serial No.
Allocated S.L.V.
Estimated Residual Value
Est. Design MWhr Output Remaining
MWhr   Factor *
MWhr Output **
Burn-Up Charge
(Col. 5 x Col. 6)
 
 
 
 
 
Total Burn-Up Charge =
$
 
 
 
 
 
 
RENT CALCULATION
 
 
 
 
 
1.Burn-Up Charge (from above)
 
$
2.A. Quarterly Lease Charge
$
 
B. Less:Amount Capitalized (see Column 5 of Quarterly Rent Schedule)
$
 
Basic Rent for Quarter =
 
$
 
 
$
 
 
 
Estimated Burn-Up Charge next quarter (for
information only)
$
 

*     Col. 2 - Col. 3 = Col. 5
Col. 4

**     For the preceding quarter-annual period in connection with Heat Production.






ANNEX II TO SCHEDULE B
(To be filled in by the Lessor) *  
    
Summary of Daily Lease Charges **  
Date
Interest Cost or Discount Amortization
Credit Agreement Fees
Other Fees, Costs and Expenses
Total Daily Lease Charge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Unamortized Discount on Commercial
Paper Notes, if any, as of
end of Quarter$
 
Quarterly Lease Charge$

*     To be completed separately for Nuclear Fuel not in Heat Production. Check applicable box:
[   ] In Heat Production
[   ] Not in Heat Production

**     To be calculated in accordance with the definition in the Lease.





SCHEDULE C
BILL OF SALE
TO
RIVER FUEL FUNDING COMPANY #3, INC.

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, __________, a __________ corporation (the “Vendor”), whose post office address is __________ __________, for and in consideration of the sum of $__________ paid to the Vendor upon or before the execution and delivery of this Bill of Sale to River Fuel Funding Company #3, Inc., a Delaware corporation (the “Purchaser”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, hereby conveys, transfers, sells and sets over all of its right, title and interest in all of the personal property consisting of the assemblies of nuclear fuel . or components thereof or other nuclear material described in Annex I hereto (the “Nuclear Fuel”), and by this Bill of Sale does hereby grant, bargain, sell, convey, transfer and deliver the Nuclear Fuel unto the Purchaser, to have and to hold the Nuclear Fuel, for itself, its successors and assigns, forever.
The Vendor hereby warrants itself to be the true and lawful owner of the Nuclear Fuel and to have full power, good right and lawful authority to dispose of the same in the aforesaid manner, and the Vendor for itself, its successors and assigns, does hereby covenant and agree with the Purchaser, its successors and assigns, to warrant and defend the true ownership of the Nuclear Fuel by the Purchaser against the claims and demands of all and every person and persons.
The Vendor and the Purchaser hereby acknowledge that, notwithstanding the sale of the Nuclear Fuel by the Vendor to the Purchaser hereunder the Nuclear Fuel will be in the possession of System Energy Resources, Inc., or in the possession of a manufacturer processing or reprocessing the Nuclear Fuel for the account of System Energy Resources, Inc., pursuant to a Fuel Lease dated as of February __, 1989, between the Purchaser, as lessor, and System Energy Resources, Inc., as lessee. On the date hereof, the Purchaser is licensed to own, but not to possess, the Nuclear Fuel, and under no circumstances shall a transfer of possession of the Nuclear Fuel to the Purchaser be necessary for the transfer of ownership effected and intended to be effected by this Bill of Sale.
    




IN WITNESS WHEREOF, the Vendor has caused this Bill of Sale to be executed in its corporate name, by one of its Vice Presidents, and to be dated __________, 19__.
By     
Vice President


    




STATE OF      )
) ss.:
COUNTY OF      )

Personally appeared before me, the undersigned authority in and for the said county and state, on this ____ day of __________, 1989, within my jurisdiction, the within named _______________, who acknowledged that he is the __________ of _______________ a _______________ corporation, and that for and on behalf of said corporation, and as its act and deed he executed the above and foregoing instrument, after being duly authorized so to do.
    
Notary Public


My Commission Expires:
    




STATE OF      )
) ss.:
COUNTY OF      )

Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of ________, 1989, within my jurisdiction, the within named _______________, who acknowledged that he is the ____________ of River Fuel Funding Company #3, Inc., a Delaware corporation, and that for and on behalf of said corporation, and as its act and deed he executed the above and foregoing instrument, after being duly authorized so to do.
    
Notary Public


My Commission Expires:
3




ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
RIVER FUEL FUNDING COMPANY #3, INC.



By:     
Title:



ANNEX I
Description of the Nuclear Fuel





SCHEDULE D
FUEL SCHEDULE NO. ______
FUEL SCHEDULE NO. ____, dated as of _______, 19__ , between RIVER FUEL FUNDING COMPANY #3, INC., a Delaware corporation (“Lessor”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, and SYSTEM ENERGY RESOURCES, INC., an Arkansas corporation (“Lessee”) whose post office address is P.O. Box 23070, Jackson, Mississippi 39225-3070.
W I T N E S S E T H:
WHEREAS, the Lessor and the Lessee have heretofore entered into that certain Fuel Lease dated as of February ___, 1989 (herein as heretofore supplemented and amended, called the “Lease”), the defined terms therein being used herein with the same meanings as provided in the Lease; and
WHEREAS, the Lease provides in Sections 6, 10, 18 and 19 thereof for Fuel Schedules, amending Schedule A to the Lease, to be executed and delivered from time to time.
NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration and in compliance with the requirements of the Lease, the Lessor and the Lessee hereby agree as follows:
1. The Lessee certifies that the amounts set forth in Annex I hereto as Acquisition Costs, Capitalized Costs and Investment, respectively, are true and correct and have been computed in accordance with the provisions of the Lease.

2. The Lessee requests the Lessor to make direct payment to the Manufacturers named in Annex I of the amounts specified in Annex I and to pay the Lessee in an amount equal to $___ for costs previously incurred by the Lessee or paid by the Lessee directly to the Manufacturers. All of the amounts for which payment is hereby requested are included in Acquisition Costs and Capitalized Costs certified in paragraph 1 above and none of said amounts have been previously paid by Lessor pursuant to Section 6 of the Lease.

3. (a)      Schedule A to the Lease is hereby supplemented and amended so as to include those assemblies of Nuclear Fuel or the component parts thereof described in Annex II hereto (the “Additional Nuclear Fuel”) and to subject such Additional Nuclear Fuel to the Lease (and if any Nuclear Fuel is simultaneously being removed, to eliminate from Schedule A as theretofor supplemented and amended the description of Assemblies Nos.___, ___, ___ and ___). The Lessee represents and warrants that the Additional Nuclear Fuel complies with all requirements of the Lease and of law, and all necessary recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) have been duly made in the public offices in which such recordings and filings must be made in order to subject, and publish notice of the subjection of such Additional Nuclear Fuel to the Lease, and all fees, taxes and charges payable in connection with such recordings and filings have been paid in full by the Lessee.

(b)      The Lessee hereby covenants and agrees with the Lessor to warrant and defend the true ownership by the Lessor of the Additional Nuclear Fuel against the claims and demands of every person. The Lessee further warrants that such property is, and is intended to be and remain, personal property, is not and has not been affixed to any land




and is free and clear of all claims, liens, security interests and other encumbrances whatsoever, except as permitted by all Security Agreements.

4. Except as hereinbefore expressly modified and amended, the Lease is ratified and confirmed in all respects, including, without limitation, the obligation of the Lessee to pay all installments of Basic Rent and Additional Rent and other amounts to be paid by the Lessee under the Lease.






IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Fuel Schedule to be duly executed as of the date first above written.
RIVER FUEL FUNDING COMPANY #3, INC.


By     
Title:



SYSTEM ENERGY RESOURCES, INC.


By     
Authorized Officer

    




ANNEX I TO SCHEDULE D
DESCRIPTION OF NUCLEAR FUEL
Date:              
Revision:              
Material or Service Supplied
Vendor (and location of Vendor Facility)
Cumulative Allocated Acquisition Cost
Cumulative Allocated Capitalized Cost
Cumulative Allocated Investment
 
 
 
 
 
U 3 O 8  Supply
 
 
 
 
Conversion
 
 
 
 
Enrichment
 
 
 
 
Fabrication
 
 
 
 
Reprocessing
 
 
 
 
Other (Identify)
 
 
 
 

COSTS TO BE PAID BY LESSOR
Invoice
Number
Batch
Service
Invoice
Amount
Interest
Accrued
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
$
$
 
 
 
$
$
$
 
 
 
 
 
 








ANNEX II TO SCHEDULE D
Date:              
Revision:              
Batch
Assembly
Serial No.
Contained
Uranium
in kg. U.
at B.O.L.*
Average Enrichment (Weight Percent U235)
(1)
Additional Allocated Acquisition Cost
(2)
Additional Allocated
Capitalized
Cost
(3)
Cumulative Allocated Acquisition
Cost
(4)
Cumulative
Allocated Capitalized Cost
(3+4)
Cumulative Allocated Investment
 
 
 
 
$
$
$
$
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  *B.O.L. = Beginning of Life
 
 
 
 
 
 




    






SCHEDULE E
BILL OF SALE
from
RIVER FUEL FUNDING COMPANY #3, INC.
to
SYSTEM ENERGY RESOURCES, INC.

KNOW ALL MEN BY THESE PRESENTS, that the undersigned River Fuel Funding Company #3, Inc., a Delaware corporation (the “Corporation”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005 for and in consideration of the sum of $1.00 paid to the Corporation upon or before the execution and delivery of this Bill of Sale to System Energy Resources, Inc., an Arkansas corporation (the “Utility”), whose post office address is P.O. Box 23070, Jackson, Mississippi 39225-3070, and for other good, valuable, adequate, sufficient and serious consideration, the receipt of which is acknowledged by the Corporation, hereby conveys, transfers, sells and sets over all of its right, title, interest and Fuel described in Annex I hereto and by this Bill of Sale does hereby grant, bargain, sell, transfer and deliver all of its right, title, interest and claim in and to such property to the Utility to have and to hold, for itself, its successors and assigns, forever. THE NUCLEAR FUEL IS TRANSFERRED AND CONVEYED BY THE CORPORATION ON AN “AS-IS”, “WHERE-IS” BASIS, WITHOUT RECOURSE AGAINST OR REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) OF ANY KIND WHATSOEVER, INCLUDING ANY WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR MERCHANTIBILITY, ON THE PART OF THE CORPORATION, EXCEPT THAT THE CORPORATION REPRESENTS AND WARRANTS THAT IT HAS NOT VOLUNTARILY GRANTED OR CREATED ANY LIEN ON THE NUCLEAR FUEL OTHER THAN THOSE PERMITTED BY SECTION 15 OF THE FUEL LEASE, DATED AS OF FEBRUARY __, 1989 BETWEEN THE UTILITY AND THE CORPORATION.
Morgan Guaranty Trust Company of New York, as Collateral Agent, whose post office address is 30 West Broadway, New York, New York 10015, joins in the execution of this Bill of Sale but only to consent as secured party under the Security and Collateral Agency Agreement dated as of February __, 1989, between it and the Corporation to the execution and delivery of this Bill of Sale, and does hereby cancel and discharge the Security Agreement with respect to the property described in Annex I hereto and releases such property from all liens and security interests under the Security Agreement.







IN WITNESS WHEREOF, the Corporation has caused this Bill of Sale to be executed, and Morgan Guaranty Trust Company of New York, as Collateral Agent, joins herein as aforesaid, in their respective corporate names by one or more of their respective duly authorized officers.
Dated:                      RIVER FUEL FUNDING COMPANY #3, INC.

By     
Consented to by:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS COLLATERAL AGENT
By         
Title:






ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
SYSTEM ENERGY RESOURCES, INC.
By         
Authorized Signature
ANNEX I
Description of the Nuclear Fuel




STATE OF          )
: ss.:
COUNTY OF          )
Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of              , 1989, within my jurisdiction, the within named              , who acknowledged that he is the              of System Energy Resources, Inc., an Arkansas corporation, and that for and on behalf of said corporation, and as its act and deed he executed the above and foregoing instrument, after being duly authorized so to do.
            
Notary Public
My Commission Expires:



    




STATE OF          )
: ss.:
COUNTY OF          )
Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of              , 1989, within my jurisdiction, the within named              , who acknowledged that he is the              of River Fuel Funding Company #3, Inc., a Delaware corporation, and that for and on behalf of said corporation, and as its act and deed he executed the above and foregoing instrument, after being duly authorized so to do.
            
Notary Public
My Commission Expires:



    




STATE OF          )
: ss.:
COUNTY OF          )
Personally appeared before me, the undersigned authority in and for the said county and state, on this ___ day of              , 1989, within my jurisdiction, the within named              , who acknowledged that he is the              of Morgan Guaranty Trust Company of New York, a              corporation, and that for and on behalf of said corporation, and as its act and deed he executed the above and foregoing instrument, after being duly authorized so to do.
            
Notary Public
My Commission Expires:







SCHEDULE F
FORM OF ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
(the “Assignor”), in consideration of one dollar and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, does hereby sell, grant, bargain, convey and assign to                  (the “Assignee”), a Delaware corporation, all right, title and interest of the Assignor in, to and under all the property described in Exhibit 1 attached hereto (all of such property being herein collectively called the “Property”).
TO HAVE AND TO HOLD the Property unto the Assignee, its successors and assigns, to its and their own use forever.
1.      The interest of the Assignor in the Property, and the interest transferred by this Assignment, is that of absolute ownership.
2.      The Assignor hereby warrants that it is the lawful owner of the rights and interests conveyed by this Assignment and that its title to such rights and interests is hereby conveyed to the Assignee free and clear of all liens, charges, claims and encumbrances of every kind whatsoever, other than (i) the amounts, if any, owing under the Contract (as such term is defined in Exhibit 1 attached hereto), (ii) other claims, if any, of the Assignor and the Contractor (as such term is defined in Exhibit 1 attached hereto) which may exist as between themselves and (iii) other liens, charges, claims and encumbrances permitted by the Lease Agreement (as hereinafter defined); and that the Assignor will warrant and defend such title forever against all claims and demands whatsoever.
3.      In order that the Contractor may transfer to the Assignee clear title to the Nuclear Fuel (as such term is defined in Exhibit 1 attached hereto) on its delivery date, the Assignor hereby releases and transfers to the Assignee any right, title or interest in the Nuclear Fuel which may have been acquired by the Assignor under the Contract prior to the date hereof.
4.      This Assignment is made in accordance with a Fuel Lease dated as of February ___, 1989, between the Assignor and the Assignee (said Lease Agreement, as the same may be from time to time amended, modified or supplemented, being herein called the “Lease Agreement”). Pursuant to a Security and Collateral Agency Agreement dated as of February ____, 1989 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by Assignee in favor of                          (the “Collateral Agent”), the Assignee is assigning and granting a security interest in the Property and the Assignment to the. Collateral Agent for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties, as such obligations are described in the Security Agreement.
5.      It is expressly agreed that, anything contained herein to the contrary notwithstanding, (a) the Assignor shall at all times remain liable to the Contractor to observe and perform all of its duties and obligations under the Contract to the same extent as if this Assignment and the Security Agreement had not been executed, (b) the exercise by the Assignee or the Collateral Agent of any of the rights assigned hereunder or under the Security Agreement, as the case may be, shall not release the Assignor from any of its duties or obligations to the Contractor under the Contract, and (c) neither the




Assignee nor the Collateral Agent, nor any of the other Secured Parties shall have any obligation or liability under the Contract by reason of or arising out of this Assignment, the Lease Agreement or the Security Agreement, or be obligated to perform or fulfill any of the duties or obligations of the Assignor under the Contract, or to make any payment thereunder, or to make any inquiry as to the nature or sufficiency of any Property received by it thereunder, or to present or file any claim, or to take any action to collect or enforce the payment of any amounts or the delivery of any Property which may have been assigned to it or to which it may be entitled at any time or times; provided , however, the Assignee agrees, solely for the benefit of the Assignor, and subject to the terms and conditions of the Lease Agreement, (i) to purchase the Nuclear Fuel from the Contractor pursuant to the Contract and (ii) to pay to the Contractor and/or to the Assignor or their order the respective amounts specified in the Lease Agreement with respect to such Nuclear Fuel.
6.      Notwithstanding anything contained herein to the contrary, subject to the terms and conditions of the Lease Agreement, the Assignor may continue to engage in Fuel Management (as such term is defined in the Lease Agreement) with respect to the Property, including, without limitation, all dealings with the Contractor and, subject to such terms and conditions, the Assignee reassigns to the Assignor the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract with respect to the Nuclear Fuel.
7.      The Assignor agrees that at any time and from time to time, upon request of the Assignee or the Collateral Agent, and, subject to Section 13(b) of the Lease Agreement, at the sole expense of the Assignor, the Assignor will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee or the Collateral Agent may reasonably request in order to obtain the full benefits of this Assignment and the security interest therein granted in the Security Agreement and of the rights, powers and interests herein and therein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the transfer of Assignor’s right, title and interest in the Property provided for hereby and the security interest granted by the Security Agreement and the appearance in the prosecution or defense of any lawsuit with respect to the rights, powers and interests herein granted (or with respect to the grant herein of such rights, powers and interests) where such appearance, prosecution or defense by the Assignor is necessary to allow Assignee or the Collateral Agent to obtain the full benefits of this Agreement. The Assignor hereby also authorizes the Assignee and the Collateral Agent to file any such financing or continuation statement without the signature of the Assignor to the extent permitted by applicable law. The Assignor will mark its books and records pertaining to the Contract to evidence this Assignment and the transfer of Assignor’s right, title and interest in the Property provided for hereby.
8.      In any suit, proceeding or action brought by the Assignee under the Contract to enforce any provisions thereof, the Assignor will save, indemnify and keep the Assignee harmless from and against all expenses, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of the Contractor, arising out of a breach by the Assignor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of the Contractor or its successors from the Assignor, and all such obligations of the Assignor shall be and remain enforceable against and only against the Assignor and shall not be enforceable against the Assignee.
9.      The Assignor hereby agrees that it will not enter into or consent to or permit any cancellation, termination, amendment, supplement or modification of or waiver with respect to the Contract insofar as it relates to the Nuclear Fuel except for cancellations, terminations, amendments, supplements, modifications or waivers which do not materially adversely affect the Assignee or the




Collateral Agent, nor will the Assignor sell, assign, grant any security interest in or otherwise transfer its rights or other interests in the Property or any part thereof, except as permitted by the Lease Agreement.
10.      The Assignor hereby represents and warrants that the Contract is in full force and effect and represents that it is the only agreement between the Assignor and the Contractor with respect to the Nuclear Fuel.
11.      Any obligations of the Assignee hereunder are intended to be the corporate obligations of the Assignee only and no recourse for the payment of any amount due hereunder, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future of the Assignee or of any successor corporation, or against any direct or indirect parent corporation of the Assignee or any other subsidiary or Affiliate (as defined in the Lease Agreement) of any such direct or indirect parent corporation or any incorporator, shareholder, officer or director, as such, past, present or future, of any such parent or other subsidiary or Affiliate, it being understood that the Assignee is a special purpose corporation formed for the purpose of the transactions involved in and relating to the Lease Agreement on the express understanding aforesaid. Nothing contained hereunder shall be construed to limit the exercise or enforcement, in accordance with the terms of this Assignment and any other documents referred to herein, of rights and remedies against the Assignee or the assets of the Assignee.
12.      The Assignor hereby agrees to send the Contractor a copy of this Assignment.
13.      This Assignment shall be governed by and construed in accordance with the laws of the State of New York.




IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed and delivered as of the ___ day of              , 1989.
By     
Title     
The foregoing Assignment is hereby accepted:
By     
Title     








EXHIBIT 1
to
Assignment

(a)      The Contract, dated as of                  , as amended, between                  , as buyer and                  as seller (the “Contractor”) (said Contract, as the same may from time to time be amended, modified or supplemented, being herein called the “Contract”), insofar as, and only to the extent that, the Contract relates to ________________ paid for by the Assignee or now or hereafter owned by the Assignee (the “Nuclear Fuel”); but not insofar as the Contract provides for the provision of other nuclear materials and services to the Assignor; and
(b)      The Property shall include, without limitation, (i) any and all amendments and supplements to the Contract from time to time executed and delivered to the extent that any such amendment or supplement relates to the Nuclear Fuel, (ii) the Nuclear Fuel, including the right to receive title thereto, (iii) all rights, claims and proceeds, now or hereafter existing, under any insurance, indemnities, warranties and guaranties provided for in or arising out of the Contract, to the extent that such rights or claims relate to the Nuclear Fuel, (iv) any claim for damages arising out of or for breach or default by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel, (v) any other amount, whether resulting from refunds or otherwise, from time to time paid or payable by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel and (vi) the right of the Assignor to terminate the Contract or to perform or to exercise or enforce any and all covenants, remedies, powers and privileges thereunder, insofar as it or they relate to the Nuclear Fuel.










EXHIBIT 2
to
Assignment

CONSENT AND AGREEMENT
The undersigned,                  (the “Contractor”), has entered into a Subcontract dated as of          , as amended, with                  (the “Assignor”) (said Contract, as the same may from time to time be further amended, modified or supplemented, being herein called the “Contract”).
The Contractor hereby acknowledges notice that (i) in accordance with the terms of a Fuel Lease dated as of February ___, 1989, between the Assignor and                  (in such capacity called the “Assignee”), the Assignor has assigned to the Assignee a part of the Assignor’s rights under the Contract pursuant to an Assignment, in the form of Annex A hereto (such Assignment, as the same may from time to time be amended, modified or supplemented, being herein collectively called the “Assignment”), and (ii) pursuant to a Security and Collateral Agency Agreement dated as of February ___, 1989 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by the Assignee in favor of                  (the “Collateral Agent”), for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, the Assignee has assigned and granted a security interest in all rights under the Contract from time to time assigned to it by Assignor, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties. The Contractor also acknowledges receipt of a copy of the Lease Agreement and of the Security Agreement.
The Contractor hereby consents to (i) the assignment by the Assignor to the Assignee of the Assignor’s right, title and interest in, to and under the Contract and the other Property described in the Assignment, pursuant to the Assignment and (ii) the assignment and security interest in favor of the Collateral Agent as described above. The Contractor further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the Assignor or the Assignee, it will acknowledge in writing the Assignment delivered by the Assignor to the Assignee; provided , that neither the lack of notice to nor acknowledgment by the Contractor of the Assignment shall limit or otherwise affect the validity or effectiveness of this consent to such Assignment.
The Contractor hereby confirms to the Assignee and the Collateral Agent that:
(a)
all representations, warranties and agreements of the Contractor under the Contract which relate to the Nuclear Fuel described in the Assignment shall inure to the benefit of, and shall be enforceable by, the Assignee or the Collateral Agent to the same extent as if originally named in the Contract as the purchaser of such Nuclear Fuel,
(b)
the Contractor understands that, pursuant to the Lease Agreement, the Assignee has agreed to lease the Nuclear Fuel described in the Assignment to the Assignor, and consents to the assignment to the Assignor, for so long as the Lease Agreement shall be in effect or until otherwise notified by the Assignee, of the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract and with respect to such Nuclear Fuel, and




(c)
The Contractor is in the business of selling nuclear fuel or related services of the kind described in the Assignment, and the proposed sale of such nuclear fuel under the Contract will be in the ordinary course of business of the Contractor.
(d)
Notwithstanding any provision to the contrary contained in the Contract, the Contractor agrees that title to any Nuclear Fuel covered by the Assignment shall pass directly to the Assignee under the Contract and shall not pass to the Assignor; provided that the foregoing shall not apply to any Nuclear Fuel for which title has already passed to Assignor prior to the execution and delivery of the Assignment.
It is understood that neither the Assignment, the Security Agreement nor this Consent and Agreement shall in any way add to the obligations of the Contractor or the Assignor under the Contract.
This Consent and Agreement shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Consent and Agreement to be duly executed and delivered by its duly authorized officer as of ___ day of              , 1989.
By:     
Title:     











ANNEX 1
SCHEDULE F
FORM OF ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
(the “Assignor”), in consideration of one dollar and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, does hereby sell, grant, bargain, convey and assign to                      (the “Assignee”), a Delaware corporation, all right, title and interest of the Assignor in, to and under all the property described in Exhibit 1 attached hereto (all of such property being herein collectively called the “Property”).
TO HAVE AND TO HOLD the Property unto the Assignee, its successors and assigns, to its and their own use forever.
1.      The interest of the Assignor in the Property, and the interest transferred by this Assignment, is that of absolute ownership.
2.      The Assignor hereby warrants that it is the lawful owner of the rights and interests conveyed by this Assignment and that its title to such rights and interests is hereby conveyed to the Assignee free and clear of all liens, charges, claims and encumbrances of every kind whatsoever, other than (i) the amounts, if any, owing under the Contract (as such term is defined in Exhibit 1 attached hereto), (ii) other claims, if any, of the Assignor and the Contractor (as such term is defined in Exhibit 1 attached hereto) which may exist as between themselves and (iii) other liens, charges, claims and encumbrances permitted by the Lease Agreement (as hereinafter defined); and that the Assignor will warrant and defend such title forever against all claims and demands whatsoever.
3.      In order that the Contractor may transfer to the Assignee clear title to the Nuclear Fuel (as such term is defined in Exhibit 1 attached hereto) on its delivery date, the Assignor hereby releases and transfers to the Assignee any right, title or interest in the Nuclear Fuel which may have been acquired by the Assignor under the Contract prior to the date hereof.
4.      This Assignment is made in accordance with a Fuel Lease dated as of February ___, 1989, between the Assignor and the Assignee (said Lease Agreement, as the same may be from time to time amended, modified or supplemented, being herein called the “Lease Agreement”). Pursuant to a Security and Collateral Agency Agreement dated as of February ___, 1989 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by Assignee in favor of              (the “Collateral Agent”), the Assignee is assigning and granting a security interest in the Property and the Assignment to the Collateral Agent for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties, as such obligations are described in the Security Agreement.
5.      It is expressly agreed that, anything contained herein to the contrary notwithstanding, (a) the Assignor shall at all times remain liable to the Contractor to observe and perform all of its duties and obligations under the Contract to the same extent as if this Assignment and the Security Agreement had not been executed, (b) the exercise by the Assignee or the Collateral Agent of any of the rights assigned hereunder or under the Security Agreement, as the case may be, shall not release the Assignor from any of its duties or obligations to the Contractor under the Contract, and (c) neither the Assignee nor the




Collateral Agent, nor any of the other Secured Parties shall have any obligation or liability under the Contract by reason of or arising out of this Assignment, the Lease Agreement or the Security Agreement, or be obligated to perform or fulfill any of the duties or obligations of the Assignor under the Contract, or to make any payment thereunder, or to make any inquiry as to the nature or sufficiency of any Property received by it thereunder, or to present or file any claim, or to take any action to collect or enforce the payment of any amounts or the delivery of any Property which may have been assigned to it or to which it may be entitled at any time or times; provided , however, the Assignee agrees, solely for the benefit of the Assignor, and subject to the terms and conditions of the Lease Agreement, (i) to purchase the Nuclear Fuel from the Contractor pursuant to the Contract and (ii) to pay to the Contractor and/or to the Assignor or their order the respective amounts specified in the Lease Agreement with respect to such Nuclear Fuel.
6.      Notwithstanding anything contained herein to the contrary, subject to the terms and conditions of the Lease Agreement, the Assignor may continue to engage in Fuel Management (as such term is defined in the Lease Agreement) with respect to the Property, including, without limitation, all dealings with the Contractor and, subject to such terms and conditions, the Assignee reassigns to the Assignor the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract with respect to the Nuclear Fuel.
7.      The Assignor agrees that at any time and from time to time, upon request of the Assignee or the Collateral Agent, and, subject to Section 13(b) of the Lease Agreement, at the sole expense of the Assignor, the Assignor will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee or the Collateral Agent may reasonably request in order to obtain the full benefits of this Assignment and the security interest therein granted in the Security Agreement and of the rights, powers and interests herein and therein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the transfer of Assignor’s right, title and interest in the Property provided for hereby and the security interest granted by the Security Agreement and the appearance in the prosecution or defense of any lawsuit with respect to the rights, powers and interests herein granted (or with respect to the grant herein of such rights, powers and interests) where such appearance, prosecution or defense by the Assignor is necessary to allow Assignee or the Collateral Agent to obtain the full benefits of this Agreement. The Assignor hereby also authorizes the Assignee and the Collateral Agent to file any such financing or continuation statement without the signature of the Assignor to the extent permitted by applicable law. The Assignor will mark its books and records pertaining to the Contract to evidence this Assignment and the transfer of Assignor’s right, title and interest in the Property provided for hereby.
8.      In any suit, proceeding or action brought by the Assignee under the Contract to enforce any provisions thereof, the Assignor will save, indemnify and keep the Assignee harmless from and against all expenses, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of the Contractor, arising out of a breach by the Assignor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of the Contractor or its successors from the Assignor, and all such obligations of the Assignor shall be and remain enforceable against and only against the Assignor and shall not be enforceable against the Assignee.
9.      The Assignor hereby agrees that it will not enter into or consent to or permit any cancellation, termination, amendment, supplement or modification of or waiver with respect to the Contract insofar as it relates to the Nuclear Fuel except for cancellations, terminations, amendments, supplements, modifications or waivers which do not materially adversely affect the Assignee or the




Collateral Agent, nor will the Assignor sell, assign, grant any security interest in or otherwise transfer its rights or other interests in the Property or any part thereof, except as permitted by the Lease Agreement.
10.      The Assignor hereby represents and warrants that the Contract is in full force and effect and represents that it is the only agreement between the Assignor and the Contractor with respect to the Nuclear Fuel.
11.      Any obligations of the Assignee hereunder are intended to be the corporate obligations of the Assignee only and no recourse for the payment of any amount due hereunder, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future of the Assignee or of any successor corporation, or against any direct or indirect parent corporation of the Assignee or any other subsidiary or Affiliate (as defined in the Lease Agreement) of any such direct or indirect parent corporation or any incorporator, shareholder, officer or director, as such, past, present or future, of any such parent or other subsidiary or Affiliate, it being understood that the Assignee is a special purpose corporation formed for the purpose of the transactions involved in and relating to the Lease Agreement on the express understanding aforesaid. Nothing contained hereunder shall be construed to limit the exercise or enforcement, in accordance with the terms of this Assignment and any other documents referred to herein, of rights and remedies against the Assignee or the assets of the Assignee.
12.      The Assignor hereby agrees to send the Contractor a copy of this Assignment.
13.      This Assignment shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, .the Assignor has caused this Assignment to be duly executed and delivered as of the ___ day of              , 1989.
By     
Title     
The foregoing Assignment is hereby accepted:
By     
Title     






EXHIBIT 1
to
Assignment

(a)      The Contract, dated as of ___, as amended, between                  , as buyer and                  , as seller (the “Contractor”) (said Contract, as the same may from time to time be amended, modified or supplemented, being herein called the “Contract”), insofar as, and only to the extent that, the Contract relates to ________________ paid for by the Assignee or now or hereafter owned by the Assignee (the “Nuclear Fuel”); but not insofar as the Contract provides for the provision of other nuclear materials and services to the Assignor; and
(b)      The Property shall include, without limitation, (i) any and all amendments and supplements to the Contract from time to time executed and delivered to the extent that any such amendment or supplement relates to the Nuclear Fuel, (ii) the Nuclear Fuel, including the right to receive title thereto, (iii) all rights, claims and proceeds, now or hereafter existing, under any insurance, indemnities, warranties and guaranties provided for in or arising out of the Contract, to the extent that such rights or claims relate to the Nuclear Fuel, (iv) any claim for damages arising out of or for breach or default by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel, (v) any other amount, whether resulting from refunds or otherwise, from time to time paid or payable by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel and (vi) the right of the Assignor to terminate the Contract or to perform or to exercise or enforce any and all covenants, remedies, powers and privileges thereunder, insofar as it or they relate to the Nuclear Fuel.






Exhibit 4(c)1


ARKANSAS POWER & LIGHT COMPANY
to
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(formerly Guaranty Trust Company of New York)

and

JOHN W. FLAHERTY
(successor to Henry A. Theis, Herbert E. Twyeffort and
Grainger S. Greene)

and

(as to property, real or personal, situated or being in Missouri)

THE BOATMEN’S NATIONAL BANK OF ST. LOUIS
(successor to Marvin A. Mueller)
As Trustees under Arkansas Power & Light Company’s Mortgage and Deed of
Trust, dated as of October 1, 1944

Forty-first Supplemental Indenture
Providing among other things for
First Mortgage Bonds, 9¾% Series due July 1, 2019
(Forty-sixth Series)

Dated as of July 1, 1989





FORTY-FIRST SUPPLEMENTAL INDENTURE
INDENTURE, dated as of July 1, 1989, between ARKANSAS POWER & LIGHT COMPANY, a corporation of the State of Arkansas, whose post office address is 425 West Capitol, Little Rock, Arkansas 72201 (hereinafter sometimes called the “Company”), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK (formerly Guaranty Trust Company of New York), a corporation of the State of New York, whose post office address is 23 Wall Street, New York, New York 10015 (hereinafter sometimes called the “Corporate Trustee”), and JOHN W. FLAHERTY (successor to Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene), whose post office address is 805 Harding Street, Westfield, New Jersey 07090 and (as to property, real or personal, situated or being in Missouri) THE BOATMEN’S NATIONAL BANK OF ST. LOUIS, a national banking association existing under the laws of the United States of America (successor to Marvin A. Mueller), whose post office address is 510 Locust St., St. Louis, Missouri 63101 (said John W. Flaherty being hereinafter sometimes called the “Co-Trustee”, and The Boatmen’s National Bank of St. Louis being hereinafter sometimes called the “Missouri Co-Trustee”, and the Corporate Trustee, the Co-Trustee and the Missouri Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of October 1, 1944 (hereinafter sometimes called the “Mortgage”), which Mortgage was executed and delivered by the Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this indenture (hereinafter called the “Forty-first Supplemental Indenture”) being supplemental thereto.
Whereas, the Mortgage was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of July 7, 1949, was executed by the Company appointing Herbert E. Twyeffort as Co-Trustee in succession to Henry A. Theis (resigned) under the Mortgage, and by Herbert E. Twyeffort accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of March 1, 1960, was executed by the Company appointing Grainger S. Greene as Co-Trustee in succession to Herbert E. Twyeffort (resigned) under the Mortgage, and by Grainger S. Greene accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, by the Twenty-first Supplemental Indenture mentioned below, the Company, among other things, appointed John W. Flaherty as Co-Trustee in succession to Grainger S. Greene (resigned) under the Mortgage, and John W. Flaherty accepted said appointment; and
Whereas, by the Thirty-third Supplemental Indenture mentioned below, the Company, among other things, appointed Marvin A. Mueller as Missouri Co-Trustee, and Marvin A. Mueller accepted said appointment; and
Whereas, by the Thirty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed the Boatmen’s National Bank of St. Louis as Missouri Co-Trustee in succession to Marvin A. Mueller (resigned) under the Mortgage, and The Boatmen’s National Bank of St. Louis accepted said appointment; and
Whereas, by the Mortgage the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be




necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
Whereas, the Company executed and delivered to the Trustees the following supplemental indentures:
Designation
Dated as of
First Supplemental Indenture
July 1, 1947
Second Supplemental Indenture
August 1, 1948
Third Supplemental Indenture
October 1, 1949
Fourth Supplemental Indenture
June 1, 1950
Fifth Supplemental Indenture
October 1, 1951
Sixth Supplemental Indenture
September 1, 1952
Seventh Supplemental Indenture
June 1, 1953
Eighth Supplemental Indenture
August 1, 1954
Ninth Supplemental Indenture
April 1, 1955
Tenth Supplemental Indenture
December 1, 1959
Eleventh Supplemental Indenture
May 1, 1961
Twelfth Supplemental Indenture
February 1, 1963
Thirteenth Supplemental Indenture
April 1, 1965
Fourteenth Supplemental Indenture
March 1, 1966
Fifteenth Supplemental Indenture
March 1, 1967
Sixteenth Supplemental Indenture
April 1, 1968
Seventeenth Supplemental Indenture
June 1, 1968
Eighteenth Supplemental Indenture
December 1, 1969
Nineteenth Supplemental Indenture
August 1, 1970
Twentieth Supplemental Indenture
March 1, 1971
Twenty-first Supplemental Indenture
August 1, 1971
Twenty-second Supplemental Indenture
April 1, 1972
Twenty-third Supplemental Indenture
December 1, 1972
Twenty-fourth Supplemental Indenture
June 1, 1973
Twenty-fifth Supplemental Indenture
December 1, 1973
Twenty-sixth Supplemental Indenture
June 1, 1974
Twenty-seventh Supplemental Indenture
November 1, 1974
Twenty-eighth Supplemental Indenture
July 1, 1975
Twenty-ninth Supplemental Indenture
December 1, 1977
Thirtieth Supplemental Indenture
July 1, 1978
Thirty-first Supplemental Indenture
February 1, 1979
Thirty-second Supplemental Indenture
December 1, 1980
Thirty-third Supplemental Indenture
January 1, 1981
Thirty-fourth Supplemental Indenture
August 1, 1981
Thirty-fifth Supplemental Indenture
February 1, 1982
Thirty-sixth Supplemental Indenture
December 1, 1982
Thirty-seventh Supplemental Indenture
February 1, 1983
Thirty-eighth Supplemental Indenture
December 1, 1984
Thirty-ninth Supplemental Indenture
December 1, 1985
Fortieth Supplemental Indenture
July 1, 1986

which supplemental indentures were appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and




Whereas, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and
Whereas, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:




Series
Principal
Amount
Issued
Principal
Amount
Outstanding
3⅛% Series due 1974
$ 30,000,000
None
2⅞% Series due 1977
11,000,000
None
3⅛% Series due 1978
7,500,000
None
2⅞% Series due 1979
8,700,000
None
2⅞% Series due 1980
6,000,000
None
3⅝% Series due 1981
8,000,000
None
3½% Series due 1982
15,000,000
None
4¼% Series due 1983
18,000,000
None
3¼% Series due 1984
7,500,000
None
3⅜% Series due 1985
18,000,000
None
5⅝% Series due 1989
15,000,000
None
4⅞% Series due 1991
12,000,000
$ 12,000,000
4⅜% Series due 1993
15,000,000
15,000,000
4⅝% Series due 1995
25,000,000
25,000,000
5¾% Series due 1996
25,000,000
25,000,000
5⅞% Series due 1997
30,000,000
30,000,000
7⅜% Series due 1998
15,000,000
15,000,000
9¼% Series due 1999
25,000,000
25,000,000
9⅝% Series due 2000
25,000,000
25,000,000
7⅝% Series due 2001
30,000,000
30,000,000
8 % Series due August 1, 2001
30,000,000
30,000,000
7¾% Series due 2002
35,000,000
35,000,000
7½% Series due December 1, 2002
$ 15,000,000
15,000,000
8 % Series due 2003
40,000,000
40,000,000
8⅛% Series due December 1, 2003
40,000,000
40,000,000
10½% Series due 2004
40,000,000
40,000,000
9¼% Series due November 1, 1981
60,000,000
None
10⅛% Series due July 1, 2005
40,000,000
40,000,000
9⅛% Series due December 1, 2007
75,000,000
75,000,000
9⅞% Series due July 1, 2008
75,000,000
75,000,000
10¼% Series due February 1, 2009
60,000,000
60,000,000
16⅛% Series due December 1, 1986
70,000,000
None
4¼% Series due September 1, 1983
1,202,000
None
5½% Series due January 1, 1988
598,310
None
5⅝% Series due May 1, 1990
1,400,000
500,000
6¼% Series due December 1, 1996
3,560,000
1,760,000
9¾% Series due September 1, 2000
4,600,000
3,000,000
8¾% Series due March 1, 1998
9,800,000
6,200,000
17⅜% Series due August 1, 1988
75,000,000
None
16½% Series due February 1, 1991
80,000,000
None
13⅜% Series due December 1, 2012
75,000,000
75,000,000
13¼% Series due February 1, 2013
25,000,000
25,000,000
14¼% Series due December 1, 2014
100,000,000
100,000,000
Pollution Control Series A
128,800,000
128,800,000
10¼% Series due July 1, 2016
50,000,000
50,000,000





which bonds are also hereinafter sometimes called bonds of the First through Forty-fifth Series, respectively; and
Whereas, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
Whereas, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
Whereas, the Company now desires to create a new series of bonds and (pursuant to the provisions of Section 120 of the Mortgage) to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
Whereas, the execution and delivery by the Company of this Forty-first Supplemental Indenture, and the terms of the bonds of the Forty-sixth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
Now, Therefore, This Indenture Witnesseth:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modifications made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto The Boatmen’s National Bank of St. Louis (as to property, real or personal, situated or being in Missouri) and John W. Flaherty (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) to Morgan Guaranty Trust Company of New York, as Trustees under the Mortgage, and to their successor or successors in said trust, and to them and their successors and assigns forever, all property, real, personal or mixed, of any kind or nature acquired by the Company after the date of the execution and delivery of the Mortgage (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned (all such property being situated in the counties and states hereinabove listed) or, subject to the provisions of Section 87 of the




Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Forty-first Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all street and interurban railway and transportation lines and systems, terminal systems and facilities; all bridges, culverts, tracks, railways, sidings, spurs, wyes, roadbeds, trestles and viaducts; all overground and underground trolleys and feeder wires; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
Together With all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
It is Hereby Agreed by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Mortgage, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and by the Mortgage and as fully embraced within the lien hereof and the lien of the Mortgage, as heretofore supplemented, as if such property, rights and franchises were now owned by the Company and were specifically described herein or in the Mortgage and conveyed hereby or thereby.
Provided That the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Forty-first Supplemental Indenture and from the lien and operation of the Mortgage, as heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches,




buses, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or covenanted so to be; the Company’s contractual rights or other interest in or with respect to tires not owned by the Company; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; (7) the electric distribution system of the Company in the municipality of Junction City, Louisiana (as the same may be now or hereafter constituted) and in the environs of such municipality within the State of Louisiana, and all renewals, replacements, extensions and additions to such electric distribution system now owned or hereafter acquired; (8) the properties heretofore sold or in the process of being sold by the Company and heretofore released from the Mortgage and Deed of Trust dated as of October 1, 1926 from Arkansas Power & Light Company to Guaranty Trust Company of New York, trustee, and specifically described in a release instrument executed by Guaranty Trust Company of New York, as trustee, dated October 13, 1938, which release has heretofore been delivered by the said trustee to the Company and recorded by the Company in the office of the Recorder for Garland County, Arkansas, in Record Book 227, Page 1, all of said properties being located in Garland County, Arkansas; and (9) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage, as heretofore supplemented, and this Forty-first Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that any or all of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
To Have and to Hold all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto The Boatmen’s National Bank of St. Louis (as to property, real or personal, situated or being in Missouri), and unto John W. Flaherty (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) unto Morgan Guaranty Trust Company of New York, as Trustees, and their successors and assigns forever.
In Trust Nevertheless, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Forty-first Supplemental Indenture being supplemental to the Mortgage.
And It Is Hereby Covenanted by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors in the trust in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successors in said trust under the Mortgage, as follows:






ARTICLE I

Forty-sixth Series of Bonds

Section 1. There shall be a series of bonds designated “9¾% Series due July 1, 2019” (herein sometimes called the “Forty-sixth Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Forty-sixth Series (which shall be initially issued in the aggregate principal amount of $75,000,000) shall mature on July 1, 2019, shall be issued as fully registered bonds in the denomination of One Thousand Dollars and, at the option of the Company, in any multiple or multiples of One Thousand Dollars (the exercise of such option to be evidenced by the execution and delivery thereof), shall bear interest at the rate of 9¾% per annum, the first interest payment to be made August 1, 1989 for the period from July 1, 1989 to August 1, 1989, with subsequent interest payments payable semi-annually on February 1 and August 1 of each year and at maturity, shall be dated as in Section 10 of the Mortgage provided, and the principal of and interest on each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.

(I) Bonds of the Forth-sixth Series shall be redeemable either at the option of the Company or pursuant to the requirements of the Mortgage in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed at least 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:

GENERAL REDEMPTION PRICES
If redeemed during the 12-months period ending June 30,
1990
108.15%
2000
104.75%
2010
101.36%
1991
107.81%
2001
104.41%
2011
101.02%
1992
107.47%
2002
104.07%
2012
100.68%
1993
107.13%
2003
103.74%
2013
100.34%
1994
106.79%
2004
103.40%
2014
100.00%
1995
106.45%
2005
103.06%
2015
100.00%
1996
106.11%
2006
102.72%
2016
100.00%
1997
105.77%
2007
102.38%
2017
100.00%
1998
105.43%
2008
102.04%
2018
100.00%
1999
105.09%
2009
101.70%
2019
100.00%

in each case together with accrued interest to the date fixed for redemption; provided, however, that none of the bonds of the Forty-sixth Series shall be redeemed at said general redemption prices prior to July 1, 1994 if such redemption is for the purpose or in anticipation of refunding such bond through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 9.9576% per annum.




(II) Bonds of the Forty-sixth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash delivered to or deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 3 of the Third Supplemental Indenture or of Section 2 hereof or with the Proceeds of Released Property at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:

SPECIAL REDEMPTION PRICES
If redeemed during the 12-months period ending June 30,
1990
100.00%
2000
100.00%
2010
100.00%
1991
100.00%
2001
100.00%
2011
100.00%
1992
100.00%
2002
100.00%
2012
100.00%
1993
100.00%
2003
100.00%
2013
100.00%
1994
100.00%
2004
100.00%
2014
100.00%
1995
100.00%
2005
100.00%
2015
100.00%
1996
100.00%
2006
100.00%
2016
100.00%
1997
100.00%
2007
100.00%
2017
100.00%
1998
100.00%
2008
100.00%
2018
100.00%
1999
100.00%
2009
100.00%
2019
100.00%

in each case together with accrued interest to the date fixed for redemption; provided, however, that if, in the case of redemption of the bonds of the Forty-sixth Series by the application of cash delivered to the Corporate Trustee pursuant to the provisions of Section 2 hereof, the date fixed for such redemption shall be prior to January 1 of the calendar year in which such delivery of cash shall become due under the provisions of said Section 2, bonds of the Forty-sixth Series shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption.
(III) At the option of the registered owner, any bonds of the Forty-sixth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.

Bonds of the Forty-sixth Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York.
Upon any exchange or transfer of bonds of the Forty-sixth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of said Series.
Upon the delivery of this Forty-first Supplemental Indenture and upon compliance with the applicable provisions of the Mortgage, as heretofore supplemented, there shall be an initial issue of bonds of the Forty-sixth Series for the aggregate principal amount of $75,000,000.





ARTICLE II

Sinking or Improvement Fund for Bonds
of the Forty-sixth Series

Section 2. The Company covenants that, so long as any of the bonds of the Forty-sixth Series shall remain Outstanding, it will, on or before October 1, 1990, and on or before October 1 of each year thereafter to and including the year 2018, deliver to the Corporate Trustee:

(A) An Officers’ Certificate which shall state:

(a) the greatest principal amount of all bonds of the Forty-sixth Series prior to January 1, of such year at any one time Outstanding;

(b) the aggregate principal amount of all bonds of the Forty-sixth Series retired prior to the date of such Officers’ Certificate pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property, or pursuant to the provisions of Section 64 of the Mortgage;

(c) the aggregate principal amount of bonds, the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Forty-sixth Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;

(d) the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;

(e) the amount which is 1% of the amount stated pursuant to clause (d) above; and

(f) (i) an aggregate principal amount of bond(s) or fraction of a bond, not to exceed, in any such year, the amount stated pursuant to clause (e) above for such year, the authentication and delivery of which the Company has theretofore waived (in compliance with a sinking or improvement fund contained in any supplemental indenture to the Mortgage, dated prior to January 1, 1988, provided that the series of bonds with respect to which such sinking or improvement fund relates has been retired prior to the date of such Officers’ Certificate) upon the basis of Property Additions, which waiver or waivers shall not theretofore have been used as a credit under this clause (i) or under clause (i) of Section 2 of the Twenty-sixth, Twenty-seventh, Twenty-eight, Twenty-ninth, Thirtieth, Thirty‑first, Thirty-second, Thirty-fourth, Thirty-fifth, Thirty-sixth, Thirty‑seventh, Thirty-eighth, or Fortieth Supplemental Indentures, plus (ii) an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Forty-sixth Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise




provided) if the Company elects to make its right to the authentication and delivery of such bond(s) or fraction of a bond the basis of a credit under this Section.

(B) An amount in cash and/or principal amount of bonds of the Forty-sixth Series equivalent to the amount stated in the Officers’ Certificate (due on or before October 1 of such year) provided for by this Section pursuant to the requirements of clause (e) of subdivision (A) of this Section; provided, however, that, against the amount of cash or bonds payable or deliverable pursuant to this paragraph (B), there shall be credited the principal amount of the Bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.

Such cash together with any bonds of the Forty-sixth Series delivered to the Corporate Trustee under the provisions of this Section shall be dealt with as provided for by this Section.
Notwithstanding any other provisions of this Forty-first Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on October 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the Forty‑sixth Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on October 1 of the then current year or of a subsequent year may be from time to time withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivision (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Forty-sixth Series shall be made the basis of the withdrawal of cash deposited under this Section; and provided further, that no bonds of any series other than the Forty-sixth Series shall be purchased or redeemed with cash deposited under the provisions of this Section and that no bonds of the Forty-sixth Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date 40 days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost); and provided further, that the Company may not deposit cash prior to July 1, 1994 in anticipation of the requirements of this Section if the cash so deposited represents borrowed funds, or is in anticipation of funds to be borrowed, having an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 9.9576% per annum.
In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions of the Mortgage relating to such authentication and delivery, except that the Company shall not be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earnings Certificate or Opinion of Counsel such as are described in subdivisions (1), (2), (6) and (8) of Section 28 of the Mortgage.
So long as any bonds of the Forty-sixth Series shall remain outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or




fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under this Section.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Forty-sixth Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I) any cash deposited under the provisions of Section 40 of the Mortgage or under Section 2 of the First through Fifteenth and Seventeenth through Thirty-second Supplemental Indentures or under Section 2 of the Thirty-fourth through Thirty-eighth and Fortieth Supplemental Indentures or under this Section shall be deemed to be Funded Cash;

(II) any bonds of the First Series delivered to the Corporate Trustee under the provisions of Section 40 of the Mortgage and any bonds of the Second through Thirty-second Series delivered to the Corporate Trustee under the provisions of Section 2 of the First through Fifteenth and Seventeenth through Thirty-second Supplemental Indentures, respectively, and any bonds of the Thirty-ninth through Forty-third and Forty-fifth Series delivered to the Corporate Trustee under the provisions of Section 2 of the Thirty-fourth through Thirty-eighth and Fortieth Supplemental Indentures, and any bonds of the Forty‑sixth Series delivered to the Corporate Trustee under the provisions of this Section shall, after such delivery, be deemed to have been retired by the use of Funded Cash; and

(III) with respect to all credits taken under Section 40 of the Mortgage, or Section 2 of the First through Fifteenth and Seventeenth through Thirty-second Supplemental Indentures or Section 2 of the Thirty-fourth through Thirty-eighth and Fortieth Supplemental Indentures or under this Section on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that a credit has been taken under the Mortgage, as supplemented, on the basis thereof.

Any bonds issued under the Mortgage, delivered to, deposited with or purchased or redeemed by, the Corporate Trustee pursuant to the provisions of this Section shall forthwith be cancelled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds of the Forty-sixth Series purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA)      the aggregate cost of principal, interest, brokerage and premium, if any, on all bonds theretofore or then to be purchased and/or redeemed pursuant to the provisions of this Section after deducting therefrom
(BB)      the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.




ARTICLE III

Maintenance and Replacement Fund Covenant - Other Related
Provisions of the Mortgage - Dividend Covenant

Section 3. (I) The Company covenants and agrees that the provisions of subsection (I) of Section 39 of the Mortgage, as amended, shall remain in full force and effect so long as any bonds of the Forty-sixth Series shall remain Outstanding.

So long as any bonds of the Forty-sixth Series shall remain Outstanding, no credit shall be given pursuant to the provisions of clause (6) or clause (d) of subsection (I) of Section 39 of the Mortgage for expenditures for gross additions to automotive equipment of the Company except for net cash expenditures for such automotive equipment.
Clause (e) of subsection (II) of Section 4 of the Mortgage, clause (6) and clause (e) of Section 5 of the Mortgage and Section 29 of the Mortgage, as heretofore amended, are hereby amended by inserting therein the words “and Forty-sixth Series” after the words “and Forty-fifth Series” each time such words occur therein.
(I) The Company covenants that, so long as any of the bonds of the Forty-sixth Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to June 30, 1989 (other than any dividend declared by the Company on or before June 30, 1989 for payment on or before August 15, 1989), exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from retained earnings to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to June 30, 1989 to retained earnings, (b) $125,000,000 and (c) such additional amount as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.

For the purpose of this subsection (II) the aggregate amount credited subsequent to June 30, 1989 to retained earnings shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to retained earnings applicable to the period prior to July 1, 1989, including, but not limited to, charges to retained earnings for write-offs or write-downs of book values of assets owned by the Company on June 30, 1989. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to June 30, 1989, amounts equal to the sum of (1) an amount, if any (not otherwise deducted), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period and (2) the Company’s provisions during such period for depreciation and retirement of property (but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this subsection (II), shall not be less than the aggregate of (i) the




amounts required to be stated for such period in the Officers’ Certificates of Maintenance and Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 (as in effect at the time the provisions were required to be met) of the Mortgage less the aggregate amounts, if any, stated for such period in such Officers’ Certificates of Maintenance and Replacements as permitted by the provisions of subdivision (2) of said subsection (I), including proportionate amounts calculated as provided in said subdivisions (1) and (2) (as in effect at the time the calculation is required to be made) for any portion of the period elapsed since June 30, 1989, not theretofore included in any Officers’ Certificates of Maintenance and Replacements plus (ii), unless the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture has been made, the amount of the excess stated in the Officers’ Certificate of Cumulative Excesses most recently filed with the Corporate Trustee pursuant to subsection (II) of Section 3 of the Third Supplemental Indenture applicable to the period subsequent to June 30, 1989, including proportionate amounts calculated in the manner provided in said subsection (II) for any portion of the period subsequent to June 30, 1989, not theretofore included in such Officers’ Certificate of Cumulative Excesses.
For the purpose of this subsection (II) the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the depreciation reserve account through charges to operating revenue deductions, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Energy Regulatory Commission.


ARTICLE IV

Amendment of Section 5 of the Tenth Supplemental Indenture

Section 4. Section 5 of the Tenth Supplemental Indenture is hereby amended by substituting the words “so long as any bonds of the Eleventh through Forty-third, Forty-fifth and Forty-sixth Series remain Outstanding” for the words “so long as any bonds of the Eleventh through Forty-third and Forty-fifth Series remain Outstanding” and by substituting the words “all bonds of the First through Forty-third, Forty-fifth and Forty-sixth Series” for the words “all bonds of the First through Forty-third and Forty-fifth Series” each time said words appear in Section 5 of the Tenth Supplemental Indenture.



ARTICLE V

Amendment of Section 7 of the Mortgage

Section 5. Effective with and applicable to the application to the Corporate Trustee for the authentication and delivery of the first series of bonds created after July 31, 1989, or such later date as shall be authorized or approved by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935, clauses (9), (10) and (11) of Section 7 of the Mortgage are hereby amended to read as follows:

“(9) the amount, if any, by which the amount required to be stated in such certificate by clause (8) of this Section exceeds 10 per centum (10%) of the amount required to be stated in such certificate by clause (7) of this Section; provided, however, that there may be substituted for 10 per centum (10%) such per centum greater than ten per centum (10%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and




Exchange Commission, or any successor commission thereto, under the Public Utility Holding Company Act of 1935;
(10) the amount remaining after deducting in such certificate the amount, if any, required to be stated by clause (9) of this Section from the amount required to be stated by clause (8) of this Section; provided, however, that, so long as any bonds issued prior to January 1, 1988, shall remain Outstanding, the amount to be deducted from clause (8) of this Section shall not be less than the amount, if any, by which the aggregate of (a) such other income (net) and (b) that portion of the amount required to be stated in such certificate by clause (7) of this Section which, in the opinion of the signers, is directly derived from the operation of property (other than paving, grading and other improvements to, under or upon public highways, bridges, parks or other public properties of analogous character) not subject to the Lien of this Indenture at the date of such certificate, exceeds ten per centum (10%) of the sum of clauses (7) and (8) of this Section; and provided further, that in computing the foregoing, there may be used such per centum greater than ten per centum (10%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935; and provided further, that if the amount required to be stated in such certificate by clause (7) of this Section includes revenues from the operation of property not subject to the Lien of this Indenture, there shall be included in the calculation to be made pursuant to this clause (10) such reasonable interdepartmental or interproperty revenues and expenses between the Mortgaged and Pledged Property and the property not subject to the Lien hereof as shall be allocated to such respective properties by the Company; and
(11) the Adjusted Net Earnings of the Company for such period of twelve (12) consecutive calendar months (being the sum of clauses (7) and (10) of this Section);”.

ACTICLE VI

Miscellaneous Provisions

Section 6. Section 55 of the Mortgage, as heretofore amended by the First through Fifteenth, Seventeenth through Thirty-second and Thirty-fourth through Fortieth Supplemental Indentures, is hereby amended to insert the words “and subject to the provisions of Section 2 of the Forty-first Supplemental Indenture dated as of July 1, 1989”, after the words “and subject to the provisions of Section 2 of the Fortieth Supplemental Indenture dated as of July 1, 1986”.

Section 7. Subject to the amendments provided for in this Forty-first Supplemental Indenture, the terms defined in the Mortgage and the First through Fortieth Supplemental Indentures shall, for all purposes of this Forty-first Supplemental Indenture, have the meanings specified in the Mortgage and the First through Fortieth Supplemental Indentures.

Section 8. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage and in the First through Fortieth Supplemental Indentures set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Forty-first Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Forty-first




Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Forty-first Supplemental Indenture.
Section 9. Whenever in this Forty-first Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Forty-first Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 10. Nothing in this Forty-first Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Forty-first Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Forty-first Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding under the Mortgage.

Section 11. This Forty-first Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 12. It is the intention and it is hereby agreed that, so far as concerns the portion of the Mortgaged and Pledged Property, if any, which may at any time be situated within the State of Louisiana, the general language of conveyance contained in this Forty-first Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as said Louisiana property is concerned, this Forty-first Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage, and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 13. This Forty-first Supplemental Indenture shall be construed in accordance with and governed by the laws of the State of New York.











In Witness Whereof, Arkansas Power & Light Company has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and Morgan Guaranty Trust Company of New York has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Assistant Vice Presidents, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Trust Officers for and in its behalf, and John W. Flaherty has hereunto set his hand and affixed his seal, and The Boatmen’s National Bank of St. Louis has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Trust Officers, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Trust Officers for and in its behalf, as of the day and year first above written.
[Corporate Seal]
Arkansas Power & Light Company

By: /s/ Lee W. Randall
Senior Vice President
Attest:

/s/ John J. Harton
Assistant Secretary

Executed, sealed and delivered by
Arkansas Power & Light
Company in the presence of:


/s/ Stephen D. Ryan III


/s/ Bonnie Wilkinson






[Corporate Seal]
Morgan Guaranty Trust Company
of New York
As Trustee

By:/s/ Helen G. Chin
Vice President
Attest:

/s/ Catherine F. Donohue
Assistant Secretary
 
/s/ John W. Flaherty
As Co-Trustee

John W. Flaherty [L.S.]
Executed, sealed and delivered by
Morgan Guaranty Trust
Company of New York and
John W. Flaherty, in the
presence of:


/s/ Chris Wielczko


/s/ Raymond S. Koloski






[Corporate Seal]
The Boatmen’s National Bank
of St. Louis
As Co-Trustee as to property, real
or personal, situated or being in
Missouri


By:/s/ R. McK. Jones
Senior Vice President
Attest:

/s/ Melissa Reynolds
Assistant Trust Officer


Executed, sealed and delivered by
The Boatmen’s National Bank
of St. Louis in the presence of:


/s/ Michael Stolfi


/s/ Paul Hull






State of New York
}
ss.:
County of New York

On this 5th day of July, 1989, before me, Michael R. Stolfi, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared in person the within named Lee W. Randall and John J. Harton, to me personally well known, who stated that they were a Senior Vice President and an Assistant Secretary, respectively, of Arkansas Power & Light Company, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 5th day of July, 1989, before me personally came Lee W. Randall, to me known, who, being by me duly sworn, did depose and say that he resides at Little Rock, Arkansas; that he is a Senior Vice President of Arkansas Power & Light Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
On the 5th day of July, 1989, before me appeared Lee W. Randall, to me personally known, who, being by me duly sworn, did say that he is a Senior Vice President of Arkansas Power & Light Company, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Michael R. Stolfi
Michael R. Stolfi
Notary Public, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires
October 05, 1989






State of New York
}
ss.:
County of New York

On this 29th day of June, 1989, before me, Simone G. Vinocour, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared Helen G. Chin and Catherine F. Donohue, to me personally well known, who stated that they were a Vice President and an Assistant Secretary, respectively, of Morgan Guaranty Trust Company of New York, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation; and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On this 29th day of June, 1989, before me personally came Helen G. Chin, to me known, who, being by me duly sworn, did depose and say that she resides at New York, New York; that she is a Vice President of Morgan Guaranty Trust Company of New York, one of the corporations described in and which executed the above instrument; that she knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that she signed her name thereto by like authority.
On this 29th day of June, 1989, before me appeared Helen G. Chin, to me personally known, who, being by me duly sworn, did say that she is a Vice President of Morgan Guaranty Trust Company of New York, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and she acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Simone G. Vinocour
Simone G. Vinocour
Notary Public, State of New York
No. 31-4938491
Qualified in New York County
Certificate Filed in New York County
Commission Expires November 7, 1990






State of New York
}
ss.:
County of New York

On this 29th day of June, 1989, before me, Simone G. Vinocour, the undersigned officer, personally appeared John W. Flaherty, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purpose therein contained.
On the 29th day of June, 1989, before me personally appeared John W. Flaherty, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
In Witness Whereof, I hereunto set my hand and official seal.
[Notarial Seal]
/s/ Simone G. Vinocour
Simone G. Vinocour
Notary Public, State of New York
No. 31-4938491
Qualified in New York County
Certificate Filed in New York County
Commission Expires November 7, 1990






State of Missouri
}
ss.:
County of St. Louis

On this 30th day of June, 1989, before me, Joy Marie Lincoln, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared R. McK. Jones and Melissa Reynolds, to me personally well known, who stated that they were a Senior Vice President and an Assistant Trust Officer, respectively, of The Boatmen’s National Bank of St. Louis, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 30th day of June, 1989, before me personally came R. McK. Jones, to me known, who, being by me duly sworn, did depose and say that he resides at St. Louis, Missouri; that he is a Senior Vice President of The Boatmen’s National Bank of St. Louis, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name by like order.
On the 30th day of June, 1989, before me appeared R. McK. Jones, to me personally known, who, being by me duly sworn, did say that he is a Senior Vice President of The Boatmen’s National Bank of St. Louis, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Joy Marie Lincoln
Joy Marie Lincoln
Notary Public - State of Missouri
St. Louis County
My Commission Expires October 16, 1990









Exhibit 4(c)1

ARKANSAS POWER & LIGHT COMPANY
TO
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(formerly Guaranty Trust Company of New York)
AND
JOHN W. FLAHERTY
(successor to Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene)
As Trustees under Arkansas Power & Light
Company’s Mortgage and Deed of
Trust, dated as of October 1, 1944
_______________
Thirtieth Supplemental Indenture
Providing among other things for
First Mortgage Bonds, 9⅞% Series due July 1, 2008
(Thirtieth Series)
_______________
Dated as of July 1, 1978












THIRTIETH SUPPLEMENTAL INDENTURE
INDENTURE, dated as of July 1, 1978, between Arkansas Power & Light Company, a corporation of the State of Arkansas, whose post office address is First National Building, Capitol Avenue and Broadway, Little Rock, Arkansas 72203 (hereinafter sometimes called the “Company”), and Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), a corporation of the State of New York, whose post office address is 23 Wall Street, New York, New York 10015 (hereinafter sometimes called the “Corporate Trustee”), and John W. Flaherty (successor to Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene), whose post office address is 805 Harding Street, Westfield, New Jersey 07090 (said John W. Flaherty being hereinafter sometimes called the “Co-Trustee”, and the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of October 1, 1944 (hereinafter sometimes called the “Mortgage”), which Mortgage was executed and delivered by the Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this indenture (hereinafter called the “Thirtieth Supplemental Indenture”) being supplemental thereto.
Whereas, the Mortgage was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of July 7, 1949, was executed by the Company appointing Herbert E. Twyeffort as Co-Trustee in succession to Henry A. Theis (resigned) under the Mortgage, and by Herbert E. Twyeffort accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of March 1, 1960, was executed by the Company appointing Grainger S. Greene as Co-Trustee in succession to Herbert E. Twyeffort (resigned) under the Mortgage, and by Grainger S. Greene accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, by the Twenty-first Supplemental Indenture mentioned below, the Company, among other things, appointed John W. Flaherty as Co-Trustee in succession to Grainger S. Greene (resigned) under the Mortgage, and John W. Flaherty accepted said appointment; and
Whereas, by the Mortgage the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
Whereas, the Company executed and delivered to the Trustees the following supplemental indentures:




Designation
Dated as of
First Supplemental Indenture
July 1, 1947
Second Supplemental Indenture
August 1, 1948
Third Supplemental Indenture
October 1, 1949
Fourth Supplemental Indenture
June 1, 1950
Fifth Supplemental Indenture
October 1, 1951
Sixth Supplemental Indenture
September 1, 1952
Seventh Supplemental Indenture
June 1, 1953
Eighth Supplemental Indenture
August 1, 1954
Ninth Supplemental Indenture
April 1, 1955
Tenth Supplemental Indenture
December 1, 1959
Eleventh Supplemental Indenture
May 1, 1961
Twelfth Supplemental Indenture
February 1, 1963
Thirteenth Supplemental Indenture
April 1, 1965
Fourteenth Supplemental Indenture
March 1, 1966
Fifteenth Supplemental Indenture
March 1, 1967
Sixteenth Supplemental Indenture
April 1, 1968
Seventeenth Supplemental Indenture
June 1, 1968
Eighteenth Supplemental Indenture
December 1, 1969
Nineteenth Supplemental Indenture
August 1, 1970
Twentieth Supplemental Indenture
March 1, 1971
Twenty-first Supplemental Indenture
August 1, 1971
Twenty-second Supplemental Indenture
April 1, 1972
Twenty-third Supplemental Indenture
December 1, 1972
Twenty-fourth Supplemental Indenture
June 1, 1973
Twenty-fifth Supplemental Indenture
December 1, 1973
Twenty-sixth Supplemental Indenture
June 1, 1974
Twenty-seventh Supplemental Indenture
November 1, 1974
Twenty-eighth Supplemental Indenture
July 1, 1975
which supplemental indentures were appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, the Company executed and delivered to the Trustees a Twenty-ninth Supplemental Indenture, dated as of December 1, 1977; and
Whereas, the Twenty-ninth Supplemental Indenture was filed for record with the Secretary of State of Arkansas and recorded by him in Book 1 at page 1 of the Records of Instruments filed in his office pursuant to Act 252 of the Acts of Arkansas of 1973; and
Whereas, in addition, a statement of the Company reflecting said filing with the Secretary of State of Arkansas of the Twenty-ninth Supplemental Indenture has been executed and acknowledged and has been recorded in the following counties in the State of Arkansas:




County
Date filed
for Record
Book
Page
Arkansas
 
 
 
     Southern
12/30/77
L-10
637
     Northern
12/30/77
178
467
Ashley
12/30/77
143
74
Baxter
12/30/77
Z
135
Boone
12/30/77
96
365
Bradley
12/30/77
123
118
Calhoun
12/30/77
3-G
472
Carroll, Eastern
12/30/77
85
250
Chicot
1/  3/78
N-14
531
Clark
1/  3/78
352
264
Cleburne
12/30/77
195
489
Cleveland
12/30/77
GGG
665
Columbia
1/  3/78
168
65
Conway
12/30/77
105
659
Craighead
12/30/77
213
468
Crittenden
12/30/77
560
86
Cross
1/  3/78
212
515
Dallas
1/  3/78
42
244
Desha
1/  3/78
249
352
Drew
12/30/77
222
618
Faulkner
12/30/77
162
559
Garland
1/  3/78
862
201
Grant
12/30/77
70
31
Hempstead
12/30/77
437
279
Hot Spring
12/30/77
36
259
Howard
12/30/77
186
273
Independence
12/30/77
V-10
103
Izard
12/30/77
47
598
Jackson
12/31/77
173
569
Jefferson
12/30/77
391
47
Johnson
12/30/77
73
273
Lafayette
1/  3/78
L-20
645
Lawrence
12/30/77
UU
154
Lee
1/  3/78
273
565
Lincoln
1/  3/78
Mtg 83
477
Logan, Northern
12/30/77
64
230
Lonoke
1/  3/78
M-38
262
Marion
1/  3/78
234
88
Miller
1/  3/78
M-356
376
Mississippi
 
 
 
     Osceola
12/30/77
175
400
     Chickasawba
12/30/77
Z-8
255
Monroe
12/30/77
88
806
Montgomery
12/30/77
45
450
Nevada
12/30/77
330
208
Newton
12/30/77
10-A
786
Ouachita
12/30/77
157
603




Perry
12/30/77
36
833
Phillips
12/30/77
558
212
Pike
12/30/77
80
109
Poinsett
1/  3/78
145
115
Pope
12/30/77
9-C
382
Prairie
 
 
 
     Southern
12/30/77
60
195
     Northern
12/30/77
Mfg 45
532
Pulaski
12/27/77
77-12582
 
St. Francis
1/  3/78
374
99
Saline
12/30/77
180
238
Scott
12/30/77
63
282
Searcy
12/30/77
51
295
Sharp
12/30/77
73
509
Stone
12/30/77
J
624
Union
1/  3/78
1342
271
Van Buren
1/  3/78
Mtg 69
743
White
12/30/77
259
747
Woodruff
12/30/77
A-50
408
Yell
 
 
 
Danville
1/  3/78
206
260
Dardanelle
12/30/77
156
415
; and
 
 
 
Whereas, an Affidavit supplementing the prior Financing Statement, together with a copy of the Twenty-ninth Supplemental Indenture, was filed with the Secretary of State of Missouri in accordance with the Missouri Uniform Commercial Code on January 26, 1978; and
Whereas, in addition, the Twenty-ninth Supplemental Indenture has been filed or recorded in the following county in the State of Missouri:
County
Date filed
for Record
Book
Page
Taney
1/30/78
245
1217
; and
 
 
 

Whereas, the Twenty-ninth Supplemental Indenture has been filed or recorded in the following counties in the State of Tennessee:
County
Date Filed
for Record
Book
Page
Shelby
1/25/78
M8
8189
Tipton
1/26/78
415
340
; and
 
 
 

Whereas, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and




Whereas, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:
Series
Principal Amount Issued
Principal Amount Outstanding
3⅛% Series due 1974
$30,000,000
None
2⅞% Series due 1977
11,000,000
None
3⅛% Series due 1978
7,500,000
$ 7,500,000
2⅞% Series due 1979
8,700,000
8,700,000
2⅞% Series due 1980
6,000,000
6,000,000
3⅝% Series due 1981
8,000,000
8,000,000
3½% Series due 1982
15,000,000
15,000,000
4¼% Series due 1983
18,000,000
None
3¼% Series due 1984
7,500,000
7,500,000
3⅜% Series due 1985
18,000,000
18,000,000
5⅝% Series due 1989
15,000,000
None
4⅞% Series due 1991
12,000,000
12,000,000
4⅜% Series due 1993
$15,000,000
$15,000,000
4⅝% Series due 1995
25,000,000
25,000,000
5¾% Series due 1996
25,000,000
25,000,000
5⅞% Series due 1997
30,000,000
30,000,000
7⅜% Series due 1998
15,000,000
15,000,000
9¼% Series due 1999
25,000,000
25,000,000
9⅝% Series due 2000
25,000,000
25,000,000
7⅝% Series due 2001
30,000,000
30,000,000
8 % Series due August 1, 2001
30,000,000
30,000,000
7¾% Series due 2002
35,000,000
35,000,000
7½% Series due December 1, 2002
15,000,000
15,000,000
8 % Series due 2003
40,000,000
40,000,000
8⅛% Series due December 1, 2003
40,000,000
40,000,000
10½% Series due 2004
40,000,000
40,000,000
9¼% Series due November 1, 1981
60,000,000
60,000,000
10⅛% Series due July 1, 2005
40,000,000
40,000,000
9⅛% Series due December 1, 2007
75,000,000
75,000,000
which bonds are also hereinafter sometimes called bonds of the First through Twenty-ninth Series, respectively; and
Whereas, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
Whereas, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional




restriction if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
Whereas, the Company now desires to create a new series of bonds and (pursuant to the provisions of Section 120 of the Mortgage) to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
Whereas, the execution and delivery by the Company of this Thirtieth Supplemental Indenture, and the terms of the bonds of the Thirtieth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
Now, Therefore, This Indenture Witnesseth:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modifications made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto John W. Flaherty and (to the extent of its legal capacity to hold the same for the purposes hereof) to Morgan Guaranty Trust Company of New York, as Trustees under the Mortgage, and to their successor or successors in said trust, and to them and their successors and assigns forever, all property, real, personal or mixed, of any kind or nature acquired by the Company after the date of the execution and delivery of the Mortgage (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned (all such property being situated in the counties and states hereinabove listed) or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Thirtieth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all street and interurban railway and transportation lines and systems, terminal systems and facilities; all bridges, culverts, tracks, railways, sidings, spurs, wyes, roadbeds, trestles and viaducts; all overground and underground trolleys and feeder wires; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents or permits;




all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
Together With all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
It is Hereby Agreed by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Mortgage, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and by the Mortgage and as fully embraced within the lien hereof and the lien of the Mortgage, as heretofore supplemented, as if such property, rights and franchises were now owned by the Company and were specifically described herein or in the Mortgage and conveyed hereby or thereby.
Provided That the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Thirtieth Supplemental Indenture and from the lien and operation of the Mortgage, as heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or convenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or covenanted so to be; the Company’s contractual rights or other interest in or with respect to tires not owned by the Company; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; (7) the electric distribution system of the Company in the municipality of Junction City, Louisiana (as the same may be now or hereafter constituted) and in the environs of such municipality within the State of Louisiana, and all renewals, replacements, extensions and additions to such electric distribution system now owned or hereafter acquired; (8) the properties heretofore sold or in the process of being sold by the Company and heretofore released from the Mortgage and Deed of Trust dated as of October 1, 1926 from Arkansas Power & Light Company to Guaranty Trust Company of New York, trustee, and specifically described in a release instrument executed by Guaranty Trust Company of New York, as trustee, dated October 13, 1938, which release has heretofore been delivered by the said trustee to the Company and recorded by the Company in the office of the Recorder for Garland County, Arkansas,




in Record Book 227, Page 1, all of said properties being located in Garland County, Arkansas; and (9) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage, as heretofore supplemented, and this Thirtieth Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
To Have and To Hold all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto John W. Flaherty and (to the extent of its legal capacity to hold the same for the purposes hereof) to Morgan Guaranty Trust Company of New York, as Trustees, and their successors and assigns forever.
In Trust Nevertheless, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Thirtieth Supplemental Indenture being supplemental to the Mortgage.
And It Is Hereby Covenanted by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors in the trust in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successors in said trust under the Mortgage, as follows:
ARTICLE I

Thirtieth Series Of Bonds

Section 1. There shall be a series of bonds designated “9⅞% Series due July 1, 2008” (herein sometimes called the “Thirtieth Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Thirtieth Series (which shall be initially issued in the aggregate principal amount of $75,000,000) shall mature on July 1, 2008, shall be issued as fully registered bonds in the denomination of One Thousand Dollars and, at the option of the Company, in any multiple or multiples of One Thousand Dollars (the exercise of such option to be evidenced by the execution and delivery thereof), shall bear interest at the rate of 9⅞% per annum, payable semi-annually on January 1 and July 1 of each year, shall be dated as in Section 10 of the Mortgage provided, and the principal of and interest on each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time, of payment is legal tender for public and private debts.

(I) Bonds of the Thirtieth Series shall be redeemable either at the option of the Company or pursuant to the requirements of the Mortgage in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed at least 30 days prior to the date




fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
General Redemption Prices
If redeemed during 12 months period ending June 30,
1979
111.09%
1989
107.27%
1999
103.44%
1980
110.71%
1990
106.88%
2000
103.06%
1981
110.32%
1991
106.50%
2001
102.68%
1982
109.94%
1992
106.12%
2002
102.30%
1983
109.56%
1993
105.74%
2003
101.92%
1984
109.18%
1994
105.36%
2004
101.53%
1985
108.79%
1995
104.97%
2005
101.15%
1986
108.41%
1996
104.59%
2006
100.77%
1987
108.03%
1997
104.21%
2007
100.39%
1988
107.65%
1998
103.83%
2008
100.00%

in each case together with accrued interest to the date fixed for redemption; provided, however, that none of the bonds of the Thirtieth Series shall be redeemed at said general redemption prices prior to July 1, 1983 if such redemption is for the purpose or in anticipation of refunding such bond through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 9.8168% per annum.
(II) Bonds of the Thirtieth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash delivered to or deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 3 of the Third Supplemental Indenture or of Section 2 hereof or with the Proceeds of Released Property at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
Special Redemption Prices
If redeemed during 12 months period ending June 30,
1979
101.21%
1989
101.10%
1999
100.79%
1980
101.21%
1990
101.08%
2000
100.74%
1981
101.20%
1991
101.06%
2001
100.69%
1982
101.19%
1992
101.03%
2002
100.63%
1983
101.18%
1993
101.01%
2003
100.56%
1984
101.17%
1994
100.98%
2004
100.49%
1985
101.16%
1995
100.95%
2005
100.41%
1986
101.14%
1996
100.91%
2006
100.32%
1987
101.13%
1997
100.88%
2007
100.23%
1988
101.11%
1998
100.84%
2008
100.00%

in each case together with accrued interest to the date fixed for redemption; provided, however, that if, in the case of redemption of bonds of the Thirtieth Series by the application of cash delivered to the Trustee pursuant to the provisions of Section 2 hereof, the date fixed for such redemption shall be prior to January 1 of the calendar year in which such delivery of cash shall become due under the provisions of said Section




2, bonds of the Thirtieth Series shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption.
(III) At the option of the registered owner, any bonds of the Thirtieth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.

Bonds of the Thirtieth Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York.
Upon any exchange or transfer of bonds of the Thirtieth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of said Series.
ARTICLE II

Sinking or Improvement Fund for Bonds
of The Thirtieth Series

Section 2. The Company covenants that, so long as any of the bonds of the Thirtieth Series shall remain Outstanding, it will, on or before October 1, 1979, and on or before October 1 of each year thereafter to and including the year 2007, deliver to the Corporate Trustee:

(A) An Officers’ Certificate which shall state:

(a) the greatest principal amount of all bonds of the Thirtieth Series prior to January 1, of such year at any one time Outstanding;

(b) the aggregate principal amount of all bonds of the Thirtieth Series retired prior to the date of such Officers’ Certificate pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property, or pursuant to the provisions of Section 64 of the Mortgage;

(c) the aggregate principal amount of bonds, the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Thirtieth Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;

(d) the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;





(e) the amount which is 1% of the amount stated pursuant to clause (d) above; and

(f) (i) an aggregate principal amount of bond(s) or fraction of a bond, not to exceed $162,000 principal amount for any such year, the authentication and delivery of which the Company has theretofore waived in compliance with Section 2 of the Second or Third Supplemental Indenture upon the basis of Property Additions, which waiver or waivers shall not theretofore have been used as a credit under this clause (i); plus (ii) an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Thirtieth Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise provided) if the Company elects to make its right to the authentication and delivery of such bond(s) or fraction of a bond the basis of a credit under this Section.

(B) An amount in cash and/or principal amount of bonds of the Thirtieth Series equivalent to the amount stated in the Officers’ Certificate (due on or before October 1 of such year) provided for by this Section pursuant to the requirements of clause (e) of subdivision (A) of this Section; provided, however, that, against the amount of cash or bonds payable or deliverable pursuant to this paragraph (B), there shall be credited the principal amount of the Bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.

Such cash together with any bonds of the Thirtieth Series delivered to the Corporate Trustee under the provisions of this Section shall be dealt with as provided for by this Section.
Notwithstanding any other provisions of this Thirtieth Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on October 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the Thirtieth Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on October 1 of the then current year or of a subsequent year, may be from time to time withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivision (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Thirtieth Series shall be made the basis of the withdrawal of cash deposited under this Section; and provided further, that no bonds of any series other than the Thirtieth Series shall be purchased or redeemed with cash deposited under the provisions of this Section and that no bonds of the Thirtieth Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date 40 days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost); and provided further, that the Company may not deposit cash prior to July 1, 1983 in anticipation of the requirements of this Section if the cash so deposited represents borrowed funds, or is in anticipation of funds to be borrowed, having an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 9.8168% per annum.
In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions of the Mortgage relating to such authentication and delivery, except that the Company shall not be required




to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as are described in subdivisions (1), (2), (6) and (8) of Section 28 of the Mortgage.
So long as any bonds of the Thirtieth Series shall remain Outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under this Section.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Thirtieth Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I) any cash deposited under the provisions of Section 40 of the Mortgage or under Section 2 of the First through Fifteenth and Seventeenth through Twenty‑ninth Supplemental Indentures or under this Section shall be deemed to be Funded Cash;

(II) any bonds of the First Series delivered to the Corporate Trustee under the provisions of Section 40 of the Mortgage and any bonds of the Second through Twenty-ninth Series delivered to the Corporate Trustee under the provisions of Section 2 of the First through Fifteenth and Seventeenth through Twenty-ninth Supplemental Indentures, respectively, and any bonds of the Thirtieth Series delivered to the Corporate Trustee under the provisions of this Section shall, after such delivery, be deemed to have been retired by the use of Funded Cash; and

(III) with respect to all credits taken under Section 40 of the Mortgage, or Section 2 of the First through Fifteenth and Seventeenth through Twenty-ninth Supplemental Indentures or under this Section on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that a credit has been taken under the Mortgage, as supplemented, on the basis thereof.

Any bonds issued under the Mortgage, delivered to, deposited with or purchased or redeemed by, the Corporate Trustee pursuant to the provisions of this Section shall forthwith be cancelled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds of the Thirtieth Series purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA) the aggregate cost of principal, interest, brokerage and premium, if any, on all bonds theretofore or then to be purchased and/or redeemed pursuant to the provisions of this Section:
after deducting therefrom
(BB) the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such




further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.
ARTICLE III

Maintenance and Replacement Fund Covenant-Other Related
Provisions of the Mortgage-Dividend Covenant

Section 3. (I)  The Company covenants and agrees that the provisions of subsection (I) of Section 39 of the Mortgage shall remain in full force and effect so long as any bonds of the Thirtieth Series shall remain Outstanding.

So long as any bonds of the Thirtieth Series shall remain Outstanding, no credit shall be given pursuant to the provisions of clause (6) or clause (d) of subsection (I) of Section 39 of the Mortgage for expenditures for gross additions to automotive equipment of the Company except for net cash expenditures for such automotive equipment.
Clause (e) of subsection (II) of Section 4 of the Mortgage, clause (6) and clause (e) of Section 5 of the Mortgage and Section 29 of the Mortgage, as heretofore amended, are hereby amended by inserting therein the words “and Thirtieth Series” after the words “and Twenty-ninth Series” each time such words occur therein.
So long as any bonds of the Thirtieth Series shall remain Outstanding, in each Net Earning Certificate made pursuant to Section 7 of the Mortgage there shall be included in operating expenses for the twelve (12) months period with respect to which such certificate is made, (i) an amount if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period, and (ii) an amount, if any (not otherwise included), equal to the provisions made by the Company out of income during such period for depreciation and retirement of property comprised in or appertaining to the electric, gas, steam and/or hot water systems covered by the Mortgage pursuant to any final order or orders of the Arkansas Public Service Commission or other regulatory authority of the State of Arkansas having jurisdiction; provided, however, that the aggregate of the amounts included in such operating expenses corresponding with the gross expenditures referred to in clause (2) of subsection (I) of Section 39 of the Mortgage for such period and the provisions (whether or not otherwise included) referred to in subdivision (ii) above shall not exceed for such period 20% of the Electric, Gas, Steam and Hot Water Adjusted Gross Operating Revenues of the Company.
(I) Subsection (II) of Section 3 of the Third Supplemental Indenture is hereby amended by inserting the words “or Thirtieth Series”, after the words “or Twenty-ninth Series” each time such words occur therein; provided, however, that upon the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture, the Company shall no longer be required to file any Officers’ Certificate of Cumulative Excesses but any amounts available to be credited pursuant to the provisions of clauses (2), (3), (4), (5) and/or (6) of subsection (I) of Section 39 of the Mortgage and which were held in reserve pursuant to the Officers’ Certificate of Cumulative Excesses filed in the calendar year 1959 shall be deemed to have been made the basis of credits under said subsection (I) of said Section 39 of the Mortgage unless the amounts held in reserve pursuant to the latest Officer’s Certificate of Cumulative Excesses total a lesser aggregate amount in which case only such lesser aggregate amount shall be deemed to have been made the basis of credits under said subsection (I) of said Section 39 of the Mortgage. Any excess of cash deposited solely pursuant to the provisions of subsection (II) of Section 3 of the Third Supplemental Indenture plus the amount held in reserve pursuant to the latest Officers’ Certificate of Cumulative Excesses over the amount




formally held in reserve pursuant to the Officers’ Certificate of Cumulative Excesses filed in the calendar year 1959 shall, upon the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture, no longer be deemed to have been made the basis of credits under subsection (I) of Section 39 of the Mortgage or to be Funded Cash.

(II) The Company covenants that, so long as any of the bonds of the Thirtieth Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to June 30, 1978 (other than any dividend declared by the Company on or before June 30, 1978 for payment on or before July 31, 1978) exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from retained earnings to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to June 30, 1978 to retained earnings, (b) $62,000,000, and (c) such additional amount as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.

For the purpose of this subsection (III) the aggregate amount credited subsequent to June 30, 1978 to retained earnings shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to retained earnings applicable to the period prior to June 30, 1978, including, but not limited to, charges to retained earnings for write-offs or write-downs of book values of assets owned by the Company on June 30, 1978. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to June 30, 1978, amounts equal to the sum of (1) an amount, if any (not otherwise deducted), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period and (2) the Company’s provisions during such period for depreciation and retirement of property (but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this subsection (III), shall not be less than the aggregate of (i) the amounts required to be stated for such period in the Officers’ Certificates of Maintenance and Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 (as in effect at the time the provisions were required to be met) of the Mortgage less the aggregate amounts, if any, stated for such period in such Officers’ Certificates of Maintenance and Replacements as permitted by the provisions of subdivision (2) of said subsection (I), including proportionate amounts calculated as provided in said subdivisions (1) and (2) (as in effect at the time the calculation is required to be made) for any portion of the period elapsed since June 30, 1978, not theretofore included in any Officers’ Certificates of Maintenance and Replacements plus (ii), unless the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture has been made, the amount of the excess stated in the Officers’ Certificate of Cumulative Excesses most recently filed with the Corporate Trustee pursuant to subsection (II) of Section 3 of the Third Supplemental Indenture applicable to the period subsequent to June 30, 1978, including proportionate amounts calculated in the manner provided in said subsection (II) for any portion of the period subsequent to June 30, 1978, not theretofore included in such Officers’ Certificate of Cumulative Excesses.




For the purpose of this subsection (III) the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the depreciation reserve account through charges to operating revenue deductions, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Power Commission.


ARTICLE IV

Amendment of Section 5 of the Tenth Supplemental Indenture

Section 4. Section 5 of the Tenth Supplemental Indenture is hereby amended by substituting the words “so long as any bonds of the Eleventh through Thirtieth Series remain Outstanding” for the words “so long as any bonds of the Eleventh through Twenty-ninth Series remain Outstanding” and by substituting the words “all bonds of the First through Thirtieth Series” for the words “all bonds of the First through Twenty-ninth Series” each time said words appear in Section 5 of the Tenth Supplemental Indenture.


ARTICLE V

Amendment of Section 7 of the Mortgage

Section 5. Effective with and applicable to the application to the Corporate Trustee for the authentication and delivery of the first series of bonds created after July 30, 1978, clause (10) of Section 7 of the Mortgage is hereby amended to read as follows:

“(10) the amount, if any, by which the aggregate of (a) such other income (net) and (b) that portion of the amount required to be stated in such certificate by clause (7) of this Section which, in the opinion of the signers, is directly derived from the operations of property (other than paving, grading and other improvements to, under or upon public highways, bridges, parks or other public properties of analogous character) not subject to the Lien of this Indenture at the date of such certificate, exceeds twelve per centum (12%) of the sum required to be stated by clause (9) of this Section; provided, however, that in computing the foregoing, there may be used such per centum greater than twelve per centum (12%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935; and provided further, that if the amount required to be stated in such certificate by clause (7) of this Section includes revenues from the operation of property not subject to the Lien of this Indenture, there shall be included in the calculation to be made pursuant to this clause (10) such reasonable interdepartmental or interproperty revenues and expenses between the Mortgaged and Pledged Property and the property not subject to the Lien hereof as shall be allocated to such respective properties by the Company; and”.

ARTICLE VI

Miscellaneous Provisions

Section 6. The Company reserves the right, without any consent or other action by holders of bonds of the Thirtieth Series or of any subsequently created series, to make such amendments to the Mortgage,




as supplemented, as shall be necessary in order to modify the present first paragraph of Section 4 of the Mortgage to read as follows:

“Section 4.      (I) The term ‘Property Additions’ shall mean plants, lines, pipes, mains, cables, machinery, boilers, transmission lines, Space Satellites, pipe lines, distribution systems, service systems and supply systems and other property, real or personal, and improvements, extensions, additions, renewals or replacements, acquired by the Company by purchase, consolidation, merger, donation, construction, erection or in any other way whatsoever, subsequent to June 30, 1944, or in the process of construction or erection in so far as actually constructed or erected subsequent to June 30, 1944, and used or useful or to be used in or in connection with the business of generating, manufacturing, producing, transmitting, transporting, distributing or supplying electricity or gas for light, heat, power, refrigeration or other purposes, or steam or hot water for power, heat or other purposes. The term ‘Property Additions’ shall not, however, include (1) any shares of stock, bonds, notes or other obligations or other securities or contracts, leases, or operating agreements, bills, notes, accounts receivable, or choses in action, or (2) except as herein otherwise specifically provided, going value, good will, franchises or governmental permits or licenses granted to or acquired by the Company, as such, separate and distinct from the property operated thereunder or in connection therewith or incident thereto, or (3) any merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles or other vehicles or aircraft, or fuel, oil or similar materials and supplies consumable in the operation of any of the properties of the Company; or street cars, rolling stock, trolley coaches, motor coaches, buses; or (except to the extent that property of such character shall have been included in any Engineer’s Certificate pursuant to the provisions of subdivision (A) of this Section) other railway or transportation property; or automobiles or other vehicles, or any aircraft, or (4) any property (other than ‘Space Satellites’) which is located outside of the limits of the United States of America or its coastal waters, or (5) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation up to the point of connection with any distribution system, or timber, minerals, mineral rights and royalties, or (6) any property, the cost of acquiring, making or constructing which is chargeable under accepted principles of accounting to operating expenses. The term ‘Space Satellites’ shall mean any form of space satellites (including but not limited to solar power satellites), space stations and other analogous facilities whether or not in the earth’s atmosphere.”
Section 7. Section 55 of the Mortgage, as heretofore amended by the First through Fifteenth and Seventeenth through Twenty-ninth Supplemental Indentures, is hereby amended to insert the words “and subject to the provisions of Section 2 of the Thirtieth Supplemental Indenture dated as of July 1, 1978”, after the words “and subject to the provisions of Section 2 of the Twenty-ninth Supplemental Indenture dated as of December 1, 1977”.

Section 8. Subject to the amendments provided for in this Thirtieth Supplemental Indenture, the terms defined in the Mortgage and the First through Twenty-ninth Supplemental Indentures shall, for all purposes of this Thirtieth Supplemental Indenture, have the meanings specified in the Mortgage and the First through Twenty-ninth Supplemental Indentures.

Section 9. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage and in the First through Twenty-ninth Supplemental Indentures set forth and upon the following terms and conditions:




The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Thirtieth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Thirtieth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Thirtieth Supplemental Indenture.
Section 10. Whenever in this Thirtieth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Thirtieth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 11. Nothing in this Thirtieth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Thirtieth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Thirtieth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding under the Mortgage.

Section 12. This Thirtieth Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 13. It is the intention and it is hereby agreed that, so far as concerns the portion of the Mortgaged and Pledged Property, if any, which may at any time be situated within the State of Louisiana, the general language of conveyance contained in this Thirtieth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as said Louisiana property is concerned, this Thirtieth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage, and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 14. This Thirtieth Supplemental Indenture shall be construed in accordance with and governed by the laws of the State of New York.





In Witness Whereof, Arkansas Power & Light Company has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and Morgan Guaranty Trust Company of New York has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Trust Officers, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Trust Officers for and in its behalf, and JOHN W. FLAHERTY has hereunto set his hand and affixed his seal, all in The City of New York, as of the day and year first above written.
 
Arkansas Power & Light Company
[Corporate Seal]
 
 
By /s/ Jerry L. Maulden
Vice President
Attest:
 
 
 
/s/ Allen Mebane
Assistant Secretary

Executed, sealed and delivered by Arkansas  
Power & Light Company in the presence of:

/s/ D. E. Matthews

/s/ John M. Stuart
 
 
Morgan Guaranty Trust Company
of New York, As Trustee
[Corporate Seal]
 
 
By /s/ D.G. Hope
Trust Officer
Attest:
 
 
 
/s/ Thomas R. Bowen
Assistant Secretary
 
 
John W. Flaherty, As Co-Trustee  [L.S.]
                  /s/ John W. Flaherty
Executed, sealed and delivered by Morgan     
Guaranty Trust Company of New York and John W. Flaherty in the presence of:       

/s/ J.M. Sullivan
 








State of New York County of New York
} ss.:

On this 26th day of July, 1978, before me, Morton Barad, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared in person the within named Jerry L. Maulden and Allen Mebane, to me personally well known, who stated that they were a Vice President and an Assistant Secretary, respectively, of Arkansas Power & Light Company, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 26th day of July, 1978, before me personally came Jerry L. Maulden, to me known, who, being by me duly sworn, did depose and say that he resides at 1813 Gunpowder Road, Little Rock, Arkansas; that he is a Vice President of Arkansas Power & Light Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
On the 26th day of July, 1978, before me appeared Jerry L. Maulden, to me personally known, who, being by me duly sworn, did say that he is a Vice President of Arkansas Power & Light Company, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Morton Barad
MORTON BARAD
Notary Public, State of New York
No. 41-5170980
Certs. filed in Bronx, Kings, Nassau,
New York and Westchester Cos.
Qualified in Queens County
Commission. Expires March 30, 1980









State of New York County of New York
} ss.:

On this 26th day of July, 1978, before me, Maureen McShane, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared D. G. Hope and Thomas R. Bowen, to me personally well known, who stated that they were a Trust Officer and an Assistant Secretary, respectively, of Morgan Guaranty Trust Company of New York, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation; and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On this 26th day of July, 1978, before me personally came D. G. Hope, to me known, who, being by me duly sworn, did depose and say that he resides at 465 Broadway, Hastings-On-Hudson, New York; that he is a Trust Officer of Morgan Guaranty Trust Company of New York, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
On this 26th day of July, 1978, before me appeared D. G. Hope, to me personally known, who, being by me duly sworn, did say that he is a Trust Officer of Morgan Guaranty Trust Company of New York, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Maureen McShane
MAUREEN McSHANE
Notary Public, State of New York
No. 24-4649500
Qualified in Kings County
Certificate Filed in New York County
Commission Expires March 30, 1979









State of New York County of New York
} ss.:

On this 26th day of July, 1978, before me, Maureen McShane, the undersigned officer, personally appeared John W. Flaherty, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained.
On the 26th day of July, 1978, before me personally appeared John W. Flaherty, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
In Witness Whereof, I hereunto set my hand and official seal.
[Notarial Seal]
/s/ Maureen McShane
MAUREEN McSHANE
Notary Public, State of New York
No. 24-4649500
Qualified in Kings County
Certificate Filed in New York County
Commission Expires March 30, 1979






Exhibit 4(c)1


ARKANSAS POWER & LIGHT COMPANY

TO

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(formerly Guaranty Trust Company of New York)

AND

JOHN W. FLAHERTY
(successor to Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene)

As Trustees under Arkansas Power & Light Company’s Mortgage and Deed of
Trust, dated as of October 1, 1944
_________

Thirty-first Supplemental Indenture

Providing among other things for
First Mortgage Bonds, 10¼% Series due February 1, 2009
(Thirty-first Series)
_________


Dated as of February 1, 1979










THIRTY-FIRST SUPPLEMENTAL INDENTURE
INDENTURE, dated as of February 1, 1979, between Arkansas Power & Light Company, a corporation of the State of Arkansas, whose post office address is First National Building, Capitol Avenue and Broadway, Little Rock, Arkansas 72203 (hereinafter sometimes called the “Company”), and Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), a corporation of the State of New York, whose post office address is 23 Wall Street, New York, New York 10015 (hereinafter sometimes called the “Corporate Trustee”), and John W. Flaherty (successor to Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene), whose post office address is 805 Harding Street, Westfield, New Jersey 07090 (said John W. Flaherty being hereinafter sometimes called the “Co-Trustee”, and the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of October 1, 1944 (hereinafter sometimes called the “Mortgage”), which Mortgage was executed and delivered by the Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this indenture (hereinafter called the “Thirty-first Supplemental Indenture”) being supplemental thereto.
Whereas, the Mortgage was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of July 7, 1949, was executed by the Company appointing Herbert E. Twyeffort as Co-Trustee in succession to Henry A. Theis (resigned) under the Mortgage, and by Herbert E. Twyeffort accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of March 1, 1960, was executed by the Company appointing Grainger S. Greene as Co-Trustee in succession to Herbert E. Twyeffort (resigned) under the Mortgage, and by Grainger S. Greene accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, by the Twenty-first Supplemental Indenture mentioned below, the Company, among other things, appointed John W. Flaherty as Co-Trustee in succession to Grainger S. Greene (resigned) under the Mortgage, and John W. Flaherty accepted said appointment; and
Whereas, by the Mortgage the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
Whereas, the Company executed and delivered to the Trustees the following supplemental indentures:




Designation
Dated as of
First Supplemental Indenture
July 1, 1947
Second Supplemental Indenture
August 1, 1948
Third Supplemental Indenture
October 1, 1949
Fourth Supplemental Indenture
June 1, 1950
Fifth Supplemental Indenture
October 1, 1951
Sixth Supplemental Indenture
September 1, 1952
Seventh Supplemental Indenture
June 1, 1953
Eighth Supplemental Indenture
August 1, 1954
Ninth Supplemental Indenture
April 1, 1955
Tenth Supplemental Indenture
December 1, 1959
Eleventh Supplemental Indenture
May 1, 1961
Twelfth Supplemental Indenture
February 1, 1963
Thirteenth Supplemental Indenture
April 1, 1965
Fourteenth Supplemental Indenture
March 1, 1966
Fifteenth Supplemental Indenture
March 1, 1967
Sixteenth Supplemental Indenture
April 1, 1968
Seventeenth Supplemental Indenture
June 1, 1968
Eighteenth Supplemental Indenture
December 1, 1969
Nineteenth Supplemental Indenture
August 1, 1970
Twentieth Supplemental Indenture
March 1, 1971
Twenty-first Supplemental Indenture
August 1, 1971
Twenty-second Supplemental Indenture
April 1, 1972
Twenty-third Supplemental Indenture
December 1, 1972
Twenty-fourth Supplemental Indenture
June 1, 1973
Twenty-fifth Supplemental Indenture
December 1, 1973
Twenty-sixth Supplemental Indenture
June 1, 1974
Twenty-seventh Supplemental Indenture
November 1, 1974
Twenty-eighth Supplemental Indenture
July 1, 1975
Twenty-ninth Supplemental Indenture
December 1, 1977
 
 
which supplemental indentures were appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, the Company executed and delivered to the Trustees a Thirtieth Supplemental Indenture, dated as of July 1, 1978; and
Whereas, the Thirtieth Supplemental Indenture was filed for record with the Secretary of State of Arkansas and recorded by him in Book 1 at page 1 of the Records of Instruments filed in his office pursuant to Act 252 of the Acts of Arkansas of 1973; and
Whereas, in addition, a statement of the Company reflecting said filing with the Secretary of State of Arkansas of the Thirtieth Supplemental Indenture has been executed and acknowledged and has been recorded in the following counties in the State of Arkansas:
County
Date Filed
for Record
Book
Page
Arkansas
 
 
 
Southern
8/ 1/78
0-10
87
Northern
8/ 1/78
183
221




Ashley
8/ 2/78
146
202-204
Baxter
8/ 1/78
101
113
Boone
8/ 7/78
100
431-433
Bradley
8/ 1/78
DT-125
171
Calhoun
8/ 1/78
3-H
122
Carroll, Eastern
8/ 1/78
88
243-245
Chicot
8/ 2/78
R-14
421
Clark
8/ 1/78
358
78
Cleburne
8/ 1/78
202
277-279
Cleveland
8/ 1/78
HHH
499
Columbia
8/ 1/78
171
163
Conway
8/ 1/78
107
621
Craighead
8/ 1/78
221
669
Crittenden
8/ 2/78
572
294
Cross
8/ 2/78
216
706
Dallas
8/ 1/78
112
715
Desha
8/ 1/78
254
446-448
Drew
8/ 1/78
227
49
Faulkner
8/ 3/78
167
279
Garland
8/ 1/78
881
823
Grant
8/ 1/78
71
343
Hempstead
8/ 1/78
444
499
Hot Spring
8/ 1/78
37
671
Howard
8/ 1/78
188
483-485
Independence
8/ 1/78
B-11
5-B
Izard
8/ 2/78
49
135
Jackson
8/ 1/78
173 & Mtg.
Rec. 175
373
Jefferson
8/ 1/78
399
550
Johnson
8/ 2/78
75
302-303
Lafayette
8/ 2/78
U-20
245
Lawrence
8/ 1/78
WW
507
Lee
8/ 2/78
276
49
Lincoln
8/ 1/78
85
290
Logan-Northern
8/ 1/78
64
277
Lonoke
8/ 1/78
213
513
Marion
8/ 1/78
237
395-397
Miller
8/ 2/78
Misc. 20
328
Mississippi
 
 
 
Osceola
8/ 2/78
A-74
253
Chickasawba
8/ 3/78
E-9
470
Monroe
8/ 1/78
91
144
Montgomery
8/ 1/78
46
326
Nevada
8/ 1/78
332
568
Newton
8/ 1/78
11-A
799
Ouachita
8/ 1/78
160
419
Perry
8/ 1/78
38
15-17
Phillips
8/ 1/78
564
107
Pike
8/ 2/78
81
203-205
Poinsett
8/ 1/78
23
712




Pope
8/ 3/78
9-I
745-747
Prairie
 
 
 
Southern
8/ 1/78
61
229
Northern
8/ 1/78
46
359
Pulaski
8/15/78
Instm.
78-33148
 
St. Francis
8/ 1/78
379
438
Saline
8/ 1/78
54
143
Scott
8/ 2/78
65
86
Searcy
8/ 1/78
52
283-284
Sharp
8/ 1/78
77
207
Stone
8/ 1/78
K
157-159
Union
8/ 1/78
1364
205
Van Buren
8/ 3/78
72
557
White
8/ 1/78
75
455
Woodruff
8/ 1/78
A-51
560
Yell
 
 
 
Danville
8/ 2/78
210
333-335
Dardanelle
8/ 1/78
161
68-70
; and
 
 
 
 
 
 
 
Whereas, an Affidavit supplementing the prior Financing Statement, together with a copy of the Thirtieth Supplemental Indenture, was filed with the Secretary of State of Missouri in accordance with the Missouri Uniform Commercial Code on July 31, 1978; and
Whereas, in addition, the Thirtieth Supplemental Indenture has been filed or recorded in the following county in the State of Missouri:
County
Date Filed
for Record
Book
Page
Taney
7/31/78
248
16
; and
 
 
 

Whereas, the Thirtieth Supplemental Indenture has been filed or recorded in the following counties in the State of Tennessee:
County
Date Filed
for Record
Book
Page
Shelby
7/31/78
N4
8804
Tipton
7/31/78
426
85
; and
 
 
 

Whereas, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and
Whereas, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:




Series
Principal
Amount
Issued
Principal
Amount
Outstanding
3⅛% Series due 1974
$30,000,000
None
2⅞% Series due 1977
11,000,000
None
3⅛% Series due 1978
7,500,000
None
2⅞% Series due 1979
8,700,000
$ 8,700,000
2⅞% Series due 1980
6,000,000
6,000,000
3⅝% Series due 1981
8,000,000
8,000,000
3½% Series due 1982
15,000,000
15,000,000
4¼% Series due 1983
18,000,000
None
3¼% Series due 1984
7,500,000
7,500,000
3⅜% Series due 1985
18,000,000
18,000,000
5⅝% Series due 1989
15,000,000
None
4⅞% Series due 1991
12,000,000
12,000,000
4⅜% Series due 1993
15,000,000
15,000,000
4⅝% Series due 1995
25,000,000
25,000,000
5¾% Series due 1996
25,000,000
25,000,000
5⅞ % Series due 1997
30,000,000
30,000,000
7⅜% Series due 1998
15,000,000
15,000,000
9¼ % Series due 1999
25,000,000
25,000,000
9⅝% Series due 2000
25,000,000
25,000,000,
7⅝% Series due 2001
30,000,000
30,000,000
8 % Series due August 1, 2001
30,000,000
30,000,000
7¾% Series due 2002
35,000,000
35,000,000
7½% Series due December 1, 2002
15,000,000
15,000,000
8 % Series due 2003
40,000,000
40,000,000
8⅛% Series due December 1, 2003
40,000,000
40,000,000
10½% Series due 2004
40,000,000
40,000,000
9¼% Series due November 1, 1981
60,000,000
60,000,000
10⅛% Series due July 1, 2005
40,000,000
40,000,000
9⅛% Series due December 1, 2007
75,000,000
75,000,000
9⅞% Series due July 1, 2008
75,000,000
75,000,000
 
 
 
which bonds are also hereinafter sometimes called bonds of the First through Thirtieth Series, respectively; and
Whereas, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
Whereas, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations or




restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
Whereas, the Company now desires to create a new series of bonds and (pursuant to the provisions of Section 120 of the Mortgage) to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
Whereas, the execution and delivery by the Company of this Thirty-first Supplemental Indenture, and the terms of the bonds of the Thirty-first Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
Now, Therefore, This Indenture Witnesseth:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modifications made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto John W. Flaherty and (to the extent of its legal capacity to hold the same for the purposes hereof) to Morgan Guaranty Trust Company of New York, as Trustees under the Mortgage, and to their successor or successors in said trust, and to them and their successors and assigns forever, all property, real, personal or mixed, of any kind or nature acquired by the Company after the date of the execution and delivery of the Mortgage (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned (all such property being situated in the counties and states hereinabove listed) or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Thirty-first Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all street and interurban railway and transportation lines and systems, terminal systems and facilities; all bridges, culverts, tracks, railways, sidings, spurs, wyes, roadbeds, trestles and viaducts; all overground and underground trolleys and feeder wires; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose




including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
Together With all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
It is Hereby Agreed by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Mortgage, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and by the Mortgage and as fully embraced within the lien hereof and the lien of the Mortgage, as heretofore supplemented, as if such property, rights and franchises were now owned by the Company and were specifically described herein or in the Mortgage and conveyed hereby or thereby.
Provided That the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Thirty-first Supplemental Indenture and from the lien and operation of the Mortgage, as heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or covenanted so to be; the Company’s contractual rights or other interest in or with respect to tires not owned by the Company; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; (7) the electric distribution system of the Company in the municipality of Junction City, Louisiana (as the same may be now or hereafter constituted) and in the environs of such municipality within the State of Louisiana, and all renewals, replacements, extensions and additions to such electric distribution system now owned or hereafter acquired; (8) the properties heretofore sold or in the process of being sold by the Company and heretofore released from the Mortgage and Deed of Trust dated as of October 1, 1926 from Arkansas Power & Light Company to Guaranty Trust Company of New York, trustee, and specifically described in a release instrument executed by Guaranty Trust Company of New York, as trustee, dated October 13, 1938, which release has heretofore been delivered by the said trustee to the Company and recorded by the Company in the office of the Recorder for Garland County, Arkansas, in Record Book 227, Page 1, all of said properties being located in Garland County, Arkansas; and (9) any




property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage, as heretofore supplemented, and this Thirty-first Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or’both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
To Have and To Hold all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto John W. Flaherty and (to the extent of its legal capacity to hold the same for the purposes hereof) to Morgan Guaranty Trust Company of New York, as Trustees, and their successors and assigns forever.
In Trust Nevertheless, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Thirty-first Supplemental Indenture being supplemental to the Mortgage.
And It Is Hereby Covenanted by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors in the trust in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed.
The Company further convenants and agrees to and with the Trustees and their successors in said trust under the Mortgage, as follows:


ARTICLE I

Thirty-first Series Of Bonds

Section 1. There shall be a series of bonds designated “10¼% Series due February 1, 2009” (herein sometimes called the “Thirty-first Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Thirty-first Series (which shall be initially issued in the aggregate principal amount of $60,000,000) shall mature on February 1, 2009, shall be issued as fully registered bonds in the denomination of One Thousand Dollars and, at the option of the Company, in any multiple or multiples of One Thousand Dollars (the exercise of such option to be evidenced by the execution and delivery thereof), shall bear interest at the rate of 10¼% per annum, payable semi-annually on February 1 and August 1 of each year, shall be dated as in Section 10 of the Mortgage provided, and the principal of and interest on each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.





(I) Bonds of the Thirty-first Series shall be redeemable either at the option of the Company or pursuant to the requirements of the Mortgage in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed at least 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
General Redemption Prices
If redeemed during 12 months period ending January 31,

1980
111.19%
1990
107.33%
2000
103.48%
1981
110.80%
1991
106.95%
2001
103.09%
1982
110.42%
1992
106.56%
2002
102.70%
1983
110.03%
1993
106.18%
2003
102.32%
1984
109.65%
1994
105.79%
2004
101.93%
1985
109.26%
1995
105.40%
2005
101.55%
1986
108.88%
1996
105.02%
2006
101.16%
1987
108.49%
1997
104.63%
2007
100.78%
1988
108.10%
1998
104.25%
2008
100.39%
1989
107.72%
1999
103.86%
2009
100.00%
in each case together with accrued interest to the date fixed for redemption; provided, however, that none of the bonds of the Thirty-first Series shall be redeemed at said general redemption prices prior to February 1, 1984 if such redemption is for the purpose or in anticipation of refunding such bond through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 10.2211% per annum.
(II) Bonds of the Thirty-first Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash delivered to or deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 3 of the Third Supplemental Indenture or of Section 2 hereof or with the Proceeds of Released Property at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
Special Redemption Prices
If redeemed during 12 months period ending January 31,
1980
100.94%
1990
100.85%
2000
100.62%
1981
100.93%
1991
100.84%
2001
100.59%
1982
100.93%
1992
100.82%
2002
100.54%
1983
100.92%
1993
100.81%
2003
100.50%
1984
100.91%
1994
100.79%
2004
100.45%
1985
100.91%
1995
100.77%
2005
100.39%
1986
100.90%
1996
100.74%
2006
100.33%
1987
100.89%
1997
100.72%
2007
100.26%
1988
100.88%
1998
100.69%
2008
100.18%
1989
100.87%
1999
100.66%
2009
100.00%





in each case together with accrued interest to the date fixed for redemption; provided, however, that if, in the case of redemption of bonds of the Thirty-first Series by the application of cash delivered to the Trustee pursuant to the provisions of Section 2 hereof, the date fixed for such redemption shall be prior to January 1 of the calendar year in which such delivery of cash shall become due under the provisions of said Section 2, bonds of the Thirty-first Series shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption.
(III) At the option of the registered owner, any bonds of the Thirty-first Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.
Bonds of the Thirty-first Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York.
Upon any exchange or transfer of bonds of the Thirty-first Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of said Series.

ARTICLE II

Sinking or Improvement Fund for Bonds
of the Thirty-first Series

Section 2. The Company covenants that, so long as any of the bonds of the Thirty-first Series shall remain Outstanding, it will, on or before October 1, 1980, and on or before October 1 of each year thereafter to and including the year 2008, deliver to the Corporate Trustee:

(A) An Officers’ Certificate which shall state:

(a) the greatest principal amount of all bonds of the Thirty-first Series prior to January 1, of such year at any one time Outstanding;

(b) the aggregate principal amount of all bonds of the Thirty-first Series retired prior to the date of such Officers’ Certificate pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property, or pursuant to the provisions of Section 64 of the Mortgage;

(c) the aggregate principal amount of bonds, the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Thirty-first Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;




(d) the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;

(e) the amount which is 1% of the amount stated pursuant to clause (d) above; and

(f) (i) an aggregate principal amount of bond(s) or fraction of a bond, not to exceed $60,000 principal amount for any such year, the authentication and delivery of which the Company has theretofore waived in compliance with Section 2 of the Fourth Supplemental Indenture upon the basis of Property Additions, which waiver or waivers shall not theretofore have been used as a credit under this clause (i); plus (ii) an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Thirty-first Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise provided) if the Company elects to make its right to the authentication and delivery of such bond(s) or fraction of a bond the basis of a credit under this Section.

(B) An amount in cash and/or principal amount of bonds of the Thirty-first Series equivalent to the amount stated in the Officers’ Certificate (due on or before October 1 of such year) provided for by this Section pursuant to the requirements of clause (e) of subdivision (A) of this Section; provided, however, that, against the amount of cash or bonds payable or deliverable pursuant to this paragraph (B), there shall be credited the principal amount of the Bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.

Such cash together with any bonds of the Thirty-first Series delivered to the Corporate Trustee under the provisions of this Section shall be dealt with as provided for by this Section.
Notwithstanding any other provisions of this Thirty-first Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on October 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the Thirty‑first Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on October 1 of the then current year or of a subsequent year, may be from time to time withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivision (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Thirty-first Series shall be made the basis of the withdrawal of cash deposited under this Section; and provided further, that no bonds of any series other than the Thirty-first Series shall be purchased or redeemed with cash deposited under the provisions of this Section and that no bonds of the Thirty-first Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date 40 days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost); and provided further, that the Company may not deposit cash prior to February 1, 1984 in anticipation of the requirements of this Section if the cash so deposited represents borrowed funds, or is in anticipation of funds to be borrowed, having an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 10.2211% per annum.




In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions of the Mortgage relating to such authentication and delivery, except that the Company shall not be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as are described in subdivisions (1), (2), (6) and (8) of Section 28 of the Mortgage.
So long as any bonds of the Thirty-first Series shall remain Outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under this Section.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Thirty-first Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I) any cash deposited under the provisions of Section 40 of the Mortgage or under Section 2 of the First through Fifteenth and Seventeenth through Thirtieth Supplemental Indentures or under this Section shall be deemed to be Funded Cash;
(II)      any bonds of the First Series delivered to the Corporate Trustee under the provisions of Section 40 of the Mortgage and any bonds of the Second through Thirtieth Series delivered to the Corporate Trustee under the provisions of Section 2 of the First through Fifteenth and Seventeenth through Thirtieth Supplemental Indentures, respectively, and any bonds of the Thirty-first Series delivered to the Corporate Trustee under the provisions of this Section shall, after such delivery, be deemed to have been retired by the use of Funded Cash; and
(III)      with respect to all credits taken under Section 40 of the Mortgage, or Section 2 of the First through Fifteenth and Seventeenth through Thirtieth Supplemental Indentures or under this Section on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that a credit has been taken under the Mortgage, as supplemented, on the basis thereof.
Any bonds issued under the Mortgage, delivered to, deposited with or purchased or redeemed by, the Corporate Trustee pursuant to the provisions of this Section shall forthwith be cancelled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds of the Thirty-first Series purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA) the aggregate cost of principal, interest, brokerage and premium, if any, on all bonds theretofore or then to be purchased and/or redeemed pursuant to the provisions of this Section:
after deducting therefrom




(BB) the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.


ARTICLE III

Maintenance and Replacement Fund Covenant-Other Related
Provisions of the Mortgage-Dividend Covenant

Section 3. (I) The Company covenants and agrees that the provisions of subsection (I) of Section 39 of the Mortgage shall remain in full force and effect so long as any bonds of the Thirty-first Series shall remain Outstanding.

So long as any bonds of the Thirty-first Series shall remain Outstanding, no credit shall be given pursuant to the provisions of clause (6) or clause (d) of subsection (I) of Section 39 of the Mortgage for expenditures for gross additions to automotive equipment of the Company except for net cash expenditures for such automotive equipment.
Clause (e) of subsection (II) of Section 4 of the Mortgage, clause (6) and clause (e) of Section 5 of the Mortgage and Section 29 of the Mortgage, as heretofore amended, are hereby amended by inserting therein the words “and Thirty-first Series” after the words “and Thirtieth Series” each time such words occur therein.
So long as any bonds of the Thirty-first Series shall remain Out-standing, in each Net Earning Certificate made pursuant to Section 7 of the Mortgage there shall be included in operating expenses for the twelve (12) months period with respect to which such certificate is made, (i) an amount if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period, and (ii) an amount, if any (not otherwise included), equal to the provisions made by the Company out of income during such period for depreciation and retirement of property com-prised in or appertaining to the electric, gas, steam and/or hot water systems covered by the Mortgage pursuant to any final order or orders of the Arkansas Public Service Commission or other regulatory au-thority of the State of Arkansas having jurisdiction; provided, however, that the aggregate of the amounts included in such operating expenses corresponding with the gross expenditures referred to in clause (2) of subsection (I) of Section 39 of the Mortgage for such period and the provisions (whether or not otherwise included) referred to in subdivision (ii) above shall not exceed for such period 20% of the Electric, Gas, Steam and Hot Water Adjusted Gross Operating Revenues of the Company.
(II)      Subsection (II) of Section 3 of the Third Supplemental Indenture is hereby amended by inserting the words “or Thirty-first Series”, after the words “or Thirtieth Series” each time such words occur therein; provided, however, that upon the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture, the Company shall no longer be required to file any Officers’ Certificate of Cumulative Excesses but any amounts available to be credited pursuant to the provisions of clauses (2), (3), (4), (5) and/or (6) of subsection (I) of Section 39 of the Mortgage and which were held in reserve pursuant to the Officers’ Certificate of Cumulative Excesses filed in the calendar year 1959 shall be deemed to have been made the basis of credits under said subsection (I) of said Section 39 of the Mortgage unless the amounts held in reserve pursuant to the latest Officers’ Certificate of Cumulative Excesses total a lesser aggregate amount in which case only such lesser aggregate amount shall be deemed to have been made the basis of




credits under said subsection (I) of said Section 39 of the Mortgage. Any excess of cash deposited solely pursuant to the provisions of subsection (II) of Section 3 of the Third Supplemental Indenture plus the amount held in reserve pursuant to the latest Officers’ Certificate of Cumulative Excesses over the amount formally held in reserve pursuant to the Officers’ Certificate of Cumulative Excesses filed in the calendar year 1959 shall, upon the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture, no longer be deemed to have been made the basis of credits under subsection (I) of Section 39 of the Mortgage or to be Funded Cash.
(III)      The Company covenants that, so long as any of the bonds of the Thirty-first Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to January 31, 1979 (other than any dividend declared by the Company on or before January 31, 1979 for payment on or before February 28, 1979), exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from retained earnings to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to January 31, 1979 to retained earnings, (b) $62,000,000, and (c) such additional amount as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.
For the purpose of this subsection (III) the aggregate amount credited subsequent to January 31, 1979 to retained earnings shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to retained earnings applicable to the period prior to January 31, 1979, including, but not limited to, charges to retained earnings for write-offs or write-downs of book values of assets owned by the Company on January 31, 1979. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to January 31, 1979, amounts equal to the sum of (1) an amount, if any (not otherwise deducted), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period and (2) the Company’s provisions during such period for depreciation and retirement of property (but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this subsection (III), shall not be less than the aggregate of (i) the amounts required to be stated for such period in the Officers’ Certificates of Maintenance and Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 (as in effect at the time the provisions were required to be met) of the Mortgage less the aggregate amounts, if any, stated for such period in such Officers’ Certificates of Maintenance and Replacements as permitted by the provisions of subdivision (2) of said subsection (I), including proportionate amounts calculated as provided in said subdivisions (1) and (2) (as in effect at the time the calculation is required to be made) for any portion of the period elapsed since January 31, 1979, not theretofore included in any Officers’ Certificates of Maintenance and Replacements plus (ii), unless the amendment of Section 39 of the Mortgage as permitted by Section 5 of the Tenth Supplemental Indenture has been made, the amount of the excess stated in the Officers’ Certificate of Cumulative Excesses most recently filed with the Corporate Trustee pursuant to subsection (II) of Section 3 of the Third Supplemental Indenture applicable to the period subsequent to January 31, 1979, including




proportionate amounts calculated in the manner provided in said subsection (II) for any portion of the period subsequent to January 31, 1979, not theretofore included in such Officers’ Certificate of Cumulative Excesses.
For the purpose of this subsection (III) the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the depreciation reserve account through charges to operating revenue deductions, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Energy Regulatory Commission.


ARTICLE IV

Amendment of Section 5 of the Tenth Supplemental Indenture

Section 4. Section 5 of the Tenth Supplemental Indenture is hereby amended by substituting the words “so long as any bonds of the Eleventh through Thirty-first Series remain Outstanding” for the words “so long as any bonds of the Eleventh through Thirtieth Series remain Outstanding” and by substituting the words “all bonds of the First through Thirty-first Series” for the words “all bonds of the First through Thirtieth Series” each time said words appear in Section 5 of the Tenth Supplemental Indenture.


ARTICLE V
Amendment of Section 7 of the Mortgage

Section 5. Effective with and applicable to the application to the Corporate Trustee for the authentication and delivery of the first series of bonds created after February 28, 1979, clause (10) of Section 7 of the Mortgage is hereby amended to read as follows:

“(10) the amount, if any, by which the aggregate of (a) such other income (net) and (b) that portion of the amount required to be stated in such certificate by clause (7) of this Section which, in the opinion of the signers, is directly derived from the operations of property (other than paving, grading and other improvements to, under or upon public highways, bridges, parks or other public properties of analogous character) not subject to the Lien of this Indenture at the date of such certificate, exceeds eleven per centum (11%) of the sum required to be stated by clause (9) of this Section; provided, however, that in computing the foregoing, there may be used such per centum greater than eleven (11%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935; and provided further, that if the amount required to be stated in such certificate by clause (7) of this Section includes revenues from the operation of property not subject to the Lien of this Indenture, there shall be included in the calculation to be made pursuant to this clause (10) such reasonable interdepartmental or interproperty revenues and expenses between the Mortgaged and Pledged Property and the property not subject to the Lien hereof as shall be allocated to such respective properties by the Company; and”.





ARTICLE VI

Miscellaneous Provisions

Section 6. Section 55 of the Mortgage, as heretofore amended by the First through Fifteenth and Seventeenth through Thirtieth Supplemental Indentures, is hereby amended to insert the words “and subject to the provisions of Section 2 of the Thirty-first Supplemental Indenture dated as of February 1, 1979”, after the words “and subject to the provisions of Section 2 of the Thirtieth Supplemental Indenture dated as of July 1, 1978”.

Section 7. Without any consent or other action by the holders of the bonds of the Thirty-first Series or any subsequent series issued under the Mortgage, the Company reserves the right to amend the Mortgage, as supplemented, so as to eliminate the requirements of Section 64 of the Mortgage, as supplemented.

Section 8. Subject to the amendments provided for in this Thirty-first Supplemental Indenture, the terms defined in the Mortgage and the First through Thirtieth Supplemental Indentures shall, for all purposes of this Thirty-first Supplemental Indenture, have the meanings specified in the Mortgage and the First through Thirtieth Supplemental Indentures.

Section 9. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage and in the First through Thirtieth Supplemental Indentures set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Thirty-first Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Thirty-first Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Thirty-first Supplemental Indenture.
Section 10. Whenever in this Thirty-first Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Thirty-first Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 11. Nothing in this Thirty-first Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Thirty-first Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Thirty-first Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding under the Mortgage.





Section 12. This Thirty-first Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 13. It is the intention and it is hereby agreed that, so far as concerns the portion of the Mortgaged and Pledged Property, if any, which may at any time be situated within the State of Louisiana, the general language of conveyance contained in this Thirty-first Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as said Louisiana property is concerned, this Thirty-first Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage, and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 14. This Thirty-first Supplemental Indenture shall be construed in accordance with and governed by the laws of the State of New York.





In Witness Whereof, Arkansas Power & Light Company has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and Morgan Guaranty Trust Company of New York has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Trust Officers, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Trust Officers for and in its behalf, and John W. Flaherty has hereunto set his hand and affixed his seal, all in The City of New York, as of the day and year first above written.
Arkansas Power & Light Company
[Corporate Seal]
By /s/ Jerry L. Maulden
Vice President
Attest:

/s/ Allen Mebane
Assistant Secretary

Executed, sealed and delivered by ARKANSAS
POWER & LIGHT COMPANY in the presence of:

/s/ D. E. Matthews

/s/ John M. Stuart
Morgan Guaranty Trust Company
of New York, As Trustee
[Corporate Seal]
By /s/ D. G. Hope
Trust Officer
Attest:

/s/ Thomas R. Bowen
Assistant Secretary

John W. Flaherty, As Co-Trustee [l.s.]
/s/ John W. Flaherty

Executed, sealed and delivered by Morgan
Guaranty Trust Company of New York
and John W. Flaherty in the presence of:

/s/ H. G. Chin

/s/ P. J. Conroy


    





State of New York County of New York
} ss.:

On this 31st day of January, 1979, before me, Morton Barad, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared in person the within named Jerry L. Maulden and Allen Mebane, to me personally well known, who stated that they were a Vice President and an Assistant Secretary, respectively, of Arkansas Power & Light Company, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 31st day of January, 1979, before me personally came Jerry L. Maulden, to me known, who, being by me duly sworn, did depose and say that he resides at 5400 Durham Drive, New Orleans, Louisiana; that he is a Vice President of Arkansas Power & Light Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
On the 31st day of January, 1979, before me appeared Jerry L. Maulden, to me personally known, who, being by me duly sworn, did say that he is a Vice President of Arkansas Power & Light Company, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged.said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Morton Barad
MORTON BARAD
Notary Public, State of New York
No. 41-5170980
Certs. filed in Bronx, Kings, Nassau,
New York and Westchester Cos.
Qualified in Queens County
Commission Expires March 30, 1980





State of New York County of New York
} ss.:

On this 31st day of January, 1979, before me, Maureen McShane, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared D. G. Hope and Thomas R. Bowen, to me personally well known, who stated that they were a Trust Officer and an Assistant Secretary, respectively, of Morgan Guaranty Trust Company of New York, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation; and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On this 31st day of January, 1979, before me personally came D. G. Hope, to me known, who, being by me duly sworn, did depose and say that he resides at 465 Broadway, Hastings-On-Hudson, New York; that he is a Trust Officer of Morgan Guaranty Trust Company of New York, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
On this 31st day of January, 1979, before me appeared D. G. Hope, to me personally known, who, being by me duly sworn, did say that he is a Trust Officer of Morgan Guaranty Trust Company of New York, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of .said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Maureen McShane

MAUREEN MCSHANE
Notary Public, State of New York
No. 24-4649500
Qualified in Kings County
Certificate Filed in New York County
Commission Expires March 30, 1979





State of New York
ss.:
County of New York

On this 31st day of January, 1979, before me, Maureen McShane, the undersigned officer, personally appeared John W. Flaherty, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained.
On the 31st day of January, 1979, before me personally appeared John W. Flaherty, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
In Witness Whereof, I hereunto set my hand and official seal.
[Notarial Seal]
/s/ Maureen McShane

MAUREEN MCSHANE
Notary Public, State of New York
No. 24-4649500
Qualified in Kings County
Certificate Filed in New York County
Commission Expires March 30, 1979







Exhibit 4(c)1

ARKANSAS POWER & LIGHT COMPANY

to

MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
(formerly Guaranty Trust Company of New York)

and

JOHN W. FLAHERTY
(successor to Henry A. Theis, Herbert E. Twyeffort and
Grainger S. Greene)

and

(as to property, real or personal, situated or being in Missouri)

THE BOATMEN’S NATIONAL BANK OF ST. LOUIS
(successor to Marvin A. Mueller)
As Trustees under Arkansas Power & Light Company’s Mortgage and Deed of
Trust, dated as of October 1, 1944
    
Thirty-ninth Supplemental Indenture
Providing among other things for
First Mortgage Bonds, Pollution Control Series A
(Forty-fourth Series)
    

Dated as of December 1, 1985





THIRTY-NINTH SUPPLEMENTAL INDENTURE
INDENTURE , dated as of December 1, 1985, between Arkansas Power & Light Company, a corporation of the State of Arkansas, whose post office address is First Commercial Building, Capitol Avenue and Broadway, Little Rock, Arkansas 72201 (hereinafter sometimes called the “Company”), and Morgan Guaranty Trust Company of New York (formerly Guaranty Trust Company of New York), a corporation of the State of New York, whose post office address is 23 Wall Street, New York, New York 10015 (hereinafter sometimes called the “Corporate Trustee”), and John W. Flaherty (successor to Henry A. Theis, Herbert E. Twyeffort and Grainger S. Greene), whose post office address is 805 Harding Street, Westfield, New Jersey 07090 and (as to property, real or personal, situated or being in Missouri) The Boatmen’s National Bank of St. Louis, a national banking association existing under the laws of the United States of America (successor to Marvin A. Mueller), whose post office address is The Boatmen’s Tower, 100 North Broadway, Box 236, St. Louis, Missouri 63166, (said John W. Flaherty being hereinafter sometimes called the “Co-Trustee”, and The Boatmen’s National Bank of St. Louis being hereinafter sometimes called the “Missouri Co-Trustee”, and the Corporate Trustee, the Co-Trustee and the Missouri Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of October 1, 1944 (hereinafter sometimes called the “Mortgage”), which Mortgage was executed and delivered by the Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this indenture (hereinafter called the “Thirty-ninth Supplemental Indenture”) being supplemental thereto.
Whereas, the Mortgage was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of July 7, 1949, was executed by the Company appointing Herbert E. Twyeffort as Co-Trustee in succession to Henry A. Theis (resigned) under the Mortgage, and by Herbert E. Twyeffort accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, an instrument, dated as of March 1, 1960, was executed by the Company appointing Grainger S. Greene as Co-Trustee in succession to Herbert E. Twyeffort (resigned) under the Mortgage, and by Grainger S. Greene accepting said appointment, and said instrument was appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, by the Twenty-first Supplemental Indenture mentioned below, the Company, among other things, appointed John W. Flaherty as Co-Trustee in succession to Grainger S. Greene (resigned) under the Mortgage, and John W. Flaherty accepted said appointment; and
Whereas, by the Thirty-third Supplemental Indenture mentioned below, the Company, among other things, appointed Marvin A. Mueller as Missouri Co-Trustee, and Marvin A. Mueller accepted said appointment; and
Whereas, by the Thirty-fifth Supplemental Indenture mentioned below, the Company, among other things, appointed The Boatmen’s National Bank of St. Louis as Missouri Co‑Trustee in succession to Marvin A. Mueller (resigned) under the Mortgage, and The Boatmen’s National Bank of St. Louis accepted said appointment; and
Whereas, by the Mortgage the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be




necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
Whereas, the Company executed and delivered to the Trustees the following supplemental indentures:
Designation
Dated as of
First Supplemental Indenture
July 1, 1947
Second Supplemental Indenture
August 1, 1948
Third Supplemental Indenture
October 1, 1949
Fourth Supplemental Indenture
June 1, 1950
Fifth Supplemental Indenture
October 1, 1951
Sixth Supplemental Indenture
September 1, 1952
Seventh Supplemental Indenture
June 1, 1953
Eighth Supplemental Indenture
August 1, 1954
Ninth Supplemental Indenture
April 1, 1955
Tenth Supplemental Indenture
December 1, 1959
Eleventh Supplemental Indenture
May 1, 1961
Twelfth Supplemental Indenture
February 1, 1963
Thirteenth Supplemental Indenture
April 1, 1965
Fourteenth Supplemental Indenture
March 1, 1966
Fifteenth Supplemental Indenture
March 1, 1967
Sixteenth Supplemental Indenture
April 1, 1968
Seventeenth Supplemental Indenture
June 1, 1968
Eighteenth Supplemental Indenture
December 1, 1969
Nineteenth Supplemental Indenture
August 1, 1970
Twentieth Supplemental Indenture
March 1, 1971
Twenty-first Supplemental Indenture
August 1, 1971
Twenty-second Supplemental Indenture
April 1, 1972
Twenty-third Supplemental Indenture
December 1, 1972
Twenty-fourth Supplemental Indenture
June 1, 1973
Twenty-fifth Supplemental Indenture
December 1, 1973
Twenty-sixth Supplemental Indenture
June 1, 1974
Twenty-seventh Supplemental Indenture
November 1, 1974
Twenty-eighth Supplemental Indenture
July 1, 1975
Twenty-ninth Supplemental Indenture
December 1, 1977
Thirtieth Supplemental Indenture
July 1, 1978
Thirty-first Supplemental Indenture
February 1, 1979
Thirty-second Supplemental Indenture
December 1, 1980
Thirty-third Supplemental Indenture
January 1, 1981
Thirty-fourth Supplemental Indenture
August 1, 1981
Thirty-fifth Supplemental Indenture
February 1, 1982
Thirty-sixth Supplemental Indenture
December 1, 1982
Thirty-seventh Supplemental Indenture
February 1, 1983
Thirty-eighth Supplemental Indenture
December 1, 1984

which supplemental indentures were appropriately filed or recorded in various official records in the States of Arkansas, Missouri and Tennessee; and
Whereas, in addition to the property described in the Mortgage, as heretofore supplemented, the Company has acquired certain other property, rights and interests in property; and




Whereas, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:




Series
Principal
Amount
Issued
Principal
Amount
Outstanding
3 1 / 8 % Series due 1974
$ 30,000,000
None
2 7 / 8 % Series due 1977
11,000,000
None
3 1 / 8 % Series due 1978
7,500,000
None
2 7 / 8 % Series due 1979
8,700,000
None
2 7 / 8 % Series due 1980
6,000,000
None
3 5 / 8 % Series due 1981
8,000,000
None
3 1 / 2 % Series due 1982
15,000,000
None
4 1 / 4 % Series due 1983
18,000,000
None
3 1 / 4 % Series due 1984
7,500,000
None
3 3 / 8 % Series due 1985
18,000,000
None
5 5 / 8 % Series due 1989
15,000,000
None
4 7 / 8 % Series due 1991
12,000,000
$ 12,000,000
4 3 / 8 % Series due 1993
15,000,000
15,000,000
4 5 / 8 % Series due 1995
25,000,000
25,000,000
5 3 / 4 % Series due 1996
25,000,000
25,000,000
5 7 / 8 % Series due 1997
30,000,000
30,000,000
7 3 / 8 % Series due 1998
15,000,000
15,000,000
9 1 / 4 % Series due 1999
25,000,000
25,000,000
9 5 / 8 % Series due 2000
25,000,000
25,000,000
7 5 / 8 % Series due 2001
30,000,000
30,000,000
   8 % Series due August 1, 2001
30,000,000
30,000,000
7 3 / 4 % Series due 2002
35,000,000
35,000,000
7 1 / 2 % Series due December 1, 2002
15,000,000
15,000,000
   8 % Series due 2003
40,000,000
40,000,000
8 1 / 8 % Series due December 1, 2003
$ 40,000,000
40,000,000
10 1 / 2 % Series due 2004
40,000,000
40,000,000
9 1 / 4 % Series due November 1, 1981
60,000,000
None
10 1 / 8 % Series due July 1, 2005
40,000,000
40,000,000
9 1 / 8 % Series due December 1, 2007
75,000,000
75,000,000
9 7 / 8 % Series due July 1, 2008
75,000,000
75,000,000
10 1 / 4 % Series due February 1, 2009
60,000,000
60,000,000
16 1 / 8 % Series due December 1, 1986
70,000,000
70,000,000
4 1 / 4 % Series due September 1, 1983
1,202,000
None
5 1 / 2 % Series due January 1, 1988
598,310
373,310
5 5 / 8 % Series due May 1, 1990
1,400,000
900,000
6 1 / 4 % Series due December 1, 1996
3,560,000
2,560,000
9 3 / 4 % Series due September 1, 2000
4,600,000
3,600,000
8 3 / 4 % Series due March 1, 1998
9,800,000
7,800,000
17 3 / 8 % Series due August 1, 1988
75,000,000
75,000,000
16 1 / 2 % Series due February 1, 1991
80,000,000
80,000,000
13 3 / 8 % Series due December 1, 2012
75,000,000
75,000,000
13 1 / 4 % Series due February 1, 2013
25,000,000
25,000,000
14 1 / 4 % Series due December 1, 2014
100,000,000
100,000,000





which bonds are also hereinafter sometimes called bonds of the First through Forty-third Series, respectively; and
Whereas, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
Whereas, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
Whereas, the Company now desires to create a new series of bonds and (pursuant to the provisions of Section 120 of the Mortgage) to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
Whereas, the execution and delivery by the Company of this Thirty-ninth Supplemental Indenture, and the terms of the bonds of the Forty-fourth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
Now, Therefore, This Indenture Witnesseth:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modifications made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto The Boatmen’s National Bank of St. Louis (as to property, real or personal, situated or being in Missouri) and John W. Flaherty (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) to Morgan Guaranty Trust Company of New York, as Trustees under the Mortgage, and to their successor or successors in said trust, and to them and their successors and assigns forever, all property, real, personal or mixed, of any kind or nature acquired by the Company after the date of the execution and delivery of the Mortgage (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), now owned (all such property being situated in the counties and states hereinabove listed) or, subject to the provisions of Section 87 of the




Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Thirty-ninth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all street and interurban railway and transportation lines and systems, terminal systems and facilities; all bridges, culverts, tracks, railways, sidings, spurs, wyes, roadbeds, trestles and viaducts; all overground and underground trolleys and feeder wires; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
Together With all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
It Is Hereby Agreed by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Mortgage, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and by the Mortgage and as fully embraced within the lien hereof and the lien of the Mortgage, as heretofore supplemented, as if such property, rights and franchises were now owned by the Company and were specifically described herein or in the Mortgage and conveyed hereby or thereby.
Provided That the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Thirty-ninth Supplemental Indenture and from the lien and operation of the Mortgage, as heretofore supplemented, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any street cars, rolling stock, trolley coaches, motor coaches,




buses, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; street cars, rolling stock, trolley coaches, motor coaches, buses, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage, as heretofore supplemented, or covenanted so to be; the Company’s contractual rights or other interest in or with respect to tires not owned by the Company; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; (7) the electric distribution system of the Company in the municipality of Junction City, Louisiana (as the same may be now or hereafter constituted) and in the environs of such municipality within the State of Louisiana, and all renewals, replacements, extensions and additions to such electric distribution system now owned or hereafter acquired; (8) the properties heretofore sold or in the process of being sold by the Company and heretofore released from the Mortgage and Deed of Trust dated as of October 1, 1926 from Arkansas Power & Light Company to Guaranty Trust Company of New York, trustee, and specifically described in a release instrument executed by Guaranty Trust Company of New York, as trustee, dated October 13, 1938, which release has heretofore been delivered by the said trustee to the Company and recorded by the Company in the office of the Recorder for Garland County, Arkansas, in Record Book 227, Page 1, all of said properties being located in Garland County, Arkansas; and (9) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage, as heretofore supplemented, and this Thirty-ninth Supplemental Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that any or all of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
To Have and To Hold all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto The Boatmen’s National Bank of St. Louis (as to property, real or personal, situated or being in Missouri), and unto John W. Flaherty (but, as to property, real or personal, situated or being in Missouri, only to the extent of his legal capacity to hold the same for the purposes hereof) and (to the extent of its legal capacity to hold the same for the purposes hereof) unto Morgan Guaranty Trust Company of New York, as Trustees, and their successors and assigns forever.
In Trust Nevertheless, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as heretofore supplemented, this Thirty-ninth Supplemental Indenture being supplemental to the Mortgage.
And It Is Hereby Covenanted by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as heretofore supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors in the trust in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successors in said trust under the Mortgage, as follows:






ARTICLE I

Forty-Fourth Series of Bonds

Section 1. There shall be a series of bonds designated “Pollution Control Series A” (herein sometimes called the “Forty-fourth Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Forty-fourth Series (which shall be initially issued in the aggregate principal amount of $128,800,000) shall mature on December 1, 2015, shall be issued as fully registered bonds in the denomination of One Hundred Dollars and, at the option of the Company, in any multiple or multiples of One Hundred Dollars (the exercise of such option to be evidenced by the execution and delivery thereof), shall be dated as in Section 10 of the Mortgage provided, and the principal of, and, to the extent permitted by the Mortgage, interest on any overdue principal of, each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.

(I) The bonds of the Forty-fourth Series shall be issued and delivered to, and registered in the name of, the trustee under the Trust Indenture, dated as of December 1, 1985 (hereinafter called the “Pope Indenture”), of Pope County, Arkansas (hereinafter called the “County”) relating to its Pollution Control Revenue Bonds, Series 1985 (Arkansas Power & Light Company Project) (hereinafter called the “Pope Bonds”), in order to evidence in part the Company’s obligation to make certain purchase price payments under the Installment Sale Agreement, dated as of December 1, 1985, between the County and the Company.

The obligation of the Company to make any payment of principal of the bonds of the Forty-fourth Series, whether at maturity, upon redemption or otherwise, shall be reduced by the amount of any reduction under the Pope Indenture of the amount of the corresponding payment required to be made by the County thereunder in respect of the principal of the Pope Bonds. The Corporate Trustee may conclusively presume that the obligation of the Company to pay the principal of the bonds of the Forty-fourth Series as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the trustee under the Pope Indenture, signed by its President, a Vice President or a Trust Officer, stating that the corresponding payment of principal of the Pope Bonds has become due and payable and has not been fully paid and specifying the amount of funds required to make such payment.
(II) In the event that any Pope Bonds outstanding under the Pope Indenture shall become immediately due and payable pursuant to Section 1002 of the Pope Indenture, upon the occurrence of an Event of Default under Section 1001 (a) or (b) of the Pope Indenture, all bonds of the Forty-fourth Series, then outstanding, shall be redeemed by the Company, on the date such Pope Bonds shall have become immediately due and payable, at the principal amount thereof.

In the event that any Pope Bonds are to be redeemed pursuant to Section 301(b) of the Pope Indenture, bonds of the Forty-fourth Series, in a principal amount equal, as nearly as practicable, to the sum of (i) the principal amount of such Pope Bonds and (ii) eight-twelfths (8/12) of the annual interest due on such Pope Bonds, shall be redeemed by the Company, on the date fixed for redemption of Pope Bonds, at the principal amount thereof.




The Corporate Trustee may conclusively presume that no redemption of bonds of the Forty-fourth Series is required pursuant to this subsection (II) unless and until it shall have received a written notice from the trustee under the Pope Indenture, signed by its President, a Vice President or a Trust Officer, stating that the Pope Bonds have become immediately due and payable pursuant to Section 1002 of the Pope Indenture, upon the occurrence of an Event of Default under Section 1001 (a) or (b) of the Pope Indenture, or that Pope Bonds are to be redeemed pursuant to Section 301(b) of the Thirty-ninth Indenture and specifying the principal amount thereof, as the case may be. Said notice shall also contain a waiver of notice of such redemption by the trustee under the Pope Indenture, as the holder of all the bonds of the Forty‑fourth Series then outstanding.
(III) The Company hereby waives its right to have any notice of redemption pursuant to subsection (II) of this Section 1 state that such notice is subject to the receipt of the redemption moneys by the trustee before the date fixed for redemption. Notwithstanding the provisions of Section 52 of the Mortgage, any such notice under such subsections shall not be conditional.

(IV) At the option of the registered owner, any bonds of the Forty-fourth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, together with a written instrument of transfer wherever required by the Company, duly executed by the registered owner or by his duly authorized attorney, shall (subject to the provisions of Section 12 of the Mortgage) be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.

Bonds of the Forty-fourth Series shall not be transferable except to any successor trustee under the Pope Indenture, any such transfer to be made (subject to the provisions of Section 12 of the Mortgage) at the office or agency of the Company in the Borough of Manhattan, The City of New York.
The Company hereby waives any right to make a charge for any exchange or transfer of bonds of the Forty-fourth Series.
(V) The bonds of the Forty-fourth Series may bear such legends as may be necessary to comply with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or to conform to usage with respect thereto.

ARTICLE II

Miscellaneous Provisions

Section 2. When all bonds of the Twelfth through Forty-third Series are no longer Outstanding, the first paragraph of Section 99 of the Mortgage is amended to read as follows:

Section 99. (a) If any Trustee has or acquires any conflicting interest, as defined by subdivisions (d) of this Section, such Trustee shall within ninety (90) days after ascertaining that it has such conflicting interest, either eliminate such conflicting interest or resign by giving written notice to the Company, but such resignation shall not become effective until the appointment of a successor trustee and such successor’s acceptance of such appointment. The Company covenants to take prompt steps to have a successor appointed in the manner hereinafter provided in Section 102 hereof. Upon giving such notice of resignation, the resigning Trustee shall publish notice thereof once in one newspaper printed in the English language and of general circulation in the Borough of Manhattan, The City of New York. If the resigning Trustee fails to publish such notice within ten (10) days after giving written notice of resignation to the Company, the Company shall publish such notice.




Section 3. When all bonds of the Twelfth through Forty-third Series are no longer Outstanding, the first paragraph of Section 101 of the Mortgage is amended to read as follows:

Section 101. Any Trustee may at any time resign and be discharged of the trusts hereby created by giving written notice to the Company specifying the day upon which such resignation shall take effect and thereafter publishing notice thereof, once in one newspaper printed in the English language and of general circulation in the Borough of Manhattan, The City of New York, and such resignation shall take effect upon the day specified in such notice unless previously a successor trustee shall have been appointed by the bondholders or the Company in the manner hereinafter provided in Section 102 and in such event such resignation shall take effect immediately on the appointment of such successor trustee. This Section shall not be applicable to resignations pursuant to Section 99 hereof.
Section 4. All bonds of the First through Tenth Series being no longer Outstanding, subsection (I) of Section 39 of the Mortgage is amended by deleting said subsection as now in effect, and substituting therefor the following:

“(I)      The Company covenants that, so long as any bonds of the Eleventh through Forty-fourth Series remain Outstanding, it will, within ninety (90) days after the close of the calendar year 1959 and of each calendar year thereafter, file with the Corporate Trustee an Officers’ Certificate (hereinafter called an “Officers’ Certificate of Maintenance and Replacements”), stating the following:
(1) for the calendar year next preceding such filing, the amount which is equal to (x) Five Million Eight Hundred Thousand Dollars ($5,800,000), plus (y) two per centum (2%) of the gross charges to plant account for additions to the depreciable property included in the Mortgaged and Pledged Property, used primarily and principally in the electric, gas, steam and hot water utility business, made subsequent to September 30, 1959, and prior to the beginning of the calendar year next preceding such filing, less (z) two per centum (2%) of the gross credits to plant account for retirement of the depreciable property included in the Mortgaged and Pledged Property, used primarily and principally in the electric, gas, steam and hot water utility business, made subsequent to September 30, 1959, and prior to the beginning of the calendar year next preceding such filing, in each case, excluding from plant account any amounts included in utility plant acquisition adjustment accounts or utility plant adjustment accounts or in any accounts for similar purposes;

(2) the calendar year for which the Officers’ Certificate of Maintenance and Replacements is then being filed;

(3) an amount equal to the aggregate amounts deducted pursuant to the provisions of clause (A) of Section 4 hereof from the Cost or fair value of Property Additions in respect of Funded Property retired less the aggregate amounts added pursuant to the provisions of items (a), (b), (c) and (e) of clause (B) of said Section 4 in any Engineer’s Certificate or Engineer’s Certificates theretofore delivered to the Corporate Trustee pursuant to any of the provisions of this Indenture, which amounts shall not theretofore have been made the basis of a credit under subsection (I) of Section 39 of this Indenture as now or heretofore in effect and which the Company then elects to make the basis of a credit under this subsection (I);

(4) the Cost or fair value to the Company, whichever is less, as shall be stated in an Engineer’s Certificate and/or Independent Engineer’s Certificate delivered to the Corporate




Trustee, of any (gross) Property Additions which are not then Funded Property (without making any of the deductions and additions provided for in subsection (II) of Section 4 hereof) and which Property Additions the Company then elects to make the basis of a credit under this subsection (I);

(5) the principal amount of each bond to the authentication and delivery of which the Company shall then be entitled under the provisions of Section 26 or Section 29 hereof by virtue of compliance with all applicable provisions of said Section 26 or Section 29, as the case may be (except as hereinafter in this Section otherwise provided); and that the Company elects to make its right to the authentication and delivery of such bond the basis of a credit under this subsection (I);

(6) net cash expenditures subsequent to September 30, 1944, for automotive equipment of the Company used (in the operation of the Mortgaged and Pledged Property) in the electric, gas, steam and/or hot water utility business, which expenditures shall not theretofore have been made the basis of a credit under subsection (I) of Section 39 of this Indenture as now or heretofore in effect and which expenditures the Company then elects to make the basis of a credit under this subsection (I);

(7) the amount, if any, required to be stated by clause (8) below in the next preceding Officers’ Certificate of Maintenance and Replacements, if any;

(8) the amount, if any, by which the aggregate of the amounts required to be stated by clauses (2) to (7), both inclusive, above in the certificate then being made exceeds the amount required to be stated by clause (1) above in such certificate; and

(9) the amount, if any, by which the aggregate of the amounts required to be stated in clauses (2) to (7), both inclusive, above by the certificate then being made is less than the amount required to be stated by clause (1) above in such certificate.

The Company covenants to deposit with the Corporate Trustee in cash within ninety (90) days after the close of each such calendar year an amount equal to any amount required to be stated by clause (9) above in the Officers’ Certificate of Maintenance and Replacements required to be filed within such ninety (90) day period.
Any cash delivered to the Corporate Trustee under the provisions of subsection (I) of Section 39 of this Indenture as now or heretofore in effect shall be held by it as part of the Mortgaged and Pledged Property and
(a) may be withdrawn by the Company in an amount equal to the aggregate amounts deducted pursuant to the provisions of clause (A) of Section 4 hereof from the Cost or fair value of Property Additions in respect of Funded Property retired less the aggregate amounts added pursuant to the provisions of items (a), (b), (c) and (e) of clause (B) of said Section 4 in any Engineer’s Certificate or Engineer’s Certificates theretofore delivered to the Corporate Trustee pursuant to any of the provisions of this Indenture, which amounts shall not theretofore have been made the basis of a credit under subsection (I) of Section 39 of this Indenture as now or heretofore in effect and which amounts the Company then elects in an Officers’ Certificate filed with the Corporate Trustee to make the basis of a credit under this subsection (I) against such withdrawal of cash;





(b) may be withdrawn by the Company in an amount equal to the Cost or fair value to the Company whichever is less, as shall be stated in any Engineer’s Certificate or Independent Engineer’s Certificate delivered to the Corporate Trustee, of any (gross) Property Additions which are not then Funded Property (without making any of the deductions or additions provided for in Section 4 hereof) and which Property Additions the Company then elects to make the basis of a credit under this subsection (I) against such withdrawal of cash;

(c) may be withdrawn from time to time by the Company in an amount equal to the principal amount of each bond to the authentication and delivery of which the Company shall then be entitled under the provisions of Section 26 or Section 29 hereof by virtue of compliance with all applicable provisions of said Section 26 or Section 29, as the case may be (except as hereinafter in this Section otherwise provided), and the right to the authentication and delivery of which bonds the Company elects to make the basis of a credit under this subsection (I) against such withdrawal of cash;

(d) may be withdrawn from time to time by the Company in an amount equal to net cash expenditures subsequent to September 30, 1944, for additions to automotive equipment of the Company used (in the operation of the Mortgaged and Pledged Property) in the electric, gas, steam and/or hot water utility business, which expenditures shall not theretofore have been made the basis of a credit under subsection (I) of Section 39 of this Indenture as now or heretofore in effect and which the Company then elects to make the basis of a credit under this subsection (I) against such withdrawal of cash;

(e) may, upon the request of the Company, be used by the Corporate Trustee for the purchase of bonds issued hereunder in accordance with the provisions of Section 55 hereof; or

(f) may, upon the request of the Company, be applied by the Corporate Trustee to the redemption of any bonds issued hereunder which are, by their terms, redeemable before maturity of such series as may be designated by the Company, such redemption to be in the manner and as provided in Article X hereof.

Such moneys shall, from time to time, be paid out or used or applied by the Corporate Trustee, as aforesaid, upon the request of the Company evidenced by a Resolution.
Unless all bonds of the First to Forty-fourth Series, both inclusive, shall have ceased to be Outstanding, any Property Additions which shall have been made the basis of a credit for any purpose under subsection (I) of Section 39 of this Indenture as now or heretofore in effect shall (except as otherwise expressly provided in Section 5 of the Tenth Supplemental Indenture) have the status of Funded Property. Unless all bonds of the First to Forty-fourth Series, both inclusive, shall have ceased to be Outstanding, any election of a credit for any purpose under subsection (I) of Section 39 of this Indenture as now or heretofore in effect based upon the right to the authentication and delivery of any bond or fraction of a bond shall (except as otherwise expressly provided in Section 5 of the Tenth Supplemental Indenture) operate as a waiver by the Company of its right to the authentication and delivery of such bond or fraction of a bond (except as aforesaid) and such bond or fraction of a bond may not thereafter be authenticated and delivered hereunder and (except as aforesaid) any bond or Qualified Lien Bond which has been made the basis of any such right to the authentication and delivery of any bond or fraction of a bond so waived shall be deemed to have been made the basis of a credit under subsection (I) of Section 39 of this Indenture as now or heretofore in effect; provided, however, that if at any time and from time to time after such an election and prior to the time when




all bonds of the First to Forty-fourth Series, both inclusive, shall have ceased to be Outstanding, the Company shall file with the Corporate Trustee an Officers’ Certificate referring to such election and stating:
(i) an amount equal to the aggregate amounts deducted pursuant to the provisions of clause (A) of Section 4 hereof from the Cost or fair value of Property Additions in respect of Funded Property retired less the aggregate amounts added pursuant to the provisions of items (a), (b), (c) and (e) of clause (B) of said Section 4 in any Engineer’s Certificate or Engineer’s Certificates theretofore delivered to the Corporate Trustee pursuant to any of the provisions of this Indenture, which amounts shall not theretofore have been made the basis of a credit under subsection (I) of Section 39 of this Indenture as now or heretofore in effect and which amounts the Company then elects to make the basis of a credit under subsection (I) of Section 39 of this Indenture as now in effect in lieu of an equal principal amount of bonds, the right to the authentication and delivery of which has theretofore been waived pursuant to the provisions of subsection (I) of Section 39 of this Indenture as now or heretofore in effect; or

(ii) the Cost or fair value to the Company whichever is less, as shall be stated in an Engineer’s Certificate or Independent Engineer’s Certificate delivered to the Corporate Trustee of any (gross) Property Additions which are not then Funded Property (without making any of the deductions and additions provided for in subsection (II) of Section 4 hereof) and which Property Additions the Company then elects to make the basis of a credit under this subsection (I) in lieu of an equal principal amount of bonds the right to the authentication and delivery of which has theretofore been waived pursuant to the provisions of subsection (I) of Section 39 of this Indenture as now or heretofore in effect;

then, and in that event, notwithstanding any other provisions of this Indenture, the Company’s waiver made by such election of the right to the authentication and delivery of bonds in the aggregate principal amount specified in the Officers’ Certificate filed pursuant to this provision shall forthwith cease to be effective and the waiver of such right shall no longer be deemed to have been made.
In every case in which any credit under this subsection (I) is, in whole or in part, based upon Property Additions as permitted under clause (4), clause (b) or clause (ii) of this subsection (I), the Company shall comply with all applicable provisions of this Indenture (except subsection (II) of Section 4 hereof) as if such Property Additions were made the basis of an application for the authentication and delivery of bonds thereon (equivalent in principal amount to sixty per centum (60%) of the credit so to be based on such Property Additions), except that in no such case shall the Company be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 28 hereof.
In every case in which any credit under this subsection (I) is to be based in whole or in part upon the right to the authentication and delivery of bonds, as permitted under clause (5) or clause (c) of this subsection (I), the Company shall comply with all applicable provisions of Section 26 or Section 29 hereof, as the case may be, relating to such authentication and delivery, except that in no such case shall the Company be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 28 hereof.
In every case in which any cash under this subsection (I) is, in whole or in part, to be withdrawn on the basis of expenditures as permitted under clause (d) of this subsection (I), there shall be delivered to the Corporate Trustee, an Engineer’s Certificate, made and dated not more than ninety (90) days prior to the date




of the application for such withdrawal of cash, stating the fair value, in the opinion of the signers, of the property for which such expenditures were made.”
Section 5. All bonds of the First through Tenth Series being no longer Outstanding, subdivision (2) of Section 7 of the Mortgage is amended by deleting said subdivision, as now in effect, and substituting therefor the following:

“(2) Its operating expenses, with the principal divisions thereof, including, but without limitation, all expenses and accruals for repairs and maintenance, an amount, if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period and all appropriations out of income for property retirement not only in respect of the Mortgaged and Pledged Property but also in respect of all other property owned by the Company; provided, however, that, in lieu of including in such operating expenses the amounts actually appropriated out of income for retirement of the Mortgaged and Pledged Property used primarily and principally in the electric, gas, steam and/or hot water utility business and of the automotive equipment of the Company used in the operation of such property, there shall be included in such operating expenses an amount for each full calendar month included in such period of twelve (12) consecutive calendar months equal to (i) one-twelfth (1/12th) of Five Million Eight Hundred Thousand Dollars ($5,800,000), plus (ii) one-twelfth (1/12th) of two per centum (2%) of the gross charges to plant account for additions to the depreciable property included in the Mortgaged and Pledged Property, used primarily and principally in the electric, gas, steam and/or hot water utility business, made subsequent to September 30, 1959, and prior to the beginning of the calendar year within which such calendar month is included, less (iii) one-twelfth (1/12th) of two per centum (2%) of the gross credits to plant account for retirement of the depreciable property included in the Mortgaged and Pledged Property, used primarily and principally in the electric, gas, steam and/or hot water utility business, made subsequent to September 30, 1959, and prior to the beginning of the calendar year within which such calendar month is included, in each case, excluding from plant account any amounts included in utility plant acquisition adjustment accounts or utility plant adjustment accounts or in any accounts for similar purposes; provided, further, that the amount so included in such operating expenses in lieu of the amounts actually appropriated out of income for retirement of the Mortgaged and Pledged Property used primarily and principally in the electric, gas, steam and/or hot water utility business and the Company’s automotive equipment used in the operation of such property shall not be less than the amounts so actually appropriated out of income.”
Section 6. The third paragraph of Section 106 of the Mortgage is amended to read in its entirety as follows, such amendment to take effect immediately for the Forty-fourth Series of bonds and all future series of bonds to be issued under the Mortgage:

Bonds and interest obligations for the payment of which and bonds for the redemption of which either (i) moneys in the necessary amount or (ii) (a) direct obligations of the government of the United States of America or (b) obligations guaranteed by the government of the United States of America or (c) securities that are backed by obligations of the government of the United States of America as collateral under an arrangement by which the interest and principal payments on the collateral generally flow immediately through to the holder of the security, which, in any case, are not subject to redemption prior to maturity by anyone other than the holder, the principal of and the interest on which when due, and without any regard to reinvestment thereof, in the opinion of an independent accountant, and, in the opinion of the officers of the Company executing an Officers’ Certificate to that effect, will provide moneys which, together with the moneys, if any, deposited with or held by the Corporate Trustee, shall be sufficient to pay when due the principal of and premium, if any, and interest due and to become due on said bonds or portions thereof on




the redemption date or maturity date thereof, as the case may be, shall have been set apart by or deposited with the Corporate Trustee, with irrevocable direction so to apply the same, subject to the provisions of Section 119 hereof (with or without any additional right given to the holders to surrender their bonds or obtain therefrom payment therefor prior to the redemption date) shall for purposes of satisfying the Lien of this Indenture be deemed to have been paid; provided that in case of redemption the notice requisite to the validity of such redemption shall have been given or arrangements shall have been made insuring to the satisfaction of the Corporate Trustee that the same will be given.
Section 7. Section 55 of the Mortgage, as heretofore amended by the First through Fifteenth, Seventeenth through Thirty-second and Thirty-fourth through Thirty-eighth Supplemental Indentures, is hereby amended to insert the words “and subject to the provisions of Section 2 of the Thirty-ninth Supplemental Indenture dated as of December 1, 1985”, after the words “and subject to the provisions of Section 2 of the Thirty-eighth Supplemental Indenture dated as of December 1, 1984”.

Section 8. Subject to the amendments provided for in this Thirty-ninth Supplemental Indenture, the terms defined in the Mortgage and the First through Thirty-eighth Supplemental Indentures shall, for all purposes of this Thirty-ninth Supplemental Indenture, have the meanings specified in the Mortgage and the First through Thirty-eighth Supplemental Indentures.

Section 9. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage and in the First through Thirty-eighth Supplemental Indentures set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Thirty-ninth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Thirty-ninth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Thirty-ninth Supplemental Indenture.
Section 10. Whenever in this Thirty-ninth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Thirty-ninth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 11. Nothing in this Thirty-ninth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Thirty-ninth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Thirty-ninth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding under the Mortgage.




Section 12. This Thirty-ninth Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 13. It is the intention and it is hereby agreed that, so far as concerns the portion of the Mortgaged and Pledged Property, if any, which may at any time be situated within the State of Louisiana, the general language of conveyance contained in this Thirty-ninth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as said Louisiana property is concerned, this Thirty-ninth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage, and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 14. This Thirty-ninth Supplemental Indenture shall be construed in accordance with and governed by the laws of the State of New York.

In Witness Whereof, Arkansas Power & Light Company has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and Morgan Guaranty Trust Company of New York has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Trust Officers, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Trust Officers for and in its behalf, and John W. Flaherty has hereunto set his hand and affixed his seal, and The Boatmen’s National Bank of St. Louis has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by, one of its Vice Presidents or one of its Trust Officers, and its corporate seal to be attested by one of its Assistant Secretaries or one of its Assistant Trust Officers for and in its behalf, as of the day and year first above written.
[Corporate Seal]
Arkansas Power & Light Company

By:/s/ Michael B. Bemis
Executive Vice President
Attest:

/s/ John J. Harton     
Assistant Secretary

Executed, sealed and delivered by Arkansas
Power & Light Company in the presence of:


/s/ D. E. Matthews     


/s/ John M. Stuart     






[Corporate Seal]
Morgan Guaranty Trust Company
of New York,
As Trustee

By:/s/ J. N. Crean
Trust Officer
Attest:

/s/ M. J. Fahey     
Assistant Secretary
 
/s/ John W. Flaherty [l.s.]
John W. Flaherty
As Co-Trustee
Executed, sealed and delivered by Morgan
Guaranty Trust Company of New York
and John W. Flaherty, in the presence of:


/s/ Nelly Borun     


/s/ Harry H. Hall Jr.     






[Corporate Seal]
The Boatmen’s National Bank
of St. Louis
As Co-Trustee as to property, real or
personal, situated or being in
Missouri


By:/s/ Calvin C. Cole
Vice President
Attest:

/s/ Rolland Hyle     
Trust Officer

Executed, sealed and delivered by The Boatmen’s
National Bank of St. Louis in the presence of:


/s/ Deborah A. Bashir     


/s/ M. Helen Ross     






State of New York
}
ss.:
County of New York

On this 18th day of December, 1985, before me, Warren Rosenthal, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared in person the within named Michael B. Bemis and John J. Harton, to me personally well known, who stated that they were an Executive Vice President and an Assistant Secretary, respectively, of Arkansas Power & Light Company, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 18th day of December, 1985, before me personally came Michael B. Bemis, to me known, who, being by me duly sworn, did depose and say that he resides at 39 River Ridge Circle, Little Rock, Arkansas; that he is an Executive Vice President of Arkansas Power & Light Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
On the 18th day of December, 1985, before me appeared Michael B. Bemis, to me personally known, who, being by me duly sworn, did say that he is an Executive Vice President of Arkansas Power & Light Company, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
 
/s/ Warren Rosenthal
WARREN ROSENTHAL
Notary Public, State of New York
No. 31-4773583
Qualified in New York County
Commission Expires March 30, 1986
[Notarial Seal]





State of New York
}
ss.:
County of New York

On this 17th day of December, 1985, before me, Kam Law, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared J. N. Crean, and M. J. Fahey, to me personally well known, who stated that they were a Trust Officer and an Assistant Trust Officer, respectively, of Morgan Guaranty Trust Company of New York, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation; and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On this 17th day of December, 1985, before me personally came J. N. Crean, to me known, who, being by me duly sworn, did depose and say that he resides at 837 Franklin Turnpike, Allendale, New Jersey 07401; that he is a Trust Officer of Morgan Guaranty Trust Company of New York, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said corporation, and that he signed his name thereto by like authority.
On this 17th day of December, 1985, before me appeared M. J. Fahey, to me personally known, who, being by me duly sworn, did say that she is an Assistant Trust Officer of Morgan Guaranty Trust Company of New York, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and she acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Kam Law
KAM LAW
Notary Public, State of New York
No. 4823386
Qualified in New York County
Commission Expires Mar. 30, 1987






State of New York
}
ss.:
County of New York

On this 17th day of December, 1985, before me, Kam Law, the undersigned officer, personally appeared John W. Flaherty, known to me to be the person whose name is subscribed to the within instrument, and acknowledged that he executed the same for the purposes therein contained.
On the 17th day of December, 1985, before me personally appeared John W. Flaherty, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
In Witness Whereof, I hereunto set my hand and official seal.
[Notarial Seal]
/s/ Kam Law
KAM LAW
Notary Public, State of New York
No. 4823386
Qualified in New York County
Commission Expires Mar. 30, 1987






State of Missouri
}
ss.:
County of St. Louis

On this 13th day of December, 1985, before me, Joy Marie Lincoln, a Notary Public duly commissioned, qualified and acting within and for said County and State, appeared Calvin C. Cole and Rolland Hyle, to me personally well known, who stated that they were a Vice President and a Trust Officer, respectively, of The Boatmen’s National Bank of St. Louis, a corporation, and were duly authorized in their respective capacities to execute the foregoing instrument for and in the name and behalf of said corporation, and further stated and acknowledged that they had so signed, executed and delivered said foregoing instrument for the consideration, uses and purposes therein mentioned and set forth.
On the 13th day of December, 1985, before me personally came Calvin C. Cole, to me known, who, being by me duly sworn, did depose and say that he resides at 1581 Narrows Drive, Ballwin, Missouri 63041; that he is a Vice President of The Boatmen’s National Bank of St. Louis, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
On the 13th day of December, 1985, before me appeared Rolland Hyle, to me personally known, who, being by me duly sworn, did say that he is a Trust Officer of The Boatmen’s National Bank of St. Louis, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation, and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and he acknowledged said instrument to be the free act and deed of said corporation.
In Testimony Whereof, I have hereunto set my hand and affixed my official seal at my office in said County and State the day and year last above written.
[Notarial Seal]
/s/ Joy Marie Lincoln
JOY MARIE LINCOLN
Notary Public-State of Missouri
St. Louis County
My Commission Expires Oct. 16, 1986







Exhibit 4(c)9


FUEL LEASE

Dated as of December 22, 1988


between


RIVER FUEL TRUST #1,
as Lessor

and

ARKANSAS POWER & LIGHT COMPANY,
as Lessee




AS OF THE DATE OF THIS LEASE, THE LESSOR UNDER THIS LEASE (THE “LESSOR”) HAS GRANTED TO MORGAN GUARANTY TRUST COMPANY OF NEW YORK A SECURITY INTEREST IN THIS LEASE AND IN ALL OF LESSOR’S RIGHTS AND INTERESTS UNDER THIS LEASE, INCLUDING, WITHOUT LIMITATION, ALL LESSOR’S RIGHTS TO AND INTERESTS IN NUCLEAR FUEL AS DEFINED IN THIS LEASE.



THIS LEASE HAS BEEN MANUALLY EXECUTED IN FIFTEEN COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 15. NO SECURITY INTEREST IN THIS LEASE OR IN ANY OF LESSOR’S RIGHTS AND INTERESTS UNDER THIS LEASE MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN COUNTERPART NO. 1.







TABLE OF CONTENTS

Section          Page
    
1.
Defined Terms      1
2.
Representations and Warranties of Lessee      7
3.
Lease of Nuclear Fuel; Term      8
4.
Title to Remain in the Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used for Generation; Location; Contract Assignment      9
5.
Basic Rent and Additional Rent; Procedure for Paying Basic Rent      10
6.
Payment of Costs by the Lessor      11
7.
Taxes      12
8.
Condition and Use of Nuclear Fuel; Quiet Enjoyment      12
9.
Maintenance of the Nuclear Fuel      14
10.
Removals; Transfer to the Lessee; Commingling; Substitution; Location      14
11.
Indemnification by the Lessee      17
12.
Inspection; Right to Enter Generating Facility      17
13.
Payment of Impositions; Recording      18
14.
Compliance with Legal and Insurance Requirements, and with Instruments      18
15.
Liens      18
16.
Permitted Contests      19
17.
Insurance      19
18.
Damage or Destruction      20
19.
Condemnation or Eminent Domain      21
20.
Termination After Certain Events      22
21.
Conditions of Termination and Conveyance      25
22.
Estoppel Certificates; Information      26
23.
Rights to Perform the Lessee’s Covenants      26
24.
Assignments      26
25.
Events of Default and Remedies      27
26.
Permanent Storage or Disposal      29
27.
No Merger      30
28.
Notices      30
29.
Allocation of Amounts      30
30.
Amendments      31
31.
Severability      31




32.
Job Incentive Credit and Investment Credit      31
33.
Miscellaneous      32

Attachments
Schedule A -- Description of Nuclear Fuel
Schedule B -- Quarterly Rent Schedule
Schedule C -- Bill of Sale to River Fuel Trust #1
Schedule D -- Fuel Schedule No. ____
Schedule E -- Bill of Sale from River Fuel Trust #1 to Arkansas Power & Light Company
Schedule F -- Form of Assignment Agreement



    




FUEL LEASE
FUEL LEASE dated as of December 22, 1988 (as the same may be amended from time to time, “this Lease”), between ARKANSAS POWER & LIGHT COMPANY, an Arkansas corporation, and RIVER FUEL TRUST #1, a trust formed pursuant to the Trust Agreement, dated as of December 20, 1988 among UNITED STATES TRUST COMPANY OF NEW YORK, as trustee (the “Trustee”), Morgan Guaranty Trust Company of New York, as Trustor, and ARKANSAS POWER & LIGHT COMPANY, as beneficiary.
Section 1.
Defined Terms .

Unless the context otherwise specifies or requires, each term defined in this Section 1 shall, when used in this Lease, have the meaning indicated:
“ Acquisition Cost ” shall mean the purchase price paid by the Lessor in order to acquire any portion of the Nuclear Fuel including progress payments, if any, made by the Lessor in respect of Nuclear Fuel, together with costs of milling, conversion, enrichment, fabrication, installation, delivery, containerization, transportation, storage, processing, Reprocessing and any other direct costs with respect to acquiring, recovering or preparing such portion of the Nuclear Fuel for use in or for cycling or recycling thereof or for management thereof through any stage of its Nuclear Fuel Cycle, and costs with respect to repairs, replacements and renewals or Restoration of any portion of the Nuclear Fuel but excluding therefrom all Capitalized Cost with respect thereto. The purchase price for any part of the Nuclear Fuel acquired by the Lessor from the Lessee shall include all payments made by the Lessee to the Manufacturers for such Nuclear Fuel plus all costs, expenses and allowances which have been incurred or made by Lessee in connection with such Nuclear Fuel and which are properly includible as a cost of such Nuclear Fuel in Lessee’s books of account in accordance with Lessee’s normal accounting practice.
“ Additional Rent ” shall mean all amounts (other than Basic Rent and Advance Rent) that the Lessee agrees to pay in this Lease (including, without limitation, indemnification payable under this Lease) and interest at the rate incurred by the Lessor or the Assignee as a result of any delay in payment by the Lessee to meet obligations that would have been satisfied out of prompt payment by the Lessee.
“ Advance Rent ” shall have the meaning assigned to that term in Section 5(g) of this Lease.
“ Assignee ” shall mean each person, firm, corporation or other entity to which any part of the Lessor’s interest under this Lease, or any rents or other rights of the Lessor under this Lease, shall at the time have been assigned, conditionally or otherwise, by the Lessor. Until the Lessee shall be otherwise notified by the Lessor, the Assignee shall be Morgan Guaranty Trust Company of New York (“Morgan”), as collateral agent under the Security and Collateral Agency Agreement, dated as of December 22, 1988 between the Lessor and Morgan.
“ Atomic Energy Act ” shall mean the Atomic Energy Act of 1954, as amended, as the same may be further amended from time to time (42 U.S.C. § 2011 et seq.).
“ Basic Rent ” payable on any Basic Rent Payment Date shall mean the sum of the Quarterly Lease Charge, less those Daily Lease Charges included in Capitalized Cost, plus the Burn-Up Charge, in each case with respect to the quarter prior to such Basic Rent Payment Date.
“ Basic Rent Payment Date ” shall have the meaning assigned to that term in Section 5(a) of this Lease.




“ Bill of Sale ” shall mean a bill of sale in substantially the form of either Schedule C or Schedule E attached to and made a part of this Lease, pursuant to which title to all or any portion of the Nuclear Fuel is transferred to the Lessor or to the Lessee.
“ Burn-Up Charge ” shall mean the amount shown as Total Burn-Up Charge on Annex I to the Quarterly Rent Schedule delivered to the Lessor pursuant to Section 5(c) hereof in respect of such Basic Rent Payment Date.
“ Business Day ” shall mean any day other than a day on which banking institutions in the State of New York or in the State of Arkansas are authorized by law to close.
“ Capitalized Cost ” shall mean the sum of all legal, printing, reproduction, closing and other normally capitalizable administrative fees and expenses actually paid by the Lessor in connection with any acquisition of the Nuclear Fuel and in connection with the transactions contemplated by a Credit Agreement (including interest expense and amortization of debt discount with respect to Commercial Paper and loans under a Credit Agreement and all commitment and other fees, costs and expenses, including the issuing agent’s fees, relating to liabilities of the Lessor under a Credit Agreement) or contemplated by a Secured Note Agreement (including interest expense and amortization of discount with respect to Secured Notes and other fees, costs and expenses incurred in connection with a Secured Note Agreement), and Daily Lease Charges accrued pursuant to this Lease which, in the Lessee’s sole judgment, are allocable to such Nuclear Fuel (i) during any stage of its Nuclear Fuel Cycle other than its Heat Production stage or (ii) during the period beginning on the Termination Notice Date and ending on the Termination Settlement Date (in each case as defined in Section 20(b) of this Lease) if and to the extent that the Lessee elects to capitalize any such Daily Lease Charges; provided, however, that Daily Lease Charges may be allocated to and included in Capitalized Cost by the Lessee only so long as the commitment under a Credit Agreement and the aggregate principal amount of Secured Notes outstanding shall exceed the sum of the Stipulated Loss Value of all of the Nuclear Fuel (including such Daily Lease Charges in the computation of Capitalized Cost for purposes of determining the amount of Investment) and $5,000,000.
“ Collateral Account ” shall have the meaning specified in the Security Agreement.
“ Commercial Paper ” shall mean commercial paper notes issued by the Lessor pursuant to a Credit Agreement.
“ Cooling ” shall mean the stage of the Nuclear Fuel Cycle pursuant to which Nuclear Fuel is placed in underwater storage upon completion of the Heat Production stage of the Nuclear Fuel Cycle.
“ Credit Agreement ” shall mean that certain credit agreement, dated as of December 22, 1988, between the Lessor and Union Bank of Switzerland, Houston Agency, as the same may from time to time be amended, modified or supplemented, and any other successor credit agreement entered into between the Lessor and any bank or other entity for use in financing the cost of Nuclear Fuel.
“ Daily Lease Charge ” shall mean for any calendar day (whether or not a Business Day) during the term of this Lease the sum of:
(i)      an accrual for such day of all interest expense and of the amortization of debt discount, whether or not paid, with respect to (A) all Commercial Paper issued, (B) all other indebtedness incurred pursuant to a Credit Agreement and (C) all Secured Notes issued, which, in each case, is outstanding at the close of business on such day (net of Lessor’s earnings on such day on investment of moneys received




in connection with the transactions contemplated by this Lease, a Credit Agreement or a Secured Note Agreement), and
(ii)      an accrual for such day with respect to (A) all commitment and other fees, costs and expenses (including, without limitation, issuing agent’s and commercial paper dealer’s fees) relating to the liabilities of the Lessor under a Credit Agreement, (B) all fees, costs and expenses incurred by the Lessor in connection with a Secured Note Agreement and (C) all fees, costs and expenses incurred by the Lessor under any Security Agreement.
Any figure used in the computation of any component of the Daily Lease Charge shall be stated to ten decimal places. No accrual, charge or other item which would constitute a part of the Acquisition Cost shall be included in the computation of Daily Lease Charge.
“ Event of Default ” shall mean any Event of Default referred to in Section 25 hereof.
“ Fuel Management ” shall mean the design of, contracting for, fixing the price and terms of acquisition of, management, movement, removal, disengagement and other activities in connection with the utilization of the Nuclear Fuel, and sometimes referred to as “management”.
“ Fuel Schedule ” shall mean an instrument in substantially the form of Schedule D attached hereto and made a part hereof, pursuant to which Schedule A to this Lease is amended in connection with a request by the Lessee for payment with respect to Nuclear Fuel pursuant to Section 6 hereof or in connection with a removal or a replacement of Nuclear Fuel pursuant to Section 10, 18(a) or 19(b) hereof.
“ Generating Facility ” shall mean both units of the pressurized water reactor power plant located near Russellville, Arkansas, known as Arkansas Nuclear One.
“ Heat Production ” shall mean the stage of the Nuclear Fuel Cycle in which the Nuclear Fuel or any portion thereof is engaged in a reactor core of the Generating Facility and is being consumed to produce heat, pursuant to the process of nuclear fission, in the production of electric energy.
“ Impositions ” shall mean all payments required by public or governmental authority in respect of any property subject to this Lease or any transaction pursuant to this Lease or any right or interest held by virtue of this Lease.
“ Insurance Requirements ” shall mean all terms of any insurance policy covering or applicable to the Nuclear Fuel or any portion thereof, all requirements of the issuer of any such policy, and all orders, rules, regulations and other requirements of the Nuclear Regulatory Commission, the National Board of Fire Underwriters, or any other body exercising similar functions with respect to electric utility properties or any other body hereafter constituted exercising similar functions, which are applicable to or affect insurance with respect to the Generating Facility, the Nuclear Fuel or any portion thereof or any operation, use or condition of the Generating Facility, the Nuclear Fuel or any portion thereof.
“ Insured Person ” shall have the meaning assigned to that term in Section 17 of this Lease.
“ Investment ” shall mean with respect to any portion of the Nuclear Fuel, the sum of (i) the Acquisition Cost for such portion plus (ii) the Capitalized Cost for such portion.
“ Legal Requirements ” shall mean all requirements having the force of law applicable to the Lessee, as owner and operator of the Generating Facility, the Generating Facility or the Nuclear Fuel.




“ Lessee ” shall mean Arkansas Power & Light Company, an Arkansas corporation, or any successor or successors to its rights and obligations as lessee hereunder.
“ Lessor ” shall mean River Fuel Trust #1, a trust formed pursuant to the Trust Agreement, or any successor or successors to the rights and obligations of River Fuel Trust #1 as lessor hereunder, including at any time after the date hereof, the then owner of the Nuclear Fuel.
“ Manufacturers ” shall mean any supplier of Nuclear Fuel, or any component thereof, or of Reprocessing or other service in connection therewith (including for this purpose Russell Energy, Inc. and Ozark Fuel Company).
“ Mortgage and Deed of Trust ” shall mean the Lessee’s Mortgage and Deed of Trust, dated as of October 1, 1944 to the Guaranty Trust Company of New York (Morgan Guaranty Trust Company of New York, successor), Henry A. Theis (John W. Flaherty, successor), and as to property situated in Missouri, Marvin A. Mueller (The Boatmen’s National Bank of St. Louis, successor), as Trustees, as supplemented or a successor general and refunding mortgage entered into in the ordinary course of the Lessee’s business.
“ MWhr Factor ” shall mean a factor determined by deducting (i) the estimated residual value stated in dollars of each assembly of the Nuclear Fuel after it shall have completed Heat Production from (ii) the Stipulated Loss Value for each such assembly and dividing the remainder by the estimated amount of heat remaining, measured in thermal megawatt hours, that such assembly will produce during Heat Production. The quotient shall be computed to the nearest fifth decimal place.
“ Nuclear Fuel ” shall mean the separate assemblies of Nuclear Fuel and components thereof more particularly described in Schedule A hereto, as amended from time to time by means of a Fuel Schedule, in the respective forms in which such assemblies and components exist at each stage of the Nuclear Fuel Cycle, beginning with Nuclear Fuel in the form of ore which has already been mined, consisting of substances and equipment which, when loaded into a nuclear reactor, are intended to produce heat through the fission process, together with all replacements thereof and additions thereto. But “Nuclear Fuel” shall not include any assemblies, components or other items purchased and paid for by the Lessee pursuant to the provisions of Sections 10(b), 10(c) and 10(f) hereof.
“ Nuclear Fuel Contract ” shall mean any contract entered into by the Lessee with one or more Manufacturers relating to the acquisition of any Nuclear Fuel or service in connection therewith.
“ Nuclear Fuel Cycle ” shall mean the various stages herein defined in the process, whether physical or chemical, by which the component parts of the Nuclear Fuel are processed, enriched, designed, fabricated into assemblies utilizable for Heat Production, loaded into a reactor core, utilized, disengaged, cooled, stored and/or reprocessed, together with all incidental processes with respect to the Nuclear Fuel at any stage of said Nuclear Fuel Cycle.
“ Nuclear Incident ” shall have the meaning specified in the Atomic Energy Act.
“ Nuclear Regulatory Commission ” shall mean the independent regulatory commission of the United States government existing under the authority of the Energy Reorganization Act of 1974, as amended, or any successor organization or organizations or administrator or administrators performing any identical or substantially identical licensing and related regulatory functions.
“ Person ” shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.




“ Quarterly Lease Charge ” shall mean the sum, for any quarter ending on the last day of each March, June, September and December, of the aggregate of the Daily Lease Charges incurred with respect to all portions of the Nuclear Fuel subject to this Lease at any time during such quarter.
“ Quarterly Rent Schedule ” shall mean an instrument in substantially the form of Schedule B attached hereto and made a part hereof from time to time executed by the Lessor and the Lessee for the purpose of setting forth and confirming the S.L.V. of the Nuclear Fuel and the Burn-Up Charges and Daily Lease Charges for the Nuclear Fuel.
“ Reprocessing ” shall mean the stage of the Nuclear Fuel Cycle in which the Nuclear Fuel, after it has completed Heat Production and Cooling, is transported to a reprocessing plant, mechanically disassembled, dissolved in acidic solution and separated into recovered forms of uranium, plutonium and other radioactive materials, or any process or processes used in place thereof.
“ Restoration ” shall mean the repair, reconstruction or replacement of all or any portion of the Nuclear Fuel which has been damaged or destroyed or lost or stolen or which has been affected by a Taking, as nearly as possible to the value, condition and character of such portion, and in its location, immediately prior to such damage, destruction, loss, theft or Taking, or the replacement of any assembly of the Nuclear Fuel so damaged, destroyed or lost or stolen or affected by a Taking, with Nuclear Fuel having an equivalent value and Heat Production capacity with only such alterations and additions as may be made at the Lessee’s election and as will not diminish the fair market value or usefulness of the Nuclear Fuel so repaired, reconstructed or replaced.
“ Secured Note ” shall mean each promissory note of the Lessor having a maturity date more than 270 days from its date of issuance, issued pursuant to a Secured Note Agreement and the proceeds of which are used to pay Acquisition Cost or Capitalized Cost or to pay borrowings previously incurred by the Lessor in connection with the financing of its acquisition or ownership of Nuclear Fuel and the holder of which is entitled to the benefit of the security interest granted to the Assignee pursuant to a Security Agreement.
“ Secured Note Agreement ” shall mean each note agreement, dated as of December 22, 1988, between the Lessor and lenders with respect to the sale by the Lessor of Secured Notes, Series A, and any similar agreement entered into between the Lessor and institutional investors relating to the issuance and sale by the Lessor of any other series of Secured Notes.
“ Security Agreement ” shall mean an agreement from the Lessor to the Assignee, which creates a security interest in the Nuclear Fuel, as the same may be entered into and/or amended from time to time.
“ Stipulated Loss Value ” or “ S.L.V. ” shall mean with respect to any portion of the Nuclear Fuel at any time leased hereunder, the excess of the amount of the Investment in such portion over the aggregate amount of the Burn-Up Charges theretofore paid by the Lessee to the Lessor in respect of such portion.
“ Taking ” shall mean a loss, during the term hereof, of the title to, ownership of or use and possession of the Nuclear Fuel, or any material portion thereof, or any material interest therein or right accruing thereto, as the result of or in lieu or in anticipation of the exercise of the rights of condemnation or eminent domain pursuant to any law, general or special, or by reason of the temporary requisition of the use of the Nuclear Fuel, or any material portion thereof, by any governmental authority, civil or military.
“ Termination Event Date ” shall have the meaning assigned to that term in Section 20(b) of this Lease.




“ Termination Rent ” shall mean an amount which, when added to the Stipulated Loss Value then payable by the Lessee pursuant to Section 20(b) or Section 25(b) hereof, as the case may be, will be sufficient to enable the Lessor (i) to retire, at their respective maturities, all of Lessor’s then outstanding obligations under (A) any Credit Agreement, including all Commercial Paper issued thereunder and all loans obtained thereunder and (B) any Secured Note Agreement, including all Secured Notes issued pursuant thereto, and (ii) to pay all charges, premiums and fees owed to any lender under a Credit Agreement or Secured Note Agreement or to the Assignee.
“ Termination Settlement Date ” shall have the meaning assigned to that term in Section 20(b) of this Lease.
“ Trust Agreement ” shall mean that certain trust agreement, dated as of December 20, 1988, among the Trustor, United States Trust Company of New York, as Trustee and the Lessee, as beneficiary, as the same may from time to time be amended, modified or supplemented.
“ Trust Estate ” shall have the meaning set forth in Section 1 of the Trust Agreement.
“ Trustee ” shall mean United States Trust Company of New York, not in its individual capacity, but solely as trustee under the Trust Agreement.
“ Trustor ” shall mean Morgan Guaranty Trust Company of New York, as trustor under the Trust Agreement.
“ Unavoidable Delays ” shall mean delays due to strikes, acts of God, governmental restrictions or regulatory delays, enemy action, civil commotion, fire, unavoidable casualty causes affecting the integrity of generating or transmission systems or other causes beyond the control of the Lessee.
Section 2.
Representations and Warranties of Lessee .

The Lessee represents and warrants to the Lessor:
(a) Organization, Standing, etc . The Lessee is a corporation duly organized, validly existing and in good standing under the laws of the State of Arkansas and has all requisite corporate power and authority, and has obtained all necessary governmental licenses and permissions, to carry on its business and to execute, deliver and perform this Lease.

(b) Financial Statements . The Lessee has furnished to the Lessor copies of its Annual Report on Form 10-K for the year ended December 31, 1987, its Annual Report to Shareholders for the year 1987, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1988, June 30, 1988 and September 30, 1988. The financial statements contained in such documents fairly present the financial condition and results of operations of the Lessee as of the dates and for the periods indicated therein and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be otherwise disclosed in the footnotes thereto).

(c) Changes, etc . Since September 30, 1988, no change has occurred in the condition or business of the Lessee which is continuing and which in any way impairs the ability of the Lessee to perform its obligations under the Lease.

(d) Litigation, etc . Except as may be disclosed in or contemplated by the Lessee’s Annual Report on Form 10-K for the year ended December 31, 1987 and its Quarterly Reports on Form 10-Q for the quarters




ended March 31, 1988, June 30, 1988 and September 30, 1988, there is no action, suit, proceeding or investigation at law or in equity or by or before any governmental instrumentality or other agency now pending or, to the knowledge of the Lessee, threatened (or any basis therefor) against or affecting the Lessee or any property or rights of the Lessee which questions the validity of this Lease or which is reasonably likely to be adversely determined, and which, if so determined, would impair the ability of the Lessee to perform its obligations hereunder.

(e) Compliance with Other Instruments, etc . The execution, delivery and performance of this Lease will not result in any violation of any term of the Amended and Restated Articles of Incorporation or the By-Laws of the Lessee or of any material agreement, indenture or similar instrument, license, judgment, decree, order, law, statute, ordinance or governmental rule or regulation applicable to the Lessee, including, without limitation, the Lessee’s Mortgage and Deed of Trust.

(f) Governmental Consent, etc . No consent, license, order, authorization or approval of, or registration, declaration or filing with, any governmental or public body or authority on the part of the Lessee is required in connection with the valid execution, delivery and performance of this Lease, except the approving Order of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended, which has heretofore been applied for and obtained and which remains in full force and effect and the filing of a certificate pursuant to Rule 24 of the Public Utility Holding Company Act of 1935, as amended, which will follow the execution and delivery of this Lease.

Section 3. Lease of Nuclear Fuel; Term .

(a) The Lessor hereby leases to the Lessee, and the Lessee hereby leases from the Lessor, the Nuclear Fuel for the term provided in this Lease and subject to the terms and provisions hereof.

(b) The term of this Lease shall begin at 12:01 A.M., New York City time, on December 22, 1988, and unless extended as herein provided or unless sooner terminated as hereunder provided pursuant to Section 20, shall end at the later to occur of (i) if any Secured Notes are issued, the final maturity date of one or more Secured Notes on a date on which no other Secured Notes are outstanding or (ii) the close of business in New York City on December 31, 1993; provided, however, that unless either the Lessor or the Lessee shall have given notice to the other by December 1 in 1991, or in any subsequent year, stating that this Lease shall terminate at the close of business in New York City on December 31 of the second following year, then the term of this Lease shall thereupon automatically be extended for one additional year, without the necessity of any action by the Lessor or the Lessee; provided further, that, not less than 15 and not more than 30 days prior to each date on which the parties could give such notice of termination, Lessor shall in writing inform Lessee of its right to give such notice and of the automatic extension of this Lease if neither Lessee nor Lessor gives such notice of termination. This Lease shall in any event terminate at the close of business in New York City on December 31, 2038, if the term shall be extended until then.

Section 4. Title to Remain in the Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used for Generation; Location; Contract Assignment .

(a) Title to and ownership of the Nuclear Fuel shall at all times remain in the Lessor and at no time become vested in the Lessee, except in accordance with an express provision of this Lease. This is a lease only, and shall not give or grant to the Lessee any right, title or interest in or to the Nuclear Fuel, or any portion thereof, except the rights of a lessee in accordance with the provisions hereof.





(b) So long as no Event of Default shall have occurred and be continuing and the Lessor shall not have elected to exercise any of its remedies under Section 25 hereof, the Lessee shall have full right and lawful authority to engage in Fuel Management. The Lessee is hereby designated the lawful representative of the Lessor in all dealings with Manufacturers and any regulatory agency having jurisdiction over the ownership or possession of the Nuclear Fuel.

(c) The Nuclear Fuel is personal property and the Lessee shall, at its expense, take all such action as may be required to cause the Nuclear Fuel to retain its character as personal property and to refrain from taking any action which would cause it to lose its character as personal property. The Nuclear Fuel shall not become part of any real property on which it or any portion thereof may from time to time be situated, notwithstanding the means by which it is installed or attached thereto and notwithstanding any law or custom or the provision of any lease, mortgage or other instrument applicable to any such real property. The Lessee agrees to indemnify the Lessor against and to hold the Lessor harmless from, all losses, costs and expenses resulting from any of the Nuclear Fuel becoming part of real property, and such indemnification shall survive the termination of this Lease, in whole or in part.

(d) The Lessee represents and warrants to the Lessor that the Nuclear Fuel location will be limited to: (x) the Manufacturer’s facilities, (y) transit between Manufacturers’ facilities and other Manufacturers’ facilities or the Generating Facility and (z) the Generating Facility. Each assembly of the Nuclear Fuel will be located during its Heat Production or Cooling stage in the Generating Facility. The Lessee shall advise the Lessor and the Assignee of the States in which Nuclear Fuel may be located during the Nuclear Fuel Cycle. The Lessee shall advise the Lessor and the Assignee of any additional State and location in which the Nuclear Fuel may be located thirty days prior to its movement to such State and location.

(e) Except to the extent otherwise agreed to by the Lessor, prior to obtaining pursuant to Section 6 hereof any payment by the Lessor to a Manufacturer pursuant to a Nuclear Fuel Contract, the Lessee shall deliver to the Lessor an executed Assignment Agreement (in the form attached as Schedule F hereto) with respect to such Contract (thereafter an “Assigned Nuclear Fuel Contract”) together with a Consent and Agreement (in the form attached to Schedule F hereto) insofar as it relates to Nuclear Fuel executed by the Manufacturer which is a party to said Assigned Nuclear Fuel Contract.

Section 5. Basic Rent and Additional Rent; Procedure for Paying Basic Rent .

(a) The Lessee covenants to pay to the Lessor or, if so directed by the Lessor, the Assignee, on January 31, 1989 and on the last day of each January, April, July and October thereafter (or if such day is not a Business Day, on the next preceding Business Day) (each such date being herein called a “Basic Rent Payment Date”), at not later than 11:00 A.M., New York City time, the respective amounts of Basic Rent shown on Annex I to the Quarterly Rent Schedule delivered to the Lessor in accordance with clause (i) of Section 5(c) hereof in respect of such Basic Rent Payment Date.

(b) The Lessee hereby covenants and agrees that it will not cause or suffer any assembly of the Nuclear Fuel to be engaged in any nuclear reactor until the Lessee delivers to the Lessor a certificate, dated the date of delivery and signed by a qualified engineer, who may be an employee of the Lessee, describing all assemblies of Nuclear Fuel then being engaged in any nuclear reactor as they are described in Schedule A hereto; provided that such a certificate for assemblies initially listed in Schedule A shall be delivered to the Lessor at the time of execution of this Lease.





(c) At least 15 days before each Basic Rent Payment Date, the Lessor shall deliver to the Lessee a Quarterly Rent Schedule completed as to Columns 1, 2, 3 and 4 and as to Annex II thereto. On such Basic Rent Payment Date, the Lessee shall

(i) deliver to the Lessor the Quarterly Rent Schedule so received duly completed as to the remaining Columns and as to Annex I; and

(ii) pay to the Lessor or the Assignee as the Lessor may direct in writing the amount shown for Basic Rent in such Annex I for the calendar quarter ended on the last day of the month preceding the month during which such Basic Rent Payment Date occurs.

Each such Quarterly Rent Schedule shall be signed and delivered in triplicate.
(d) All sums payable by the Lessee to the Lessor shall be payable in Federal funds and shall be paid to the Lessor at the Lessor’s address for purposes of notices hereunder or to such other Person or at such other address as the Lessor may from time to time designate.

(e) In addition to the Basic Rent, the Lessee will also pay from time to time as provided in this Lease or on demand of the Lessor, all Additional Rent as and when due and payable. In the event of any failure by the Lessee to pay any Additional Rent, the Lessor shall have all the rights, powers and remedies as in the case of failure to pay Basic Rent.

(f) The Lessee may prepay Basic Rent at any time. Such payment shall be credited against subsequent amounts owed by the Lessee on account of Basic Rent.

(g) In addition to Basic Rent and Additional Rent, the Lessee will also pay, from time to time, upon demand of the Lessor or the Assignee (to the extent the Assignee may exercise the Lessor’s rights hereunder), advance rent (the “Advance Rent”) in such amounts as may be required to permit the Lessor to pay in full the amount of any component of Daily Lease Charge which is then due and payable by the Lessor to the extent that funds for the payment of such component may not then be obtained by the Lessor by effecting borrowings permitted by a Credit Agreement or any Secured Note Agreement. Any such payment of Advance Rent shall be credited against subsequent amounts owed by the Lessee on account of Basic Rent. In the event of any failure by the Lessee to pay any Advance Rent, the Lessor shall have all of the rights, powers and remedies as in the case of a failure to pay Basic Rent.

(h) The obligations of the Lessee to pay Basic Rent, Additional Rent, Advance Rent, Termination Rent and the amounts specified in Section 10(c), Section 20(b) and Section 25(b)(ii) shall be absolute and unconditional and the payment of such amounts shall not be subject to any right of set-off, counterclaim, recoupment, defense, abatement, suspension, deferment or reduction. The foregoing agreement by the Lessee is without prejudice to its right to pursue, by separate action, any claim which the Lessee may have against any Person, including, without limitation, the Lessor, each Person who is a lender under a Credit Agreement or a Secured Note Agreement or the Trustee.

Section 6. Payment of Costs by the Lessor .

So long as no Event of Default or event which, with the giving of notice or the lapse of time or both, would be an Event of Default has occurred and is then continuing and the Lessee’s representations and warranties set forth in Section 2 are true, whenever the Lessee desires the Lessor to acquire title to property which, upon such acquisition, shall become part of the Nuclear Fuel and to pay any Acquisition




Cost relating thereto, or the Lessee desires to obtain payment to a Manufacturer or payment to the Lessee of any Acquisition Cost or Capitalized Cost or both of any portion of the Nuclear Fuel, including Nuclear Fuel acquired after the date of this Lease either as additional Nuclear Fuel or as replacement Nuclear Fuel, the Lessee may deliver to the Lessor a Fuel Schedule in substantially the form of Schedule D, dated as of the date of delivery and fully executed by the Lessee, which shall (i) describe in Annex II thereto, in the same manner as in Schedule A hereto, such portion of the Nuclear Fuel, (ii) set forth in Annex I thereto, in the manner specified in Section 29 hereof, the Acquisition Cost and Capitalized Cost payable to such Manufacturer or incurred by the Lessee as of the date of such Fuel Schedule with respect to such portion of the Nuclear Fuel and (iii) set forth in item 2 of the Fuel Schedule that portion of such Acquisition Cost and Capitalized Cost which has not previously been the basis of payment to such Manufacturer or payment to the Lessee pursuant to this Section 6, and with respect to which the Lessee desires payment. At such time as a Nuclear Fuel Contract provides for transfer of title to any portion of the Nuclear Fuel for which a Fuel Schedule has been or is being submitted to the Lessor by the Lessee, the Lessee shall cause the relevant Manufacturer to deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing such portion of the Nuclear Fuel unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale; and at such time as a Fuel Schedule is delivered the Lessee shall deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing any portion of the Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such Bill or Bills of Sale. Not earlier than five days nor later than ten days after the Lessor shall have received a Fuel Schedule hereunder, the Lessor shall pay to the Manufacturer designated in the Fuel Schedule or, as the case may be, to the Lessee the amount of the requested payment and shall complete such Fuel Schedule so delivered to it by (y) setting forth in Annex I thereto the Investment in such portion of the Nuclear Fuel as of the date of such payment and (z) executing such Fuel Schedule and delivering copies thereof to the Lessee, provided, however, that the Lessor shall not be required to make any payment pursuant to this Section 6 if and to the extent that such payment exceeds (a) the amount of the proceeds of borrowings which would be available to it under any Credit Agreement and any Secured Note Agreement then in effect under which the Lessor could make borrowings for such purpose contemporaneously with such payment, minus (b) $5,000,000.
Section 7.
Taxes .

The Lessee agrees that it will promptly pay all taxes, assessments and other governmental charges and fees levied or assessed upon the interest of the Lessee during the term of this Lease in the Nuclear Fuel or any part thereof and against the Lessor on account of the transactions, including investments, contemplated by this Lease, including without limitation, any Federal or state income, excess profits or franchise taxes against the Lessor on or measured by any moneys payable hereunder or the net income therefrom; provided, that this Section 7 shall not be deemed to obligate the Lessee to pay any taxes, assessments and other governmental charges and fees which may have been included in the Capitalized Cost of any Nuclear Fuel; and provided further, that such obligations shall survive the termination of this Lease, in whole or in part. The Lessee further agrees at its expense to do all things required to be done by the Lessor in connection with the levy, assessment, billing or payment of any such taxes (other than Federal or state income, excess profits or franchise taxes) and is hereby authorized by the Lessor to act for and on behalf of the Lessor in any and all such respects, and to file, on behalf of the Lessor, all required tax returns and reports (other than returns and reports in respect of Federal or state income, excess profits or franchise taxes) concerning the Nuclear Fuel.




Section 8.
Condition and Use of Nuclear Fuel; Quiet Enjoyment .

(a) Each assembly of the Nuclear Fuel is leased subject to the rights of any parties in possession thereof and the state of the title thereto and the rights of ownership therein whenever the same first becomes subject to this Lease, and to all applicable zoning regulations, restrictions, rules, licenses and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by any governmental authority having jurisdiction, and in the state and condition thereof when the same first becomes subject to this Lease, without representations or warranties of any kind by the Lessor, the Assignee, or any Person acting on behalf of any of them. THE LESSEE ACKNOWLEDGES AND AGREES THAT THE TYPE AND DESIGN OF THE NUCLEAR FUEL HAS NOT BEEN SELECTED BY THE LESSOR OR THE TRUSTEE, THAT THE LESSOR, THE TRUSTEE OR THE ASSIGNEE HAVE NOT SUPPLIED ANY SPECIFICATIONS WITH RESPECT TO THE MANUFACTURE OF ANY PORTION THEREOF AND THAT NEITHER THE LESSOR, THE TRUSTEE, THE ASSIGNEE, EACH PERSON WHO IS A LENDER UNDER A CREDIT AGREEMENT OR A SECURED NOTE AGREEMENT NOR ANY PERSON (EXCEPT THE LESSEE) ACTING ON BEHALF OF ANY THEREOF (I) IS A MANUFACTURER OF, OR DEALER IN, NUCLEAR MATERIAL OF ANY KIND OR HAS ANY LICENSE TO USE OR POSSESS SUCH MATERIAL, (II) HAS MADE ANY RECOMMENDATION, GIVEN ANY ADVICE OR TAKEN ANY OTHER ACTION WITH RESPECT TO (A) THE CHOICE OF ANY SUPPLIER, VENDOR, PROCESSOR, DESIGNER, FABRICATOR OR TRANSPORTER OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO, THE NUCLEAR FUEL OR ANY PORTION THEREOF OR (B) ANY ACTION TAKEN OR TO BE TAKEN WITH RESPECT TO THE NUCLEAR FUEL OR ANY PORTION THEREOF AT ANY STAGE OF THE NUCLEAR FUEL CYCLE, (III) HAS AT ANY TIME HAD PHYSICAL POSSESSION OF ANY PORTION OF THE NUCLEAR FUEL OR MADE ANY INSPECTION THEREOF OR (IV) HAS MADE ANY WARRANTY OR OTHER REPRESENTATION, EXPRESS OR IMPLIED, THAT THE NUCLEAR FUEL (X) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY, (Y) HAS BEEN PROPERLY DESIGNED OR FABRICATED OR WILL ACCOMPLISH THE RESULTS WHICH THE LESSEE INTENDS THEREFOR OR (Z) IS SAFE IN ANY MANNER OR RESPECT. NO WARRANTY HAS BEEN OR IS MADE BY THE LESSOR, THE TRUSTEE, THE ASSIGNEE OR ANY PERSON ACTING ON BEHALF OF ANY OF THEM, EXPRESS OR IMPLIED, RELATING TO THE NUCLEAR FUEL OR ANY PORTION THEREOF, WITH RESPECT TO MERCHANTABILITY, FITNESS OR OTHERWISE, WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER PRESENT OR FUTURE LAW, OR OTHERWISE.

(b) So long as no Event of Default shall have occurred and be continuing, the Lessor hereby authorizes the Lessee at the Lessee’s cost and expense, to assert all rights and claims, and to bring suits, actions and proceedings, in its own name or in the name of the Lessor, in respect of any seller’s, Manufacturer’s (including miller’s, converter’s, enricher’s or reprocessor’s), transporter’s, designer’s or fabricator’s warranties or undertakings, express or implied, relating to any portion of the Nuclear Fuel and to retain the proceeds of any such suits, actions and proceedings.

(c) The Lessee has investigated the state of the title to and rights of ownership in the Nuclear Fuel subject to this Lease at the commencement of the term hereof, and has made a physical inspection of the Nuclear Fuel subject to this Lease at the commencement of the term hereof or reasonably prior thereto, and is satisfied with and has approved the same for all purposes hereof. The Lessee will, from time to time after such commencement make a similar investigation and inspection of each portion of the Nuclear Fuel as the same becomes subject to this Lease, and will not permit any such portion to become subject to this




Lease unless the Lessee is similarly satisfied with and has similarly approved the same for all purposes thereof. No approval by the Lessee pursuant to this Section 8(c) shall affect or impair any of the Lessee’s rights under Section 8(b).

(d) So long as no Event of Default shall have occurred and be continuing, the Lessee shall have exclusive possession and use of the Nuclear Fuel. The Nuclear Fuel may be used for any lawful purpose. The Lessee will not do or permit any act or thing which is contrary to any Legal Requirement or Insurance Requirement or which might impair the value or usefulness of the Nuclear Fuel or any part thereof other than in the normal usage thereof in the production of electric energy.

Section 9. Maintenance of the Nuclear Fuel .

The Lessee will (i) at its own expense (without limiting the Lessee’s right to request payment by the Lessor of such expense provided in Section 6) keep the Nuclear Fuel in good condition and will promptly make or cause to be made all necessary or appropriate repairs, replacements and renewals or Restoration thereof, and (ii) at its own expense (without limiting the Lessee’s rights to request payment by the Lessor of such expense provided in Section 6) arrange for the proper Fuel Management. All repairs, replacements and renewals shall be done in a workmanlike manner. The Lessee will be responsible for all actions and expense necessary or appropriate for the proper utilization, preservation and safety of the Nuclear Fuel. The Lessor shall not be required to perform any construction, or to alter, repair, rebuild or replace the Nuclear Fuel or any portion thereof, or to maintain, service or manage the Nuclear Fuel or any portion thereof in any way, and the Lessee hereby expressly waives the right to perform any construction or to make such alterations or repairs or to effect any such Fuel Management at the expense of the Lessor which may be required by any law now in effect or hereafter enacted.
Section 10.
Removals; Transfer to the Lessee; Commingling; Substitution; Location .

(a) If no Event of Default under this Lease shall have occurred and be continuing, the Lessee shall have the right at any time and from time to time during the continuance of this Lease, at the Lessee’s expense (without limiting the Lessee’s rights to request payment by the Lessor of such expense provided in Section 6) to move any assembly of the Nuclear Fuel from the Generating Facility to any other location in the continental United States for the purpose of having services performed thereon in connection with any stage of the Nuclear Fuel Cycle other than the Heat Production and Cooling stages, provided that no such action shall materially reduce the then fair market value of such assembly, and provided, further, that unless such assembly shall have been released from this Lease pursuant to Section 10(b), (i) such assembly shall be and remain the property of the Lessor, subject to this Lease and the Security Agreement, and (ii) as a condition to such removal and relocation, all necessary governmental approvals and licenses with respect thereto shall have been procured and shall be in full force and effect, all necessary recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) shall have been duly made in the public offices in which such recordings and filings must be made in order to publish notice, or otherwise protect the validity and effectiveness, of this Lease and the security interest created by the Security Agreement, and all fees, taxes and charges payable in connection with such recordings and filings shall have been paid in full by the Lessee. Any such removal shall constitute the agreement of the Lessee that the Lessee will continue to be obligated in respect of such assembly as provided in this Lease notwithstanding such removal, that the Lessee will pay or cause to be paid (except as provided in Section 6) all taxes and expenses incurred or to be incurred by the Lessor, the Lessee and the Assignee by reason of such removal and relocation, and that the indemnities by the Lessee contained in Section 11 shall extend to the use, possession, conduct or management, or any




work, improvement, demolition or thing done in or about or in respect, of such assembly so removed to the same extent as if its place of relocation were the Generating Facility. The provisions of this Section 10(a) shall be applicable to each subsequent removal of any assembly of the Nuclear Fuel so removed from the place of relocation to which it was removed after its initial removal from the Generating Facility.

(b) At any time and from time to time, the Lessee shall have the right to purchase any portion, but not all, of the Nuclear Fuel. Whenever the Lessee desires to purchase any portion, but not all, of the Nuclear Fuel regardless of the then present stage of its Nuclear Fuel Cycle, then the Lessee shall deliver to the Lessor a certificate in the form of Schedule B hereto showing the Stipulated Loss Value of such portion of the Nuclear Fuel at the date of such certificate and shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. Thereupon the Lessor shall execute and deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon such portion of the Nuclear Fuel shall cease to be Nuclear Fuel and shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

(c) The Lessee shall, upon (i) the regularly scheduled final maturity of the Lessor’s borrowings under a Credit Agreement following a determination by the lenders under such Credit Agreement not to extend the maturity of such borrowings and (ii) the regularly scheduled final maturity date of one or more Secured Notes of the Lessor, in each case under circumstances where the Lessor cannot obtain funds to meet such maturities through the proceeds of borrowings which would be available to the Lessor under any Credit Agreement and any Secured Note Agreement then in effect, purchase an amount of Nuclear Fuel to be designated by the Lessee not less than 15 days prior to such purchase, by delivering to the Lessor a certificate in the form of Schedule B hereto showing that the Stipulated Loss Value of the designated Nuclear Fuel is not less than the amount of the Lessor’s borrowings maturing under the circumstances set forth above. The Lessor shall give the Lessee at least 60 days' notice of the above maturities and circumstances. The Lessee shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. In addition, the Lessee shall at such time pay all Additional Rent and Advance Rent then due and payable to the Lessor. Thereupon, the Lessor shall deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration, all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon such portion of the Nuclear Fuel shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

(d) The Lessor and the Lessee recognize that during the processing and reprocessing of Nuclear Fuel leased hereunder before and after its utilization in the Generating Facility, a Manufacturer performing services on such Nuclear Fuel may require that title thereto be transferred to such Manufacturer and such Nuclear Fuel be commingled with other nuclear fuel, with an obligation on such Manufacturer, upon completion of the services to reconvey a specified amount of Nuclear Fuel. Accordingly, the Lessor and the Lessee agree that (i) Nuclear Fuel leased hereunder may become subject to such a contract notwithstanding any provision of this Lease to the contrary, (ii) as between the Lessor and the Lessee, such Nuclear Fuel shall be deemed to be and remain leased hereunder while title thereto is in such Manufacturer and (iii) title to the Nuclear Fuel delivered by such Manufacturer upon completion of its services automatically shall vest in the




Lessor and such Nuclear Fuel automatically shall be leased hereunder in substitution for the Nuclear Fuel originally delivered to such Manufacturer.

(e) After the utilization of the Nuclear Fuel leased hereunder in the Generating Facility, the Lessor will at the Lessee’s request, and upon approval of such request by the Lessor, which approval shall not be unreasonably withheld, transfer title to Nuclear Fuel leased hereunder in accordance with Section 21 hereof to a third party in exchange for the simultaneous transfer to the Lessor of clear and unencumbered title to replacement Nuclear Fuel having a fair market value not less than that of the Nuclear Fuel conveyed to such third party. The Nuclear Fuel received by the Lessor pursuant to any such exchange shall be automatically substituted for the Nuclear Fuel delivered by the Lessor and shall be deemed to be subject to this Lease. Subject to the limitation on payment contained in Section 6, the Lessor shall pay any additional amounts required to effect such exchange. Such payments shall increase the Acquisition Cost of the substituted Nuclear Fuel and a new Fuel Schedule reflecting transfers and such increased Acquisition Cost shall be executed and delivered by the Lessor and the Lessee.

(f) In the event of (1) the occurrence of a Nuclear Incident at either Unit No. 1 or Unit No. 2 of the Generating Facility as a result of which either Unit No. 1 or Unit No. 2 of the Generating Facility ceases to operate (or if either Unit No. 1 or Unit No. 2 of the Generating Facility is not in operation immediately prior to such Nuclear Incident, fails to resume operation as a result of such Nuclear Incident) for a period of 24 consecutive months after such occurrence or (ii) the permanent suspension, revocation or expiration of the Nuclear Regulatory Commission operating license relating to either Unit No. 1 or Unit No. 2 of the Generating Facility, or any portion thereof, with the result that the operation of either Unit No. 1 or Unit No. 2 of the Generating Facility is no longer permitted, the Lessee shall, within 120 days after the end of the 24-month period in (i) above or the permanent suspension, revocation or expiration in (ii) above, purchase such portion of the Nuclear Fuel which is capable of use only in such affected Unit No. 1 or Unit No. 2 of the Generating Facility and not in the unaffected Unit. The Lessee shall deliver to the Lessor a certificate in the form of Schedule B hereto showing the Stipulated Loss Value of such Nuclear Fuel at the date of such certificate and shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. Thereupon, the Lessor shall execute and deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon, such portion of the Nuclear Fuel shall cease to be Nuclear Fuel and shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

Section 11. Indemnification by the Lessee .

The Lessee shall pay, and shall protect, indemnify and save harmless the Lessor, United States Trust Company of New York, the Assignee, each Person who is a lender under a Credit Agreement or a Secured Note Agreement, Merrill Lynch & Co., Inc., Merrill Lynch Money Markets Inc. and their respective officers, directors, incorporators, shareholders, partners, employees, affiliates, agents and servants from and against, all Impositions, all liabilities, taxes, losses, obligations, claims, damages, penalties, causes of action, suits, costs and expenses (including, without limitation, attorneys’ fees and expenses) or judgments of any nature arising from any and all of the following during the term of this Lease and thereafter arising in connection with this Lease: (a) any injury to or disease, sickness or death of persons, or loss of or damage to property, occurring through or resulting from any Nuclear Incident involving or connected in any way with the Nuclear Fuel or any portion thereof, or in any manner growing out of or relating to the acquisition, ownership, possession, disposition, sale, use, nonuse, misuse,




fabrication, design, cycling, recycling, transportation, containerization, cooling, processing, reprocessing, storing, condition, operation, construction, maintenance, management, repair or rebuilding of the Nuclear Fuel or any portion thereof or resulting from the condition of the land underlying the Nuclear Fuel, (b) any use, nonuse or condition of the Generating Facility or the land underlying the Generating Facility, (c) any violation, or alleged violation, of this Lease, or of any contracts or agreements to which the Lessee is a party or by which it is bound, or any Legal Requirements, (d) performance of any labor or services or the furnishing of any materials or other property in respect of the Nuclear Fuel or any portion thereof, and (e) any infringement or alleged infringement of any patent, copyright, trade secret or other similar right relating to the Nuclear Fuel or any portion thereof provided that, Lessee shall not be required to indemnify any of the above parties with respect to any of the above arising out of such party’s gross negligence or willful misconduct. In the event that any action, suit or proceeding is brought against the Lessor, the Assignee or any other Person indemnified or intended to be indemnified pursuant to this Section 11 by reason of any such occurrence, the Lessee will, at the Lessee’s expense, resist and defend such action, suit or proceeding or cause the same to be resisted and defended by counsel designated by the Lessee and reasonably acceptable to the Person or Persons indemnified or intended to be indemnified under this Section 11. The obligations of the Lessee under this Section 11 shall survive any termination of the Lease, in whole or in part.
Section 12.
Inspection; Right to Enter Generating Facility .

The Lessor and its authorized representatives may enter the Generating Facility at reasonable times for the purpose of inspecting the Nuclear Fuel and the reactor in which it may be loaded from time to time (subject to availability for inspection) and discussing its condition and performance with the responsible officers, agents and employees of the Lessee. The Lessee agrees, subject to applicable state and Federal laws and regulations, to make the Nuclear Fuel and the reactor in which it may be loaded from time to time available (to the extent practicable) for such inspection and to provide customary protective procedures and devices in connection therewith, and to make such officers, agents and employees available for such discussion promptly after receiving notice thereof. The Lessor shall not have any duty to make any such inspection or conduct any such discussion and shall not incur any liability or obligation for not making any such inspection or for not conducting any such discussion.
Section 13.
Payment of Impositions; Recording .

(a) Subject to the provisions of Section 16 hereof, the Lessee will pay all Impositions before any fine, penalty, interest or cost may be added for non-payment, and will furnish to the Lessor, upon request, copies of official receipts or other satisfactory proof evidencing such payment.

(b) The Lessee, at its expense, shall execute, acknowledge and deliver from time to time such further counterparts of this Lease or such affidavits, certificates, Bills of Sale, financing and continuation statements and other instruments as may be reasonably requested by the Lessor in order to evidence the respective interests of the Lessor and the Lessee in the Nuclear Fuel or any portion thereof and in order to establish the character thereof as personal property, and shall, at its expense, cause such documents and any Credit Agreement and any Security Agreement if so requested by the Lessor to be recorded, filed or registered and to be re‑recorded, refiled or re-registered in such manner and at such times and in such places as may be required by any present or future law applicable to the Nuclear Fuel or any portion thereof in order to publish notice and perfect the validity of such interests.




Section 14. Compliance with Legal and Insurance Requirements, and with Instruments .

Subject to the provisions of Section 16 hereof, the Lessee at its expense will promptly (i) comply in all material respects with all Legal Requirements and Insurance Requirements, whether or not compliance therewith shall require structural or basic mechanical changes in the Generating Facility, or in any design or fabrication of the Nuclear Fuel or any portion thereof, and whether or not such compliance will interfere with the use and enjoyment of the Nuclear Fuel or any portion thereof, (ii) procure, maintain and comply with all permits, licenses and other authorizations required for the ownership of the Nuclear Fuel or any portion thereof by the Lessor, or for any operation or use of the Nuclear Fuel or any portion thereof then being made and for the proper maintenance thereof, and for the taking of all necessary and proper steps in the management of the Nuclear Fuel through each stage of the Nuclear Fuel Cycle, and (iii) comply with any other instruments of record or any contract or agreement at the time in force affecting title to or ownership of the Nuclear Fuel or any portion thereof.
Section 15.
Liens .

The Lessee will not directly or indirectly create or permit to be created or to remain, and will discharge, any mortgage, lien, encumbrance or charge on, security interest in, or conditional sale or other title retention agreement with respect to, the Nuclear Fuel or any portion thereof, or upon the Lessee’s leasehold interest therein, or upon the Basic Rent, Additional Rent, Advance Rent or any other sum payable under this Lease, other than (i) this Lease and any assignment hereof permitted hereby, (ii) liens for Impositions not yet payable, or payable without the addition of any fine, penalty, interest or cost for nonpayment, or being contested as permitted by Section 16 hereof, (iii) liens and security interests created by any Security Agreement and other liens, charges or encumbrances resulting from acts of the Lessor or securing obligations of the Lessor which the Lessee is not obligated to pay or discharge under the terms of this Lease, (iv) the title transfer and commingling of the Nuclear Fuel contemplated by Section 10(d) hereof, and (v) liens of mechanics, laborers, materialmen, suppliers or vendors, or rights thereto, incurred in the ordinary course of business for sums of money which under the terms of the related contracts are not at the time due, provided that such reserve or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made in respect thereto.
Section 16.
Permitted Contests .

The Lessee, at its expense, may contest after prior notice to the Lessor, by appropriate legal proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Imposition or lien therefor, or any Legal Requirement, or any other mortgage, lien, encumbrance, charge, security interest, conditional sale or other contract or agreement referred to in Section 15 hereof; provided that (i) in the case of an unpaid Imposition or lien therefor, such proceedings shall suspend the collection thereof from the Lessor, (ii) neither the Nuclear Fuel nor any portion thereof or interest therein would be subject to being sold, forfeited, confiscated, condemned or lost, (iii) neither the use of the Nuclear Fuel or any portion thereof, nor the taking of any step necessary or proper with respect thereto in the management thereof through any stage of the Nuclear Fuel Cycle, nor the performance of any other act required to be performed by the Lessee under this Lease would be enjoined, prevented or otherwise interfered with, (iv) the Lessor would not be subject to any additional civil liability (other than interest which the Lessee agrees to pay), or any criminal liability, for failure to pay any such Imposition or to comply with any such Legal Requirement or any such other mortgage, lien, encumbrance, charge, contract or agreement, and (v) the Lessee shall have set aside on its books adequate reserves (in accordance with generally accepted accounting principles) with respect thereto and shall have furnished such security, if any, as may be required in the proceedings or reasonably requested by the




Lessor. The Lessee will pay, and save the Lessor harmless against, all losses, judgments, decrees and costs, including attorneys’ fees and expenses, in connection with any such contest and will, promptly after the determination of such contest, pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable therein, together with all penalties, fines, interest, costs and expenses thereon or in connection therewith, and such indemnification by the Lessee shall survive the termination of this Lease, in whole or in part.
Section 17.
Insurance .

The Lessee shall, at its own cost and expense, procure and maintain, or cause to be procured and maintained, liability insurance and indemnification agreements with respect to the Generating Facility, including Nuclear Fuel insuring and indemnifying the respective interests of the Lessor, the Lessee, each Person who is a lender under a Credit Agreement or a Secured Note Agreement, Merrill Lynch & Co., Inc., United States Trust Company of New York and the Assignee (each of the foregoing is hereinafter sometimes called an “Insured Person”) to the full extent required under the Atomic Energy Act, or under any other law, rule or regulation. In the event the provisions of the Atomic Energy Act with respect to liability insurance and the indemnification of owners, licensees and operators of Nuclear Fuel thereunder shall change, then the Lessee shall use its best efforts to obtain equivalent insurance and indemnification from the Nuclear Regulatory Commission or from such other governmental, public and/or private sources from which such coverage is available. The Lessee shall, at its own cost and expense, procure and maintain, or cause to be procured or maintained, physical damage insurance with respect to the Nuclear Fuel insuring the Lessor and the Assignee against loss or damage to the Nuclear Fuel in a manner and in amounts which are consistent at all times with current prudent utility industry practice in the United States and in any case to the full extent required by law or rules or regulations having the force of law. Such liability and physical damage insurance may be subject to such deductible amounts and the Lessee may self-insure with respect to such liability and physical damage insurance to the extent that the Lessor and the Assignee and the Lessee may consent in writing, which consent on the part of the Lessor and the Assignee shall not be unreasonably withheld, provided that such deductible amounts and such self-insurance are permitted under all applicable laws, rules and regulations. The Lessor and the Assignee shall be additional insureds where possible, and, with respect to physical damage coverage, the Lessor and the Assignee shall be loss payees, as their interests may appear under this Lease, in all insurance policies and indemnification agreements required under this Section 17. All such policies and indemnification agreements, where possible, shall provide for at least ten days prior written notice to the Lessor and the Assignee of any cancellation of or any material adverse change in such policies by the insurer. The Lessee will advise the Lessor and the Assignee of all expirations (including any expiration upon cancellation by the Lessee) and renewals of policies and will upon request of the Lessor and the Assignee provide the Lessor and the Assignee with insurance certificates from its insurance brokers in respect of the insurance procured pursuant to the provisions of this Section 17. Upon execution of this Lease and at yearly intervals thereafter, the Lessee will furnish to the Lessor and the Assignee a detailed statement as to the insurance coverage provided pursuant to this Section 17 and will further give immediate notice as to any material adverse change in the nature or availability of such coverage, including any material adverse change of which the Lessee has knowledge in the provisions of the Atomic Energy Act or any other applicable law, rule or regulation with respect to liability insurance and indemnification agreements, or any material adverse change in the application, interpretation or enforcement thereof. The Lessor and the Assignee shall be under no duty to examine such insurance policies or indemnification agreements or to advise the Lessee in case the insurance or indemnification is not in compliance herewith.




Section 18.
Damage or Destruction .

(a) If any incident of damage to or destruction of the Generating Facility, the Nuclear Fuel or any portion thereof should occur, which damage or destruction (i) is in excess of $10,000,000 and (ii) is of such a nature as to prevent Heat Production by the Nuclear Fuel, the Lessee will promptly give notice thereof to the Lessor, generally describing the nature and extent of such damage or destruction, and unless the Lessee shall have delivered to the Lessor the certificate described in Section 20(a)(i) hereof or shall have exercised its right to obtain a release of such Nuclear Fuel or portion thereof pursuant to Section 10(b) within 90 days after the happening of such incident, the Lessee, at its cost and expense (without limiting the Lessee’s right to request payment by the Lessor of such expenses provided in Section 6), will promptly commence and will complete (subject to Unavoidable Delays but in any event within 18 months after the happening of such incident) the Restoration of the Generating Facility, the Nuclear Fuel or such portion thereof, as the case may be, whether or not the insurance proceeds, if any, on account of such damage or destruction shall be sufficient for the purpose. Upon completion of the Restoration, the Lessee shall execute and deliver to the Lessor a Fuel Schedule and shall cause the relevant Manufacturer of the replacement Nuclear Fuel to execute and deliver to the Lessor a Bill of Sale substantially in the form of Schedule C, unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale; and the Lessor shall accept such Bill or Bills of Sale. As to any damaged or destroyed Nuclear Fuel originally included on Schedule A, as amended, and replaced by such Restoration, the Lessor shall deliver to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of Schedule E hereto.

(b) If no Event of Default shall have occurred and be then continuing, all insurance proceeds received by the Lessor or the Assignee on account of any damage to or destruction of the Nuclear Fuel or any portion thereof (less the actual costs, fees and expenses incurred in the collection thereof for which the Person incurring the same shall be reimbursed from such proceeds) shall be paid to the Lessee.

Section 19. Condemnation or Eminent Domain .

(a) In case of a Taking or the commencement of any proceedings or negotiations which might result in any Taking, the Lessee will promptly give notice thereof to the Lessor, generally describing the nature and extent of such Taking which might result therefrom, as the case may be. The Lessee hereby assigns to the Lessor any award or payment on account of any Taking of the Nuclear Fuel or any portion thereof which is payable to the Lessee. The Lessor shall have the right to participate fully in any proceedings or negotiations in connection with any such Taking of the Nuclear Fuel or any portion thereof, provided that Lessee shall be entitled to control such proceedings or negotiations as long as no Event of Default shall have occurred and be then continuing. The Lessee will pay all reasonable costs, fees and expenses incurred by the Lessor in connection with any Taking of the Nuclear Fuel or any portion thereof and seeking and obtaining any award or payment on account thereof.

(b) In the case of any Taking, (i) the provisions of this Lease shall remain in effect, except as expressly provided below in this Section 19, without any abatement or reduction of Basic Rent, Additional Rent, Advance Rent or any other sum payable hereunder, and (ii) unless the Lessee shall have exercised within 90 days after the happening of such Taking its right to obtain a release of such Nuclear Fuel or portion thereof pursuant to Section 10(b), the Lessee, whether or not the awards or payments, if any, on account of such Taking shall be sufficient for the purpose, at its cost and expense (without limiting the Lessee’s right to request payment by the Lessor of such expenses provided in Section 6) will promptly commence and will




complete (subject to Unavoidable Delays but in any event within 18 months after the happening of such Taking) Restoration of the Nuclear Fuel or the portion thereof affected by such Taking, unless the Lessee shall have delivered to the Lessor the certificate described in Section 20(a)(i) hereof within 90 days after the happening of such Taking, provided that in the case of a Taking for temporary use the Lessee shall not be required to effect such Restoration until such Taking has terminated. A Taking for temporary use shall mean a requisition of the use of the Nuclear Fuel, or any portion thereof which by its terms does not exceed the original term of this Lease or the then current extended term. Upon completion of Restoration, the Lessee shall execute and deliver to the Lessor a Fuel Schedule, shall cause the relevant Manufacturer of the replacement Nuclear Fuel to execute and deliver to the Lessor a Bill of Sale substantially in the form of Schedule C, unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale, and shall deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing any portion of the Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such Bill or Bills of Sale. As to any condemned or requisitioned (or otherwise taken) Nuclear Fuel originally included on Schedule A, as amended, and replaced by such Restoration, the Lessor shall deliver to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of Schedule E hereto.

(c) If no Event of Default shall have occurred and be then continuing, all awards and payments received by the Lessor on account of any Taking of the Nuclear Fuel or any portion thereof (less the actual costs, fees and expenses incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such awards or payments) shall be paid to the Collateral Account and, at the Lessee’s option, credited against the purchase price of Nuclear Fuel released pursuant to Sections 10(b) and 19(b) or paid to the Lessee in reimbursement of the cost of Restoration, as contemplated by Section 19(b).

(d) For purposes of this Lease, all amounts paid pursuant to any agreement with any condemning authority which has been made in connection with any Taking shall be deemed to constitute an award on account of such Taking.

Section 20. Termination After Certain Events .

(a) This Lease shall terminate in the manner and with the effect hereinafter set forth in Section 20(b) upon the happening of any of the following events:

(i) The Lessee shall have delivered to the Lessor a certificate of the Lessee signed by its President or any Vice President stating that the Lessee desires to terminate this Lease and the Lessor is permitted to prepay at or prior to the Termination Settlement Date all Secured Notes then outstanding pursuant to the terms of such Secured Notes;

(ii) Any change in, or new interpretation by a governmental authority having jurisdiction relating to the Price-Anderson Act, as amended, or the Atomic Energy Act, or the regulations of the Nuclear Regulatory Commission thereunder, in each case as in effect on the date of this Lease, as a result of which, in the opinion of independent counsel to the Lessor, the Lessor is prohibited from asserting any material right, protection or defense available under applicable law as of the date of this Lease with respect to civil or criminal actions brought in connection with a Nuclear Incident;

(iii) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by the Securities and Exchange Commission to be, an “electric utility company” as defined in the Public




Utility Holding Company Act of 1935, as amended, or its officers, directors, shareholders, partners or employees shall become subject to regulation under such Act;

(iv) If as a result of the transactions contemplated by this Lease the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by the Federal Energy Regulatory Commission to be a “public utility” as defined in the Federal Power Act, as amended, or its officers, directors, shareholders, partners or employees shall become subject to regulation under such Act;

(v) If as a result of the transactions contemplated by this Lease the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by any relevant governmental body to be, a public utility or similar entity under the laws of any state or its officers, directors, shareholders, partners or employees shall become subject to regulation under any such laws;

(vi) A change in any law or regulation or interpretation of any law or regulation as in effect on the date of this Lease shall be adopted or enforced by any governmental or regulatory authority (including, without limitation, the Nuclear Regulatory Commission, the Arkansas Public Service Commission, the Securities and Exchange Commission, the Federal Energy Regulatory Commission and the New York Stock Exchange), and as a result of such adoption or enforcement, approval of the transactions contemplated by this Lease shall be required and shall not have been obtained within any grace period after such adoption or enforcement, or as a result of which adoption or enforcement this Lease or any transaction contemplated hereby, including any payments to be made by the Lessee or the ownership of the Nuclear Fuel by the Lessor, shall be or become unlawful or the performance of this Lease shall be rendered impracticable in any material way;

(vii) The occurrence of a Nuclear Incident at Unit No. 1 or Unit No. 2 of the Generating Facility as a result of which Unit No. 1 and Unit No. 2 of the Generating Facility cease to operate (or if Unit No. 1 and Unit No. 2 of the Generating Facility are not in operation immediately prior to such Nuclear Incident, the failure to resume operation as a result of such Nuclear Incident) for a period of 24 consecutive months;

(viii) If Unit No. 1 and Unit No. 2 of the Generating Facility shall not be operated for a period of 24 consecutive months, and the Lessor shall have given notice to the Lessee that the Lessor desires to terminate this Lease on such account;

(ix) The permanent suspension, revocation or expiration of the Nuclear Regulatory Commission operating license relating to Unit No. 1 and Unit No. 2 of the Generating Facility, or any portion thereof, with the result that the operation of Unit No. 1 and Unit No. 2 of the Generating Facility is no longer permitted; or

(x) If the Lessor or the Lessee shall have given to the other the notice of termination provided for in Section 3(b) hereof and the termination date stated in such notice shall have occurred or the termination date of December 31, 2038 provided for in Section 3(b) shall have occurred by lapse of time.

(b) Upon the date of occurrence of any of the events listed in Section 20(a) hereof (the earliest such date being herein called the “Termination Event Date”), this Lease shall cease and terminate, except with respect to obligations and liabilities of the Lessee, actual or contingent, which arose under this Lease




on or prior to the Termination Event Date and except for the Lessee’s obligations set forth in Sections 5, 7, 9, 13, 14 and 17 hereof, and in this Section 20(b), all of which obligations will continue until the delivery of documentation by the Lessor and the payment by the Lessee provided for below in this Section 20(b), and except that Lessee’s obligations under Section 11 hereof shall continue as set forth therein, and forthwith also upon such termination, title to, and the entire interest of the Lessor in, the Nuclear Fuel shall automatically transfer to and be vested in the Lessee, without the necessity of any action by either the Lessor or the Lessee, but subject to the rights of the Assignee under a Security Agreement and to the lien and security interest created thereby. Title to, and the entire interest of the Lessor in, the Nuclear Fuel or any portion thereof shall, forthwith upon such termination, automatically transfer to and be vested in the Lessee or in any Person or Persons designated by the Lessee and approved by the Lessor in writing, rather than transferring to and being vested in the Lessee as aforesaid, if but only if (i) any such Person shall, upon such termination, be lawfully entitled to accept and be vested with title to the Nuclear Fuel and (ii) prior to such termination, any such Person shall have delivered an instrument to the Lessor, in form and substance satisfactory to it, executed and acknowledged by such Person and by the Lessee, pursuant to which such Person shall irrevocably (A) undertake to accept title to, and the entire interest of the Lessor in, the Nuclear Fuel forthwith upon such termination, subject to the rights of the Assignee under a Security Agreement and to the lien and security interest created thereby, (B) agree that the transfer to and the vesting in such Person of such title and interest shall occur automatically upon such termination without the necessity of any action by either the Lessor or the Lessee or such Person, and (C) undertake to execute, upon such termination, the instrument referred to below in this Section 20(b) acknowledging, among other things, that title to and ownership of the Nuclear Fuel has transferred to and vested in such Person. As soon as possible after either the Lessor or the Lessee shall learn of the happening of any of the events listed in Section 20(a) hereof, such party shall give notice thereof to the other party hereto (and in the case of such a notice to the Lessor, signed also by such other Person in whom title to the Nuclear Fuel shall have vested as aforesaid), which notice shall (X) acknowledge that this Lease has terminated, subject to the continuing obligations of the Lessee mentioned above, and that title to and ownership of the Nuclear Fuel has transferred to and vested in the Lessee or such other Person, as the case may be, subject as aforesaid, (Y) state that on a settlement date occurring not less than 30 nor more than 120 days after the giving of notice pursuant to Section 20(a)(i) hereof and not less than 90 nor more than 120 days after the giving of notice pursuant to Sections 20(a)(ii)-(ix) hereof and on the termination date provided in Section 3(b) in the case of notice pursuant to Section 20(a)(x), which settlement date shall be specified therein (such date being herein called the “Termination Settlement Date”), the Lessee shall be obligated to pay or cause to be paid to the Lessor as the purchase price for the Nuclear Fuel an amount equal to the sum of (1) the Stipulated Loss Value of the Nuclear Fuel as of the Termination Settlement Date plus (2) the Termination Rent on the Termination Settlement Date, provided that in the case of a termination arising by virtue of the Lessor’s exercise of its rights under Section 25(b)(i) hereof, the Termination Settlement Date shall in no event be later than the termination date provided for under Section 3(b) hereof, and (Z) state that on the Termination Settlement Date, the Lessor shall be obligated to deliver to the Lessee or such other Person as the Lessee may have designated as aforesaid both a confirmatory Bill of Sale acknowledging the above-described transfer and vesting of title and ownership of the Nuclear Fuel, and an appropriate instrument duly executed by the Assignee, cancelling and discharging such Security Agreement and the liens and security interest created thereby upon the Nuclear Fuel. Upon the delivery of such notice, the Lessor and the Lessee shall become obligated to make the payment and to deliver the documentation referred to therein on such Termination Settlement Date to the same extent as if each had acknowledged in writing its obligation so to do. The Lessee’s obligation to make such payment shall be unconditional and unaffected by any event or matter whatsoever including, without limitation, failure of the Lessor to deliver such confirmatory documentation, or the quality, condition, existence, utility or title of or to the Nuclear Fuel. Any such payment made by the Lessee shall not prejudice, or constitute a waiver of, any right, claim or cause of action which the Lessee shall have against the Lessor. Such payment and delivery of documentation shall be made in accordance with Section 21 hereof.




Section 21. Conditions of Termination and Conveyance .

(a) Upon the purchase by the Lessee or such other Person pursuant to this Lease of the Lessor’s interest in the Nuclear Fuel or any portion thereof or of the Lessor’s interest in any insurance proceeds or condemnation awards (or the right to receive the same) which the Lessee is entitled to receive in connection with any such purchase by it, the Lessor will transfer the same title thereto or ownership interest therein that existed on the respective dates when the various items of property so sold first became subject to this Lease, and the Lessee or such other Person, as the case may be, shall accept the same subject to all liens, encumbrances, charges, exceptions and restrictions attaching thereto on or after the date of this Lease which have not been created by voluntary act of the Lessor or for the discharge of which the Lessee is responsible under this Lease, and to all applicable laws, regulations and ordinances, but free and clear of the lien of any Security Agreement.

(b) Upon the Termination Settlement Date specified in the notice delivered by the Lessor or the Lessee, the Lessee shall pay to the Lessor at its address for purposes of notices hereunder or to such other Person at such other place designated by the Lessor, the purchase price therefor specified herein, in Federal funds, and the Lessor shall deliver to the Lessee a confirmatory Bill of Sale acknowledging the transfer and vesting of ownership of the Nuclear Fuel and an appropriate instrument duly executed by the Assignee and/or any other necessary Person or Persons, cancelling and discharging all Security Agreements and the liens and security interests created thereby upon the Nuclear Fuel. The Lessee shall pay all expenses in connection with such transfer, including all escrow fees, search and recording and filing fees, attorneys’ fees and all applicable Federal, state and local sales, use and other taxes which may be incurred or imposed by reason of the transfer then being made by the Lessor, or by reason of the delivery of said instrument or instruments of transfer.

(c) Notwithstanding any other provision of this Lease, whenever the Lessee has the right or obligation to purchase the Nuclear Fuel or any portion thereof or any other property pursuant to any provision of this Lease (other than Section 20(b)), the Lessee may cause such purchase to be effected by, and the Lessor shall transfer title and ownership to the subject matter of such purchase to, any other Person specified by the Lessee in a notice to the Lessor given at least 15 days prior to the date of such purchase, provided , however, that nothing specified in this subsection (c) shall in any way impair or affect the obligations of the Lessee under this Lease in connection with such purchase and provided , further, that, at the time of any such transfer to such other Person, the Lessee shall deliver to the Lessor the undertaking of the Lessee indemnifying and holding the Lessor harmless from and against any loss or liability incurred by the Lessor by reason of such transfer.

Section 22. Estoppel Certificates; Information .

The Lessee will from time to time deliver to the Lessor, promptly upon reasonable request, (i) a statement, executed by any Vice President of the Lessee, certifying the dates to which Basic Rent, Additional Rent, Advance Rent and other sums payable hereunder have been paid, that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and identifying such modifications) and that no Event of Default has occurred and is continuing (or, if any Event of Default has occurred and is continuing, specifying the nature and period of existence thereof and what action the Lessee is taking or proposes to take with respect thereto), and (ii) such information with respect to the Nuclear Fuel or any portion thereof, including the amounts of Stipulated Loss Value of the Nuclear Fuel or portions thereof in accordance with the Lessee’s records, as from time to time may reasonably be requested, it being intended that any such statement delivered pursuant to this Section 22 may be relied upon by the Lessor.




Section 23.
Rights to Perform the Lessee’s Covenants .

If the Lessee shall fail to make any payment or perform any act required to be made or performed by it hereunder, the Lessor, without notice to or demand upon the Lessee and without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Lessee therefor. All payments so made by the Lessor and all costs and expenses (including, without limitation, attorneys’ fees and expenses) incurred in connection therewith or in connection with the performance by the Lessor of any such act shall constitute Additional Rent hereunder and the Lessee agrees to pay the same as provided in Section 5 hereof.
Section 24.
Assignments .

The interest of the Lessee in this Lease may be assigned, provided that such assignment shall expressly be made subject to the provisions of this Lease, and provided, further , that no such assignment shall affect or reduce any obligations of the Lessee or rights of the Lessor hereunder, and all obligations of the Lessee hereunder shall continue in full effect as the obligations of a principal, to the same extent as though no assignment had been made.
The Lessor may assign to an Assignee. Upon written request of the Lessor, the Lessee agrees to acknowledge notice of any such assignment or the granting of a security interest in the Nuclear Fuel.
Section 25.
Events of Default and Remedies .

(a) Any of the following events of default by the Lessee shall constitute an “Event of Default” and give rise to the rights on the part of the Lessor described in Section 25(b) hereof:

(i) default in the payment of any amount payable by the Lessee under Section 10(c); or

(ii) default in the payment of any other amount payable by the Lessee hereunder and the continuance of such default for 5 days; or

(iii) default in the payment or performance of any other liability or other obligation or covenant of the Lessee to the Lessor hereunder and the continuance of such default for 30 days after the occurrence thereof; or

(iv) the Lessee admits insolvency or bankruptcy or is unable to pay its debts as they mature, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee or receiver for the Lessee, or for the major part of its property other than the trustees pursuant to the Mortgage and Deed of Trust; or

(v) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors, are instituted by or against the Lessee, and if instituted against the Lessee are allowed against the Lessee or are consented to or are not dismissed, stayed or otherwise nullified within 60 days after such institution; or





(vi) any representation or warranty made by the Lessee in this Lease, or in any related instrument, or in any report, certificate, financial statement or other instrument furnished in connection with this Lease shall prove to be false or misleading in any material respect; or

(vii) a default or event of default under any instrument evidencing indebtedness for borrowed money (or under the provisions of any agreement pursuant to which such instrument was issued) in excess of $10,000,000 and providing the holder thereof with recourse against the Lessee shall cause such indebtedness to become due prior to its stated maturity; or

(viii) one or more final judgments for the payment of money shall be rendered against the Lessee in an aggregate amount in excess of $10,000,000 and the same shall remain undischarged for a period of 30 days during which execution of such judgment shall not be effectively stayed.

(b) Upon the occurrence of any Event of Default, the Lessor may in its discretion do any one or more of the following:

(i) treat the Event of Default as an event under Section 20(a) hereof, entitling Lessor to the consequent benefits of Section 20(b) hereof and in general proceed by appropriate judicial proceedings, either at law or in equity, to enforce performance or observance by the Lessee of the applicable provisions of this Lease, or to recover damages for the breach of any thereof; or

(ii) by notice to the Lessee terminate this Lease, whereupon the Lessee’s interest and all right of the Lessee and Persons claiming through or under the Lessee to the use of the Nuclear Fuel shall forthwith terminate but the Lessee shall remain liable with respect to obligations and liabilities, actual or contingent, which arose under this Lease on or prior to the date of such termination and the Lessee’s obligations set forth in Section 11 and this Section 25(b)(ii) and, until the earlier of (1) Lessor’s taking possession of the Nuclear Fuel or Lessee’s delivering the Nuclear Fuel as set forth below or (2) final and uncontested payment of the amounts referred to in (A) and (B) below, Sections 9, 13, 14 and 17; and upon such termination the Lessor shall have the immediate right of possession of the Nuclear Fuel (to the extent not prohibited by law) and the right, at the Lessor’s election, either to enter the Generating Facility or any other premises where the Nuclear Fuel or any portion thereof is located and remove the Nuclear Fuel or such portion thereof there located (to the extent not prohibited by law) or cause the same to be done by any Person entitled by law so to do, in which case the Lessor shall not be responsible for any damage to the Generating Facility or such premises, except for damage resulting from the Lessor’s willful misconduct or gross negligence (the Lessee hereby agreeing to indemnify and hold the Lessor harmless from all losses and liabilities in respect of any such damage to the Generating Facility, such premises or the Nuclear Fuel or injury to the Lessor’s, the Lessee’s or such other Person’s employees sustained in the course of such removal, except any such damage resulting from the Lessor’s willful misconduct or gross negligence, provided that the Lessee hereby further agrees that the misconduct or negligence of the Assignee shall not be imputed to the Lessor), or to require the Lessee, at the Lessee’s expense to deliver the Nuclear Fuel or any portion thereof, properly containerized and insulated for shipping, at the Generating Facility and consigned to a Person specified by the Lessor and licensed to receive such Nuclear Fuel, in which case the risk of loss shall be upon the Lessee until such delivery is made; and the Lessor may thenceforth hold, possess and enjoy the Nuclear Fuel (to the extent not prohibited by law) and may sell the Lessor’s interest in the Nuclear Fuel or any portion thereof upon any terms deemed satisfactory to the Lessor, free from any rights of the Lessee and any Person claiming through or under the Lessee; but the Lessor shall, nevertheless, have the right to recover forthwith from the Lessee:





(A) any and all Basic Rent, Additional Rent, Advance Rent and all other amounts payable by the Lessee hereunder which may be due and unpaid immediately prior to such termination or which may then be accrued and unpaid;

(B) as liquidated damages for loss of the bargain and not as a penalty, an amount equal to the excess of (x) the sum of (i) the Stipulated Loss Value of the Nuclear Fuel as of the date of such termination of this Lease plus (ii) the Termination Rent, over (y) the amount, if any, realized by the Lessor in a sale of the Nuclear Fuel (at which the Lessor may be a purchaser), without set-off, defense or reduction other than a deduction from the sale price of all the costs of such sale, including legal fees, commissions, sales taxes and other customary charges; it being understood that the Lessor shall have no obligation to conduct any such sale, and that the Lessor may, in lieu of conducting such sale, transfer and convey title to, and its entire ownership interest in, the Nuclear Fuel to the Lessee or any trustee or liquidator therefor upon the terms and conditions set forth in Section 21, but that, if the Lessor conducts such sale, the Nuclear Fuel may be sold free and clear of all rights of the Lessee; and

(C) any and all other damages and expenses (including, without limitation, attorneys’ fees and expenses), which the Lessor shall have sustained by reason of the breach of any provision of this Lease.

The Lessee hereby waives, to the full extent not prohibited by law, any right it may now or hereafter have to require the sale, in mitigation of damages, of the Nuclear Fuel or any portion thereof consequent to an Event of Default.
(c) Pending Lessor’s exercise of any available remedy to take or deliver to a third party possession of any Nuclear Fuel, the Lessee shall be responsible for the storage of the Nuclear Fuel.

(d) The remedies herein provided in favor of the Lessor in case of an Event of Default as hereinabove set forth shall not be deemed to be exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law, in equity or in bankruptcy.

Section 26. Permanent Storage or Disposal .

(a) Any other provisions of this Lease to the contrary notwithstanding, provided that the Lessor has not exercised its rights to sell such Nuclear Fuel after an Event of Default and provided that the Lessee has not surrendered such Nuclear Fuel pursuant to Section 26(a) hereof upon termination of the Lease, the Lessee shall be obligated to, at its expense, either store, dispose of or Reprocess Nuclear Fuel which has completed Heat Production. The Lessee shall be entitled to choose whether to store, dispose of or Reprocess the Nuclear Fuel at its discretion. If required by the Lessee in connection with such permanent storage, disposal or Reprocessing of such Nuclear Fuel, the Lessor will transfer title to such Nuclear Fuel to the Lessee at the Lessee’s request, pursuant to a Bill of Sale in the form of Schedule E hereto, and the Lessor and the Lessee shall execute a Fuel Schedule reflecting such transfer.

(b) When any assembly of Nuclear Fuel is no longer useful for Heat Production, the Lessor shall be entitled to transfer title to such assembly of Nuclear Fuel to the Lessee, pursuant to a Bill of Sale in the form of Schedule E hereto. A Fuel Schedule reflecting such transfer shall be executed and delivered by the Lessor and the Lessee.





(c) Any provision of this Lease to the contrary notwithstanding, the Lessee will not move any assembly of Nuclear Fuel which has been in Heat Production from the Generating Facility unless it shall notify the Lessor, and shall, if requested by the Lessor, have repurchased such assembly. A Fuel Schedule reflecting such transfer shall be executed and delivered by the Lessor and the Lessee.

Section 27. No Merger .

There shall be no merger of this Lease or of the leasehold interest created by this Lease with the absolute ownership interest in the Nuclear Fuel or any portion thereof by reason of the fact that the same Person may acquire or own or hold, directly or indirectly, (i) this Lease or the leasehold interest created by this Lease or any interest in this Lease or in any such leasehold interest and (ii) the absolute ownership or other interest in the Nuclear Fuel or any portion thereof, and no such merger shall occur unless and until all Persons, including the Assignee, having any interest in (y) this Lease or the leasehold interest created by this Lease and (z) the absolute ownership or other interest in the Nuclear Fuel or any portion thereof shall join in an instrument effecting such merger and shall duly record the same.
Section 28.
Notices .

Any notices provided for in this Lease shall be in writing and shall be deemed to have been duly given when delivered personally or otherwise actually received or five days after the same have been deposited in the United States mail, registered, postage prepaid, addressed as follows:
If to the Lessor:
(with a copy to the Assignee)
River Fuel Trust #1
United States Trust Company of New York
45 Wall Street
New York, New York 10005
Attention:Corporate Trust and Agency Division; Department B
If to the Lessee:
Arkansas Power & Light Company
425 West Capitol
P.O. Box 551
Little Rock, Arkansas 72203
Attention:Treasurer
and if to the Assignee, then at such address as shall have been designated by such Assignee by notice duly given to the Lessee, or at such other place as any of the parties may designate by notice duly given in accordance with this Section.
Section 29.
Allocation of Amounts .

Lessee agrees to cooperate in good faith with the Lessor in determining appropriate accruals and allocations pursuant to the terms of this Lease and to provide any other calculations and information which are necessary or appropriate in order to assist the Lessor in performing its obligations. Whenever, under Section 1, 5, 6, 10, 18(a), 19(b) or 22, computations are required to be made involving a cost, price, payment, charge, factor, discount or any other amount relating to a single assembly of the Nuclear Fuel, such cost, price, payment, charge, factor, discount or other amount shall be determined in the reasonable judgment of the Lessee. Unless the Lessee shall have informed the Lessor otherwise in writing or unless otherwise set forth in any of the Schedules attached hereto or furnished pursuant to this Lease, allocation shall be made by dividing the aggregate of all such costs, prices, payments, charges, discounts or any other amounts which are known to have been incurred, paid, accrued or arisen, at approximately the same time and in the same general transaction or computation, with respect to such assembly and one or more




other assemblies of the Nuclear Fuel, into as many equal parts as there are such assemblies, and allocating one of the parts so divided to each such assembly. In the event that any such cost, price, payment, charge, discount or any other amount must be certified pursuant to this Lease, the Person making such certification shall be the sole judge of the propriety of making any such allocation, and such Person need only place the term “(allocated)” before or after any cost, price, payment, charge, discount, or any other amount so certified in order to (i) establish the propriety of making such an allocation and (ii) give the warranty of such Person as to the accuracy of the allocation so certified and its compliance with the provisions of this Section 29.
Section 30.
Amendments .

This Lease may not be amended, modified or terminated, nor may any obligation hereunder be waived, orally, and no amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing, signed by the party against whom enforcement thereof is sought, except that amendments of Schedule A hereto pursuant to Section 6, 10, 18(a) or 19(b) hereof shall be made in accordance with the provisions of such Sections.
Section 31.
Severability .

Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the Lessor and Lessee hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.
Section 32.
Job Incentive Credit and Investment Credit .

To the extent that the Nuclear Fuel is or becomes eligible for the job incentive credit or the investment credit or service credit under the Internal Revenue Code as in effect on the date of this Lease or thereafter amended from time to time, the Lessor at the Lessee’s request shall elect to treat the Lessee as having acquired the Nuclear Fuel, and shall provide the Lessee with an appropriate credit election. The Lessee shall provide the Lessor with a report or statement with respect to all Nuclear Fuel as to which such credit election is applicable, and such report or statement shall be in such form as may be required for Internal Revenue Service reporting.
Section 33.
Miscellaneous .

(a) United States Trust Company of New York has not executed this Lease in its individual capacity, but solely on behalf of River Fuel Trust #1 as Trustee under the Trust Agreement. In no case whatsoever shall United States Trust Company of New York or any agent thereof (or any entity acting as a successor trustee, co-trustee or separate trustee under the Trust Agreement) or the Trustor be personally liable on, or for any loss in respect of, any of the statements, representations, warranties, agreements or obligations of the Lessor hereunder, as to all of which the Lessee agrees to look solely to the Trust Estate, except for any loss, damage or injury caused by the United States Trust Company of New York’s willful misconduct or gross negligence (provided that this exception shall not be deemed to apply to the extent that United States Trust Company of New York has followed instructions, allocations, calculations or information given to it by parties authorized to do so, or which it is authorized to accept, pursuant to the Trust Agreement).





(b) The Lessee agrees that if a successor trustee is appointed in accordance with the terms of the Trust Agreement, such successor trustee shall, without further act, succeed to all the rights, duties, immunities and obligations of the Trustee hereunder and the predecessor trustee shall be released from all further duties and obligations hereunder, all without the necessity of any consent or approval by the Lessee and without in any way altering the terms of this Lease or the Lessee’s rights or obligations hereunder. The trustee under the Trust Agreement or any successor trustee thereunder may from time to time appoint one or more co-trustees or separate trustees pursuant to the terms of the Trust Agreement to exercise or hold any or all of the rights, power and title of Lessor hereunder, without the necessity of any consent or approvals by the Lessee and without in any way altering the terms of this Lease or the Lessee’s rights or obligations hereunder. One such appointment and designation of a co-trustee or separate trustee shall not exhaust the right to appoint further co-trustees or separate trustees pursuant to the Trust Agreement, and such right may be exercised repeatedly so long as this Lease shall be in effect. Except to the extent there shall be only one trustee, and such trustee shall be United States Trust Company of New York, at least one trustee shall at all times be a bank or trust company, organized under the laws of the United States of America, any State thereof or the District of Columbia, having a combined capital and surplus of at least $500,000,000.

(c) The Lessee shall, at its expense, upon receipt of written notice of the appointment of a successor trustee, co-trustee or separate trustee under the Trust Agreement, promptly make such modifications and changes to reflect such appointment as shall be reasonably requested by such successor trustee, co-trustee or separate trustee in such insurance, schedules, supplements, certificates and other instruments relating to the Nuclear Fuel as shall be specified by such successor trustee, co-trustee or separate trustee, all in form and substance satisfactory to such successor trustee, co-trustee or separate trustee and its counsel.

(d) The Lessor agrees that (i) the Lessor will not enter into any Credit Agreement, Secured Note Agreement or Security Agreement or amend or modify or consent to any amendment or modification of a Credit Agreement, Secured Note Agreement or Security Agreement without the prior written consent of the Lessee, and (ii) the Lessor will at all times use its best efforts to comply with, observe and perform all of the covenants and agreements required to be complied with, observed or performed by the Lessor under a Credit Agreement, Secured Note Agreement or Security Agreement. The Lessee agrees to furnish such documents and certificates as may be required in this regard.

(e) The Lessor and the Lessee agree that the rights, duties and obligations of the Lessee hereunder may be exercised or performed, as the case may be, by System Energy Resources, Inc. (“SERI”), as agent for the Lessee, pursuant to the terms of the Operating Agreement to be entered into between the Lessee and SERI as filed with the Securities and Exchange Commission in File No. 70-7570 and to the extent such filing shall be approved; provided that the ability of the Lessee to exercise its rights under this Lease, and the requirement of the Lessee to perform its duties and obligations shall not be affected by the appointment of SERI as the Lessee’s agent.

(f) The terms and provisions of this Lease supersede all prior negotiations and oral understandings, if any, between the Lessor and the Lessee with respect to the transactions contemplated hereby. The captions in this Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof. This Lease shall in all respects be governed by, and construed in accordance with, the laws of the State of New York including all matters of construction, validity and performance.





IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed by their respective officers thereunto duly authorized, as of the day and year first above written.
RIVER FUEL TRUST #1
By:United States Trust Company
of New York, as Trustee
By: /s/ Louis P. Young
Assistant Vice President
ARKANSAS POWER & LIGHT COMPANY
By: /s/ Lee W. Randall
Vice President
LESSEE






    
STATE OF NEW YORK
)
 
) ss.:
COUNTY OF NEW YORK
)

On this 22nd day of December, 1988, before me, a Notary Public in the State of New York personally appeared Louis P. Young, to me personally known, who being by me duly sworn did say that he is an officer of the Trustee of River Fuel Trust #1, and that said instrument was signed on behalf of the said trust and the said officer acknowledged the execution of said instrument to be the voluntary act and deed of said Trust by it voluntarily executed.
 
/s/ Michael R. Stolfi
Notary Public
[NOTARIAL SEAL]
Michael R. Stolfi
NOTARY PUBLIC, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires October 05, 1989




STATE OF NEW YORK
)
 
 
) ss.:
 
COUNTY OF NEW YORK
)
 
On this 21st day of December, 1988, before me, a Notary Public in the State of New York personally appeared Lee W. Randall, to me personally known, who being by me duly sworn did say that he is a Vice President of ARKANSAS POWER & LIGHT COMPANY, and that said instrument was signed on behalf of the said corporation by authority of its Board of Directors and the said Vice President acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
 
/s/ Michael R. Stolfi
Notary Public
[NOTARIAL SEAL]
Michael R. Stolfi
NOTARY PUBLIC, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires October 05, 1989

    




SCHEDULE A

DESCRIPTION OF NUCLEAR FUEL
Date:
 
Revision:
 

Assembly Serial No.
Contained Uranium
in Kg. U.
at B.O.L  *
Average Enrichment (Weight Percentage U235)
Allocated Acquisition Cost
Allocated Capitalized Cost
Allocated Investment
 
 
 
 
 
 
 
 
 
 
 
 




* B.O.L. = Beginning of Life






Date:
 
Revision:
 


SCHEDULE B

QUARTERLY RENT SCHEDULE

STIPULATED LOSS VALUE CONFIRMATION
Cost Attributable to Quarter Ending

1
2
3
4
5
6
7
8
Assembly Serial No
S.L.V. as of the End of Prior Quarter
Allocated Acquisition Costs
Allocated Capitalized Costs (other than Allocated Capitalized Daily Lease Charges)
Daily Lease Charges to be Allocated to and Included in Capitalized Cost
Burn-Up Charges
S.L.V. At the Date Hereof (to be Used Only if Fuel is Being Added or Removed)
S.L.V. at the End of this Quarter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(Lessor)
(Lessee)
By:
Title
(acknowledging acceptance)
By:
Title
(acknowledging acceptance)

NOTES:
Columns 1.2.3 and 4 filled in by the Lessor when it forwards quarterly Daily Lease Charges to Lessee.
Colums 5.6.7 and 8-inserted by the Lessee.
Column 5-represents that portion of Daily Lease Charges attributable to a period during which Nuclear Fuel is not in commercial operation or in Heat Production.
Column 6-the Lessee's calculation of Burn-Up Charge.
Column 7-used only when Fuel is added or removed.
Annexes I and II are a part hereof.
Any allocation shall be made in the sole judgment of Lessee.

    

    




ANNEX I TO SCHEDULE B
(To be filled in by the Lessee)

Calculation of Burn-Up Charges and Basic Rent

1
2
3
4
5
6
7
 
 
 
Fill in only if first time or if MWhr Factor being revised
 
 
 
 
Assembly Serial No.
Allocated S.L.V.
Estimated Residual Value
Est. Design MWhr Output Remaining
MWhr* Factor
MWhr** Output
Burn-Up Charge
(Col. 5 x
Col. 6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Burn-Up Charge =
 
 
 
 
 
 
 
 
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RENT CALCULATION
 
 
 
1. Burn-Up Charge (from above)
 
$
 
2.A. Quarterly Lease Charge$
 
 
 
B. Less: Amount Capitalized (see
Column 5 of Quarterly Rent Schedule)$
 
  
 
Basic Rent for Quarter =
 
$
 
 
 
$
 
Estimated Burn-Up Charge next quarter
(for information only)
$
 
 
 
 
 
 
 
 
 
 
* Col. 2-Col. 3  = Col. 5
Col. 4
 
 
 
**For the preceding quarter-annual period in connection with Heat Production.





ANNEX II TO SCHEDULE B
(To be filled in by the Lessor)*

Summary of Daily Lease Charges **  
Date
Interest Cost or Discount Amortization
Credit Agreement Fees
Other Fees, Costs and Expenses
Total Daily Lease Charge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Unamortized Discount on Commercial
Paper Notes, if any, as of end of
Quarter      $__________Quarterly Lease Charge      $__________

*     To be completed separately for Nuclear Fuel not in Heat Production. Check applicable box:
[ ] In Heat Production
[ ] Not in Heat Production

**      To be calculated in accordance with the definition in the Lease.




SCHEDULE C

BILL OF SALE
TO
RIVER FUEL TRUST #1

KNOW ALL MEN BY THESE PRESENTS, that the undersigned, _______________, a __________________________ corporation (the “Vendor”), whose post office address is __________________________, for and in consideration of the sum of $_________ paid to the Vendor upon or before the execution and delivery of this Bill of Sale to River Fuel Trust #1, a New York trust (the “Purchaser”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, hereby conveys, transfers, sells and sets over all of its right, title and interest in all of the personal property consisting of the assemblies of nuclear fuel or components thereof or other nuclear material described in Annex I hereto (the “Nuclear Fuel”), and by this Bill of Sale does hereby grant, bargain, sell, transfer and deliver the Nuclear Fuel unto the Purchaser, to have and to hold the Nuclear Fuel, for itself, its successors and assigns, forever.
The Vendor hereby warrants itself to be the true and lawful owner of the Nuclear Fuel and to have full power, good right and lawful authority to dispose of the same in the aforesaid manner, and the Vendor for itself, its successors and assigns, does hereby covenant and agree with the Purchaser, its successors and assigns, to warrant and defend the true ownership of the Nuclear Fuel by the Purchaser against the claims and demands of all and every person and persons.
The Vendor and the Purchaser hereby acknowledge that, notwithstanding the sale of the Nuclear Fuel by the Vendor to the Purchaser hereunder the Nuclear Fuel will be in the possession of Arkansas Power & Light Company, or in the possession of a manufacturer processing or reprocessing the Nuclear Fuel for the account of Arkansas Power & Light Company, pursuant to a Fuel Lease dated as of December 22, 1988, between the Purchaser, as lessor, and Arkansas Power & Light Company, as lessee. On the date hereof, the Purchaser is licensed to own, but not to possess, the Nuclear Fuel, and under no circumstances shall a transfer of possession of the Nuclear Fuel to the Purchaser be necessary for the transfer of ownership effected and intended to be effected by this Bill of Sale.










IN WITNESS WHEREOF, The Vendor has caused this Bill of Sale to be executed in its corporate name, by one of its Vice Presidents, and to be dated ____________________, 19___.
By
Vice President
3




ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
RIVER FUEL TRUST #1
By:United States Trust Company of
New York, as Trustee
By:
Title:
ANNEX I

Description of Nuclear Fuel
    
    





STATE OF
)
 
) ss.:
COUNTY OF
)

On this _____ day of ________, 19___, before me, a Notary Public in the State of ____________, personally appeared _______________, to me personally known, who being by me duly sworn did say that he is the Vice President of _______________________, and that said instrument was signed on behalf of the said ____________ acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
 
Notary Public
My Commission Expires:
 






STATE OF
)
 
) ss.:
COUNTY OF
)

On this _____ day of __________, 19__, before me, a Notary Public in the State of _______________, personally appeared_______________, to me personally known, who being by me duly sworn did say that he is an officer of the Trustee of River Fuel Trust #1, and that said instrument was signed on behalf of the said trust and the said officer acknowledged the execution of said instrument to be the voluntary act and deed of said Trust by it voluntarily executed.
 
Notary Public
My Commission Expires:
 





SCHEDULE D

FUEL SCHEDULE NO._____

FUEL SCHEDULE NO. _____ dated as of __________, 19_____, between RIVER FUEL TRUST #1, a New York trust (“Lessor”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, and ARKANSAS POWER & LIGHT COMPANY, an Arkansas corporation (“Lessee”) whose post office address is P.O. Box 551, Little Rock, Arkansas 72203.
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have heretofore entered into that certain Fuel Lease dated as of December 22, 1988 (herein as heretofore supplemented and amended, called the “Lease”), the defined terms therein being used herein with the same meanings as provided in the Lease; and
WHEREAS, the Lease provides in Sections 6, 10, 18 and 19 thereof for Fuel Schedules, amending Schedule A to the Lease, to be executed and delivered from time to time.
NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration and in compliance with the requirements of the Lease, the Lessor and the Lessee hereby agree as follows:
1.      The Lessee certifies that the amounts set forth in Annex I hereto as Acquisition Costs, Capitalized Costs and Investment, respectively, are true and correct and have been computed in accordance with the provisions of the Lease.
2.      The Lessee requests the Lessor to make direct payment to the Manufacturers named in Annex I of the amounts specified in Annex I and to pay the Lessee in an amount equal to $__________ for costs previously incurred by the Lessee or paid by the Lessee directly to the Manufacturers. All of the amounts for which payment is hereby requested are included in Acquisition Costs and Capitalized Costs certified in paragraph 1 above and none of said amounts have been previously paid by Lessor pursuant to Section 6 of the Lease.
3.      (a)      Schedule A to the Lease is hereby supplemented and amended so as to include those assemblies of Nuclear Fuel or the component parts thereof described in Annex II hereto (the “Additional Nuclear Fuel”) and to subject such Additional Nuclear Fuel to the Lease (and if any Nuclear Fuel is simultaneously being removed, to eliminate from Schedule A as theretofor supplemented and amended the description of Assemblies Nos._____, _____, _____ and _____). The Lessee represents and warrants that the Additional Nuclear Fuel complies with all requirements of the Lease and of law, and all necessary recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) have been duly made in the public offices in which such recordings and filings must be made in order to subject, and publish notice of the subjection of such Additional Nuclear Fuel to the Lease, and all fees, taxes and charges payable in connection with such recordings and filings have been paid in full by the Lessee.
(b)      The Lessee hereby covenants and agrees with the Lessor to warrant and defend the true ownership by the Lessor of the Additional Nuclear Fuel against the claims and demands of every person. The Lessee further warrants that such property is, and is intended to be and remain, personal property, is not and has not been affixed to any land and is free and clear of all claims, liens, security interests and other encumbrances whatsoever, except as permitted by all Security Agreements.




4.      Except as hereinbefore expressly modified and amended, the Lease is ratified and confirmed in all respects, including, without limitation, the obligation of the Lessee to pay all installments of Basic Rent and Additional Rent and other amounts to be paid by the Lessee under the Lease.






















IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Fuel Schedule to be duly executed as of the date first above written.
RIVER FUEL TRUST #1
ByUnited States Trust Company of New York, as Trustee
By
Title:  
ARKANSAS POWER & LIGHT COMPANY
By
               Authorized Officer




ANNEX I TO SCHEDULE D
Date:
 
Revision:
 

Material or Service Supplied
Vendor (and location of Vendor Facility)
Cumulative Allocated Acquisition Cost
Cumulative Allocated Capitalized Cost
Cumulative Allocated Investment
U 3 O 8 Supply
 
 
 
 
Conversion
 
 
 
 
Enrichment
 
 
 
 
Fabrication
 
 
 
 
Reprocessing
 
 
 
 
Other (Identify)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

COSTS TO BE PAID BY LESSOR
Invoice Number
Batch
Service
Invoice Amount
Interest Accrued
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
$
$




ANNEX II TO SCHEDULE D

Date:
 
Revision:
 

Batch
Assembly Serial No.
Contained Uranium in kg. U. at B.O.L. *
Average Enrichment (Weight Percent U235)
(3)
Cumulative Allocated Acquisition
Cost
(1)
Cumulative Allocated Acquisition
Cost
(4)
Cumulative Allocated Capitalized
Cost
(2)
Additional
Allocated Capitalized
Cost
(3+4)

Cumulative Allocated Investment
 
 
 
 
$
$
$
$
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

    
* B.O.L. = Beginning of Life.





SCHEDULE E

BILL OF SALE

from

RIVER FUEL TRUST #1

to

ARKANSAS POWER & LIGHT COMPANY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned River Fuel Trust #1, a New York trust (the “Fuel Company”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005 for and in consideration of the sum of $1.00 paid to the Fuel Company upon or before the execution and delivery of this Bill of Sale to Arkansas Power & Light Company, an Arkansas corporation (the “Utility”), whose post office address is P.O. Box 551, Little Rock, Arkansas 72203, hereby conveys, transfers, sells and sets over all of its right, title, interest and Fuel described in Annex I hereto and by this Bill of Sale does hereby grant, bargain, sell, transfer and deliver all of its right, title, interest and claim in and to such property to the Utility to have and to hold, for itself and assigns, forever. THE NUCLEAR FUEL IS TRANSFERRED AND CONVEYED BY THE TRUST ON AN “AS-IS”, “WHERE-IS” BASIS, WITHOUT RECOURSE AGAINST OR REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) OF ANY KIND WHATSOEVER, INCLUDING ANY WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR MERCHANTIBILITY, ON THE PART OF THE TRUST, EXCEPT THAT THE TRUST REPRESENTS AND WARRANTS THAT IT HAS NOT VOLUNTARILY GRANTED OR CREATED ANY LIEN ON THE NUCLEAR FUEL OTHER THAN THOSE PERMITTED BY SECTION 15 OF THE LEASE AGREEMENT.
Morgan Guaranty Trust Company of New York, as Collateral Agent, whose post office address is 30 West Broadway, New York, New York 10015, joins in the execution of this Bill of Sale but only to consent as secured party under the Security and Collateral Agency Agreement dated as of December 22, 1988, between it and the Fuel Company to the execution and delivery of this Bill of Sale, and does hereby cancel and discharge the Security Agreement with respect to the property described in Annex I hereto and releases such property from all liens and security interests under the Security Agreement.





IN WITNESS WHEREOF, the Fuel Company has caused this Bill of Sale to be executed, and _____________________________________________________________ joins herein as aforesaid, in their respective corporate names by one or more of their respective duly authorized officers.
Dated:
RIVER FUEL TRUST #1

By: United States Trust Company of
New York, as Trustee

By
 
Contented to by:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS COLLATERAL AGENT
By
Title:

    





ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
ARKANSAS POWER & LIGHT COMPANY
By:
Authorized Signature

ANNEX I
Description of the Nuclear Fuel
    





STATE OF
)
 
: ss.:
COUNTY OF
)

On this _____ day of __________, 19___, before me, a Notary Public in the State of ____________ personally appeared _______________, to me personally known, who being by me duly sworn did say that he is the __________ of ARKANSAS POWER & LIGHT COMPANY, and that said instrument was signed on behalf of the said corporation by authority of its Board of Directors and the said __________ acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
 
Notary Public
My Commission Expires:
 





STATE OF
)
 
: ss.:
COUNTY OF
)

On this _____ day of __________, 19__, before me, a Notary Public in the State of _______________ personally appeared_______________, to me personally known, who being by me duly sworn did say that he is an officer of the Trustee of River Fuel Trust #1, and that said instrument was signed on behalf of the said trust and such officer acknowledged the execution of said instrument to be the voluntary act and deed of said trust by it voluntarily executed.
 
Notary Public
My Commission Expires:
 





STATE OF
)
 
: ss.:
COUNTY OF
)

On this _____ day of __________, 19__, before me, a Notary Public in the State of _______________ personally appeared_______________, and ___________________ to me personally known, who being by me duly sworn did say that they are a ______________ and ____________, respectively, of Morgan Guaranty Trust Company of New York, and that said instrument was signed on behalf of the said Morgan Guaranty Trust Company of New York, by authority of its Board of Directors and the said _______________ and _______________ acknowledged the execution of said instrument to be the voluntary act and deed of said Morgan Guaranty Trust Company of New York, by it voluntarily executed.
 
Notary Public
My Commission Expires:
 

    

    





SCHEDULE F

FORM OF ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:

                                                                                                           (the “Assignor”), in consideration of one dollar and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, does hereby sell, grant, bargain, convey and assign to                                                                               , not in its individual capacity but solely as trustee (in such capacity called the “Assignee”), under the Trust Agreement dated as of December  , 1988 (said Trust Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Trust Agreement”), among it and the Trustor and the Beneficiary named therein, all right, title and interest of the Assignor in, to and under all the property described in Exhibit 1 attached hereto (all of such property being herein collectively called the “Property”).
TO HAVE AND TO HOLD the Property unto the Assignee, its successors and assigns, to its and their own use forever.
1.      The interest of the Assignor in the Property, and the interest transferred by this Assignment, is that of absolute ownership.
2.      The Assignor hereby warrants that it is the lawful owner of the rights and interests conveyed by this Assignment and that its title to such rights and interests is hereby conveyed to the Assignee free and clear of all liens, charges, claims and encumbrances of every kind whatsoever, other than (i) the amounts, if any, owing under the Contract (as such term is defined in Exhibit 1 attached hereto), (ii) other claims, if any, of the Assignor and the Contractor (as such term is defined in Exhibit 1 attached hereto) which may exist as between themselves and (iii) other liens, charges, claims and encumbrances permitted by the Lease Agreement (as hereinafter defined); and that the Assignor will warrant and defend such title forever against all claims and demands whatsoever.
3.      In order that the Contractor may transfer to the Assignee clear title to the Nuclear Fuel (as such term is defined in Exhibit 1 attached hereto) on its delivery date, the Assignor hereby releases and transfers to the Assignee any right, title or interest in the Nuclear Fuel which may have been acquired by the Assignor under the Contract prior to the date hereof.
4.      This Assignment is made in accordance with a Fuel Lease dated as of December _____, 1988, between the Assignor and the Assignee (said Lease Agreement, as the same may be from time to time amended, modified or supplemented, being herein called the “Lease Agreement”). Pursuant to a Security and Collateral Agency Agreement dated as of December _____, 1988 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by Assignee in favor of                                                           (the “Collateral Agent”), the Assignee is assigning and granting a security interest in the Property and the Assignment to the Collateral Agent for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties, as such obligations are described in the Security Agreement.
5.      It is expressly agreed that, anything contained herein to the contrary notwithstanding, (a) the Assignor shall at all times remain liable to the Contractor to observe and perform all of its duties and obligations under the Contract to the same extent as if this Assignment and the Security Agreement had not been executed, (b) the exercise by the Assignee or the Collateral Agent of any of the rights assigned




hereunder or under the Security Agreement, as the case may be, shall not release the Assignor from any of its duties or obligations to the Contractor under the Contract, and (c) neither the Assignee nor the Collateral Agent, nor any of the other Secured Parties shall have any obligation or liability under the Contract by reason of or arising out of this Assignment, the Lease Agreement or the Security Agreement, or be obligated to perform or fulfill any of the duties or obligations of the Assignor under the Contract, or to make any payment thereunder, or to make any inquiry as to the nature or sufficiency of any Property received by it thereunder, or to present or file any claim, or to take any action to collect or enforce the payment of any amounts or the delivery of any Property which may have been assigned to it or to which it may be entitled at any time or times; provided , however , the Assignee agrees, solely for the benefit of the Assignor, and subject to the terms and conditions of the Lease Agreement, (i) to purchase the Nuclear Fuel from the Contractor pursuant to the Contract and (ii) to pay to the Contractor and/or to the Assignor or their order the respective amounts specified in the Lease Agreement with respect to such Nuclear Fuel.
6.      Notwithstanding anything contained herein to the contrary, subject to the terms and conditions of the Lease Agreement, the Assignor may continue to engage in Fuel Management (as such term is defined in the Lease Agreement) with respect to the Property, including, without limitation, all dealings with the Contractor and, subject to such terms and conditions, the Assignee reassigns to the Assignor the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract with respect to the Nuclear Fuel.
7.      The Assignor agrees that at any time and from time to time, upon request of the Assignee or the Collateral Agent, and, subject to Section 13(b) of the Lease Agreement, at the sole expense of the Assignor, the Assignor will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee or the Collateral Agent may reasonably request in order to obtain the full benefits of this Assignment and the security interest therein granted in the Security Agreement and of the rights, powers and interests herein and therein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the transfer of Assignor’s right, title and interest in the Property provided for hereby and the security interest granted by the Security Agreement and the appearance in the prosecution or defense of any lawsuit with respect to the rights, powers and interests herein granted (or with respect to the grant herein of such rights, powers and interests) where such appearance, prosecution or defense by the Assignor is necessary to allow Assignee or the Collateral Agent to obtain the full benefits of this Agreement. The Assignor hereby also authorizes the Assignee and the Collateral Agent to file any such financing or continuation statement without the signature of the Assignor to the extent permitted by applicable law. The Assignor will mark its books and records pertaining to the Contract to evidence this Assignment and the transfer of Assignor’s right, title and interest in the Property provided for hereby.
8.      In any suit, proceeding or action brought by the Assignee under the Contract to enforce any provisions thereof, the Assignor will save, indemnify and keep the Assignee harmless from and against all expenses, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of the Contractor, arising out of a breach by the Assignor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of the Contractor or its successors from the Assignor, and all such obligations of the Assignor shall be and remain enforceable against and only against the Assignor and shall not be enforceable against the Assignee.
9.      The Assignor hereby agrees that it will not enter into or consent to or permit any cancellation, termination, amendment, supplement or modification of or waiver with respect to the Contract insofar as it relates to the Nuclear Fuel except for cancellations, terminations, amendments,




supplements, modifications or waivers which do not materially adversely affect the Assignee or the Collateral Agent, nor will the Assignor sell, assign, grant any security interest in or otherwise transfer its rights or other interests in the Property or any part thereof, except as permitted by the Lease Agreement.
10.      The Assignor hereby represents and warrants that the Contract is in full force and effect and represents that it is the only agreement between the Assignor and the Contractor with respect to the Nuclear Fuel.
11.      (a)                                                                                       , in its capacity as Assignee, is accepting this Assignment solely as trustee under the Trust Agreement and not in its individual capacity, and in no case whatsoever shall                                                                    (or any entity acting as successor trustee, co-trustee or separate trustee under the Trust Agreement) be personally liable on or for any loss in respect hereof or any of the statements, representations, warranties, agreements or obligations of the Trustee hereunder, as to all of which the Assignor agrees to look solely to the Trust created by the Trust Agreement, except for any loss caused by the Assignee’s willful misconduct or gross negligence (provided that this exception shall not be deemed to apply to the extent that Assignee has followed instructions given it, or which it is authorized to accept, pursuant to the Trust Agreement).
(b)      The Assignor agrees that if a successor trustee is appointed in accordance with the terms of the Trust Agreement, such successor trustee shall, without further act, succeed to all the rights, duties, immunities and obligations of the Assignee hereunder, and the predecessor trustee shall be released from all further duties and obligations hereunder, all without in any way altering the terms of this Assignment or the Assignor’s rights or obligations hereunder.
12.      The Assignor hereby agrees to send the Contractor a copy of this Assignment.
13.      This Assignment shall be governed by and construed in accordance with the laws of the State of New York.





IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed and delivered as of the __________________ day of _______________, 1988.
By
Title

The foregoing Assignment is hereby accepted:
                                                           , in its individual capacity but solely as trustee under the Trust Agreement dated as of December _____, 1988, among it and the Trustor and the Beneficiary named therein.
By
Title





EXHIBIT 1
to
Assignment

(a)      The Contract, dated as of                                                                     , as amended, between                                                                                                                      , as buyer and                                                                                                                                  , as seller (the “Contractor”) (said Contract, as the same may from time to time be amended, modified or supplemented, being herein called the “Contract”), insofar as, and only to the extent that, the Contract relates to _______________________ paid for by the Assignee or now or hereafter owned by the Assignee (the “Nuclear Fuel”); but not insofar as the Contract provides for the provision of other nuclear materials and services to the Assignor; and
(b)      The Property shall include, without limitation, (i) any and all amendments and supplements to the Contract from time to time executed and delivered to the extent that any such amendment or supplement relates to the Nuclear Fuel, (ii) the Nuclear Fuel, including the right to receive title thereto, (iii) all rights, claims and proceeds, now or hereafter existing, under any insurance, indemnities, warranties and guaranties provided for in or arising out of the Contract, to the extent that such rights or claims relate to the Nuclear Fuel, (iv) any claim for damages arising out of or for breach or default by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel, (v) any other amount, whether resulting from refunds or otherwise, from time to time paid or payable by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel and (vi) the right of the Assignor to terminate the Contract or to perform or to exercise or enforce any and all covenants, remedies, powers and privileges thereunder, insofar as it or they relate to the Nuclear Fuel.
    
    





EXHIBIT 2
to
Assignment

CONSENT AND AGREEMENT
The undersigned,                                                                                                     (the “Contractor”), has entered into a Subcontract dated as of October 27, 1982, as amended, with                                                                                           (the “Assignor”) (said Contract, as the same may from time to time be further amended, modified or supplemented, being herein called the “Contract”).
The Contractor hereby acknowledges notice that (i) in accordance with the terms of a Fuel Lease dated as of December _____, 1988, between the Assignor and ___________________________________________ , not in its individual capacity but solely as Trustee (in such capacity called the “Assignee”) under a Trust Agreement dated as of December _____, 1988 among it and the Trustor and the Beneficiary named therein, the Assignor has assigned to the Assignee a part of the Assignor’s rights under the Contract pursuant to an Assignment, in the form of Annex A hereto (such Assignment, as the same may from time to time be amended, modified or supplemented, being herein collectively called the “Assignment”), and (ii) pursuant to a Security and Collateral Agency Agreement dated as of December _________, 1988 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by the Assignee in favor of __________________________________________ (the “Collateral Agent”), for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, the Assignee has assigned and granted a security interest in all rights under the Contract from time to time assigned to it by Assignor, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties. The Contractor also acknowledges receipt of a copy of the Lease Agreement and of the Security Agreement.
The Contractor hereby consents to (i) the assignment by the Assignor to the Assignee of the Assignor’s right, title and interest in, to and under the Contract and the other Property described in the Assignment, pursuant to the Assignment and (ii) the assignment and security interest in favor of the Collateral Agent as described above. The Contractor further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the Assignor or the Assignee, it will acknowledge in writing the Assignment delivered by the Assignor to the Assignee; provided , that neither the lack of notice to nor acknowledgment by the Contractor of the Assignment shall limit or otherwise affect the validity or effectiveness of this consent to such Assignment.
The Contractor hereby confirms to the Assignee and the Collateral Agent that:
(a)      all representations, warranties and agreements of the Contractor under the Contract which relate to the Nuclear Fuel described in the Assignment shall inure to the benefit of, and shall be enforceable by, the Assignee or the Collateral Agent to the same extent as if originally named in the Contract as the purchaser of such Nuclear Fuel,
(b)      the Contractor understands that, pursuant to the Lease Agreement, the Assignee has agreed to lease the Nuclear Fuel described in the Assignment to the Assignor, and consents to the assignment to the Assignor, for so long as the Lease Agreement shall be in effect or until otherwise notified by the




Assignee, of the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract and with respect to such Nuclear Fuel, and
(c)      The Contractor is in the business of selling nuclear fuel or related services of the kind described in the Assignment, and the proposed sale of such nuclear fuel under the Contract will be in the ordinary course of business of the Contractor.
(d)      Notwithstanding any provision to the contrary contained in the Contract, the Contractor agrees that title to any Nuclear Fuel covered by the Assignment shall pass directly to the Assignee under the Contract and shall not pass to the Assignor; provided that the foregoing shall not apply to any Nuclear Fuel for which title has already passed to Assignor prior to the execution and delivery of the Assignment.
It is understood that neither the Assignment, the Security Agreement nor this Consent and Agreement shall in any way add to the obligations of the Contractor or the Assignor under the Contract.
This Consent and Agreement shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Consent and Agreement to be duly executed and delivered by its duly authorized officer as of _____ day of _____________, 1988.
By:
Title:








    
Exhibit 4(d)1
LOUISIANA POWER & LIGHT COMPANY

TO

BANK OF MONTREAL TRUST COMPANY
(successor to The Chase Manhattan Bank (National Association))

AND

Z. GEORGE KLODNICKI
(successor to J. A. Payne)
As Trustees under Louisiana Power & Light
Company’s Mortgage and Deed of Trust,
dated as of April 1, 1944
__________________
Forty-second Supplemental Indenture
Providing among other things for
First Mortgage Bonds, Environmental Series A
(Forty-fifth Series)


Dated as of June 1, 1991

        





FORTY-SECOND SUPPLEMENTAL INDENTURE
INDENTURE, dated as of June 1, 1991, between LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Louisiana (successor by merger to LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Florida), whose post office address is 317 Baronne Street, New Orleans, Louisiana 70112 (hereinafter sometimes called the “Company”), and BANK OF MONTREAL TRUST COMPANY, a New York corporation (successor to THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION)), whose principal office is located at 77 Water Street, New York, New York 10005 (hereinafter sometimes called the “Corporate Trustee”), and Z. GEORGE KLODNICKI (successor to J. A. PAYNE), whose post office address is 87 Prospect Avenue, Westwood, New Jersey 07675 (said Z. GEORGE KLODNICKI being hereinafter sometimes called the “Co-Trustee” and the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of April 1, 1944 (hereinafter called the “Mortgage”), which Mortgage was executed and delivered by Louisiana Power & Light Company, a corporation of the State of Florida (hereinafter sometimes called the “Florida Company”), to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this Indenture (hereinafter called the “Forty-second Supplemental Indenture”) being supplemental thereto;
WHEREAS, the Mortgage was recorded in various Parishes in the State of Louisiana, which Parishes are the same Parishes in which this Forty-second Supplemental Indenture is to be recorded; and
WHEREAS, by the Mortgage, the Florida Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
WHEREAS, the Florida Company executed and delivered the following supplemental indentures:          24





Designation
Dated as of
First Supplemental Indenture
March 1, 1948
Second Supplemental Indenture
November 1, 1950
Third Supplemental Indenture
September 1, 1953
Fourth Supplemental Indenture
October 1, 1954
Fifth Supplemental Indenture
January 1, 1957
Sixth Supplemental Indenture
April 1, 1960
Seventh Supplemental Indenture
June 1, 1964
Eighth Supplemental Indenture
March 1, 1966
Ninth Supplemental Indenture
February 1, 1967
Tenth Supplemental Indenture
September 1, 1967
Eleventh Supplemental Indenture
March 1, 1968
Twelfth Supplemental Indenture
June 1, 1969
Thirteenth Supplemental Indenture
December 1, 1969
Fourteenth Supplemental Indenture
November 1, 1970
Fifteenth Supplemental Indenture
April 1, 1971
Sixteenth Supplemental Indenture
January 1, 1972
Seventeenth Supplemental Indenture
November 1, 1972
Eighteenth Supplemental Indenture
June 1, 1973
Nineteenth Supplemental Indenture
March 1, 1974
Twentieth Supplemental Indenture
November 1, 1974

which supplemental indentures were recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Florida Company was merged into the Company on February 28, 1975, and the Company thereupon executed and delivered a Twenty-first Supplemental Indenture, dated as of March 1, 1975, pursuant to which the Company, among other things, assumed and agreed duly and punctually to pay the principal of and interest on the bonds at the time issued and outstanding under the Mortgage, as then supplemented, in accordance with the provisions of said bonds and of any appurtenant coupons and of the Mortgage as so supplemented, and duly and punctually to observe, perform and fulfill all of the covenants and conditions of the Mortgage, as so supplemented, to be kept or performed by the Florida Company, and said Twenty-first Supplemental Indenture was recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Company has succeeded to and has been substituted for the Florida Company under the Mortgage with the same effect as if it had been named as mortgagor corporation therein; and
WHEREAS, the Company executed and delivered the following supplemental indentures:




Designation
Dated as of
Twenty-second Supplemental Indenture
September 1, 1975
Twenty-third Supplemental Indenture
December 1, 1976
Twenty-fourth Supplemental Indenture
January 1, 1978
Twenty-fifth Supplemental Indenture
July 1, 1978
Twenty-sixth Supplemental Indenture
May 1, 1979
Twenty-seventh Supplemental Indenture
November 1, 1979
Twenty-eighth Supplemental Indenture
December 1, 1980
Twenty-ninth Supplemental Indenture
April 1, 1981
Thirtieth Supplemental Indenture
December 1, 1981
Thirty-first Supplemental Indenture
March 1, 1983
Thirty-second Supplemental Indenture
September 1, 1983
Thirty-third Supplemental Indenture
August 1, 1984
Thirty-fourth Supplemental Indenture
November 1, 1984
Thirty-fifth Supplemental Indenture
December 1, 1984
Thirty-sixth Supplemental Indenture
December 1, 1985
Thirty-seventh Supplemental Indenture
April 1, 1986
Thirty-eighth Supplemental Indenture
November 1, 1986
Thirty-ninth Supplemental Indenture
May 1, 1988
Fortieth Supplemental Indenture
December 1, 1988
Forty-first Supplemental Indenture
April 1, 1990

which supplemental indentures were recorded in various Parishes in the State of Louisiana; and
WHEREAS, in addition to the property described in the Mortgage, as supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Florida Company or the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:




Series
Principal
Amount
Issued
Principal
Amount
Outstanding
3% Series due 1974
$17,000,000
None
3⅛% Series due 1978
$10,000,000
None
3% Series due 1980
$10,000,000
None
4% Series due 1983
$12,000,000
None
3⅛% Series due 1984
$18,000,000
None
4¾% Series due 1987
$20,000,000
None
5% Series due 1990
$20,000,000
None
4⅝% Series due 1994
$25,000,000
$25,000,000
5¾% Series due 1996
$35,000,000
$35,000,000
5⅝% Series due 1997
$16,000,000
$16,000,000
6½% Series due September 1, 1997
$18,000,000
$18,000,000
7⅛% Series due 1998
$35,000,000
$35,000,000
9⅜% Series due 1999
$25,000,000
$25,000,000
9⅜% Series due 2000
$20,000,000
$20,000,000
7⅞% Series due 2001
$25,000,000
$25,000,000
7½% Series due 2002
$25,000,000
$25,000,000
7½% Series due November 1, 2002
$25,000,000
$25,000,000
8% Series due 2003
$45,000,000
$36,500,000
8¾% Series due 2004
$45,000,000
$45,000,000
9½% Series due November 1, 1981
$50,000,000
None
9⅜% Series due September 1, 1983
$50,000,000
None
8¾% Series due December 1, 2006
$40,000,000
$40,000,000
9% Series due January 1, 1986
$75,000,000
None
10% Series due July 1, 2008
$60,000,000
$60,000,000
10⅞% Series due May 1, 1989
$45,000,000
None
13½% Series due November 1, 2009
$55,000,000
None
15¾% Series due December 1, 1988
$50,000,000
None
16% Series due April 1, 1991
$75,000,000
None
16¼% Series due December 1, 1991
$100,000,000
None
12% Series due March 1, 1993
$100,000,000
None
13¼% Series due March 1, 2013
$100,000,000
None
13% Series due September 1, 2013
$50,000,000
None
16% Series due August 1, 1994
$100,000,000
None
14¾% Series due November 1, 2014
$55,000,000
None
15¼% Series due December 1, 2014
$35,000,000
None
14% Series due December 1, 1992
$60,000,000
None
14¼% Series due December 1, 1995
$15,000,000
None
10½% Series due April 1, 1993
$200,000,000
$200,000,000
10⅜% Series due November 1, 2016
$280,000,000
$275,000,000
Series 1988A due September 30, 1988
$13,334,000
None
Series 1988B due September 30, 1988
$10,000,000
None
Series 1988C due September 30, 1988
$6,667,000
None
10.36% Series due December 1, 1995
$75,000,000
$75,000,000
10⅛% Series due April 1, 2020
$100,000,000
$95,000,000





which bonds are also hereinafter sometimes called bonds of the First through Forty-fourth Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restrictions if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein, or in any supplemental indenture, or may establish the terms and provisions of any series of bonds (other than the First Series) by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
WHEREAS, the execution and delivery by the Company of this Forty-second Supplemental Indenture, and the terms of the bonds of the Forty-fifth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment both of the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto Z. George Klodnicki and (to the extent of its legal capacity to hold the same for the purposes hereof) to Bank of Montreal Trust Company, as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all of the property now owned by the Company and specifically described in the Mortgage, as supplemented, and all the following described properties of the Company, whether now owned or hereafter acquired, namely:




PARAGRAPH ONE
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipe lines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, equipment and appurtenances, forming a part of said plants, sites or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property.
PARAGRAPH TWO
The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations or UHF-VHF installations, or any of them, or used or enjoyed or capable of being used or enjoyed in conjunction with any of them, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:
IBERVILLE PARISH
(1) Additions, improvements and replacements to the Evergreen 230/34.5 KV Substation, located approximately 3.5 miles southeasterly of Plaquemine in Iberville Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (5) of the Thirteenth Supplemental Indenture.

JEFFERSON PARISH
(2) The Estelle 230/13.8 KV Substation, located on a site fronting on Louisiana State Highway No. 45 approximately 5 miles southerly of the intersection of said Louisiana State Highway No. 45 with Louisiana State Highway No. 90, at or near Marrero in Jefferson Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (2) of the Sixteenth Supplemental Indenture.

(3) Additions, improvements and replacements to the Paris 230X115/13.8 KV Substation, located in an area bounded by Paris Avenue, Carrollton Avenue, Cedar Street and the west line of Metairieville Subdivision in Jefferson Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (2) of the Eighth Supplemental Indenture.

(4) The Southport 230 KV Switching Station, located on a site fronting on the River Road at Dakin Street one block from the west Orleans Parish boundary line in Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraphs (4), (5), (6), (7), (8), (9), (10), (11), (12), and (13) of the Fortieth Supplemental Indenture and in Paragraph Three, Sub-Paragraphs (2) and (3) of the Forty-first Supplemental Indenture.




LAFOURCHE PARISH
(5) Additions, improvements and replacements to the Raceland 230/115/34.5X13.8 KV Substation, located approximately one mile northeasterly of Raceland in Lafourche Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Two, Sub-Paragraph (3) of the Eighteenth Supplemental Indenture, in Paragraph Two, Sub-Paragraph (14) of the Fourteenth Supplemental Indenture, and in Paragraph Three, Sub-Paragraph (19) of the Second Supplemental Indenture.

(6) Additions, improvements and replacements to the Thibodaux Substation, which is now the Thibodaux 230/34.5/13.8 KV Substation, located just northerly of Thibodaux in Lafourche Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (28) of the Fifth Supplemental Indenture.

(7) Additions, improvements and replacements to the Valentine Substation, which is now the Valentine 230X115/34.5 KV Substation, located approximately 4 miles southeasterly of Lockport in Lafourche Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (29) of the Fifth Supplemental Indenture.

ST. JAMES PARISH
(8) Additions, improvements and replacements to the Welcome 230/34.5/13.8 KV Substation, located approximately 8 miles northwesterly of St. James in St. James Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Two, Sub-Paragraph (23) of the Thirteenth Supplemental Indenture, and on/and that certain tract or parcel of land particularly described as follows:

A certain tract or portion of land situated in the Parish of St. James, State of Louisiana, on the right descending side of the Mississippi River, located in Sections 46 and 47, Township 11 South, Range 15 East and which is more fully and specifically described in accordance with a certain plan of survey prepared by Charles M. Camp, Registered Land Surveyor in the State of Louisiana, Reg. No. 339, and a member of T. Baker Smith & Son, Inc., dated April 27, 1990 and entitled “MAP SHOWING 0.976 ACRE ADDITION TO LOUISIANA POWER & LIGHT ‘WELCOME’ SUBSTATION SITE LOCATED WITHIN SECTION 46 & 47, T11S-R15E ST. JAMES PARISH, LOUISIANA,” as follows:
Commencing at a 3 inch concrete monument at the intersection of the westerly right of way line of Louisiana State Highway 18 with the line common to Sections 45 and 46, Township 11 South, Range 15 East, St. James Parish, Louisiana, and from said point proceed South 52 degrees 05 minutes 41 seconds West along the common section line a distance of 3,442.61 feet to a point; thence measure South 37 degrees 54 minutes 19 seconds East a distance of 347.00 feet to the POINT OF BEGINNING;
Thence from the said POINT OF BEGINNING measure South 37 degrees 54 minutes 19 seconds East a distance of 425.00 feet to a point; thence measure South 52 degrees 05 minutes 41 seconds West a distance of 100.00 feet to a point; thence measure North 37 degrees 54 minutes 19 seconds West a distance of 425.00 feet to a point; thence measure North 52 degrees 05 minutes 41 seconds East a distance of 100.00 feet to the said POINT OF BEGINNING; containing 0.976 acre.
Being the same property acquired by the Company from Freeport-McMoRan Resource Partners, Limited Partnership, a limited partnership organized under the laws of the State of Delaware,




by deed executed by the vendor on December 31, 1990 and by the Company on January 9, 1991, recorded in Conveyance Book 309, Folio 273 of the records of St. James Parish.
TANGIPAHOA PARISH
(9) The Chickenfarm 115/13.8 KV Substation, located on a site fronting on Louisiana State Highway No. 16 approximately 9 miles east of the City of Amite in Tangipahoa Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (4) of the Forty-first Supplemental Indenture.

PARAGRAPH THREE
All and Singular the Miscellaneous Lands and Real Estate or Rights and Interests Therein of the Company now owned, or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired during the existence of this trust, including the following property situated in the State of Louisiana, described as:
EAST CARROLL PARISH
(10) A certain tract or parcel of land situated in the Parish of East Carroll, specifically described as follows:

The easterly ninety (90’) feet of Lots 12 and 13 of Block 9 of the Town of Lake Providence (formerly the Town of Providence), as per plat thereof duly filed for record in Notarial Book V, page 738 of the records of East Carroll Parish, Louisiana; according to a plat of said property prepared by Henry M. Messinger, Registered Land Surveyor, dated November, 1963, a copy of which is attached to a servitude of driveway dated December 29, 1970 and recorded in Conveyance Book 81, page 838, said property is shown thereon as “Tract A”, and forms the corner of Scarbrough Street and Morgan Street in the Town of Lake Providence, and fronts fifty-nine and 75/100 (59.75’) feet along the west side of Scarbrough Street by a depth and distance of ninety (90’) feet, one of which is the north side of Morgan Street, to a rear measurement of sixty and 4/10 (60.4’) feet.
Being the same property acquired by the Company from Resolution Trust Corporation as Receiver for Republic Bank for Savings, F.A. by deed executed by the vendor on December 28, 1990 and by the Company on December 12, 1990, recorded in Conveyance Book 130, Folio 222 of the records of East Carroll Parish.
JEFFERSON PARISH
(11) A certain tract or parcel of land situated in the Parish of Jefferson, specifically described as follows:

A certain piece or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Jefferson, State of Louisiana, consisting of portions of former Lot or Block 12 of Section “D”, Elmwood Subdivision, as shown on a plan of subdivision of said Section “D” of Elmwood Subdivision by F. B. Grevemberg, C.E., dated April 30, 1931, copies of which are filed in the Office of the Clerk of Court for the Parish of Jefferson in Book of Plans, Volume 14, page 16, and attached to an Act of Sale passed before Henry G. Huckabee, Notary Public, on December 27, 1935; which said piece or parcel of land is a part of Plot 12-B shown on a plan of resubdivision by Alvin E. Hotard, C.E., dated




November 22, 1964, a copy of which is attached to the Ordinance hereinafter referred to, which said plan of resubdivision was approved by the Jefferson Parish Council on January 28, 1965, per Ordinance No. 6976, a certified true copy of which said Ordinance was filed in the Conveyance Records of Jefferson Parish, Louisiana, on February 12, 1965, as Entry No. 318073, and recorded in Conveyance Book 608, Folio 266 of said records; and which said piece or parcel of land is designated as Lot 12-B on a plan of resubdivision by J. J. Krebs, C.E., of J. J. Krebs & Sons, Inc., dated February 12, 1976, a copy of which is attached to the Ordinance hereinafter referred to, which said plan or resubdivision was approved by the Jefferson Parish Council on May 13, 1976, per Ordinance No. 12390, a certified true copy of which said Ordinance was filed in the Conveyance Records of Jefferson Parish, Louisiana, on June 9, 1976 as Entry No. 723141, and recorded in Conveyance Book 864, Folio 295 of said records; and in accordance with plan of survey by J. F. Ruello, Registered Land Surveyor, Reg. No. 4508, dated December 20, 1989, is more fully and particularly located and described as follows, to-wit:
Commencing at the intersection of the west right of way line for Behrman Highway and the south boundary of Lot 14-B in Section “D” of Elmwood Subdivision as shown on the aforesaid Krebs plan of resubdivision located in Jefferson Parish, Louisiana; said point of intersection being 687.12 feet from the intersection of said Behrman Highway and the south line of Peters Street; thence along the south boundary of said Lot 14-B on a bearing of North 86 degrees 19 minutes 35 seconds West a distance of 416.00 feet to the POINT OF BEGINNING; thence from the said point of beginning continue along the south boundary of said Lot 14-B on a bearing of North 86 degrees 19 minutes 35 seconds West a distance of 131.25 feet to a point on the east right of way line of Alto Street; thence measure along the said right of way line of Alto Street on a bearing of South 03 degrees 40 minutes 25 seconds West a distance of 290.52 feet to a point on the north right of way line of Industry Street; thence measure along the said north right of way line of Industry Street on a bearing of South 48 degrees 59 minutes 35 seconds East a distance of 165.07 feet to a point; thence measure on a bearing of North 03 degrees 40 minutes 25 seconds East a distance of 390.61 feet to the POINT OF BEGINNING.
Being the same property acquired by the Company from Manson Realty Company, Inc. by deed dated March 20, 1990, recorded in Conveyance Book 2306, Folio 327 of the records of Jefferson Parish.
LAFOURCHE PARISH
(12) A certain tract or parcel of land situated in the Parish of Lafourche, specifically described as follows:

A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, prescriptions, servitudes, appurtenances and advantages thereunto belonging or in anywise appertaining, located in the Parish of Lafourche, State of Louisiana, in Section 97, Township 17 South, Range 20 East, in Ludevine Plantation, on the left descending bank of Bayou Lafourche, which said tract or portion of ground contains 0.951 acres and is more fully and specifically described in accordance with plan of survey prepared by Charles M. Camp, Registered Land Surveyor, La. Reg. No. 339, dated January 30, 1990 and attached to an Act of Cash Sale of Real Property dated July 23, 1990, by Ethel Walther, widow of Oscar T. Mire, et al., to Rebus Realty Co., Inc., registered in Conveyance Book 1087, Folio 638 of the records of Lafourche Parish, as follows, to-wit;




Commencing at the lower front corner or southeasterly corner of said Section 97, Township 17 South, Range 20 East, which point is designated by the letter A on the plan of survey by J. C. Lovell, Surveyor, dated February 8, 1956, which is attached to the instrument of sale from Peltier Realty Company, Inc., et al. to Louisiana Power & Light Company, dated May 17, 1956, and recorded in the Conveyance records of Lafourche Parish under Entry No. 139879, thence running in a northwesterly direction along the southerly section line of said Section 97, which southerly section line is also a Government Traverse line, on a bearing of North 77 degrees 37 minutes West, for a distance of 1172.82 feet to a point designated by the letter B on the aforesaid plan of survey; thence continuing along said southerly section line or Government Traverse line in a northwesterly direction, on a bearing of North 70 degrees 30 minutes West, for a distance of 107.2 feet to a point designated by the letter C on the aforesaid plan of survey (said point C being also reached by commencing at the intersection of the westerly property line of Ludevine Plantation with said southerly section line or Government Traverse line, said point of intersection being designated by the letter X on the aforesaid plan of survey and running thence, in a southeasterly direction, along said section line or Government Traverse line, on a bearing of South 62 degrees 45 minutes East for a distance of 325 feet to a point designated by the letter Y on the aforesaid plan of survey, thence continuing in a southeasterly direction along said southerly section line or Government Traverse line, on a bearing of South 70 degrees 30 minutes East, for a distance of 338 feet to said point C as shown on the aforesaid plan of survey); thence running in a northeasterly direction, on a bearing of North 13 degrees 00 minutes East, for a distance of 111.37 feet, across and to the northerly margin of the Right of Way of Louisiana State Highway No. 308 (formerly No. 77), which point is designated as the POINT OF BEGINNING; thence from said POINT OF BEGINNING measure North 71 degrees 50 minutes West for a distance of 100.00 feet to a point; thence measure North 13 degrees 00 minutes East for a distance of 416.00 feet to a point; thence measure South 71 degrees 50 minutes East for a distance of 100.00 feet to a point, also being common with the northwest corner of the existing Louisiana Power & Light Company Substation [site] and being designated by the letter E on the J. C. Lovell plan of survey mentioned above; thence on and along the west property line of the existing Louisiana Power & Light Company Substation [site] measure South 13 degrees 00 minutes West for a distance of 416.00 feet to the POINT OF BEGINNING.
Being the same property acquired by Rebus Realty Co., Inc. (subject to a reservation of all oil, gas or other minerals in or under the land but with the use of the land protected against mineral development) from Ethel Walther, widow of Oscar T. Mire, et al., by Act of Cash Sale of Real Property, acknowledged with respect to the vendors of said property before Eugene G. Taggart, Notary Public, on July 23, 1990, and acknowledged by the purchaser of said property before Bartholomew P. Sullivan, Jr., on July 23, 1990, registered in Conveyance Book 1087, Folio 638 of the records of Lafourche Parish, and acquired by the Company from Rebus Realty Co., Inc. by Counterletter acknowledged before Bartholomew P. Sullivan, Jr., Notary Public, on July 23, 1990, registered in Conveyance Book 1105, Folio 615 of the records of Lafourche Parish.
WASHINGTON PARISH
(13) A certain tract or parcel of land situated in the Parish of Washington, specifically described as follows:

A CERTAIN LOT OR PARCEL OF GROUND located in the City of Bogalusa, Parish of Washington, State of Louisiana, Section 15, Township 3 South, Range 13 East, St. Helena Meridian, being bounded by Brazos Street on the North, Ontario Avenue on the South, James Street on the East and Rio Grand Street (Louisiana Highway 10) on the West, and fronting on the said Rio Grand Street




a distance of 225.00 feet and on the said Brazos Street a distance of 579.64 feet, which said lot or parcel of ground is more specifically and fully described in accordance with survey of BFM Corporation prepared by R. P. Fontouberta, Jr., Registered Professional Land Surveyor, Louisiana Reg. No. 4329 and dated December 14, 1990, revised December 19, 1990 and February 1, 1991, as follows, to-wit:
Commencing at the intersection of the easterly right of way line of Rio Grand Street and the southerly right of way line of Brazos Street, which said point of intersection is marked by a one-half inch iron pipe; thence from said POINT OF BEGINNING: measure South 89 degrees, 55 minutes, 00 seconds East, along the southerly right of way line of Brazos Street, for a distance of 579.64 feet to a point marked by a one-half inch iron pipe; thence measure North 89 degrees, 55 minutes 00 seconds West, for a distance of 579.64 feet to a point on the easterly right of way line of the said Rio Grand Street marked by a one-half inch iron pipe; thence measure North 00 degrees, 05 minutes, 00 seconds East, along the easterly right of way line of the said Rio Grand Street, for a distance of 225 feet to the POINT OF BEGINNING; containing 2.994 acres of land.
Being the same property acquired by the Company from John B. Bunch, Jr. by deed executed by the vendor on February 8, 1991, and by the Company on February 15, 1991, recorded in Conveyance Book 411, Folio 167 of the records of Washington Parish.
PARAGRAPH FOUR
The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, pole type substations, insulators and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the State of Louisiana, to wit:
(1) Additions, improvements and replacements to the Mississippi State Line-Amite 115 KV Transmission Line in Tangipahoa Parish (formerly designated as the Amite-Mississippi State Line (Osyka) 115 KV Transmission Line), described in Paragraph Four, Sub-Paragraph (2) of the Eighth Supplemental Indenture, said additions, improvements and replacements including replacement of two wood structures with steel poles in that portion of said transmission line located approximately 5.5 miles north of Amite in Tangipahoa Parish.

(2) Additions, improvements and replacements to the Little Gypsy-Destrehan-Orleans (ICRR) 230 KV Transmission Line in St. Charles and Jefferson Parishes (consisting of the transmission lines formerly designated as the Little Gypsy-Destrehan 230 KV Transmission Line, described in Paragraph Four, Sub-Paragraph (9) of the Tenth Supplemental Indenture and in Paragraph Four, Sub-Paragraph (1) of the Twenty-fourth Supplemental Indenture; as the Destrehan-Kenner 230 KV Transmission Line, described in Paragraph Four, Sub-Paragraph (5) of the Tenth Supplemental Indenture; and as the Kenner-New Orleans 230 KV Transmission Line, described in Paragraph Four, Sub-Paragraph (9) of the Thirteenth Supplemental Indenture) described in Paragraph Four, Sub-Paragraph (1) of the Thirty-sixth Supplemental Indenture and in Paragraph Four, Sub-Paragraph (6) of the Fortieth Supplemental Indenture, said additions, improvements and replacements including the reconductoring and re-routing of a portion of said transmission line of approximately 500 feet




from the corner of Addison and Dakin Streets to the Southport Switching Station, located at the corner of River Road and Dakin Street in Jefferson Parish.

(3) Additions, improvements and replacements to the Little Gypsy-Snake Farm-Orleans (Airline) 230 KV Transmission Line in Jefferson and St. Charles Parishes (formerly designated as the Little Gypsy-Snake Farm 230 KV Transmission Line), described in Paragraph Four, Sub-Paragraph (10) of the Tenth Supplemental Indenture and in Paragraph Four, Sub-Paragraph (1) of the Twenty-fifth Supplemental Indenture, said additions, improvements and replacements including re-routing of said line in a westerly direction for a distance of approximately .50 miles and then in a southwesterly direction for approximately 2 miles, forming a loop and then connecting to said transmission line in St. Charles Parish at a point located approximately 2 miles southwest of the Kenner 115/13.8 KV Substation, located at or near Kenner in Jefferson Parish.

(4) The Ninemile-Southport E/B 230 KV Transmission Line in Jefferson Parish. This double circuit, shielded, part steel pole, part steel tower transmission line begins at the Southport 230 KV Switching Station, located at the corner of Dakin Street and the River Road, approximately .50 miles westerly of the Orleans-Jefferson Parish Line, and extends in a generally southerly direction for a distance of approximately .40 miles to a point midstream in the Mississippi River.

(5) The Ninemile-Southport W/B 230 KV Transmission Line in Jefferson Parish. This double circuit, shielded, part steel pole, part steel tower transmission line begins at the Ninemile 230 KV Switching Station, located at Ninemile Point, and extends in a generally northerly direction for a distance of approximately 1 mile to a point midstream in the Mississippi River.

(6) Additions, improvements and replacements to the Winnfield-Hodge 115 KV Transmission Line in Winn and Jackson Parishes, described in Paragraph Five, Sub-Paragraph (13) of the Mortgage and in Paragraph Four, Sub-Paragraph (45) of the Eighth Supplemental Indenture, said additions, improvements and replacements including the rebuilding of said transmission line with double circuit, shielded, steel pole construction.

PARAGRAPH FIVE
The Electric Submarine Cables of the Company, including the wires, cables, switch racks, conductors, conduits, transformers, substations, insulators and all appliances, devices and equipment used or useful in connection with said submarine cables, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof.
And also all extensions, replacements, branches, taps, developments and improvements of said submarine cables, or any of them, and all other submarine cables owned by the Company wherever situated, whether now owned or hereafter acquired and/or constructed, as well as all of the Company’s rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SIX
The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company’s other property, real,




personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all of the Company’s rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under, or upon any public streets or highways, public or private lands, including all additions, improvements or replacements to all of the distribution systems located in the municipalities and parishes set forth in the Mortgage and in the First through Forty-first Supplemental Indentures.
And also all branches, extensions, improvements and developments of or appertaining to or connected with said distribution lines, systems or any of them, and all other distribution systems of the Company and parts and portions thereof, wherever situated, whether connected or not connected with any of the foregoing systems and whether now owned or hereafter acquired, as well as all of the Company’s rights-of-way, easements, privileges, prescriptions, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof or any part or portion thereof, through, over, under or upon any public streets or highways or public or private lands, whether now owned or hereafter acquired, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SEVEN
The certain franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric systems in, on and under streets, alleys, highways, roads, and public grounds, areas and rights-of-way, and/or for the supply and sale of electricity, and all rights incident thereto, which were granted by the governing bodies of the respective municipalities, parishes and public authorities in the State of Louisiana, including, in addition to those described in the Mortgage and in the First through Forty-first Supplemental Indentures, those which are shown together with the expiration dates thereof in the following schedule:
MUNICIPAL ELECTRIC FRANCHISES
Municipality
Parishes
Expiration
Junction City
Union and Claiborne
January 2, 2015

Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric systems in, on or under streets, alleys, highways, roads, and public grounds, areas and rights-of-way and/or for the supply and sale of electricity and all rights incident thereto, subject, however, to the provisions of Section 87 of the Mortgage.
All other property, real, personal and mixed, acquired by the Company after the date of the execution and delivery of the Mortgage, in addition to property covered by the First through Forty-first Supplemental Indentures (except any herein or in the Mortgage or in said Supplemental Indentures expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Forty-second Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts and all other rights or means for appropriating, conveying, storing and supplying water; all rights-of-way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-




conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents, or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose, including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights-of-way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), shall be and are as fully granted and conveyed hereby and as fully embraced within the lien hereof and the lien of the Mortgage, as if such property, rights and franchises were now owned by the Company and were specifically described herein and conveyed hereby.
PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Forty-second Supplemental Indenture and from the lien and operation of the Mortgage, namely: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; and (7) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or their successor or successors in said trust or a receiver or trustee shall enter upon and take possession of the




Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD ALL such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto Z. George Klodnicki and (to the extent of its legal capacity to hold the same for the purposes hereof) to Bank of Montreal Trust Company, as Trustees, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as supplemented, this Forty-second Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Mortgage as follows:


ARTICLE I

FORTY-FIFTH SERIES OF BONDS

Section 1. There shall be a series of bonds designated “Environmental Series A” (herein sometimes called the “Forty-fifth Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Forty-fifth Series (which shall be initially issued in the aggregate principal amount of $52,500,000) shall mature on June 1, 2021, shall be issued as fully registered bonds in the denomination of One Thousand Dollars and such other denominations as the officers of the Company shall determine to issue (such determination to be evidenced by the execution and delivery thereof), shall be dated as in Section 10 of the Mortgage provided, and the principal of, and, to the extent permitted by the Mortgage, interest on any overdue principal of, each said bond shall be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.

(I) The bonds of the Forty-fifth Series shall be issued and delivered to, and registered in the name of, the trustee under the Trust Indenture, dated as of June 1, 1991 (hereinafter called the “St. Charles Indenture”), of the Parish of St. Charles, Louisiana (hereinafter called the “Parish”), relating to its 7½% Pollution Control Revenue Bonds (Louisiana Power & Light Company Project) Series 1991 (hereinafter called the “St. Charles Bonds”), in order to evidence in part the Company’s obligation to make certain




purchase price payments under the Installment Sale Agreement, dated as of June 1, 1991, between the Parish and the Company.

The obligation of the Company to make any payment of principal of the bonds of the Forty-fifth Series, whether at maturity, upon redemption or otherwise, shall be reduced by the amount of any reduction under the St. Charles Indenture of the amount of the corresponding payment required to be made by the Parish thereunder in respect of the principal of the St. Charles Bonds. The Corporate Trustee may conclusively presume that the obligation of the Company to pay the principal of the bonds of the Forty-fifth Series as the same shall become due and payable shall have been fully satisfied and discharged unless and until it shall have received a written notice from the trustee under the St. Charles Indenture, signed by its President, a Vice President or a Trust Officer, stating that the corresponding payment of principal of the St. Charles Bonds has become due and payable and has not been fully paid and specifying the amount of funds required to make such payment.
(II) In the event that the St. Charles Bonds outstanding under the St. Charles Indenture shall become immediately due and payable pursuant to Section 10.2 of the St. Charles Indenture, upon the occurrence of an Event of Default under Section 10.1 (a) or (b) of the St. Charles Indenture, all bonds of the Forty-fifth Series then outstanding shall be redeemed by the Company, on the date such St. Charles Bonds shall have become immediately due and payable, at the principal amount of the bonds of the Forty-fifth Series.

In the event that any St. Charles Bonds are to be redeemed pursuant to Section 3.1 (b) of the St. Charles Indenture, bonds of the Forty-fifth Series, in a principal amount equal, as nearly as practicable, to the sum of (i) the principal amount of such St. Charles Bonds and (ii) eight-twelfths (8/12) of the annual interest due on such St. Charles Bonds, shall be redeemed by the Company, on the date fixed for such redemption of St. Charles Bonds, at the principal amount thereof.
The Corporate Trustee may conclusively presume that no redemption of bonds of the Forty-fifth Series is required pursuant to this subsection (II) unless and until it shall have received a written notice (which may be a facsimile followed by a hard copy) from the trustee under the St. Charles Indenture, signed by its President, a Vice President or a Trust Officer, stating that the St. Charles Bonds have become immediately due and payable pursuant to Section 10.2 of the St. Charles Indenture, upon the occurrence of an Event of Default under Section 10.1 (a) or (b) of the St. Charles Indenture, or St. Charles Bonds are to be redeemed pursuant to Section 3.1 (b) of the St. Charles Indenture and specifying the principal amount thereof, as the case may be. Said notice shall also contain a waiver of notice of such redemption by the trustee under the St. Charles Indenture, as the holder of all the bonds of the Forty-fifth Series then outstanding.
(III) The Company hereby waives its right to have any notice of any redemption pursuant to subsection (II) of this Section 1 state that such notice is subject to the receipt of the redemption moneys by the Corporate Trustee before the date fixed for redemption. Notwithstanding the provisions of Section 52 of the Mortgage, any such notice under such subsection shall not be conditional.

(IV) At the option of the registered owner, any bonds of the Forty-fifth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, together with a written instrument of transfer wherever required by the Company, duly executed by the registered owner or by his duly authorized attorney, shall (subject to the provisions of Section 12 of the Mortgage) be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.




Bonds of the Forty-fifth Series shall not be transferable except to any successor trustee under the St. Charles Indenture, any such transfer to be made (subject to the provisions of Section 12 of the Mortgage) at the office or agency of the Company in the Borough of Manhattan, The City of New York.
The Company hereby waives any right to make a charge for any exchange or transfer of bonds of the Forty-fifth Series.
(V) The bonds of the Forty-fifth Series may bear such legends as may be necessary to comply with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or to conform to usage with respect thereto.


ARTICLE II

MISCELLANEOUS PROVISIONS

Section 2. Subject to any amendments provided for in this Forty-second Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Forty-second Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.

Section 3. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore amended, set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Forty-second Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Forty-second Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Forty-second Supplemental Indenture.
Section 4. Whenever in this Forty-second Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all covenants and agreements in this Forty-second Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 5. Nothing in this Forty-second Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Forty-second Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Forty-second Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and coupons Outstanding under the Mortgage.





Section 6. It is the intention and it is hereby agreed that, so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Forty-second Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as the said Louisiana property is concerned, this Forty-second Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 7. This Forty-second Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 8. The Company reserves the right, without any consent or other action by holders of bonds of the Forty-fifth Series or of any subsequently created series, to amend the Mortgage, as heretofore amended and supplemented, as follows:

To amend subdivision (e) of Section 6 of the Mortgage to read as follows:
“(e) easements, ground leases, restrictions, exceptions or reservations in any property and/or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communication lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment, and defects, irregularities and deficiencies in titles of any property and/or rights of way which do not materially impair the use of such property and/or rights of way for the purposes for which such property and/or rights of way are held by the Company;”
To amend Section 58 of the Mortgage by deleting the word “and” at the end of subdivision (2), replacing the period at the end of subdivision (3) with a semicolon, and adding the following subdivision (4) at the end of Section 58 to read as follows:
“and (4) grant, free from the Lien of this Indenture, and effect the subordination of the Lien of this Indenture to, easements, ground leases or rights of way in, upon, over and across the property or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communication lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment; provided that such grant does not materially impair the use of the property or rights of way for the purposes for which such property or rights of way are held by the Company.”
Section 9. The Company reserves the right, without any consent or other action by holders of bonds of the Forty-fifth Series or of any subsequently created series, to amend the Mortgage, as heretofore amended and supplemented, as follows:

To amend subdivision (3) (b) and (c) of Section 59 of the Mortgage to read as follows:
“(b) (i) the fair value and (ii) the Cost (or as to Property Additions constituting Funded Property of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to Section 4 hereof, then such fair value in lieu of Cost), in the opinion




of the signers, of the property (or securities) to be released; (c) the Cost (or as to Property Additions constituting Funded Property of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to Section 4 hereof, then such fair value in lieu of Cost), in the opinion of the signers, of any portion thereof that is Funded Property;”
To amend the first six lines of subdivision (4) of Section 59 of the Mortgage to read as follows:
“(4) an amount in cash, to be held by the Corporate Trustee as part of the Mortgaged and Pledged Property, equivalent to the amount, if any, by which the Cost (or as to Property Additions constituting Funded Property of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to Section 4 hereof, then such fair value in lieu of Cost) of the property to be released, as specified in the Engineer’s Certificate provided for in subdivision (3) above, exceeds the aggregate of the following items:”
To amend Section 60 of the Mortgage by inserting “(I)” before the word “Unless” in the first line thereof, and by adding the following Subsection (II) at the end of Section 60;
“(II) Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more of the Defaults defined in Section 65 hereof shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property that is not Funded Property, except cash then held by the Corporate Trustee (provided, however, that Qualified Lien Bonds deposited with the Corporate Trustee shall not be released or surrendered except as provided in Article IX hereof and obligations secured by purchase money mortgage deposited with the Corporate Trustee shall not be released except as provided in Section 61 hereof), and the Corporate Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon application of the Company and receipt by the Corporate Trustee of the following (in lieu of complying with the requirements of Section 59 hereof):
(1) an Officers’ Certificate complying with the requirements of Section 121 hereof and describing in reasonable detail the property to be released and requesting such release, and stating:

(a) that the Company is not in default in the payment of interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing;

(b) that the Company has sold, leased, granted an interest in, exchanged, dedicated or disposed of, or intends or has agreed to sell, lease, grant an interest in, exchange, dedicate or dispose of or that a governmental body or agency has exercised a right to order the Company to divest itself of, the property to be released;

(c) that the property to be released is not Funded Property;

(d) that (except in any case where a governmental body or agency has exercised a right to order the Company to divest itself of such property) such release is in the opinion of the signers desirable in the conduct of the business of the Company; and

(e) the amount of cash and/or principal amount of obligations secured by purchase money mortgage received or to be received for any portion of said property sold to any Federal, State, County, Municipal or other governmental bodies or agencies or public or semi-public corporations, districts, or authorities;





(2) an Engineer’s Certificate, made and dated not more than ninety (90) days prior to the date of such application, stating:

(a) the fair value, in the opinion of the signers, of the property (or securities) to be released;

(b) that in the opinion of the signers such release will not impair the security under this Indenture in contravention of the provisions hereof; and

(c) that the Company has Property Additions constituting property that is not Funded Property (not including the Property Additions then being released) of a Cost or fair value to the Company (whichever is less) of not less than one dollar ($1) (after making any deductions and any additions pursuant to the provisions of Section 4 hereof) after deducting the Cost of the property then being released;

(3) an Opinion of Counsel complying with the requirements of Section 121 hereof and stating that all conditions precedent provided for in this Indenture relating to the release of the property in question have been complied with; and

(4) in case the Corporate Trustee is requested to release any franchise, an Opinion of Counsel complying with the requirements of Section 121 hereof and stating that in his or their opinion such release will not impair to any material extent the right of the Company to operate any of its remaining properties.”

To amend the fifth paragraph of Section 3 of the Mortgage to read as follows:
“The term ‘Engineer’s Certificate’ shall mean a certificate signed by the President or a Vice-President of the Company and by an Engineer (who may be an employee of the Company) appointed by the Board of Directors of the Company; provided, however, if any property or securities are to be released from the Lien of this Indenture, the Engineer’s Certificate as to the fair value of such property or securities and as to matters referred to in clause (f) of subdivision (3) of Section 59 hereof or clause (b) of subdivision (2) of Section 60 (II) hereof shall be made by an independent Engineer, appraiser, or other expert, if the fair value of such property or securities and of all other property or securities released since the commencement of the then current calendar year, as set forth in the certificates required by this Indenture, is ten per centum (10%) or more of the aggregate principal amount of the bonds at the time Outstanding; but such a certificate of an independent Engineer, appraiser, or other expert shall not be required in the case of any release of property or securities, if the fair value thereof as set forth in the certificates required by this Indenture is less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate principal amount of the bonds at the time Outstanding. If and to the extent required by the provisions of Section 121 hereof, each such certificate shall include the statements provided for in such Section.”IN WITNESS WHEREOF, LOUISIANA POWER & LIGHT COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries, for and in its behalf, and BANK OF MONTREAL TRUST COMPANY, in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries and Z. George Klodnicki, in token of his acceptance of the trust hereby created, has hereunto set his hand and affixed his seal, all as of the day and year first above written.




[CORPORATE SEAL]
LOUISIANA POWER & LIGHT COMPANY



By /s/ T. O. Lind                                        
      T. O. Lind
       Vice President
Attest:


/s/ N. J. Briley                                   
N. J. Briley
Assistant Secretary

 
Executed, sealed and delivered by
LOUISIANA Power & Light Company
in the presence of:

/s/ Audrey Jacks                               
Audrey Jacks

/s/ Joni Bathel                                   
Joni Bathel
 

[CORPORATE SEAL]
BANK OF MONTREAL TRUST COMPANY,
As Corporate Trustee


By   /s/ Mark F. McLaughlin                              
      Mark F. McLaughlin
       Vice President and Trust Officer
Attest:


/s/ Therese Gaballah                      
Therese Gaballah
Assistant Secretary
 





/s/ Z. George Klodnicki          [L.S.]
Z. George Klodnicki
As Co-Trustee
Executed, sealed and delivered by
BANK OF MONTREAL TRUST COMPANY and Z. GEORGE KLODNICKI
in the presence of:

/s/ Maryann Luisi                           
Maryann Luisi

/s/ Magaly Lebron                         
Magaly Lebron
 





STATE OF LOUISIANA
PARISH OF ORLEANS
}
ss.:

On this 2nd day of August, 1991, before me appeared T. O. LIND, to me personally known, who, being by me duly sworn, did say that he is a Vice President of LOUISIANA POWER & LIGHT COMPANY, and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said T. O. LIND acknowledged said instrument to be the free act and deed of said corporation.
On the 2nd day of August, in the year 1991, before me personally came T. O. LIND, to me known, who, being by me duly sworn, did depose and say that he resides at 1126 Octavia Street, New Orleans, State of Louisiana; that he is a Vice President of LOUISIANA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
/s/ MARY HULL TOOKER     
MARY HULL TOOKER
NOTARY PUBLIC
Parish of Orleans, State of Louisiana
My Commission is Issued for Life






STATE OF NEW YORK COUNTY OF NEW YORK
}
ss.:

On this 5th day of August, 1991, before me appeared MARK F. MCLAUGHLIN, to me personally known, who, being by me duly sworn, did say that he is a Vice President of BANK OF MONTREAL TRUST COMPANY, and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said MARK F. MCLAUGHLIN acknowledged said instrument to be the free act and deed of said corporation.
On the 5th day of August in the year 1991, before me personally came MARK F. MCLAUGHLIN, to me known, who, being by me duly sworn, did depose and say that he resides at 44 Norwood Avenue, Allenhurst, New Jersey 07711; that he is a Vice President of BANK OF MONTREAL TRUST COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
/s/ MAUREEN RADIGAN     
MAUREEN RADIGAN
NOTARY PUBLIC, State of New York
No. 31-4971219
Qualified in New York County
Commission Expires August 27, 1992





STATE OF NEW YORK COUNTY OF NEW YORK
}
ss.:

On this 5th day of August, 1991, before me personally appeared Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 5th day of August, 1991, before me personally came Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.
/s/ MAUREEN RADIGAN     
MAUREEN RADIGAN
NOTARY PUBLIC, State of New York
No. 31-4971219
Qualified in New York County
Commission Expires August 27, 1992






Exhibit 4(d)1

LOUISIANA POWER & LIGHT COMPANY
TO
THE CHASE MANHATTAN BANK
(successor to The Chase National Bank of the City of New York)
AND
MILTON J. REDLICH
(successor to Carl E. Buckley),
As Trustees under Louisiana Power &
Light Company’s Mortgage and
Deed of Trust, Dated as of
April 1, 1944
___________________
SIXTH SUPPLEMENTAL INDENTURE
___________________
Dated as of April 1, 1960







SIXTH SUPPLEMENTAL INDENTURE
INDENTURE , dated as of the 1st day of April, 1960, made and entered into by and between LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Florida, whose post office address is 142 Delaronde Street, New Orleans 14, Louisiana (hereinafter sometimes called the Company), party of the first part, and THE CHASE MANHATTAN BANK, a corporation organized and existing under the laws of the State of New York (successor by merger to The Chase National Bank of the City of New York), whose post office address is 18 Pine Street, New York 15, New York (hereinafter sometimes called the Corporate Trustee), and MILTON J. REDLICH (successor to Carl E. Buckley), whose post office address is 641 East 31st Street, Brooklyn 10, New York (hereinafter sometimes called the Co-Trustee), as Trustees, parties of the second part (the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the Trustees), as Trustees under the Mortgage and Deed of Trust, dated as of April 1, 1944 (hereinafter called the Mortgage), which Mortgage was executed and delivered by Louisiana Power & Light Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which said Mortgage is hereby made, this Indenture (hereinafter called Sixth Supplemental Indenture) being supplemental thereto;
WHEREAS, said Mortgage was recorded in various Parishes in the State of Louisiana; and
WHEREAS, by the Mortgage, the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof and the Company executed and delivered to the Trustees a First Supplemental Indenture, dated as of March 1, 1948 (hereinafter called the First Supplemental Indenture), a Second Supplemental Indenture, dated as of November 1, 1950 (hereinafter called the Second Supplemental Indenture), a Third Supplemental Indenture, dated as of September 1, 1953 (hereinafter called the Third Supplemental Indenture), and a Fourth Supplemental Indenture, dated as of October 1, 1954 (hereinafter called the Fourth Supplemental Indenture), which were recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Company executed and delivered to the Trustees a Fifth Supplemental Indenture, dated as of January 1, 1957 (hereinafter called the Fifth Supplemental Indenture), which was recorded in Parishes in the State of Louisiana, as follows:





PARISH
DATE FILED
ENTRY NO.
MORTGAGE BOOK
FOLIO
Ascension
Jan. 22, 1957
50372
86
332
Assumption
Jan. 22, 1957
44563
70
573
Avoyelles
Jan. 22, 1957
165620
11
603
Bienville
Jan. 22, 1957
N-8852
79
177
Bossier
Jan. 22, 1957
113826
**92
1
Caldwell
Jan. 22, 1957
97598
38
182
Catahoula
Jan. 22, 1957
75930
51
133
Claiborne
Jan. 22, 1957
211587
*10
120
Concordia
Jan. 22, 1957
60905
G-4
194
East Carroll
Jan. 22, 1957
16458
64
567
East Feliciana
Jan. 22, 1957
9868
35
163
Franklin
Jan. 22, 1957
71931
44
567
Grant
Jan. 22, 1957
17563
*6
418
Iberville
Jan. 22, 1957
222
80
326
Jackson
Jan. 22, 1957
137627
*N
249
Jefferson
Jan. 22, 1957
92898
***3
443
Lafourche
Jan. 22, 1957
146504
53
101
LaSalle
Jan. 22, 1957
56161
39
305
Lincoln
Jan. 22, 1957
C-3284
25
481
Livingston
Jan. 22, 1957
24606
**8
21
Madison
Jan. 22, 1957
14404
2
19
Morehouse
Jan. 22, 1957
15061
132
137
Natchitoches
Jan. 22, 1957
M-A-1317
210-A
487
Orleans
Jan. 22, 1957
0
1678-B
518
Ouachita
Jan. 22, 1957
423735
435
497
Plaquemines
Jan. 22, 1957
320
35
589
Rapides
Jan. 22, 1957
411452
402
277
Red River
Jan. 22, 1957
89578
45
351
Richland
Jan. 22, 1957
167493
108
608
Sabine
Jan. 22, 1957
158803
32
353
St. Bernard
Jan. 22, 1957
19728
53
395
St. Charles
Jan. 22, 1957
15463
68
469
St. Helena
Jan. 22, 1957
0
28
335
St. James
Jan. 22, 1957
14240
48
592
St. John the Baptist
Jan. 22, 1957
16508
YY
452
St. Martin
Jan. 22, 1957
53981
108
254
St. Tammany
Jan. 22, 1957
135308
126
565
Tangipahoa
Jan. 22, 1957
87974
**23
1
Tensas
Jan. 22, 1957
46017
00
21
Terrebonne
Jan. 22, 1957
161596
144
599
Union
Jan. 22, 1957
104840
41
589
Vernon
Jan. 22, 1957
212605
242
308
Washington
Jan. 22, 1957
138
138
225
Webster
Jan. 22, 1957
150157
104
347
West Carroll
Jan. 22, 1957
116056
33
520
Winn
Jan. 22, 1957
14385
40
389





* Special Mortgage Book.
** Amortization Mortgage Book.
*** Bond Mortgage Book.
and
WHEREAS, in addition to the property described in the Mortgage, as supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, bonds of a series entitled and designated First Mortgage Bonds, 3% Series due 1974 (hereinafter called the bonds of the First Series), in the aggregate principal amount of Seventeen Million Dollars ($17,000,000), of which Fifteen Million Two Hundred Ninety-seven Thousand Dollars ($15,297,000) principal amount are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 3⅛ % Series due 1978 (hereinafter called the bonds of the Second Series), in the aggregate principal amount of Ten Million Dollars ($10,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 3% Series due 1980 (hereinafter called the bonds of the Third Series), in the aggregate principal amount of Ten Million Dollars ($10,000,000), of which Nine Million Nine Hundred Thousand Dollars ($9,900,000) principal amount are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 4% Series due 1983 (hereinafter called the bonds of the Fourth Series), in the aggregate principal amount of Twelve Million Dollars ($12,000,000), none of which bonds of the Fourth Series are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 3⅛% Series due 1984 (hereinafter called the bonds of the Fifth Series), in the aggregate principal amount of Eighteen Million Dollars ($18,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 4 ¾% Series due 1987 (hereinafter called bonds of the Sixth Series), in the aggregate principal amount of Twenty Million Dollars ($20,000,000), all of which are now Outstanding; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to the coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restrictions if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein, or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and




WHEREAS, the execution and delivery by the Company of this Sixth Supplemental Indenture, and the terms of the bonds of the Seventh Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate resolutions of said Board of Directors;
NOW THEREFORE, THIS INDENTURE WITNESSETH: That Louisiana Power & Light Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment both of the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto Milton J. Redlich (successor to Carl E. Buckley) and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (successor by merger to The Chase National Bank of the City of New York), as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors, and assigns forever, all of the property now owned by the Company and specifically described in the Mortgage, as supplemented, and all the following described properties of the Company, whether now owned or hereafter acquired - that is to say:
Paragraph One
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipe lines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, equipment and appurtenances, forming a part of said plants, sites, or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:
OUACHITA PARISH
(1)      Additions, improvements and replacements to the Steam Electric Generating Station and the 110 KV and the 110/13.8/34.5 KV Substations in Sterlington, Ouachita Parish, situated on those certain tracts or parcels of land more particularly described in Paragraph One, Sub-Paragraph (5) of the Mortgage and on those certain tracts or parcels of land particularly described as follows:
Two tracts of land situated in Ouachita Parish, Louisiana more particularly described as follows:
TRACT No. 1 - 34.864 Acres
34.864 Acres of land situated in Section 37, Township 20 North, Range 4 East, Parish of Ouachita, State of Louisiana, lying north of the Sterlington-Monroe Road and joining Louisiana Power and Light Co. 41.14 acre tract (Book 153, p. 101) and bounded as follows:
Commencing at the meander corner on the east bank of the Ouachita River and the south line of Section 20, T 20 N - R 4 E; thence, N 16° 10 ¼’ E, 155.84’; thence, S 61° 59 ¼’ E, 499.76’ along the south line




1.      Thence, N 61° 41¼’ W, 131.09’.
2.      Thence, N 68° 36’ E, 66.21’.
3.      Thence, S 56° 28’ E, 122.18’.
4.      Thence, S 68° 36’ W, 51.64’ back to the point of beginning.
Said tracts containing in the aggregate 36.562 acres and being also shown on a plat of survey made by J. T. Balfour, C. E., under date of April 10, 1957.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from Harvey L. Gregg, Jr., et al by Act of Sale under private signature, duly acknowledged, executed by the vendors on August 1, 1957 and by the purchaser on August 8, 1957, recorded in Conveyance Book 624, Folio 664 of the records of Ouachita Parish.
Paragraph Two
The Electric Substations and Substation Sites of the Company, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, transmitting and distributing electric energy, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations or any of them or used or enjoyed or capable of being used or enjoyed in conjunction with any thereof, including all the Company’s right, title and interest in and to the following, situated in the State of Louisiana:
ASCENSION PARISH
(1)      The Burnside 115/13.8 KV Substation, located northeast of Burnside in Ascension Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain parcel of ground situated in Section 7, T 10 S, R 3 E, southeastern district of Louisiana, east of the Mississippi in Ascension Parish, Louisiana, being a portion of the original Clark plantation which said portion of ground is described as follows:
Commencing at an old grate on the 80 arpent line marking the corner common to Sections 12, 32, 7 and 9, S 14 degrees 52’ W along the division line of the Clark and Conway plantations a distance of 7490.82’ to a point as noted on the survey by George H. Grandjean, D. S. in 1881 thence continuing along said division line S 15 degrees 15’ W, a distance of 664.77’ to the north right of way line of Louisiana Highway No. 22 (formerly No. 761) thence along said right of way line S 87 degrees 37’ 45” W, a distance of 66.79’, thence S 84 degrees 46’ W continuing along said right of way line a distance of 113.51’ to the point of beginning, thence along said right of way line S 84 degrees 46’ W, a distance of 86.49’, thence along said right of way line S 81 degrees 54’ 15” W a distance of 100.12’, thence along said right of way line S 84 degrees 46’ W a distance of 315.37’, thence N 5 degrees 14’ W a distance of 500’, thence N 84 degrees 46’ E a distance of 686.78’, thence S 15 degrees 15’ W a distance of 528.41’ to the point of beginning, all as is




more fully shown on a survey by J. J. Krebs & Sons, Civil Engineers & Surveyors, dated September 16, 1957.
The above described property is subject to a reservation to former owners of the property of an undivided one-half (½) interest in and to all oil, gas and other minerals, but the authority to make and execute leases or other agreements for the exploration, development, production and/or marketing of oil, gas and other minerals, in respect to the one-half (½) interest in said minerals reserved by former owners as aforesaid, has passed to and been acquired by the Company by mesne assignments and the Act of Sale, hereinafter mentioned, by which it acquired the property.
Being the same property acquired by the Company from Olin Mathieson Chemical Corporation and Revere Copper and Brass Incorporated by Act of Sale under private signature, duly acknowledged, executed by the vendors on October 3, 1958 and by the Company on October 15, 1958, recorded in Conveyance Book 139, File No. 56896 of the records of Ascension Parish.
ASSUMPTION PARISH
(2)      The Bayou Boeuf 34.5/13.8 KV Substation situated on land owned by others.
CONCORDIA PARISH
(3)      The Vidalia 34.5/13.8 KV Substation in Vidalia, Concordia Parish, located on that certain tract or parcel of land more particularly described in Paragraph Three, Sub-Paragraph (5) of the Mortgage.
CONCORDIA PARISH
(4)      Additions, improvements and replacements to the Red Gum 115/34.5 KV Substation in Concordia Parish, situated on that certain tract or parcel of land more particularly described in Paragraph Three, Sub-Paragraph (3) of the Mortgage, and on that certain tract or parcel of land particularly described as follows:
A certain lot or parcel of ground situated in Section 47, Township 8 North, Range 10 East, Concordia Parish, Louisiana, more particularly described as follows:
From the corner common to Sections 40, 47 and 48, Township 8 North, Range 10 East, Concordia Parish, Louisiana, run N20° 00’W for 131.21 feet to the northerly right-of-way of U. S. No. 65 Highway, thence along said U.S. No. 65 right-of-way on a bearing of N53°40’E for 300.00 feet, more or less, to the point of beginning, said point of beginning being the southeast corner of Louisiana Power & Light Company Lot as recorded in Con. Book SS, page 316 of the records of Concordia Parish, Louisiana. From said point of beginning run N53 °40’E for 75.0 feet; thence N20°00’W for 624.2 feet; thence S53°48’W, 75.0 feet; thence S20°00’E, 624.3 feet to point of beginning, said tract of land containing 1.03 acres and being in Section 47.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas and other minerals, but the mineral owners have covenanted not to drill or explore for said minerals on said property nor to exercise on said property any surface rights whatsoever.
Being the same property acquired by the Company from Ulric L. Fomby, et als, by Act of Sale under private signature, duly acknowledged, executed by the vendors on October 25 and 28 and November 3, 1958, and by the Company on November 14, 1958, recorded in Conveyance Book P-6, Folio 375 of the records of Concordia Parish.




JEFFERSON PARISH
(5)      Additions, improvements and replacements to the Harvey 115/13.8 KV Substation in Harvey, Jefferson Parish, situated on that tract or parcel of land more particularly described in Paragraph Two, Sub-Paragraph (19) of the Fifth Supplemental Indenture.
JEFFERSON PARISH
(6)      The Lakeshore 115/13.8 KV Substation at Arnoult Road in Jefferson Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages, appurtenances, prescriptions, both liberative and acquisitive, batture and batture rights, and riparian rights thereunto belonging or in anywise appertaining, located in the Parish of Jefferson, State of Louisiana, on the east or left descending side of the Mississippi River, in Hessmer Farms, which said tract or portion of ground, in accordance with plan of survey by J. L. Fontcuberta, Surveyor, dated June 14, 1957, is composed of all of Plots 276, 277, 286, and 287, and portions of Plots 288 and 289 of said Hessmer Farms, and is bounded on the west by the easterly margin of Edenborn Avenue, on and along which it fronts and measures 437.91 feet, on the north by the top of the southerly bank of Canal No. 2, along which it measures 420.32 feet, on the east by the westerly margin of Arnoult Road, on and along which it fronts and measures 421.41 feet, and on the south by the southerly property line of said Plots 276 and 277, a distance of 420 feet; and further in accordance with said plan of survey said tract or portion of ground is more particularly described as follows, to-wit:
Commencing at an iron pipe located in the northwest corner of the intersection of Arnoult Road and Cypress Street and running thence in a northerly direction along the westerly margin of Arnoult Road for a distance of 12,720 feet to an iron pipe located in the southeast corner of the aforementioned Plot 276, which is the POINT OF BEGINNING. Thence, from said POINT OF BEGINNING, turning a right angle to the left and running in a westerly direction along the southerly line of the aforementioned Plots 276 and 277 for a distance of 420 feet to the easterly margin of Edenborn Avenue and an iron pipe located in the southwest corner of said Plot 277; thence turning a right angle to the right and running in a northerly direction along and fronting on the easterly margin of Edenborn Avenue for a distance of 437.91 feet to an iron pipe in the top of the southerly bank of Canal No. 2; thence turning 92 degrees 15 minutes to the right and running in an easterly direction along the top of the southerly bank of Canal No. 2 for a distance of 420.32 feet to an iron pipe located at the westerly margin of Amoult Road; thence turning 87 degrees 45 minutes to the right and running in a southerly direction along and fronting on the westerly margin of Arnoult Road for a distance of 421.41 feet to the POINT OF BEGINNING; containing 4.143 acres of land.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations of property of Louisiana Power & Light Company.
Being the same property acquired by the Company from Dr. Ignatius Tedesco, Jr., et als by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on October 10, 1957, recorded in Conveyance Book 433, Folio 698 of the records of Jefferson Parish.




JEFFERSON PARISH
(7)      The Kenner 115/13.8 KV Substation in Kenner, Jefferson Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain tract of land together with all the buildings and improvements thereon situated in the Parish of Jefferson, Louisiana more particularly described as follows:
ONE CERTAIN SQUARE OF GROUND, containing and consisting of
FORTY-SEVEN CERTAIN LOTS OR PARCELS OF GROUND, together with all improvements thereon and all rights, ways, privileges, servitudes, and advantages and appurtenances thereunto belonging or in anywise appertaining, situated in the Parish of Jefferson, State of Louisiana in that part thereof known as Hanson Place, said square being designated as Square No. 7 and being bounded by Gordon Avenue, Geneva Street, Alliance Avenue, and Orleans-Kenner Road, said lots being designated by the Numbers 1 to 47 inclusive and measure according to map of Hanson Place by S. A. Calongne’s Sons dated July 23, 1926, and revised September 15th, 1926, as follows:
LOTS ONE TO TWELVE (1 to 12) adjoin each other and measure each 20.63 feet front on Orleans-Kenner Road, similar width in the rear, by a depth of 120 feet between equal and parallel lines. Lot No. 1 forms the corner of Gordon Avenue and Orleans-Kenner Road. Lot No. 12 forms the corner of Alliance Avenue and Orleans-Kenner Road.
LOT No. THIRTEEN (13) adjoins the rear of lots 7 to 12 inclusive and measures 26.55 feet front on Alliance Avenue, a width in the rear of 56.95 feet by a depth on the side line separating it from Lot No. 14 of 120 feet and a depth on the other side line separating it from the rear of lots 7 to 12 inclusive of 123.79 feet.
LOTS Nos. 14 to 23 inclusive adjoin each other and measure each 20 feet front on Alliance Avenue, similar width in the rear, by a depth of 120 feet between equal and parallel lines. Lot No. 14 commences at a distance of 146.55 feet from the corner of Alliance Avenue and Orleans-Kenner Road.
LOT No. 24 adjoins the rear of lots 25 to 30 inclusive and measures 53.96 feet front on Alliance Avenue, a width in the rear of 5.86 feet by a depth on the side line separating it from Lot No. 23 of 120 feet and a depth on the other side line separating it from the rear of Lots Nos. 25 to 30 inclusive of 129.29 feet.
LOTS Nos. 25 to 36 inclusive adjoin each other and measure each 21.55 feet front on Geneva Street, similar width in the rear, by a depth of 120 feet between equal and parallel lines. Lot No. 25 forms the corner of Alliance Avenue, and Geneva Street. Lot No. 36 forms the corner of Gordon Avenue and Geneva Street.
Lot No. 37 adjoins the rear of lots 31 to 36 inclusive and measures 17.80 feet front on Gordon Avenue, a width in the rear of 65.88 feet by a depth on the side line separating it from Lot 38 of 120 feet and a depth on the other side line separating it from the rear of Lots Nos. 31 to 36 inclusive of 129.29 feet.
LOTS Nos. 38 to 46 inclusive adjoin each other and measure each 20 feet front on Gordon Avenue, a similar width in the rear, by a depth of 120 feet between equal and parallel lines. Lot No. 38 commences at a distance of 137.80 feet from the corner of Gordon Avenue and Geneva Street.




LOT No. 47 adjoins Lot No. 46 and measures 47.35 feet front on Gordon Avenue, a width in the rear of 16.95 feet by a depth on the side line separating it from Lot No. 46 of 120 feet and a depth on the other side line separating it from the rear of Lots Nos. 1 to 6 inclusive of 123.79 feet.
AND according to a plan of survey by J. L. Fontcuberta, Surveyor, dated January 27, 1959, said square of ground has the same bounds as above set forth, is designated as Square No. 7, and is located in Hanson Place in the City of Kenner, Parish of Jefferson, State of Louisiana, in Section 38, Township 12 South, Range 9 East, on the left descending bank of the Mississippi River, and said Square No. 7 of Hanson Place measures 247.56 feet front on the Orleans-Kenner Road, 485.15 feet front on Gordon Avenue, 258.60 feet front on Geneva Street, and 520.51 feet front on Alliance Avenue. AND FURTHER according to said plan of survey by J. L. Fontcuberta, Surveyor, dated January 27, 1959, the aforesaid forty-seven certain lots or parcels of ground contained in said Square No. 7 of Hanson Place and of which said square consists, have the same designations and locations as above set forth, and the same measurements as above set forth except for the following very minor differences; Lot No. 13 is shown by said Fontcuberta plan as having a depth on its side line separating it from the rear of Lots 7 to 12 inclusive of 123.78 feet; Lot No. 24 is shown by said Fontcuberta plan as having a width in the rear of 5.88 feet and a depth on the side line separating it from the rear of Lots Nos. 25 to 30 inclusive of 129.30 feet; Lot No. 37 is shown by said Fontcuberta plan as having a depth on the side line separating it from the rear of Lots Nos. 31 to 36 inclusive of 129.30 feet; and Lot 47 is shown by said Fontcuberta plan as having a depth on its side line separating it from the rear of Lots Nos. 1 to 6 inclusive of 123.78 feet.
Being the same property acquired by the Company from Ernest J. Robin, et als by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on April 15, 1959, recorded in Conveyance Book 474, Folio 271 of the records of Jefferson Parish.
LAFOURCHE PARISH
(8)      The Cut Off 34.5/13.8 KV Substation at Cut Off, Lafourche Parish, situated on land owned by others.
LAFOURCHE PARISH
(9)      The Leeville 115/34.5 KV Substation located near Leeville in Lafourche Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Lafourche, State of Louisiana, on the left descending side of Bayou Lafourche, in Lot 7 of Section 3, Township 22 South, Range 22 East, at the intersection of the northerly line of said Lot 7 and the easterly margin of the Right of Way of Louisiana State Highway No. 1 (Leeville-Grand Isle Highway), which said tract or portion of ground, in accordance with plan of survey by E. M. Collier, Surveyor, dated June 3, 1957, revised July 29, 1957, measures and is more particularly described as follows, to-wit:
Commencing at the northeast corner of said Section 3, Township 22 South, Range 22 East, Lafourche Parish, Louisiana, which is the section corner common to Sections 2 and 3 of Township 22 South, Range 22 East, and Sections 34 and 35 of Township 21 South, Range 22 East, and running thence in a westerly direction along the northerly section line of said Section 3, which is also the southerly section line of the aforesaid Section 34, for a distance of 1,320 feet to the northeast corner of Lot 1 of said Section 3; thence running in a southerly direction along the easterly line of Lots 1 and 6 of said Section 3, on a bearing of




South 4 degrees 56 minutes East, for a distance of 2,646.65 feet to the northeast corner of Lot 7 of said Section 3; thence running in a westerly direction along the northerly line of said Lot 7 of Section 3, which is also the southerly line of Lot 6 of said Section 3, on a bearing of North 89 degrees 58 minutes West, for a distance of 464.7 feet to a ⅞ ths inch iron rod marking the northeasterly corner of said tract or portion of ground, which is the POINT OF BEGINNING. Thence, from said POINT OF BEGINNING, continuing in a westerly direction along the northerly line of Lot 7 of the aforementioned Section 3, which is also the southerly line of Lot 6 of said Section 3, on the aforementioned bearing of North 89 degrees 58 minutes West, for a distance of 400 feet to the easterly margin of the Right of Way of Louisiana State Highway No. 1 (Leeville-Grand Isle Highway), which point is marked by a 2 ½ inch pipe; thence running in a southerly direction along and fronting on the easterly margin of the Right of Way of said Louisiana State Highway No. 1 (Leeville-Grand Isle Highway), on a bearing of South 2 degrees 48 minutes East for a distance of 255 feet; thence continuing to run in a southerly direction along and to front on the easterly margin of said highway Right of Way, on a bearing of South 12 degrees 26 minutes East, for a distance of 146.05 feet to a point marked by a 1 ¼ inch pipe; thence running in an easterly direction, on a bearing of South 89 degrees 58 minutes East, for a distance of 400 feet to a point marked by a ⅞ ths inch iron rod; thence running in a northerly direction, on a bearing of North 6 degrees 18 minutes West, for a distance of 399.75 feet to the POINT OF BEGINNING;
The above described property is subject to a reservation and/or grant to some of the Company’s predecessors in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from Eugene Constantin, Jr., et als by Act of Sale under private signature, duly acknowledged, executed by the vendors on February 28, 1958, March 11, 1958 and March 25, 1958, and by the Company on April 10, 1958, recorded in Conveyance Book 234, Folio 289 of the records of Lafourche Parish.
MOREHOUSE PARISH
(10)      The Gallion 115/13.8 KV Substation near Gallion, Morehouse Parish, situated on that certain tract or parcel of land more particularly described in Paragraph Four, Sub-Paragraph (2) of the Fourth Supplemental Indenture.
PLAQUEMINES PARISH
(11)      The Port Nickel 115/13.8 KV Substation located at Port Nickel, Plaquemines Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of Plaquemines, State of Louisiana, in Section 3, Township 14 South, Range 12 East, Southeastern Land District of Louisiana, East of the Mississippi River, being a part of what was formerly known or designated as “Mon Plaisir Plantation” bounded on its westerly side by the easterly margin of the right of way of the Public Road running along the Mississippi River and presently designated as Louisiana State Highway No. 39, on its northerly side by the property of Freeport Sulphur Company, formerly Charles Mumphrey, and on its easterly and southerly sides by property of Lothrop Realty Co., Inc. forming a part of what was formerly known or designated as “Mon Plaisir Plantation”; which said tract or portion of ground is designated as Parcel “A” on a plan of survey by




R. P. Rordam, Civil Engineer, dated July 17, 1958, revised July 25, 1958, to show bearings and July 31, 1958, to show radius of curve, and in accordance with said plan of survey said tract or portion of ground thereon designated as Parcel “A” is located, measures and is described more fully and specifically as follows, to-wit:
Commencing at the point of intersection of the northerly section line of said Section 3 (which is also the southerly section line of Section 2 of the same township and range and is also the upper or northerly boundary line of what was formerly known or designated as “Mon Plaisir Plantation”) with the easterly margin of the right of way of the Public Road running along the Mississippi River, presently designated as Louisiana State Highway No. 39, which point of intersection and beginning is marked by an iron pipe, and running thence along said northerly section line of Section 3 on a bearing of South 62 degrees 00 minutes East for a distance of 400.00 feet to a point marked by a 1 ½ inch iron pipe, thence running on a bearing of South 05 degrees 32 minutes West for a distance of 384.00 feet to a point marked by a 1½ inch iron pipe, thence running on a bearing of North 62 degrees 00 minutes West for a distance of 410.00 feet to the easterly margin of the right of way of the aforesaid Public Road presently designated as Louisiana State Highway No. 39, which point is marked by a 1 ½ inch iron pipe, thence running in a northeasterly direction along and fronting on the easterly margin of the right of way of the said Public Road along the arc of a circle having a radius of 1,701.78 feet for a distance of 169.10 feet (the chord subtending said arc being a straight line running on a bearing of North 08 degrees 41 minutes East for a distance of 169.04 feet) to a point marked by a 1½ inch iron pipe, thence continuing along and fronting on the easterly margin of the right of way of the said Public Road on a bearing of North 05 degrees 32 minutes East for a distance of 211.40 feet to the point of beginning, marked by an iron pipe; containing 3.276 acres of land.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted off and without the outside surface limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from Lothrop Realty Co., Inc. by Act of Sale under private signature, duly acknowledged, executed by Lothrop Realty Co., Inc. on October 6, 1958 and by the Company on November 7, 1958, recorded in Conveyance Book 210, Folio 1008 of the records of Plaquemines Parish.
ST. BERNARD PARISH
(12)      Additions, improvements and replacements to the Chalmette 115 KV Substation in Chalmette, St. Bernard Parish, situated on that certain tract or parcel of land more particularly described in Paragraph Two, Sub-Paragraph (48) of the Fifth Supplemental Indenture.
TANGIPAHOA PARISH
(13)      The Independence 115/24 KV 7500 KVA Substation located in Tangipahoa Parish approximately 1.5 miles West of the Town of Independence, Louisiana situated on a certain tract or parcel of land more particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages, prescriptions, both liberative and acquisitive, batture and batture rights, and riparian rights, thereunto belonging or in anywise appertaining, located in the Parish of Tangipahoa, State of Louisiana, in Section 38, Township 5 South, Range 7 East, Greensburg District, which said tract or portion of ground is bounded on the South by the northerly margin of the Right of Way




of the asphalt highway presently designated as Louisiana State Highway No. 40, on the East by the Natalbany River, and on the West and North by property now or formerly owned by the vendor herein; and in accordance with plan of survey by W. A. Tycer, C. E., dated April 23, 1957, said tract or portion of ground measures and is more particularly described as follows, to-wit:
Commencing on the northerly margin of the Right of Way of the asphalt highway presently designated as Louisiana State Highway No. 40 at a point located 21 feet North and 128 feet West of the intersection of the south section line of the aforementioned Section 38 with the center of the Natalbany River, which point of beginning is also located 34 feet South of the West pole of Structure No. 75 of the Louisiana Power & Light Company power line as presently constructed; thence running due West along the northerly margin of said highway Right of Way and fronting thereon for a distance of 174 feet to a point marked by a 4 inch pipe; thence running in a northerly direction, on a bearing of North 0 degrees 15 minutes West, for a distance of 400 feet to a point marked by a 4 inch iron pipe; thence running in an easterly direction, on a bearing of North 89 degrees 45 minutes East, for a distance of 623 feet to the westerly bank of the Natalbany River; thence running along the westerly bank of the Natalbany River, on a bearing of South 12 degrees West for a distance of 190 feet; thence continuing along the westerly bank of the Natalbany River and running due West for a distance of 198 feet; thence continuing along the westerly bank of the Natalbany River, on a bearing of South 30 degrees West, for a distance of 244 feet to the northerly margin of the aforementioned highway Right of Way; thence running due West along and fronting on the northerly margin of the said highway Right of Way for a distance of 98 feet to the point of beginning, containing 4.15 acres of land.
Being the same property acquired by the Company from Sam J. Leto by Act of Sale under private signature, duly acknowledged, executed on September 30, 1957, recorded in Conveyance Book 226, Folio 558 of the records of Tangipahoa Parish.
WASHINGTON PARISH
(14)      The Bogalusa (Camellia Street) 115 KV Substation in Bogalusa, Washington Parish, situated on that certain tract or parcel of land more particularly described in Paragraph Three, Sub-Paragraph (56) of the Fourth Supplemental Indenture.
WINN PARISH
(15)      The Dodson 115/13.8 KV Substation in Dodson, Winn Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain tract or parcel of land containing 4.15 acres situated in the West Half of Northeast Quarter of Southwest Quarter, Section 26, Township 13 North, Range 3 West, Parish of Winn, State of Louisiana, lying south of State Highway No. 126 and bounded as follows:
Commencing at the northeast corner of the W½ of NE¼ of SW¼, Section 26, T13N, R3W, thence South 524.9 feet to the south right-of-way line of Highway No. 126 and THE POINT OF BEGINNING (said POINT OF BEGINNING is further described as being East 2078.1 feet and South 3136.24 feet from the Northwest corner of Section 26, T13N, R3W) Running,
1.      Thence, continuing South 417.44 feet to the southeast corner of the land hereby conveyed.
2.      Thence S 89° 18’ W, 417.44 feet to the southwest corner of the land hereby conveyed.




3.      Thence North 427.04 feet to the south right-of-way line of Highway No. 126 and the northwest corner of the land hereby conveyed.
4.      Thence S. 86° 53’ E 144.0 feet along said highway right-of-way.
5.      Thence N 89° 18’ E 273.44 feet along said right-of-way back to the point of beginning and the northeast corner of the land hereby conveyed.
Said tract containing 4.15 acres, more or less, and being shown on plat of survey made by J. T. Balfour, Registered Civil Engineer, under date of November 3, 1958.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from Mrs. Velma Gates French, et als, by Act of Sale under private signature, duly acknowledged, executed by the vendors on November 13, 20 and 21, 1958 and by the Company on November 28, 1958, recorded in Conveyance Book 85, Folio 160 of the records of Winn Parish.
Paragraph Three
All and Singular the Miscellaneous Lands and Real Estate or Right and Interests Therein of the Company now owned, or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired during the existence of this trust, including the following, situated in the State of Louisiana, described as:
CLAIBORNE PARISH
(1)      A certain lot or parcel of ground located in Claiborne Parish, more particularly described as follows:
A certain lot or parcel of ground situated in the Northeast Quarter of the Southwest Quarter (NE¼ of SW¼) of Section 32, Township 23 North, Range 7 West, Claiborne Parish, Louisiana, more particularly described as follows:
Commencing at an iron pin in the Southeast corner of said Section 32; thence North 89 degrees 45 minutes West a distance of 2640 feet to the Southeast corner of the Southwest Quarter (SW¼ ) of Section 32; thence North along the North-South center line of the South Half (S½) of said Section 32 a distance of 607.5 feet to the North right of way line of Highway No. 79 (Homer-Haynesville Road); thence North 40 degrees 24 minutes West along the said North line of the highway right of way a distance of 1003.6 feet to a point on the fence line between the Callender and Sales property for the POINT OF BEGINNING:
(1)      Thence continue North 40 degrees 24 minutes West along the North line of said highway right of way a distance of 500 feet;
(2)      Thence North 49 degrees 36 minutes East a distance of 450 feet;
(3)      Thence South 40 degrees 24 minutes East a distance of 500 feet;




(4)      Thence South 49 degrees 36 minutes West a distance of 450 feet to the said POINT OF BEGINNING;
said tract containing five (5) acres, more or less, and being shown on plat of survey made by J. T. Balfour, C. E.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from W. M. Callender, et als by Act of Sale under private signature, duly acknowledged, executed by the vendors on May 6, 7 and 9, 1958 and by the Company on May 23, 1958, recorded in Conveyance Book 233, Folio 109 of the records of Claiborne Parish.
JACKSON PARISH
(2)      A certain lot or parcel of ground situated in the Village of Hodge, Parish of Jackson, more particularly described as follows:
A certain lot or parcel of ground situated in the Northwest Quarter of Northwest Quarter (NW¼ of NW¼) of Section 19, Township 15 North, Range 3 West, and the Northeast Quarter of Northeast Quarter (NE¼ of NE¼) of Section 24, Township 15 North, Range 4 West, said lot being more particularly described as follows:
From the Northeast corner of the Northwest Quarter of the Northwest Quarter of Section 19, T. 15 N., R. 3 W., Jackson Parish, Louisiana; thence Westerly along the line between Sections 18 and 19 a distance of 956.79 feet to the East right-of-way line of U.S. Highway No. 167; thence Southwesterly along said right-of-way line a distance of 243.49 feet to the POINT OF BEGINNING; From thence Southwesterly along said highway right-of-way line a distance of 459.22 feet; thence Easterly parallel with the line between Sections 18 and 19 a distance of 734.09 feet; thence Northerly perpendicular to the last mentioned course a distance of 367.28 feet; thence Southwesterly at a deflection angle of 94 deg. 25 minutes to the left a distance of 421.08 feet to the East right-of-way line of U.S. Highway No. 167 and the point of beginning;
said lot containing 4.59 acres, more or less, and being designated “Hodge Office Site” on plat of survey No. A 6950 dated November 28, 1958.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas, coal or other minerals, but no surface rights whatever are reserved to the mineral owner, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted off the property or under the property whereby the use of the property by the Company shall not be interfered with and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company, and provided that in no event shall drilling for minerals be conducted within 200 feet of any buildings or improvements placed on the property by the Company.
Being the same property acquired by the Company from Continental Can Company, Inc. by Act of Sale under private signature, duly acknowledged, executed by Continental Can Company, Inc. on January 8, 1959 and by the Company on February 3, 1959, recorded in Conveyance Book 95, Folio 135 of the records of Jackson Parish.




JEFFERSON PARISH
(3)      A certain tract or portion of ground in the Parish of Jefferson, more particularly described as follows:
A certain piece or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Jefferson, State of Louisiana, on the East or left descending side of the Mississippi River, in Hessmer Farms, which said piece or portion of ground is composed of a part of Plot 291 of Hessmer Farms, the subdivision of Hessmer Farms and said Plot 291 thereof being shown on a Plan by W. A. Blalock, C. E., dated July 15, 1919, made part of an Act of Deposit by Hessmer Holdings Company, Incorporated passed before Alexis Brian, Notary Public for the Parish of Orleans, on January 2, 1920, filed January 15, 1920 and registered in Conveyance Book 47, Folio 70 of the records of Jefferson Parish, Louisiana; and which said piece or portion of ground, in accordance with a plan of survey by J. L. Fontcuberta, Surveyor, dated January 8, 1958, is composed of a part of Plot 291 of Hessmer Farms, and measures and is described more fully and specifically as follows, to-wit:
Commencing at a point on the easterly margin of Hessmer Avenue located North 1 degree 24 minutes 17 seconds East 13,140 feet (measured along said easterly margin of Hessmer Avenue) from the northeasterly corner of the intersection of Hessmer Avenue and Cypress Street, which point of beginning is the southwesterly corner of Plot 291 and the northwesterly corner of Plot 284 of the aforesaid Hessmer Farms; thence running along the westerly margin of said Plot 291, which is also the easterly margin of Hessmer Avenue, on a bearing of North 1 degree 24 minutes 17 seconds East, for a distance of 36.36 feet to the top of the southerly bank of Canal No. 2; thence running along the top of the southerly bank of Canal No. 2 on a bearing of South 86 degrees 20 minutes 44 seconds East, for a distance of 210.16 feet to the easterly boundary line of said Plot 291; thence running along said easterly boundary line of said Plot 291 on a bearing of South 1 degree 24 minutes 17 seconds West for a distance of 28.11 feet to the southeasterly corner of said Plot 291, which point is also the northeasterly corner of said Plot 284; thence running along the southerly boundary line of said Plot 291 (which is also the northerly boundary line of said Plot 284) on a bearing of North 88 degrees 35 minutes 43 seconds West for a distance of 210.00 feet to the point of beginning; containing 6,769.35 square feet.
Being the same property acquired by the Company from Doris Fleckinger by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on July 3, 1959, recorded in Conveyance Book 481, Folio 568 of the records of Jefferson Parish.
JEFFERSON PARISH
(4)      A certain tract or portion of ground in the Parish of Jefferson, more particularly described as follows:
A certain piece or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Jefferson, State of Louisiana, on the East or left descending side of the Mississippi River, in what is known as the Hickman Tract, which said piece or portion of ground, in accordance with plan of survey by J. L. Fontcuberta, Surveyor, dated January 8, 1958, measures and is more particularly described as follows, to-wit:




Commencing at the intersection of the southerly margin of 11th Street of Harlem Subdivision with the boundary line separating Harlem Subdivision from the Hickman Tract, said boundary line being the westerly boundary line of Harlem Subdivision and the easterly boundary line of the Hickman Tract, said point of intersection and beginning being also the northwesterly corner of Square 23 of Harlem Subdivision, and running thence in a westerly direction along the projection of the southerly margin of 11th Street of Harlem Subdivision for a distance of 288.00 feet to the westerly boundary line of the Hickman Tract, which boundary line is also the easterly boundary line of Athania Place Annex Subdivision; thence running in a northerly direction along the westerly boundary line of the Hickman Tract (which is also the easterly boundary line of Athania Place Annex Subdivision) for a distance of 50 feet to a point, said point being located at a distance of 71.81 feet, measured along the westerly boundary line of the Hickman Tract, from and southerly of the top of the southerly bank of Canal No. 2; thence running in an easterly direction along the projection of the northerly margin of the said 11th Street of Harlem Subdivision for a distance of 288.00 feet to the easterly boundary line of the Hickman Tract, which boundary line is also the westerly boundary line of Harlem Subdivision, said point being the southwesterly corner of Square 22 of Harlem Subdivision and being located at a distance of 59.20 feet, measured along said easterly boundary line of the Hickman Tract, from and southerly of the top of the southerly bank of Canal No. 2; thence running in a southerly direction along the said easterly boundary line of the Hickman Tract across said 11th Street of Harlem Subdivision, from the southwesterly corner of Square 22 of the Harlem Subdivision to the northwesterly corner of Square 23 of the Harlem Subdivision, for a distance of 50 feet to the point of beginning; containing 14,400 square feet of land.
Being the same property acquired by the Company from Jules J. Viosca by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 25, 1959, recorded in Conveyance Book 477, Folio 527, of the records of Jefferson Parish.
JEFFERSON PARISH
(5)      A certain piece or parcel of land situated in Jefferson Parish, more particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all of the rights, ways, privileges, servitudes, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Jefferson, State of Louisiana, in Section 10, Township 15 South, Range 23 East, Southeastern District, West of the Mississippi River, fronting on the northerly margin of Louisiana State Highway No. 301 at or near Barataria, which said tract or portion of ground, in accordance with plan of survey by Alvin E. Hotard, Civil Engineer, dated August 12, 1957, measures and is more particularly described as follows, to-wit:
Commencing at the intersection of the westerly section line of the aforesaid Section 10, Township 15 South, Range 23 East, with the northerly margin of the Right of Way of Louisiana State Highway No. 301, and running thence in an easterly direction along the northerly margin of said highway Right of Way for a distance of 576.84 feet to the intersection with the northerly margin of said highway Right of Way of the westerly boundary line of the property of NEW ORLEANS PLANTATION TRUST (said westerly boundary line being parallel to the said westerly section line of Section 10), which point of intersection is the POINT OF BEGINNING (said Point of Beginning on the northerly margin of said highway Right of Way being located at a distance of 576 feet from the westerly section line of said Section 10 measured along a line perpendicular to said section line). Thence, from said POINT OF BEGINNING, continuing in an easterly direction along and fronting on the northerly margin of the Right of Way of said Louisiana State Highway No. 301, along a tangent forming an interior angle with the aforesaid westerly boundary line of the property of New Orleans Plantation Trust of 93 degrees 06 minutes for a distance of 200.30 feet to a point;




thence continuing in an easterly direction along and fronting on the northerly margin of said highway Right of Way, along a curve having a radius of 607.05 feet, for a distance of 107.72 feet to a point; thence continuing in an easterly direction along and fronting on the northerly margin of said highway Right of Way, along a tangent, for a distance of 109.26 feet; thence turning to the left with an interior angle of 76 degrees 44 minutes and running in a northerly direction, parallel to the westerly section line of the aforesaid Section 10, for a distance of 416 feet; thence turning to the left with an interior angle of 97 degrees 04 minutes and running in a westerly direction for a distance of 416 feet to the westerly boundary line of the property of New Orleans Plantation Trust; thence turning to the left with an interior angle of 82 degrees 56 minutes and running in a southerly direction along the westerly boundary line of the property of New Orleans Plantation Trust, parallel to the westerly section line of said Section 10, for a distance of 416 feet to the northerly margin of the Right of Way of Louisiana State Highway No. 301 and the POINT OF BEGINNING.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owner, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from Whitney National Bank of New Orleans, Trustee of New Orleans Plantation Trust, by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on October 16, 1957, recorded in Conveyance Book 434, Folio 185 of the records of Jefferson Parish.
JEFFERSON PARISH
(6)      Those certain tracts or parcels of land in Jefferson Parish, more particularly described as follows:
(A)      A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages, appurtenances, prescriptions, both liberative and acquisitive, batture and batture rights, and riparian rights, thereunto belonging or in anywise appertaining, located in the City of Gretna, Parish of Jefferson, State of Louisiana, in Square 23 of that part thereof known as McDonoghville, bounded by Washington, Anson and Burmaster Streets and the Levee of the Mississippi River; which said lot or portion of ground, according to its record title description and a plan of survey by J. J. Krebs & Sons, by John M. Krebs, Surveyor, dated October 16, 1952, revised December 11, 1952, a copy of which is annexed to an Act of Sale by Mrs. Rita Goldie Lambly, wife of/and Joseph Frederich Keppel to George Carra Krider passed before Robert R. Rainold, Notary Public, on March 28, 1953, recorded in Conveyance Book 335, folio 690 of the records of Jefferson Parish, Louisiana, is designated as Lot 8A, commences at a distance of 63 feet 11 inches 3 lines from the corner of Washington and Anson Streets, measures 63 feet 11 inches 3 lines American Measure front on Washington Street, same in width in the rear, by a depth of 110 feet American Measure between equal and parallel lines, and adjoins Lot 7A, which said Lot 7A forms the corner of Washington and Anson Streets; AND in accordance with a plan of survey by Alvin E. Hotard, Civil Engineer, dated August 15, 1957, said lot or portion of ground is also designated as Lot 8A, commences at a distance of 64.57 feet (63.95 Title) from the corner of Washington and Anson Streets, and measures thence 64.58 feet (63.95 feet Title) front on Washington Street, same in width in the rear, by a depth of 110 feet between equal and parallel lines (all measurements being American Measure), said Lot 8A immediately adjoining Lot 7A, which said Lot 7A forms the corner of Washington and Anson Streets.




Being the same property acquired by the Company from Charles J. Derbes, Jr., et al, by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on February 7, 1958, recorded in Conveyance Book 441, Folio 473 of the records of Jefferson Parish.
(B)      A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages, appurtenances, prescriptions, both liberative and acquisitive, batture and batture rights, and riparian rights, thereunto belonging or in anywise appertaining, located in the City of Gretna, Parish of Jefferson, State of Louisiana, in Square 23 of that part thereof known as McDonoghville, bounded by Washington, Anson and Burmaster Streets and the Levee of the Mississippi River; which said lot or portion of ground, according to its record title description and a plan of survey by J. J. Krebs & Sons, by John M. Krebs, Surveyor, dated October 16, 1952, revised December 11, 1952, a copy of which is annexed to an Act of Sale by Mrs. Rita Goldie Lambly, wife of/and Joseph Fredrich Keppel to George Carra Krider passed before Robert R. Rainold, Notary Public, on March 28, 1953, recorded in Conveyance Book 335, folio 690 of the records of Jefferson Parish, Louisiana, is designated as Lot 7A, forms the corner of Washington and Anson Streets, and measures in American Measure 63 feet 11 inches 3 lines front on Washington Street, same in width in the rear, by a depth between equal and parallel lines, and front on Anson Street, of 110 feet American Measure; AND in accordance with a plan of survey by Alvin E. Hotard, Civil Engineer, dated August 15, 1957, said lot or portion of ground is also designated as Lot 7A, forms the corner of Anson and Washington Streets, and measures 64.57 feet (63.95 feet Title) front on Washington Street, same in width in the rear, by a depth between equal and parallel lines, and front on Anson Street, of 110 feet (all measurements being American Measure). The improvements thereon bear the Municipal No. 215 Anson Street.
Being the same property acquired by the Company from George Carra Krider, et al by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on February 7, 1958, recorded in Conveyance Book 441, Folio 470 of the records of Jefferson Parish.
(C) Two certain lots or portions of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages, appurtenances, prescriptions, both liberative and acquisitive, batture and batture rights, and riparian rights, thereunto belonging or in anywise appertaining, located in the City of Gretna, Parish of Jefferson, State of Louisiana, in Square 23 of that part thereof known as McDonoghville, bounded by Washington, Anson and Burmaster Streets and the Levee of the Mississippi River, which said lots or portions of ground, in accordance with a plan of survey by Alvin E. Hotard, Civil Engineer, dated August 15, 1957, are designated as Lots C-1 and B, immediately adjoin each other, and are measured and described as follows:
Lot C-1 commences at a distance of 110 feet from the corner of Washington and Anson Streets, and measures thence 49.86 feet front on Anson Street by depths between parallel lines of 129.15 feet along its sideline nearer and running parallel to Washington Street and 66.32 feet (72.42 feet Title) to the toe of the Levee along its opposite sideline, separating said Lot C-1 from said Lot B, thence narrowing and running obliquely along the toe of the Levee for a distance of 72.81 feet (64.05 feet Title), and having a width in the rear of 12.55 feet (17.90 feet Title), all measurements being in American Measure. The Improvements thereon bear the Municipal No. 209 Anson Street.
Lot B commences at a distance of 159.86 feet from the corner of Washington and Anson Streets, and measures thence 32 feet front on Anson Street by depths between parallel lines of 66.32 feet (72.42 feet Title) to the toe of the Levee along its sideline nearer and running parallel to Washington Street and separating said Lot B from said Lot C-1, and 12.49 feet to the toe of the Levee along its opposite sideline, and running obliquely in the rear along the toe of the Levee for a distance of 62.45 feet.




Being the same property acquired by the Company from Emma Koenig Lambly by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on March 8, 1958, recorded in Conveyance Book 443, Folio 306 of the records of Jefferson Parish.
LAFOURCHE PARISH
(7)      A certain piece or parcel of land situated in the Parish of Lafourche, more particularly described as follows:
A certain tract of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of Lafourche, State of Louisiana, on the left descending bank of Bayou Lafourche, located partly in Section 18 and partly in Section 19, Township 19 South, Range 22 East; which said tract of land forms a square measuring 416 feet on each side thereof, and in accordance with plan of survey by J. C. Lovell, Surveyor, dated February 20, 1956, said tract of land is located and described more specifically as follows, to wit:
Commencing at a point on the section line dividing the aforesaid Sections 18 and 19, said line being the southerly section line of said Section 19 and the northerly section line of said Section 18, located North 78 degrees 15 minutes East 189.45 feet (measured along said section line) from the point of intersection of said section line with the Government Traverse line running along and through Bayou Lafourche; thence running on a bearing of South 11 degrees 45 minutes East for a distance of 296 feet; thence turning at right angles and running on a bearing of North 78 degrees 15 minutes East for a distance of 416 feet; thence turning at right angles and running on a bearing of North 11 degrees 45 minutes West for a distance of 416 feet; thence turning at right angles and running on a bearing of South 78 degrees 15 minutes West for a distance of 416 feet; thence turning at right angles and running on a bearing of South 11 degrees 45 minutes East for a distance of 120 feet back to the point of beginning.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owner, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted off and outside of the surface limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from William H. Talbot by Act of Exchange passed before Bartholomew P. Sullivan, Jr., Notary Public, on December 13, 1957, recorded in Conveyance Book 230, Folio 308 of the records of Lafourche Parish.
LINCOLN PARISH
(8)      A certain piece or parcel of land situated in the Parish of Lincoln, more particularly described as follows:
4.84 acres situated in Section 21, Township 20 North, Range 3 West, Parish of Lincoln, State of Louisiana, bounded on the North by Louisiana Highway No. 152, on the South by Louisiana Highway No. 151, on the East and West by lands owned by C. C. Barham. A more particular description is as follows: Commencing at the Southeast corner of Section 21, T. 20 N., R 3 W., thence North 88° 34’ West one thousand thirty-two and 30/100 (1032.30’) feet along the section line; thence due North fifty-eight and 71/100 (58.71’) feet to the North right-of-way line of Louisiana Highway No. 151 and THE POINT OF BEGINNING: Running




1.      Thence North 86° 56’ West six hundred fifty (650’) feet along the North right-of-way line of Highway No. 151 to the Southwest corner of the tract herein described.
2.      Thence North 3° 04’ East four hundred eighty-nine (489’) feet to the southerly right-of-way line of Highway No. 152 and the Northwest corner of the tract herein conveyed.
3.      Thence South 60° 04’ East seven hundred twenty-eight and 7/10 (728.7’) feet along said right-of-way line of Highway No. 152 to the Northeast corner of the land herein conveyed. This corner is further established as being five hundred thirty-seven and 4/10 (537.4’) feet measured North 60° 04’ West along the centerline of Highway No. 152 from the intersection of said Highway No. 152 and No. 151.
4.      Thence South 3° 04’ West one hundred fifty-nine and 6/10 (159.6’) feet back to the point of beginning and the Southeast corner of the land herein conveyed.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owner, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property or within 150 surface feet from the outside limits thereof.
Being the same property acquired by the Company from C. C. Barham by Act of Sale under private signature, duly acknowledged, executed on October 30, 1959, recorded in Conveyance Book 72, Folio 529 of the records of Lincoln Parish.
ORLEANS PARISH
(9)      Additions, improvements and replacements to the General Office in the City of New Orleans (Algiers), Orleans Parish, situated on those certain tracts or parcels of land more particularly described in Paragraph Four, Sub-Paragraph (10) of the Mortgage, and on those certain tracts or parcels of land particularly described as follows:
(A)      A certain lot or portion of ground, together with all the buildings and improvements thereon, and all of the rights, ways, privileges, servitudes, appurtenances, advantages, and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Fifth District of the City of New Orleans, in Square No. 9, bounded by Morgan (formerly Villere), Seguin, Delaronde, and Bouny Streets, designated by the letter “B” on a sketch of survey by Adloe Orr, Civil Engineer and Deputy City Surveyor, dated October 3, 1916, annexed to an Act of Sale by Succession of Mrs. M. A. Pujol to John Kinsinger, passed before Robert E. O’Connor, Notary Public, on December 14, 1916; and in accordance with a plan of survey by F. G. Stewart, Civil Engineer and Surveyor, dated July 30, 1957, said lot or portion of ground is designated by the letter “B”, commences at a distance of 32 feet 5 inches 3 lines (31 feet 5 inches 2 lines Title) from the corner of Delaronde and Seguin Streets and measures thence 31 feet 6 inches front on Delaronde Street, by a depth on the side line nearer Bouny Street, running approximately parallel to Seguin Street, of 67 feet 11 inches 6 lines (67 feet 10 inches 5 lines Title), and a first depth on its side line nearer Seguin Street and running approximately parallel thereto of 39 feet 7 inches, thence widening towards Seguin Street and running at an angle for a distance of 3 feet 6 inches, thence having a further depth on the side line nearer Seguin Street and running approximately parallel thereto of 25 feet 11 inches 7 lines, and having a width in the rear of 33 feet 5 inches. The improvements thereon bear the Municipal Nos. 164-166 Delaronde Street.




Being the same property acquired by the Company from George J. Kinsinger by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on November 6, 1957, registered in Conveyance Office Book 618, Folio 147 of the records of Orleans Parish.
(B)      A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Fifth District of the City of New Orleans, in Square No. 9, bounded by Morgan (formerly Villere), Seguin, Delaronde and Bouny Streets, designated by the letter “A” on a sketch of survey by Adloe Orr, Civil Engineer and Deputy City Surveyor, dated October 3, 1916, annexed to an Act of Sale by Succession of Mrs. M. A. Pujol to John Kinsinger, passed before Robert E. O’Connor, Notary Public, on December 14, 1916; and in accordance with a plan of survey by F. G. Stewart, Civil Engineer and Surveyor, dated July 30, 1957, said lot or portion of ground is designated by the letter “A”, forms the corner of Delaronde and Seguin Streets, and measures 28 feet 7 inches 2 lines front on Delaronde Street, by a depth and front on Seguin Street of 67 feet 11 inches 6 lines (67 feet 10 inches 5 lines Title), and a first depth on its sideline nearer Bouny Street, running approximately parallel to Seguin Street, of 39 feet 7 inches, thence widening towards Bouny Street and running obliquely for a distance of 3 feet 6 inches, thence having a further depth on the sideline nearer Bouny Street and here common to and separating said Lot A from Lot B of said square, and running approximately parallel to Seguin Street, of 25 feet 11 inches 7 lines, and having a width in the rear of 30 feet 6 inches 3 lines (30 feet 6 inches 2 lines Title). The Improvements thereon bear the Municipal Nos. 168-170 Delaronde Street.
ANOTHER PORTION OF GROUND, in the same District and Square, immediately adjoining the above-described Lot A, which portion of ground, in accordance with the aforesaid plan of survey by F. G. Stewart, Civil Engineer and Surveyor, dated July 30, 1957, commences at a distance of 28 feet 7 inches 2 lines from the corner of Delaronde and Seguin Street and measures thence 3 feet 10 inches 1 line (2 feet 10 inches Title) front on Delaronde Street (being all of the frontage on Delaronde Street lying between the above-described Lot A of said square and Lot B of said square), by a first depth between equal and parallel lines of 39 feet 7 inches, thence narrowing for a distance of 3 feet 6 inches along oblique lines coming together at a point equidistant from the projections of said sidelines.
Being the same property acquired by the Company from George J. Kinsinger by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on January 15, 1958, registered in Conveyance Office Book 618, Folio 325 of the records of Orleans Parish.
(C)      A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Fifth District of the City of New Orleans, in Square No. 9, bounded by Morgan (formerly Villere), Seguin, Delaronde and Bouny Streets, which said lot (according to its record title description) is a part of the lot designated by the No.7 on a plan of C. A. DeArmas dated March 1, 1865, annexed to an act executed on the 15th day of December, 1866, before E. Bouny, Notary, in this City; and in accordance with a plan of survey by F. G. Stewart, Civil Engineer and Surveyor, dated July 30, 1957, (Municipal No. corrected on Lot 7 on January 5, 1959), said lot or portion of ground is designated by the No. 7, commences at a distance of 67 feet 11 inches 6 lines (67 feet 10 inches 5 lines Title) from the corner of Delaronde and Seguin Streets and measures thence 60 feet 0 inches 0 lines front on Seguin Street, same in width in the rear, by a depth between equal and parallel lines of 63 feet 11 inches 3 lines (all measurements being American measure). The improvements thereon bear the Municipal No. 233 Seguin Street.




Being the same property acquired by the Company from George J. Kinsinger by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on January 13, 1959, registered in Conveyance Office Book 624, Folio 392 of the records of Orleans Parish.
(D)      A certain lot of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes and advantages thereunto belonging or in anywise appertaining, situated in the FIFTH DISTRICT of the City of New Orleans, in the Square No. 9, bounded by Delaronde, Seguin and Morgan Streets, and the line of the levee (formerly Bouny Street), designated by the No. 5 on a sketch and certificate of survey made by C. Uncas Lewis, D.C.S., dated May 22, 1912, and annexed to an act of sale passed before Charles G. Rebentisch, late a Notary Public in this City, on July 25, 1912, according to which sketch, said lot measures thirty-one feet, eleven inches, five lines (31’ 11” 5’”) front on Delaronde Street, beginning at a point sixty-three feet, eleven inches, three lines (63’ 11” 3”’) distant from the corner of Delaronde and Seguin Streets, the same width on the rear line, by a depth of one hundred and twenty-seven feet, ten inches, five lines (127’ 10” 5’”), between parallel lines.
The improvements on said property bear the Municipal Nos. 160 and 162 Delaronde Street.
Being the same property acquired in the name of Nicholas Callan (the nominee of the Company) from Hugh E. Humphrey by Act of Sale passed before Watts K. Leverich, Notary Public, on July 16, 1948, registered in Conveyance Office Book 562, Folio 170 of the records of Orleans Parish, and acquired of record by the Company by filing in the Conveyance Records of Orleans Parish on January 16, 1959 a Counter Letter by Nicholas Callan in favor of Louisiana Power & Light Company by Act under private signature, duly acknowledged, executed on July 16, 1948, registered in Conveyance Office Book 624, Folio 400 of the records of Orleans Parish, and thereafter placed in and made part of an Act of Deposit passed before Bartholomew P. Sullivan, Jr., Notary Public, on January 26, 1959, and by filing in the Conveyance Records of Orleans Parish on January 26, 1959 the aforesaid Act of Deposit passed before Bartholomew P. Sullivan, Jr., Notary Public, on January 26, 1959, registered in Conveyance Office Book 623, Folio 528 of the records of Orleans Parish.
PLAQUEMINES PARISH
(10)      Those certain tracts or parcels of land situated in the Parish of Plaquemines, more particularly described as follows:
(A)      A certain piece or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, servitudes, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of Plaquemines, State of Louisiana, at Bellechasse, in Section 9, Township 14 South, Range 25 East, Southeastern Land District of Louisiana, West of the Mississippi River, which said piece or parcel of land is designated as Parcel 1 of Tract “B” on plan of survey by R. P. Rordam, Civil Engineer, dated February 8, 1959, and in accordance with said plan of survey said piece or parcel of land is located and described as follows. to-wit:
Commencing at the northwesterly corner of the intersection of Oak Avenue and Third Street and running thence along the northerly margin of Third Street, on a bearing of South 25 degrees 05 minutes 30 seconds West for a distance of 1,005.77 feet to the point of intersection of the northerly margin of Third Street with the projection of the easterly margin of Avenue M of Bellechasse Townsite, which point of intersection is the southeasterly corner of the property now or formerly owned by Rose Dutton and James Hicks and the southwesterly corner of the property of the vendor herein, Mahaley Provines Carter, and which said point is marked by an iron pipe and designated by the letter (A) on the aforesaid plan of survey annexed




hereto, and is the POINT OF BEGINNING. Thence, from said POINT OF BEGINNING, running North 64 degrees 54 minutes 30 seconds West, along the easterly property line of the property now or formerly belonging to Rose Dutton and James Hicks and the westerly property line of the vendor herein, for a distance of 658.85 feet to a point on the southerly margin of the right of way of the Missouri Pacific Railroad, which point is marked by an iron pipe and is the northeasterly corner of the property now or formerly owned by Rose Dutton and James Hicks and the northwesterly corner of the property of the vendor herein; thence running along the southerly margin of the right of way of the Missouri Pacific Railroad, on a bearing of North 25 degrees 05 minutes 30 seconds East, for a distance of 320 feet to a point marked by an iron pipe, which point is the northeasterly corner of the property of the vendor herein; thence running on a bearing of South 64 degrees 54 minutes 30 seconds East, along the easterly property line of the vendor herein, for a distance of 458.85 feet to a point marked by an iron pipe; thence running on a bearing of South 25 degrees 05 minutes 30 seconds West for a distance of 270 feet to a point marked by an iron pipe; thence running on a bearing of South 64 degrees 54 minutes 30 seconds East for a distance of 200 feet to a point on the northerly margin of Third Street, which point is marked by an iron pipe; thence running along and fronting on said northerly margin of Third Street, on a bearing of South 25 degrees 05 minutes 30 seconds West, for a distance of 50 feet to the POINT OF BEGINNING; containing 3.600 acres.
Being the same property acquired by the Company from Mahaley Provines Carter by Act of Sale under private signature, duly acknowledged, executed on May 14, 1959, recorded in Conveyance Book 215, Folio 771 of the records of Plaquemines Parish.
(B)      A certain piece or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, servitudes, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of Plaquemines, State of Louisiana, at Bellechasse, in Section 9, Township 14 South, Range 25 East, Southeastern Land District of Louisiana, West of the Mississippi River, which said piece or parcel of land is designated as Parcel 2 of Tract “A” on plan of survey by R. P. Rordam, Civil Engineer, dated February 8, 1959, and in accordance with said plan of survey said piece or parcel of land is located and described as follows, to-wit:
Commencing at the northwesterly corner of the intersection of Oak Avenue and Third Street and running thence along the northerly margin of Third Street, on a bearing of South 25 degrees 05 minutes 30 seconds West for a distance of 1,005.77 feet to the point of intersection of the northerly margin of Third Street with the projection of the easterly margin of Avenue M of Bellechasse Townsite, which point of intersection is the southwesterly corner of the property now or formerly owned by Mahaley Provines Carter and the southeasterly corner of the property of the vendors herein, Rose Dutton and James Hicks, and which said point is marked by an iron pipe and designated by the letter (A) on the aforesaid plan of survey and is the POINT OF BEGINNING. Thence, from said POINT OF BEGINNING, continuing along and fronting on said northerly margin of Third Street, on said bearing of South 25 degrees 05 minutes 30 seconds West, for a distance of 50 feet to a point, marked by an iron pipe; thence running on a bearing of North 64 degrees 54 minutes 30 seconds West for a distance of 658.85 feet to a point on the southerly margin of the right of way of the Missouri Pacific Railroad, which point is marked by an iron pipe; thence running along said southerly margin of the right of way of the Missouri Pacific Railroad, on a bearing of North 25 degrees 05 minutes 30 seconds East, for a distance of 50 feet to a point, marked by an iron pipe, which point is the northwesterly corner of the property now or formerly owned by Mahaley Provines Carter and the northeasterly corner of the property of the vendors herein; thence running along the westerly boundary line of the property now or formerly belonging to Mahaley Provines Carter, which is the easterly boundary line of the property of the vendors herein, on a bearing of South 64 degrees 54 minutes 30 seconds East, for a distance of 658.85 feet to the northerly margin of Third Street and the POINT OF BEGINNING: containing 0.756 acres.




Being the same property acquired by the Company from Rose Dutton and James Hicks by Act of Sale under private signature, duly acknowledged, executed on May 14, 1959, recorded in Conveyance Book 215, Folio 778 of the records of Plaquemines Parish.
PLAQUEMINES PARISH
(11)      That certain 115 KV submarine cable structure at Belle Chasse, Plaquemines Parish, situated on that certain tract or parcel of land particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, advantages, servitudes, riparian rights, batture and batture rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Plaquemines, State of Louisiana, on the right descending bank of the Mississippi River, in Section 9, Township 14 South, Range 25 East, at Belle Chasse and within the Belle Chasse Townsite, which said tract or portion of ground extends from the Mississippi River to the easterly margin of Main Street of the said Belle Chasse Townsite, and consists in part of portions of Squares 64, 65 and 72 of said Belle Chasse Townsite, and, in accordance with plan of survey by John W. Mitchell, Surveyor, dated February 12, 1959, is located, measures, and is described as follows, to-wit:
Commencing at a point on the westerly margin of said Square 72 of Belle Chasse Townsite, which is also the easterly margin of said Main Street, located North 24 degrees 03 minutes 53 seconds East 30 feet (measured along said easterly margin of Main Street) from the intersection of the easterly margin of Main Street with the projection of the northerly margin of Avenue “M”, said point of beginning being designated by the letter “A” on the aforesaid plan of survey by John W. Mitchell, Surveyor, dated February 12, 1959, and running thence, from said easterly margin of Main Street, on a bearing of South 66 degrees 04 minutes 40 seconds East for a distance of 400 feet more or less to the Mississippi River, which point is designated by the letter “B” on said plan of survey; thence following the meandering line of the Mississippi River in a downstream or southerly direction to its intersection with a line running parallel to and located at a distance of 100 feet (measured perpendicularly) from the above-described line running from point “A” to point “B”, which point of intersection is designated by the letter “C” on said plan of survey; thence running on a bearing of North 66 degrees 04 minutes 40 seconds West for a distance of 430 feet more or less to the easterly margin of Main Street, which point is designated by the letter “D” on said plan of survey; thence running along the easterly margin of Main Street on a bearing of North 24 degrees 03 minutes 53 seconds East for a distance of 100 feet to the aforesaid point “A”, which is the point of beginning; containing approximately 0.95 acres of land.
Being the same property acquired by the Company from Edwin W. Hodge, et als, by Act of Sale under private signature, duly acknowledged, executed by the vendors on July 23 and 29 and August 10, 1959, and by the Company on October 15, 1959, recorded in Conveyance Book 219, Folio 692 of the records of Plaquemines Parish.
ST. BERNARD PARISH
(12)      A certain tract or parcel of land situated in the Parish of St. Bernard, more particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Bernard, State of Louisiana, in Section 17, Township 13 South, Range 13 East, Southeastern District of Louisiana, East of the Mississippi




River, which said tract or portion of ground, in accordance with plan of survey by Chalmette Engineers by John M. Krebs, Registered Surveyor, dated May 29, 1957, measures and is more particularly described as follows:
Commencing at the intersection of the projection of the section line between Sections 16 and 17 of the aforesaid township and range (said section line being the easterly section line of said Section 16 and the westerly section line of said Section 17) with the northerly margin of the right of way of the St. Bernard Highway, thence running in an easterly direction along said northerly margin of said highway right of way for a distance of 416 feet to the westerly property line of the property now or formerly belonging to Mrs. Elvira Torres, thence running in a northerly direction along said Torres westerly property line, which said property line runs parallel to the aforesaid section line between said Sections 16 and 17, for a distance of 600 feet to the POINT OF BEGINNING, marked by a one inch iron pipe. Thence, from said POINT OF BEGINNING, continuing in a northerly direction along said westerly Torres property line, running parallel to said section line, for a distance of 476.63 feet to a one inch iron pipe, thence running in a westerly direction, parallel to said northerly margin of the right of way of St. Bernard Highway, for a distance of 365.95 feet to a one inch iron pipe, thence running in a southerly direction along a line parallel to the above-mentioned section line for a distance of 476.63 feet to a one inch iron pipe, thence running in an easterly direction along a line parallel to said northerly margin of said highway right of way for a distance of 365.95 feet to the POINT OF BEGINNING, marked by a one inch iron pipe; containing four (4) acres of land.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas or other minerals, but no surface rights whatever are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company.
Being the same property acquired by the Company from Camille Ducros Botos, et als by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on July 17, 1957, recorded in Conveyance Book 68, Folio 299 of the records of St. Bernard Parish.
ST. CHARLES PARISH
(13)      A certain piece or parcel of land situated in the Parish of St. Charles, more specifically described as follows:
A certain piece or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, servitudes, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Charles, State of Louisiana, on the east or left descending bank of the Mississippi River, at or near Montz, Louisiana, which said piece or portion of ground is located in Section 11, Township 12 South, Range 7 East, Southeastern District of Louisiana, East of the Mississippi River, and in accordance with plan of survey by F. C. Gandolfo, Jr., Surveyor, dated March 31, 1956, revised (as to other property only) on May 28, 1956, said piece or portion of ground is located and described more specifically as follows, to-wit:
Commencing at a point on the northerly margin of the Public River Road located South 66 degrees 48 minutes 38 seconds East 840.52 feet (measured along the northerly margin of said Public River Road) from the section line dividing Sections 9 and 10 of the aforesaid township and range, said section line being the westerly section line of said Section 10 and the easterly section line of said Section 9, and being also the easterly line of Lot 13 of the Plan of J. A. d’Hemecourt dated February 26, 1839, thence fronting on




and running along said northerly margin of said Public River Road on a bearing of South 66 degrees 48 minutes 38 seconds East for a distance of 125 feet to the southwesterly corner of the property now or formerly owned by Wilfred Keller, which point has a position with reference to the Louisiana Geodetic Survey represented by coordinates of X equals 2,275,293.64 and Y equals 487,375.56, thence running along the westerly property line of the said property now or formerly owned by Wilfred Keller on a bearing of North 25 degrees 02 minutes 40 seconds East for a distance of 281.26 feet (285 title) to a point having a position with reference to the Louisiana Geodetic Survey represented by coordinates of X equals 2,275,412.70 and Y equals 487,630.38, thence running North 66 degrees 48 minutes 33 seconds West for a distance of 125 feet, thence running South 25 degrees 02 minutes 40 seconds West for a distance of 281.26 feet (285 feet title) to the northerly margin of the said Public River Road and the point of beginning.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas, sulphur and other minerals, like as well as unlike, together with the right to use the surface of the property for drilling wells, exploring for and other operations incidental to the taking, saving, treating, storing, producing and marketing of said minerals; provided, however, that all derricks, structures, improvements and equipment in connection with the reserved minerals shall be located so as not to unreasonably interfere with buildings, structures, towers, equipment and improvements of the Company then on the land, or the operation thereof, and provided further that before erecting any derricks, structures or improvements on the land the mineral owner shall notify the Company, who shall furnish its plan to the mineral owner showing the proposed locations of its buildings and structures of a permanent nature then contemplated by it, and the mineral owner shall locate his wells, derricks, buildings, structures and equipment so as not to unreasonably interfere with the planned development of said property by the Company.
Being the same property acquired by the Company from Richard Carter, Jr. by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on March 23, 1957, recorded in Conveyance Book 16, Folio 81 of the records of St. Charles Parish.
ST. CHARLES PARISH
(14)      A certain piece or parcel of land situated in the Parish of St. Charles, more specifically described as follows:
A certain tract or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, servitudes, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Charles, State of Louisiana, on the east or left descending bank of the Mississippi River, at or near Montz, Louisiana, in Section 11, Township 12 South, Range 7 East, Southeastern District of Louisiana, East of the Mississippi River; which said tract or parcel of land is described in its record title description as fronting on Jefferson Highway, commencing at the intersection of the lower line of the Keller Tract with the right-of-way of Jefferson Highway, and measuring thence in a northwesterly direction 187.5 feet along Jefferson Highway to the lower line of the property formerly belonging to Ozeme Keller, thence in a northeasterly direction 284 feet along the lower line of the property formerly belonging to Ozeme Keller to the rear end of the Ozeme Keller property, thence North 29 degrees 15 minutes East 1,550 feet to the lower boundary line of the Keller Tract, thence in a southwesterly direction (along said boundary line) 1825 feet to the point of beginning; and said tract or parcel of land adjoins and is immediately easterly of a tract or portion of land now owned by Louisiana Power & Light Company and, in accordance with a plan of survey by F. C. Gandolfo, Jr., Surveyor, dated April 23, 1958 (whereon is also shown and included certain portions of land previously surveyed by said surveyor under date of March 31, 1956, revised May 28, 1956), whereon said tract or parcel of land is designated by the encircled number 10, said tract or parcel




of land thus designated as Parcel 10 is located and described more fully and specifically and accurately as follows, to-wit:
Commencing at a point on the northerly margin of the Public River Road located South 66 degrees 48 minutes 38 seconds East 965.52 feet (measured along the northerly margin of said Public River Road) from the section line dividing Section 9 and 10 of the aforesaid Township 12 South, Range 7 East, said section line being the westerly section line of said Section 10 and the easterly section line of said Section 9, and being also the easterly line of Lot 13 of the Plan of J. A. d’Hemecourt dated February 26, 1839, said point of beginning having a position with reference to the Louisiana Geodetic Survey represented by coordinates of X equals 2,275,293.64 and Y equals 487,375.56; thence, from said point of beginning, fronting on and running along said northerly margin of said Public River Road on a bearing of South 66 degrees 48 minutes 38 seconds East for a distance of 187.5 feet, thence running North 24 degrees 47 minutes 08 seconds East for a distance of 1825.64 feet to a point marked by an old iron pipe and having a position with reference to the Louisiana Geodetic Survey represented by coordinates of X equals 2,276,231.26 and Y equals 488,959.03, thence running South 31 degrees 38 minutes 12 seconds West for a distance of 1560.56 feet to a point marked by an old 4 inch diameter iron pipe and having a position with reference to the Louisiana Geodetic Survey represented by coordinates of X equals 2,275,412.70 and Y equals 487,630.38, thence running South 25 degrees 02 minutes 40 seconds West for a distance of 281.26 feet to the northerly margin of the Public River Road and the point of beginning; containing 4.513 acres of land.
The above described property is subject to a reservation to the Company’s predecessor in title of all oil, gas and other minerals, but the mineral owner has no right to enter upon the surface of said property nor to conduct any drilling, exploring or other operations thereon, except as and subject to the conditions hereinafter set forth: before commencing any drilling the mineral owner shall notify the Company of the proposed drilling location, whereupon the Company will advise the mineral owner either that the location does not interfere with the Company’s planned development and the drilling in such location may proceed, or that the proposed drilling location does so interfere, in which case drilling in such location shall not be permitted but the Company will then designate and make available such other available location as will enable the mineral owner to directionally drill and bottom a well under the originally proposed location.
Being the same property acquired by the Company from Wilfred Keller by Act of Sale under private signature, duly acknowledged, executed on June 4, 1958, recorded in Conveyance Book 20, Folio 215 of the records of St. Charles Parish.
ST. CHARLES PARISH
(15)      A certain piece or parcel of land situated in the Parish of St. Charles, more specifically described as follows:
A certain tract or parcel of land, together with all the buildings, and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Charles, State of Louisiana, on the East or left descending bank of the Mississippi River, at or near Montz, Louisiana, in Section 11, Township 12 South, Range 7 East, Southeastern District of Louisiana, East of the Mississippi River, extending from the Mississippi River, on which it has a frontage of two arpents, between converging lines to the forty arpent line, bounded on its southerly side by the Mississippi River, on its easterly side by property now or formerly owned by Mary B. Keller, et als, on its northerly side by the northerly section line of said Section 11, which is also the forty arpent line, and on its westerly side by property now or formerly owned by Wilfred Keller and by property formerly owned by Godchaux Sugars, Inc., now owned by Louisiana Power & Light Company; and in




accordance with a plan of survey by F. C. Gandolfo, Jr., Surveyor, dated April 23, 1958 (whereon is also shown and included certain portions of land previously surveyed by said surveyor under date of March 31, 1956, revised May 28, 1956), said tract or parcel of land is located and described more fully and specifically as follows, to-wit:
Commencing at a point on the northerly margin of the Public River Road located South 66 degrees 48 minutes 38 seconds East 1,153.02 feet (measured along the northerly margin of said Public River Road) from the section line dividing Sections 9 and 10 of the aforesaid Township 12 South, Range 7 East, said section line being the westerly section line of said Section 10 and the easterly Section Line of said Section 9, and being also the easterly line of Lot 13 of the Plan of J. A. d’Hemecourt, dated February 26, 1839; thence, from said point of beginning, fronting on and running along said northerly margin of said Public River Road on a bearing of South 66 degrees 48 minutes 38 seconds East for a distance of 373.21 feet, thence running North 22 degrees 12 minutes 20 seconds East for a distance of 7,369.20 feet to the northerly section line of said Section 11, which line is also the forty arpent line, thence running along said northerly section line or forty arpent line on a bearing of North 79 degrees 16 minutes 33 seconds West for a distance of 42.64 feet to a point marked by an old 4 inch diameter iron pipe and having a position with reference to the Louisiana Geodetic Survey represented by coordinates of X equals 2,278,552.21 and Y equals 493,985.36, thence running on a bearing of South 24 degrees 47 minutes 08 seconds West for a distance of 7,361.96 feet to the northerly margin of the Public River Road and the point of beginning; together with all of the land, including all of the batture, between the above described frontage of said tract of land on and along the northerly margin of the Public River Road and the bank line of the Mississippi River between the projections of the above described side lines of said tract of land, said side lines being projected and extended along their aforesaid bearings from the northerly margin of the Public River Road to their respective intersections with the bank line of the Mississippi River.
INCLUDED WITHIN THE ABOVE DESCRIBED TRACT OR PARCEL OF LAND are those eight (8) certain lots of ground, bearing the Lots Numbers 1 through 8 respectively, into which a part of the front portion of the above described tract or parcel of land was partitioned of record; said lots being described in their record title description as follows: Lots 1, 2, 3, 4 and 5 adjoin each other and have each a (record title) width on Jefferson Highway of 72 4/5 feet by a depth of 400 feet between lines closing according to original titles and are bounded in the rear by a (record title) twenty foot roadway running across said tract of land, Lot 5 being bounded above by the westerly property line of said tract or parcel of land and below by Lot 4, Lot 4 being bounded above by Lot 5 and below by Lot 3, Lot 3 being bounded above by Lot 4 and below by Lot 2, Lot 2 being bounded above by Lot 3 and below by Lot 1, and Lot 1 being bounded above Lot 2 and below by a (record title) twenty foot road leading from Jefferson Highway to the forty arpent line; Lots 6, 7 and 8 adjoin each other and have each a (record title) width of 72 4/5 feet on a (record title) twenty foot roadway running across said tract of land by a depth of 400 feet between lines closing according to original titles and are bounded in the rear by the remaining property of said tract of land, Lot 6 being bounded below by a (record title) twenty foot roadway running from Jefferson Highway to the forty arpent line and above by Lot 7, Lot 7 being bounded below by Lot 6 and above by Lot 8, and Lot 8 being bounded below by Lot 7 and above by the remaining property of said tract of land. AND, in accordance with a plan of survey by F. C. Gandolfo, Jr., Surveyor, dated April 22, 1958, said 8 lots are located and described more fully, specifically and accurately as follows, to-wit:
Commencing at the same point of beginning on the northerly margin of the Public River Road as the point of beginning hereinabove described and set forth for the tract or parcel of land hereinabove described, which point of beginning is the southwesterly corner of Lot Number 5, Lots Numbers 5, 4, 3, 2 and 1 adjoin each other in that order and measure, running from said point of beginning along the northerly margin of the Public River Road on a bearing of South 66 degrees 48 minutes 38 seconds East, 70.64 feet




each front on the northerly margin of the Public River Road by a width in the rear, running along the southerly margin of a record title twenty foot roadway running across said tract, on a bearing of South 66 degrees 49 minutes 37 seconds East, of 67.04 feet each; Lot Number 5 having a depth of 400 feet on its upper or westerly sideline, which is also the upper or westerly sideline of the tract or parcel of land hereinabove described, running on a bearing of North 24 degrees 47 minutes 08 seconds East, and a depth of 399.94 feet on its lower or easterly sideline, separating it from Lot Number 4, and running on a bearing of North 24 degrees 16 minutes 10 seconds East; Lot Number 4 having a depth of 399.94 feet on its upper or westerly sideline, separating it from Lot Number 5, and running on a bearing of North 24 degrees 16 minutes 10 seconds East, and a depth of 399.90 feet on its lower or easterly sideline, separating it from Lot Number 3, and running on a bearing of North 23 degrees 45 minutes 13 seconds East; Lot Number 3 having a depth of 399.90 feet on its upper or westerly sideline, separating it from Lot Number 4, and running on a bearing of North 23 degrees 45 minutes 13 seconds East, and a depth of 399.90 feet on its lower or easterly sideline, separating it from Lot Number 2, and running on a bearing of North 23 degrees 14 minutes 16 seconds East; Lot Number 2 having a depth of 399.90 feet on its upper or westerly sideline, separating it from Lot Number 3, and running on a bearing of North 23 degrees 14 minutes 16 seconds East, and a depth of 399.94 feet on its lower or easterly sideline, separating it from Lot Number 1, and running on a bearing of North 22 degrees 43 minutes 17 seconds East; Lot Number 1 having a depth of 399.94 feet on its upper or westerly sideline, separating it from Lot Number 2, and running on a bearing of North 22 degrees 43 minutes 17 seconds East, and a depth of 400 feet on its lower or easterly sideline, running along the westerly margin of a record title twenty foot roadway leading from Jefferson Highway (Public River Road) to the forty arpent line, on a bearing of North 22 degrees 12 minutes 20 seconds East. Lots Numbers 8, 7 and 6 adjoin each other in that order; the southwesterly corner of Lot Number 8 being located and reached by running from the aforesaid point of beginning on the northerly margin of the Public River Road for a distance of 420.01 feet along the upper or westerly sideline of the tract or parcel of land hereinabove described, on a bearing of North 24 degrees 47 minutes 08 seconds East, to the northerly margin of the said record title twenty foot roadway running across said tract, thence running along said northerly margin of said record title roadway, on a bearing of South 66 degrees 49 minutes 37 seconds East, for a distance of 122.38 feet to said southwesterly corner of Lot Number 8; and said Lots Numbers 8, 7 and 6 measure, running from said southwesterly corner of Lot Number 8 along said northerly margin of said record title roadway on a bearing of South 66 degrees 49 minutes 37 seconds East, 70.64 feet each front on and along said northerly margin of said record title roadway by a width in the rear of 67.04 feet each running along a line having a bearing of South 66 degrees 50 minutes 07 seconds East; Lot Number 8 having a depth of 400 feet on its upper or westerly sideline, separating it from the remainder of the above described tract or parcel of land, running on a bearing of North 23 degrees 45 minutes 13 seconds East, and a depth of 399.97 feet on its lower or easterly sideline, separating it from Lot Number 7, and running on a bearing of North 23 degrees 14 minutes 15 seconds East; Lot Number 7 having a depth of 399.97 feet on its upper or westerly sideline, separating it from Lot Number 8, and running on a bearing of North 23 degrees 14 minutes 15 seconds East, and a depth of 399.95 feet on its lower or easterly sideline, separating it from Lot Number 6, and running on a bearing of North 22 degrees 43 minutes 17 seconds East; and Lot Number 6 having a depth of 399.95 feet on its upper or westerly sideline, separating it from Lot Number 7, and running on a bearing of North 22 degrees 43 minutes 17 seconds East, and a depth of 400 feet on its lower or easterly sideline, running along the westerly margin of the aforesaid record title twenty foot roadway leading from Jefferson Highway (Public River Road) to the forty arpent line, on a bearing of North 22 degrees 12 minutes 20 seconds East. Said Lots Numbers 1 through 8, both inclusive, each contains 0.632 of an acre.
The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas and other minerals, but the mineral owners have no right to enter upon the surface of said property nor to conduct any drilling, exploring or other operations thereon, except as and subject to the conditions hereinafter set forth: before commencing any drilling or exploring the mineral owners shall notify




the Company of the proposed location thereof, whereupon the Company will advise the mineral owners either that the location does not interfere with the Company’s planned development and the drilling or exploring in such location may proceed, or that the proposed location of the drilling or exploring does so interfere, in which case drilling or exploring in such location shall not be permitted but the Company will then designate and make available such other available location as will enable the mineral owners to directionally drill or explore under the originally proposed location.
Being the same property acquired by the Company from Luke Keller, et als, by Act of Sale under private signature, duly acknowledged, executed by the vendors on July 26, 1958 and by the Company on July 21, 1958, recorded in Conveyance Book 21, Folio 47 of the records of St. Charles Parish.
ST. CHARLES PARISH
(16)      A certain piece or parcel of land situated in the Parish of St. Charles, more specifically described as follows:
A certain tract or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Charles, State of Louisiana, on the East or left descending bank of the Mississippi River, at or near Montz, Louisiana, in Section 11, Township 12 South, Range 7 East, Southeastern District of Louisiana, East of the Mississippi River, extending from the Mississippi River, on which it has a frontage of one arpent, between converging lines to the forty arpent line, bounded on its southerly side by the Mississippi River, on its easterly or downstream side by the properties of Jules Laurent, Jr., et als (now or formerly), on its northerly side by the northerly section line of said Section 11, which is also the forty arpent line, and on its westerly or upstream side by property now or formerly owned by Luke Keller, et als (heirs of Jules Keller, et als); and in accordance with a plan of survey by F. C. Gandolfo, Jr., Surveyor, dated April 23, 1958 (whereon is also shown and included certain portions of land previously surveyed by said surveyor under date of March 31, 1956, revised May 28, 1956), whereon said tract or parcel of land is designated by the encircled number 11, said tract or parcel of land thus designated as Parcel 11 is located and described more fully and specifically as follows, to-wit:
Commencing at a point on the northerly margin of the Public River Road located South 66 degrees 48 minutes 38 seconds East 1,526.23 feet (measured along the northerly margin of said Public River Road) from the section line dividing Sections 9 and 10 of the aforesaid Township 12 South, Range 7 East, said section line being the westerly section line of said Section 10 and the easterly section line of said Section 9, and being also the easterly line of Lot 13 of the Plan of J. A. d’Hemecourt, dated February 26, 1839; thence, from said point of beginning, fronting on and running along said northerly margin of said Public River Road on a bearing of South 66 degrees 48 minutes 38 seconds East for a distance of 186.59 feet, thence running on a bearing of North 20 degrees 55 minutes 09 seconds East for a distance of 7,378.52 feet to the northerly section line of said Section 11, which line is also the forty arpent line, thence running along said northerly section line or forty arpent line on a bearing of North 79 degrees 16 minutes 33 seconds West for a distance of 21.32 feet, thence running on a bearing of South 22 degrees 12 minutes 20 seconds West for a distance of 7,369.20 feet to the northerly margin of the Public River Road and the point of beginning; together with all of the land, including all of the batture, between the above described frontage of said tract of land on and along the northerly margin of the Public River Road and the bank line of the Mississippi River between the projections of the above described side lines of said tract of land, said side lines being projected and extended along their aforesaid bearings from the northerly margin of the Public River Road to their respective intersections with the bank line of the Mississippi River; containing a total gross acreage, including all levee and road and batture, of 21.258 acres.




The above described property is subject to a reservation to the Company’s predecessors in title of all oil, gas and other minerals, but the mineral owners have no right to enter upon the surface of said property nor to conduct any drilling, exploring or other operations thereon, except as and subject to the conditions hereinafter set forth: before commencing any drilling the mineral owners shall notify the Company of the proposed drilling location, whereupon the Company will advise the mineral owners either that the location does not interfere with the Company’s planned development and the drilling in such location may proceed, or that the proposed drilling location does so interfere, in which case drilling in such location shall not be permitted but the Company will then designate and make available such other available location as will enable the mineral owners to directionally drill and bottom a well under the originally proposed location.
Being the same property acquired by the Company from Mrs. Mary Barrios Keller, et als, by Act of Sale under private signature, duly acknowledged, executed on July 28, 1958, recorded in Conveyance Book 21, Folio 51 of the records of St. Charles Parish.
ST. CHARLES PARISH
(17)      A certain piece or parcel of land situated in the Parish of St. Charles, more specifically described as follows:
A certain tract or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, servitudes, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Charles, State of Louisiana, on the east or left descending bank of the Mississippi River, at or near Montz, Louisiana, in Section 11, Township 12 South, Range 7 East, Southeastern District of Louisiana, East of the Mississippi River, extending from the Mississippi River, on which it has a frontage of one arpent, between converging lines to the forty arpent line, bounded on its southerly side by the Mississippi River, on its westerly or upstream side by the property now owned by Louisiana Power & Light Company, formerly owned by Mary B. Keller, et als (heirs of Flavin Keller), on its northerly side by the northerly section line of said Section 11, which is also the forty arpent line, and on its easterly or downstream side by the property of Jean Parquet, Jr. (or Paquet, Jr.) et als (now or formerly); and, in accordance with a plan of survey by F. C. Gandolfo, Jr., Surveyor, dated April 23, 1958 (whereon is also shown and included certain portions of land previously surveyed by said surveyor under date of March 31, 1956, revised May 28, 1956), said tract or parcel of land is located and described more fully and specifically and accurately as follows, to-wit:
Commencing at a point on the northerly margin of the Public River Road located South 66 degrees 48 minutes 38 seconds East 1,712.82 feet (measured along the northerly margin of said Public River Road) from the section line dividing Sections 9 and 10 of the aforesaid Township 12 South, Range 7 East, said section line being the westerly section line of said Section 10 and the easterly section line of said Section 9, and being also the easterly line of Lot 13 of the Plan of J. A. d’Hemecourt dated February 26, 1839; thence, from said point of beginning, fronting on and running along said northerly margin of said Public River Road on a bearing of South 66 degrees 48 minutes 38 seconds East for a distance of 186.58 feet, thence running on a bearing of North 19 degrees 38 minutes 11 seconds East for a distance of 7,391.53 feet to the northerly section line of said Section 11, which line is also the forty arpent line, thence running along said northerly section line or forty arpent line on a bearing of North 79 degrees 16 minutes 33 seconds West for a distance of 21.32 feet, thence running on a bearing of South 20 degrees 55 minutes 09 seconds West for a distance of 7,378.52 feet to the northerly margin of the Public River Road and the point of beginning: together with all of the land, including all of the batture, between the above described frontage of said tract or parcel of land on and along the northerly margin of the Public River Road and the bank line of the Mississippi River between the projections of the above described side lines of said tract or parcel of land, said side lines being




projected and extended along their aforesaid bearings from the northerly margin of the Public River Road to their respective intersections with the bank line of the Mississippi River; containing a total gross acreage, including all levee and road and batture, of 21.064 acres of land.
Being the same property acquired by the Company from Jules Laurent, Jr., et als., by Judgment of the Twenty-Ninth Judicial District Court for the Parish of St. Charles, State of Louisiana, rendered and signed on May 18, 1959 in the expropriation proceedings entitled “Louisiana Power & Light Company vs. Jules Laurent, Jr. et als.”, No. 5896 on the Docket of said Court, recorded in Conveyance Book 24, Folio 163 of the records of St. Charles Parish, and by Act of Receipt by Julius B. Sellers, Clerk of Court of the Twenty-Ninth Judicial District Court in and for the Parish of St. Charles, State of Louisiana, passed before Leontine Hymel, Deputy Clerk of Court and Ex-Officio Notary Public in and for the Parish of St. Charles, State of Louisiana, on May 19, 1959, in the aforesaid proceedings, recorded in Conveyance Book 24, Folio 172 of the records of St. Charles Parish.
ST. TAMMANY PARISH
(18)      A certain tract or parcel of land situated near Madisonville, St. Tammany Parish, more specifically described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Tammany, State of Louisiana, in Section 42, Township 7 South, Range 10 East, Greensburg District, which said tract or portion of ground, in accordance with plan of survey by E. J. Champagne, Surveyor, dated October 1, 1956 is located and described more specifically as follows:
Commencing at the southwesterly corner of Section 42, Township 7 South, Range 10 East, Greensburg District, Louisiana, and running thence along the southerly section line of said Section 42 on a bearing of South 76 degrees 00 minutes East for a distance of 2,979.9 feet; thence turning and running on a bearing of North 15 degrees 45 minutes East for a distance of 716.6 feet to a 1 ½ inch galvanized iron pipe on the northerly margin of the Right of Way of U. S. Highway No. 190 and the POINT OF BEGINNING. Thence, from said POINT OF BEGINNING, continuing on said bearing of North 15 degrees 45 minutes East for a distance of 600 feet to a 1 ½ inch galvanized iron pipe located 2,932.5 feet along the same bearing from the northerly section line of said Section 42; thence turning and running parallel to the northerly margin of the Right of Way of the said U.S. Highway No. 190, on a bearing of South 61 degrees 20 minutes East, for a distance of 750 feet to a 1 ½ inch galvanized iron pipe; thence turning and running on a bearing of South 15 degrees 45 minutes West for a distance of 600 feet to a 1½ inch galvanized iron pipe on the northerly margin of the Right of Way of U.S. Highway No. 190; thence turning and running along and fronting on the northerly margin of said highway Right of Way on a bearing of North 61 degrees 20 minutes West for a distance of 750 feet to the aforesaid POINT OF BEGINNING; containing 10.083 acres of land.
Being the same property acquired by the Company from George Dendinger, Jr., et als., by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on February 13, 1957, recorded in Conveyance Book 249, Folio 572 of the records of St. Tammany Parish.
LESS AND EXCEPTING THEREFROM the following described portion thereof, sold by the Company to Central Louisiana Electric Company, Inc., by Act of Sale under private signature, duly acknowledged, executed by the Company on May 31, 1958 and by Central Louisiana Electric Company, Inc. on July 1, 1958, recorded in Conveyance Book 263, Folio 350 of the records of St. Tammany Parish, to-wit:




A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, situated in the Parish of St. Tammany, State of Louisiana, in Section 42, Township 7 South, Range 10 East, Greensburg District, which said tract or portion of ground, in accordance with plan of survey by E. J. Champagne, Surveyor, dated January 13, 1958, is located and described more specifically as follows:
Commencing at the southwesterly corner of Section 42, Township 7 South, Range 10 East, Greensburg District, Louisiana, and running thence along the southerly section line of said Section 42 on a bearing of South 76 degrees 00 minutes East for a distance of 2,979.9 feet; thence turning and running on a bearing of North 15 degrees 45 minutes East for a distance of 716.6 feet to a galvanized iron pipe on the northerly margin of the Right of Way of U.S. Highway No. 190, which point is also the southwesterly corner of the property of Louisiana Power & Light Company; thence turning and running along the northerly margin of the Right of Way of U.S. Highway No. 190, (which is here also the southerly property line of Louisiana Power & Light Company) on a bearing of South 61 degrees 20 minutes East for a distance of 619.0 feet to a galvanized iron pipe on the northerly margin of said highway Right of Way and the POINT OF BEGINNING. Thence, from said POINT OF BEGINNING, turning and running on a bearing of North 5 degrees 17 minutes West for a distance of 454.5 feet to a galvanized iron pipe; thence turning and running on a bearing of North 28 degrees 40 minutes East for a distance of 208.3 feet to a galvanized iron pipe on the northerly property line of Louisiana Power & Light Company; thence turning and running along said property line on a bearing of South 61 degrees 20 minutes East for a distance of 253.0 feet to a galvanized iron pipe at the northeasterly corner of the property of Louisiana Power & Light Company; thence turning and running along the easterly property line of Louisiana Power & Light Company on a bearing of South 15 degrees 45 minutes West for a distance of 600.0 feet to the northerly margin of the Right of Way of U.S. Highway No. 190, marked by a galvanized iron pipe, which point is the southeasterly corner of the property of Louisiana Power & Light Company; thence turning and running along the northerly margin of said highway Right of Way, which is here also the southerly property line of Louisiana Power & Light Company, on a bearing of North 61 degrees 20 minutes West for a distance of 131.0 feet to a galvanized iron pipe and the POINT OF BEGINNING; containing 3.19 acres of ground.
TANGIPAHOA PARISH
(19)      The Amite District Office Building, together with other buildings providing storage, service, garage and other facilities, situated on that certain tract or parcel of land particularly described as follows:
A certain piece or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, appurtenances, servitudes, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Town of Amite City, Tangipahoa Parish, Louisiana, in Square 15 of said Amite City, bounded on the North by Chestnut Street, on the East by Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue), on the South by Pine Street, and on the West by First Street, consisting of the East 185 feet of Lots 1 and 2 and the East 185 feet of the North 30 feet of Lot 3 of said Square 15, less the East 36 feet of Lot 1 and the East 36 feet of the North 2 feet of Lot 2 of said Square 15, which said piece or parcel of land, in accordance with plan of survey by W.A. Tycer, Civil Engineer, dated May 1, 1959, measures and is described more fully and specifically as follows, to-wit:
Commencing at a point on the westerly margin of Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) located 52 feet from the intersection of said westerly margin of Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) with the southerly margin of Chestnut Street, said point of intersection being the




northeasterly corner of said Square 15, and thence running in a southerly direction along and fronting on said westerly margin of Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) for a distance of 78 feet; thence turning a right angle and running perpendicular to said westerly margin of Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) in a westerly direction (towards First Street) for a distance of 185 feet, thence turning a right angle and running perpendicular to Chestnut Street in a northerly direction for a distance of 130 feet to the southerly margin of Chestnut Street, thence turning a right angle and running along and fronting on the southerly margin of Chestnut Street in an easterly direction for a distance of 149 feet to a point located 36 feet from the westerly margin of Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) and from the aforesaid northeasterly corner of Square 15, thence turning a right angle and running perpendicular to Chestnut Street in a southerly direction (towards Pine Street) for a distance of 52 feet, thence turning a right angle and running perpendicular to Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) for a distance of 36 feet to the westerly margin of Southwest Central Railroad Avenue (commonly known as Railroad Avenue or West Railroad Avenue) and the point of beginning; containing 22,178 square feet.
Being the same property acquired by the Company from Atlantic Company by Act of Sale under private signature, duly acknowledged, executed on July 14, 1959, recorded in Conveyance Book 240, Folic 389 of the records of Tangipahoa Parish.
TERREBONNE PARISH
(20)      A certain piece or parcel of land situated in the City of Houma Parish of Terrebonne, more particularly described as follows:
A certain tract or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Terrebonne, State of Louisiana, within the present city limits of Houma, Louisiana, in Section 105, Township 17 South, Range 17 East, which said tract or portion of ground, in accordance with a plan of survey by Robert R. Wright, Civil Engineer, dated July 22, 1958, revised August 4, 1958, to show calculated tie to section corner, is located, measures and is described more fully and specifically as follows, to-wit:
Commencing at the point of intersection of the center line of Bayou Sale with the boundary line separating the property of William Voss from the Boquet Subdivision, said boundary line being the easterly boundary line of the property of William Voss and the westerly boundary line of said Boquet Subdivision, said point of intersection and beginning being designated by the letter “D” on the aforesaid plan of survey by Robert R. Wright; thence running along the center line of said Bayou Sale on a bearing of North 68 degrees 08 minutes 56 seconds West for a distance of 104.02 feet, thence continuing along the center line of said Bayou Sale on a bearing of North 74 degrees 02 minutes 47 seconds West for a distance of 140.08 feet to a point designated by the letter “A” on said plan of survey; thence running North 08 degrees 06 minute 49 seconds East for a distance of 544.5 feet to a point designated by the letter “B” on said plan of survey marked by a ¾ inch galvanized iron pipe, which said point “B” is located at a calculated distance and bearing of North 20 degrees 11 minutes 19 seconds East 7,142.41 feet from the section corner common to Sections 12, 101 and 105 of said Township 17 South, Range 17 East; thence, from said point “B”, running South 81 degrees 53 minutes 11 seconds East for a distance of 240.0 feet to a point on the said boundary line separating the property of William Voss from the Boquet Subdivision, said boundary line being the easterly boundary line of the property of William Voss and the westerly boundary line of said Boquet Subdivision, said point being designated by the letter “C” on said plan of survey and being marked by a ¾ inch galvanized iron pipe;




thence running along said boundary line on a bearing of South 08 degrees 06 minutes 49 seconds West for a distance of 588.35 feet to the point of intersection of said boundary line with the center line of Bayou Sale, which said point is designated by the letter “D” on said plan of survey, and is the point of beginning; containing 3.104 acres of land.
The above described property, is subject to a reservation to the Company’s predecessors in title of all oil, gas, sulphur and other minerals, like as well as unlike, but no surface rights of any kind are reserved to the mineral owners, whose rights to explore for and develop said minerals are limited to directional drilling or other operations conducted off and without the outside surface limits of said property and conducted only in such a way as to cause no interference with or damage to the operations or property of the Company, provided that the mineral owners shall have the further right to use and/or include said property for mineral pooling or unitization purposes but any drilling, exploring or other operations in connection with said pooling or unitization shall be subject to all of the foregoing provisions.
Being the same property acquired by the Company from William Voss and Lydia Callahan, wife of William Voss, by Act of Sale under private signature, duly acknowledged, executed on November 26, 1958, recorded in Conveyance Book 269, Folio 601 of the records of Terrebonne Parish.
Paragraph Four
The Electric Transmission Lines of the Company, including the towers, poles, wires, cables, switch racks, conductors, transformers, pole type substations, insulators and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the State of Louisiana, to-wit:
(1)      The Chalmette-Port Nickel 115 KV Transmission Line in St. Bernard and Plaquemines Parishes. This single circuit, wood pole, “H” frame 115 KV transmission line starts at the end of the present Chalmette Substation-Ingram Products 115 KV line and extends in a southeasterly direction and then in a southwesterly direction to the Port Nickel 115/13.8 KV Substation, a distance of approximately 15 miles.
(2)      The Gretna-Port Nickel 115 KV Transmission Line beginning at the pull off from the Gretna-Westwego 115 KV Line and extending in a southeasterly direction in Jefferson and Plaquemines Parishes to the Port Nickel 115/13.8 KV Substation. This transmission line consists of 3.94 miles of single circuit steel tower line, 1.38 miles of single circuit, wood pole, wishbone construction line, and .59 miles of 4 conductor 115 KV Submarine Cable described in Paragraph Five, Sub-Paragraph (1) of this Sixth Supplemental Indenture.
(3)      The 115 KV triple circuit steel tower transmission line in Jefferson Parish extending on Gretna Boulevard from Hamilton Street in a southerly direction to a point approximately 150 feet southerly of the Belle Chasse Highway, a distance of a little over one mile.
(4)      The 115/138 KV single circuit, shielded, “H” frame, wood pole transmission line in Ascension Parish extending from the Sorrento 115/66/ 13.8 KV Substation approximately 6.22 miles in a southwesterly direction to the Burnside 138/115/13.8 KV Substation, thence in a southwesterly direction and then in a northwesterly direction approximately 2.98 miles to Bayou Conway.




(5)      The Hammond-Ponchatoula 115 KV Transmission Line in Tangipahoa Parish. This single circuit, wood pole, “H” frame transmission line begins at the Hammond 115/24/13.8 KV Substation and extends in a southeasterly direction approximately 6.07 miles to the site of the proposed Ponchatoula 115/24 KV Substation.
(6)      The Chalmette-Michaud 115 KV Transmission Line from Chalmette Substation to Bayou Bienvenue. This single circuit, shielded, single wood pole transmission line in St. Bernard Parish extends from the Chalmette 115/13.8 KV Substation to Bayou Bienvenue, a distance of 2.1 miles.
(7)      The Westwego-Barataria 115 KV Transmission Line in Jefferson Parish. This single circuit, shielded, “H” frame, wood pole transmission line extends from the Westwego 115/13.8 KV Substation in a southwesterly direction approximately 9.5 miles to the site of the proposed Barataria 115/13.8 KV Substation.
(8)      Additions, improvements and replacements to the 110 KV single circuit, shielded, wood-pole, H-frame transmission line in Assumption, Ascension and Iberville Parishes, extending from the Napoleonville 110 KV Substation near Napoleonville in a Northwesterly direction to a point near the Town of Plaquemine, at Bayou Plaquemine, a distance of approximately 27.80 miles. Also, the property owned by the Company and used or useful in connection with said 110 KV transmission line, consisting of the property more particularly described in Paragraph Five, Sub-Paragraph (8) of the Third Supplemental Indenture and the following described property:
Lots 67, 68, 69 and 70 in Block “A”. Also Lots 61, 62 and 63 in Block “B” of Adams Terrace Subdivision, being located in Sections 18 and 85, T. 10 S. R. 13 E., Iberville Parish, Louisiana, Town of White Castle.
Being the same property acquired in the name of Nicholas Callan (the nominee of the Company) from Edward B. Adams, et als by Act of Sale under private signature, duly acknowledged, executed on February 21, 1952, recorded in Conveyance Book 106, Entry 96 of the records of Iberville Parish, and acquired of record by the Company by filing in the Conveyance Records of Iberville Parish on June 25, 1959 a Counter Letter by Nicholas Callan in favor of the Company by Act under private signature, duly acknowledged, executed on February 25, 1952, recorded in Conveyance Book 148, Entry 383 of the records of Iberville Parish.
(9)      The Golden Meadow-Leeville 115 KV Transmission Line in Lafourche Parish. This single circuit, shielded, “H” frame, wood pole transmission line extends from the Golden Meadow 34.5/13.8 KV Sub-station to the Leeville 115/34.5 KV Substation, a distance of 13.03 miles.
(10)      The Sarepta-Haynesville 115 KV Transmission Line in Webster and Claiborne Parishes. This single circuit, wood pole, “H” frame transmission line starts at the Sarepta 115/13.8 KV Substation and runs in an easterly direction to the site of the proposed Haynesville 115/13.8 KV Substation in Clairborne Parish, a distance of 19.93 miles.
(11)      The Oak Grove-Arkansas State 115 KV Transmission Line in West Carroll Parish. This single circuit, shielded, “H” frame, wood pole transmission line extends from the Oak Grove 115/13.8 KV Substation in a northeasterly direction to the Louisiana-Arkansas State Line, a distance of approximately 12.23 miles.
(12)      The Houma-Bayou Boeuf 138 KV Transmission Line in Terrebonne and Assumption Parishes. This single circuit, shielded, “H” frame, wood pole 138 KV line extends from the Houma Substation to Bayou Boeuf, a distance of 28.38 miles.




(13)      The Red Gum-St. Joseph 115 KV Transmission Line in Concordia and Tensas Parishes. This single circuit, shielded, “H” frame, wood pole transmission line extends from the Red Gum 115/34.5 KV Substation in a northeasterly direction 6.42 miles towards St. Joseph.
(14)      The Swartz-Rilla 115 KV Transmission Line in Ouachita Parish. This single circuit, wood pole, “H” frame transmission line begins at the Swartz 115/13.8 KV Substation and extends in a southerly direction 15.5 miles to the site of the proposed Rilla 115/13.8 KV Substation.
(15)      The LaBarre-Lakeshore 115 KV Transmission Line in Jefferson Parish. This single circuit, wood pole, wishbone type 115 KV transmission line starts at the LaBarre 115/13.8 KV Substation and runs in a westerly direction along the Airline Highway to Arnoult Road, a distance of .59 miles thence northerly along Arnoult Road, a distance of 2.70 miles to the Lakeshore 115/13.8 KV Substation.
Paragraph Five
The Electric Submarine Cables of the Company, including the wires, cables, switch racks, conductors, conduits, transformers, substations, insulators and all appliances, devices and equipment used or useful in connection with said submarine cables, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, including all of the Company’s right, title and interest in and to the following situated in the State of Louisiana:
(1)      That certain 4 conductor 115 KV Submarine Cable, constituting a portion of the Gretna-Port Nickel 115 KV Transmission Line described in Paragraph Four, Sub-Paragraph (2) of this Sixth Supplemental Indenture, laid under and across the Mississippi River from a point approximately one-half mile upstream from Belle Chasse on the west bank of said River to a point at Port Nickel on the east bank of said River, in Plaquemines Parish.
(2)      Additions, improvements and replacements and renewals to the Electric Submarine Cables described in the Mortgage, the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, and the Fifth Supplemental Indenture.
And also all extensions, replacements, branches, taps, developments and improvements of said submarine cables, or any of them, and all other submarine cables owned by the Company wherever situated, whether now owned or hereafter acquired and/or constructed hereafter, as well as all of the Company’s rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, subject, however, to the provisions of Section 87 of the Mortgage.
Paragraph Six
The Electric Distribution Lines and Systems of the Company, including towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, accessories, devices and equipment and all of the Company’s other property, real, personal or mixed forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all the Company’s rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under, or upon any public streets or highways, public or private lands, including all additions, improvements or replacements to all of the distribution systems located in the towns and parishes set forth




in the Mortgage, the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, and the Fifth Supplemental Indenture and including the additional distribution systems situated in the State of Louisiana and located at, in, near, or in the vicinity of the cities, towns and communities and parishes set forth below:
Name
Parish
Cat Island
Caldwell
Cross-Road
Caldwell
Florrissant
St. Bernard
Hendrix
Caldwell
Joy-Hill
Caldwell
Pleasant Ridge
LaSalle
Ward 5 School
Caldwell
And also all branches, extensions, improvements and developments of or appertaining to or connected with said distribution lines, systems or any of them, and all other distributing systems of the Company and parts thereof, wherever situated, whether connected or not connected with any of the foregoing systems or whether now owned or hereafter acquired, as well as all of the Company’s rights-of-way, easements, privileges, prescriptions, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof or any part thereof, through, over, under or upon any public streets or highways or public or private lands, whether now owned or hereafter acquired, subject, however, to the provisions of Section 87 of the Mortgage.
Paragraph Seven
The certain franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric systems in, on and under streets, alleys, highways, roads, public grounds and rights-of-way and all rights incident thereto which were granted by the governing bodies of the respective municipalities and parishes in the State of Louisiana including, in addition to those described in the Mortgage, the First Supplemental Indenture, the Second Supplemental Indenture, the Third Supplemental Indenture, the Fourth Supplemental Indenture, and the Fifth Supplemental Indenture, those which are shown together with the expiration dates thereof in the following schedule:




MUNICIPAL ELECTRIC FRANCHISES
Municipality
Parish
Expiration
 
 
 
Amite City
Tangipahoa
September 1, 1984
Arcadia
Bienville
November 4, 1983
Dixie Inn
Webster
April 2, 1982
Dubberly
Webster
December 17, 1984
Golden Meadow
Lafourche
March 2, 1984
Gramercy
St. James
March 4, 1984
Harahan
Jefferson
September 14, 1984
Hodge
Jackson
April 7, 1984
Homer
Terrebonne
March 12, 1982
Independence
Tangipahoa
May 6, 1983
Kenner
Jefferson
March 9, 1984
Lisbon
Claiborne
March 5, 1984
Montpelier
St. Helena
March 22, 1983
Ponchatoula
Tangipahoa
October 21, 1983
Sorrento
Ascension
December 4, 1981
Springfield
Livingston
October 8, 1984
Tangipahoa
Tangipahoa
October 13, 1984
Tickfaw
Tangipahoa
May 21, 1982
PARISH ELECTRIC FRANCHISES AND PERMITS
Iberville
January 10, 2007
Morehouse
July 7, 2009
Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric systems in, on or under streets, alleys, highways, roads, public grounds and rights-of-way, and all rights incident thereto, subject, however, to the provisions of Section 87 of the Mortgage.
All other property, real, personal and mixed, acquired by the Company after the date of the execution and delivery of the Mortgage, in addition to property covered by the First, Second, Third, Fourth and Fifth Supplemental Indentures (except any herein or in the Mortgage or in said First, Second, Third, Fourth and Fifth Supplemental Indentures expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Sixth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment




thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents, or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted), all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
Together with all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in any wise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
It is hereby agreed by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights, and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), shall be and are as fully granted and conveyed hereby and as fully embraced within the lien hereof and the lien of the Mortgage, as if such property, rights and franchises were now owned by the Company and were specifically described herein and conveyed hereby.
Provided that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Sixth Supplemental Indenture and from the lien and operation of the Mortgage, viz.: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; and (7) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
To HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed




by the Company as aforesaid, or intended so to be, unto Milton J. Redlich (successor to Carl E. Buckley) and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (successor by merger to The Chase National Bank of the City of New York), the Corporate Trustee, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as supplemented, this Sixth Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if the said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees, by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Mortgage, as follows:

ARTICLE I

Seventh Series of Bonds.

Section 1. There shall be a series of bonds designated “5% Series due 1990” (herein sometimes referred to as the “Seventh Series”), each of which shall also bear the descriptive title First Mortgage Bond, and the form thereof and of any appurtenant coupons, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Seventh Series shall mature on April 1, 1990, and shall be issued as coupon bonds in the denomination of One Thousand Dollars, registrable as to principal, and as fully registered bonds in denominations of One Thousand Dollars and Ten Thousand Dollars and, at the option of the Company, as to either coupon bonds or fully registered bonds, in any multiple or multiples of One Thousand Dollars (the exercise of such option to be evidenced by the execution and delivery thereof); they shall bear interest at the rate of five per centum (5%) per annum, payable semi-annually on October 1 and April 1 of each year; the principal of and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts. Coupon bonds of the Seventh Series shall be dated as of April 1, 1960, and fully registered bonds of the Seventh Series shall be dated as in Section 10 of the Mortgage provided.

(I) Bonds of the Seventh Series shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, upon notice published as provided in Section 52 of the Mortgage, once on at least four different days before the date fixed for redemption, unless notice by publication shall not be required as provided in Section 52 of the Mortgage, in which event notice shall be given by mailing, the first publication, or notice by mailing, as the case may be, to be at least thirty (30) days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:




GENERAL REDEMPTION PRICES
If redeemed during 12 months period ending March 31,
1961
106.09%
1971
103.99%
1981
101.89%
1962
105.88%
1972
103.78%
1982
101.68%
1963
105.67%
1973
103.57%
1983
101.47%
1964
105.46%
1974
103.36%
1984
101.26%
1965
105.25%
1975
103.15%
1985
101.05%
1966
105.04%
1976
102.94%
1986
100.84%
1967
104.83%
1977
102.73%
1987
100.63%
1968
104.62%
1978
102.52%
1988
100.42%
1969
104.41%
1979
102.31%
1989
100.21%
1970
104.20%
1980
102.10%
1990
100.00%
in each case, together with accrued interest to the date fixed for redemption.
(II) Bonds of the Seventh Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 2 hereof or with the Proceeds of Released Property; provided, however, that in the case of application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 2 hereof, if the date fixed for such redemption shall be prior to January 1 of the calendar year in which such deposit of cash shall become due under the provisions of Section 2 hereof, they shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption; and provided further, that

(1) in the case of application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 2 hereof, if the date fixed for such redemption shall be on or after January 1 of the calendar year in which such deposit of cash shall become due under the provisions of Section 2 hereof, or

(2) in the case of redemption by the application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or with the Proceeds of Released Property,

they shall be redeemable at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 months period ending March 31,




1961
101.09%
1971
100.89%
1981
100.55%
1962
101.08%
1972
100.86%
1982
100.51%
1963
101.06%
1973
100.83%
1983
100.46%
1964
101.04%
1974
100.80%
1984
100.41%
1965
101.02%
1975
100.77%
1985
100.36%
1966
101.00%
1976
100.74%
1986
100.31%
1967
100.98%
1977
100.71%
1987
100.26%
1968
100.96%
1978
100.67%
1988
100.20%
1969
100.94%
1979
100.63%
1989
100.14%
1970
100.91%
1980
100.59%
1990
100.00%
in each case, together with accrued interest to the date fixed for redemption.
(III) At the option of the holder, any coupon bonds of the Seventh Series, upon surrender thereof with all unmatured coupons appertaining thereto at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall (subject to the provisions of Section 12 of the Mortgage) be exchangeable for a like aggregate principal amount of fully registered bonds of the same series of authorized denominations; all such coupon bonds to be exchanged as aforesaid shall be in bearer form or, if registered, accompanied by a written instrument of transfer whenever required by the Company duly executed by the registered owner or by his duly authorized attorney. At the option of the registered owner, any fully registered bonds of the Seventh Series, upon surrender thereof, for cancellation, at said office or agency of the Company, together with a written instrument of transfer whenever required by the Company duly executed by the registered owner or by his duly authorized attorney, shall (subject to the provisions of Section 12 of the Mortgage) be exchangeable for a like aggregate principal amount of coupon bonds of the same series, with all unmatured coupons attached, or for a like aggregate principal amount of fully registered bonds of the same series of other authorized denominations.

The holder of any coupon bond of the Seventh Series may have the ownership thereof registered as to principal at the office or agency of the Company in the Borough of Manhattan, The City of New York, and such registration noted on such bond. After such registration no transfer of such bond shall be valid unless made at said office or agency by the registered owner in person or by his duly authorized attorney and similarly noted on such bond; but (subject to the provisions of Section 12 of the Mortgage) the same may be discharged from registration by being in like manner transferred to bearer and thereupon transferability by delivery shall be restored; but such bond may again from time to time be registered or transferred to bearer in accordance with the above procedure. Such registration, however, shall not affect the negotiability of the coupons appertaining to such bond, but every such coupon shall continue to be transferable by delivery merely and shall remain payable to bearer. Fully registered bonds of the Seventh Series shall also be transferable (subject to the provisions of Section 12 of the Mortgage) at said office or agency of the Company.


ARTICLE II

Sinking or Improvement Fund for Bonds of the Seventh Series.

Section 2. The Company covenants that, so long as any of the bonds of the Seventh Series shall remain Outstanding, it will, on or before March 1, 1962, and on or before March 1 of each year thereafter, to and including the year 1990, deliver to the Corporate Trustee:





(A)      An Officers’ Certificate which shall state:
(a)      the greatest principal amount of all bonds of the Seventh Series prior to January 1 of such year at any one time Outstanding;
(b)      the aggregate principal amount of all bonds of the Seventh Series retired prior to the date of such Officers’ Certificate (i) pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property; or (ii) pursuant to the provisions of Section 64 of the Mortgage;
(c)      the aggregate principal amount of bonds the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Seventh Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;
(d)      the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;
(e)      the amount which is one per centum (1%) of the amount stated pursuant to clause (d) above; and
(f)      an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Seventh Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise provided) if the Company elects to make its right to the authentication and delivery of such bond(s)-or fraction of a bond the basis of a credit under this Section.
(B)      An amount in cash and/or principal amount of bonds of the Seventh Series equivalent to the amount stated in the Officers’ Certificate (due on or before March 1 of such year) provided for by this Section pursuant to the requirements of clause (e) of subdivision (A) of this Section; provided, however, that, against the amount of cash or bonds payable or deliverable pursuant to this subdivision (B), there shall be credited the principal amount of the bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.
For the purpose of subdivision (A) of this Section the term “Outstanding” shall not include bonds of the Seventh Series pledged to secure indebtedness of the Company and not at any time otherwise issued by the Company.
Such cash together with any bonds delivered to the Corporate Trustee under the provisions of this Section shall be dealt with as provided for by this Section.
Notwithstanding any other provisions of this Sixth Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on March 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the Seventh Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on March 1 of the then current year or of a subsequent year, may be from time to time withdrawn, used or applied in




the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivisions (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Seventh Series shall be made the basis of the withdrawal of cash deposited under this Section and, provided further that no bonds of any series other than the Seventh Series shall be purchased, paid or redeemed, as above provided, with cash deposited under the provisions of this Section and that no bonds of the Seventh Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date forty (40) days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost).
In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions of the Mortgage relating to such authentication and delivery; except that the Company shall not be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 28 of the Mortgage.
So long as any bonds of the Seventh Series shall remain Outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under the Mortgage.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Seventh Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I)      any cash deposited under the provisions of this Section or Section 40 of the Mortgage or Section 2 of the First, Second, Third, Fourth or Fifth Supplemental Indenture shall be deemed to be Funded Cash;
(II)      any bonds of the Seventh Series delivered to the Corporate Trustee pursuant to the provisions of this Section or any bonds of the Second, Third, Fourth, Fifth or Sixth Series delivered to the Corporate Trustee pursuant to the provisions of Section 2 of the First, Second, Third, Fourth or Fifth Supplemental Indenture or any bonds of the First Series delivered to the Corporate Trustee or credited pursuant to the provisions of Section 40 of the Mortgage shall, after such delivery or crediting, be deemed to have been retired by the use of Funded Cash; and
(III)      with respect to all credits taken under this Section or Section 2 of the First, Second, Third, Fourth or Fifth Supplemental Indenture on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that (in lieu of such credits being so taken) an amount of cash equal to each such credit was deposited pursuant to the provisions of this Section or of said Section 2 of the First, Second, Third, Fourth or Fifth Supplemental Indenture, as the case may be, and concurrently with such deposit was withdrawn on the same basis as that on which such credit was taken.




Any bonds issued under the Mortgage, delivered to, deposited with or purchased or redeemed by, the Corporate Trustee pursuant to the provisions of this Section, shall forthwith be canceled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA) the aggregate cost for principal, interest, brokerage and premium, if any, on all bonds theretofore, or then to be, purchased and/or redeemed pursuant to the provisions of this Section;
after deducting therefrom
(BB) the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.

ARTICLE III

Dividend Covenant.

Section 3. The Company covenants that, so long as any of the bonds of the Seventh Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to March 31, 1960 exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from earned surplus to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to March 31, 1960 to earned surplus, (b) $6,550,000, and (c) such additional amount as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.

For the purpose of this Section 3 the aggregate amount credited subsequent to March 31, 1960 to earned surplus shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to earned surplus applicable to the period prior to April 1, 1960, including, but not limited to, charges to earned surplus for write-offs or write-downs of book values of assets owned by the Company on March 31, 1960. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to March 31, 1960, amounts equal to the sum of (1) amounts, not otherwise deducted, which would be required to be included in operating expenses in each Net Earning Certificate by the provisions of Section 6 of this Sixth Supplemental Indenture and (2) the Company’s provisions during such period for depreciation and retirement of property (but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this Section 3, shall not be less than the aggregate




amounts required to be stated for the period from April 1, 1960 to the date of such dividend, distribution, purchase or acquisition in the Officers’ Certificate of Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 of the Mortgage, including proportionate amounts calculated as provided in subdivision (1) thereof for any portion of the period elapsed since March 31, 1960 not theretofore included in any Officers’ Certificate of Replacements.
For the purpose of this Section 3, the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the depreciation reserve account through charges to operating revenue deductions, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Power Commission.

ARTICLE IV

Limitation on Acquisition of Property Subject to Prior Lien and on Issuance of Prior Lien Bonds.

Section 4. The covenants in Sections 4 and 5 of the Third Supplemental Indenture shall remain in effect so long as any bonds of the Seventh Series are Outstanding to the same extent as if the covenants in said Sections 4 and 5 were repeated in this Sixth Supplemental Indenture with the words “Seventh Series” substituted in place of the words “Fourth Series” each time such words appear in Sections 4 and 5 of the Third Supplemental Indenture.


ARTICLE V

Miscellaneous Provisions.

Section 5. Subject to the amendments provided for in this Sixth Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Sixth Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.

Section 6. So long as any bonds of the Fifth, Sixth or Seventh Series shall remain Outstanding, in each Net Earning Certificate made pursuant to Section 7 of the Mortgage, there shall be included in operating expenses for the twelve (12) months period with respect to which such certificate is made, an amount, if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period.

Section 7. So long as any bonds of the Seventh Series are Outstanding, subdivision (2) of Section 7 of the Mortgage is hereby amended by adding thereto the following words “provided, further, that the amount so included in such operating expenses in lieu of the amounts actually appropriated out of income for retirement of the Mortgaged and Pledged Property used primarily and principally in the electric, gas, steam and/or hot water utility business and the Company’s automotive equipment used in the operation of such property shall not be less than the amounts so actually appropriated out of income.”

Section 14 of the Mortgage, as heretofore amended, is hereby further amended to read as follows:
“Section 14. All bonds authenticated and delivered hereunder shall from time to time, be executed on behalf of the Company by the Chairman of the Board & Chief Executive Officer, except on bonds of the First, Second, Third, Fourth, Fifth and Sixth Series, or its President or one of its Vice-Presidents, whose signature, except on bonds of the First, Second and Third Series, may be facsimile, and its corporate




seal shall be thereon impressed or imprinted and attested by its Secretary or one of its Assistant Secretaries, whose signature, except on bonds of the First, Second, Third, Fourth, Fifth and Sixth Series, may be facsimile. The coupons to be attached to coupon bonds shall bear the facsimile signature of the present or any future Treasurer of the Company. In case any of the officers who shall have signed any bonds or attested the seal thereon, or whose facsimile signature appears on any bond or coupon, shall cease to be such officers of the Company before the bonds so signed and/or sealed shall have been actually authenticated and delivered by the Corporate Trustee or issued by the Company, such bonds nevertheless may be authenticated, delivered and/or issued with the same force and effect as though the person or persons who signed such bonds and/or attested the seal thereon and/or whose facsimile signature appears on any bond or coupon had not ceased to be such officer or officers of the Company. Before authenticating any coupon bonds, the Corporate Trustee shall cut off and cancel all matured coupons thereto attached (except as otherwise provided or permitted in Sections 12 and 16 hereof).”
Section 8. The Company reserves the right, subject to appropriate corporate action but without any consent or other action by holders of bonds of the Seventh Series or of any subsequently created series, to make such amendments to the Mortgage, as supplemented, as shall be necessary in order to amend Section 20 and Section 126 thereof to change the figure “Two Hundred Fifty Million Dollars ($250,000,000)” appearing in said sections to “One Billion Dollars ($1,000,000,000)”.

Section 9. So long as any bonds of the Second, Third, Fourth, Fifth Sixth or Seventh Series shall remain Outstanding, clause (5) of subsection (I) of Section 39 of the Mortgage shall be amended by deleting the word “expenditures” from the first line of such clause (5) and inserting in lieu thereof the words “net cash expenditures (after reflecting salvage) made”.

Section 10. Section 55 of the Mortgage, as heretofore amended, is hereby further amended to insert the words “and subject to the provisions of Section 2 of the Sixth Supplemental Indenture dated as of April 1, 1960”, after the date “January 1, 1957”.

Section 11. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore amended, set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Sixth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Sixth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Sixth Supplemental Indenture.
Section 12. Whenever in this Sixth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Sixth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.





Section 13. Nothing in this Sixth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Sixth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Sixth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and coupons Outstanding under the Mortgage.

Section 14. It is the intention and it is hereby agreed that so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana the general language of conveyance contained in this Sixth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that so far as the said Louisiana property is concerned, this Sixth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 15. This Sixth Supplemental Indenture shall be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.







IN WITNESS WHEREOF LOUISIANA POWER & LIGHT COMPANY, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice-Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and The Chase Manhattan Bank, one of the parties hereto of the second part, in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice-Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and Milton J. Redlich, one of the parties hereto of the second part, for all like purposes has hereunto set his hand and affixed his seal, all in The City of New York, as of the 1st day of April, 1960.
 
Louisiana Power & Light Company,
 
By:
/s/ Anson E. Elliott
 
(Anson E. Elliott)
 
Vice-President.
 
 
 
 
Attest:
 
 
 
/s/ Laurence E. Didier
 
 
(Laurence E. Didier)
 
 
Secretary.
 
 
 
Executed, sealed and delivered by Louisiana
Power & Light Company in the presence of:
 
 
 
 
 
/s/ John M. Stuart
 
 
(John M. Stuart)

/s/ Lucille M. Gannon
 
 
(Lucille M. Gannon)
 





 
 
 
The Chase Manhattan Bank,
                            As Trustee,
 
 
 
By:
/s/ J. Bryson Aird
 
(J. Bryson Aird)
 
Vice-President.
 
 
 
 
Attest:
 
 
 
/s/ John J. O’Connell
 
 
(John J. O’Connell)
 
 
Assistant Secretary.
 
 
 
Executed, sealed and delivered by The Chase Manhattan Bank in the presence of:
 
 
 
 
 
/s/ Charles B. Knower
 
 
(Charles B. Knower)

/s/ Wilmer T. Langstroth
 
 
(Wilmer T. Langstroth)
 
 
 
 
 
Executed, sealed and delivered by Milton J. Redlich in the presence of:
 
 
/s/ Milton J. Redlich
[L.S.]
 
Milton J. Redlich
                     As Trustee.
/s/ Charles B. Knower
 
 
(Charles B. Knower)

/s/ Wilmer T. Langstroth
 
 
(Wilmer T. Langstroth)








STATE OF NEW YORK,
 
ss.:
COUNTY OF NEW YORK

On this 31st day of March, 1960, before me appeared ANSON E. ELLIOTT, to me personally known, who, being by me duly sworn, did say that he is a Vice-President of LOUISIANA POWER & LIGHT COMPANY, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said ANSON E. ELLIOTT acknowledged said instrument to be the free act and deed of said corporation.
On the 31st day of March, in the year 1960, before me personally came ANSON E. ELLIOTT, to me known, who, being by me duly sworn, did depose and say that he resides at No. 100 Woodland Place, in New Orleans, State of Louisiana; that he is a Vice-President of LOUISIANA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.

/s/ Irene Fay                         
Irene Fay
Notary Public, State of New York
No. 31-1174825
Qualified in New York County
Commission Expires March 30, 1961







STATE OF NEW YORK,
 
ss.:
COUNTY OF NEW YORK

On this 31st day of March, 1960, before me appeared J. BRYSON AIRD, to me personally known, who, being by me duly sworn, did say that he is a Vice-President of THE CHASE MANHATTAN BANK, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said J. BRYSON AIRD acknowledged said instrument to be the free act and deed of said corporation.
On the 31st day of March, in the year 1960, before me personally came J. BRYSON AIRD, to me known, who, being by me duly sworn, did depose and say that he resides at 177 East 77th Street, New York, New York; that he is a Vice-President of THE CHASE MANHATTAN BANK, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.

/s/ Ferdinand F. Werner                 
Ferdinand F. Werner
Notary Public, State of New York
No. 43-4225675
Qualified in Richmond County
Cert. filed with New York Co. Clerk
Commission Expires March 30, 1961








STATE OF NEW YORK,
 
ss.:
COUNTY OF NEW YORK

On this 31st day of March, 1960, before me personally appeared MILTON J. REDLICH, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 31st day of March, 1960, before me personally came MILTON J. REDLICH, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.

/s/ Ferdinand F. Werner                 
Ferdinand F. Werner
Notary Public, State of New York
No. 43-4225675
Qualified in Richmond County
Cert. filed with New York Co. Clerk
Commission Expires March 30, 1961







[CONFORMED COPY]

Exhibit 4(d)1

LOUISIANA POWER & LIGHT COMPANY
TO
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(successor to The Chase National Bank of the City of New York)
AND
CHARLES F. RUGE
(successor to Carl E. Buckley),
As Trustees under Louisiana Power &
Light Company’s Mortgage and Deed of Trust, Dated as of April 1, 1944

________________


THIRTEENTH SUPPLEMENTAL INDENTURE

_________________



Dated as of December 1, 1969






THIRTEENTH SUPPLEMENTAL INDENTURE
INDENTURE , dated as of the 1st day of December, 1969, made and entered into by and between LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Florida, whose post office address is 142 Delaronde Street, New Orleans, Louisiana 70114 (hereinafter sometimes called the Company), party of the first part, and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association existing under the laws of the United States of America (successor to The Chase National Bank of the City of New York), whose post office address is 1 Chase Manhattan Plaza, New York, New York 10015 (hereinafter sometimes called the Corporate Trustee), and CHARLES F. RUGE (successor to Carl E. Buckley), whose post office address is 80 Michael Street, Iselin, New Jersey 08830 (hereinafter sometimes called the Co-Trustee), as Trustees, parties of the second part (the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the Trustees), as Trustees under the Mortgage and Deed of Trust, dated as of April 1, 1944 (hereinafter called the Mortgage), which Mortgage was executed and delivered by Louisiana Power & Light Company to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which said Mortgage is hereby made, this Indenture (hereinafter called Thirteenth Supplemental Indenture) being supplemental thereto;
WHEREAS, said Mortgage was recorded in various Parishes in the State of Louisiana; and
WHEREAS, by the Mortgage, the Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof and the Company executed and delivered to the Trustees a First Supplemental Indenture, dated as of March 1, 1948 (hereinafter called the First Supplemental Indenture), a Second Supplemental Indenture, dated as of November 1, 1950 (hereinafter called the Second Supplemental Indenture), a Third Supplemental Indenture, dated as of September 1, 1953 (hereinafter called the Third Supplemental Indenture), a Fourth Supplemental Indenture, dated as of October 1, 1954 (hereinafter called the Fourth Supplemental Indenture), a Fifth Supplemental Indenture, dated as of January 1, 1957 (hereinafter called the Fifth Supplemental Indenture), a Sixth Supplemental Indenture, dated as of April 1, 1960 (hereinafter called the Sixth Supplemental Indenture), a Seventh Supplemental Indenture, dated as of June 1, 1964 (hereinafter called the Seventh Supplemental Indenture), an Eighth Supplemental Indenture, dated as of March 1, 1966 (hereinafter called the Eighth Supplemental Indenture), a Ninth Supplemental Indenture, dated as of February 1, 1967 (hereinafter called the Ninth Supplemental Indenture), a Tenth Supplemental Indenture, dated as of September 1, 1967 (hereinafter called the Tenth Supplemental Indenture), and an Eleventh Supplemental Indenture, dated as of March 1, 1968 (hereinafter called the Eleventh Supplemental Indenture), which were recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Company executed and delivered to the Trustees a Twelfth Supplemental Indenture, dated as of June 1, 1969 (hereinafter called the Twelfth Supplemental Indenture), which was recorded in Parishes in the State of Louisiana, as follows:




Parish
Date Filed
Entry or
File Number
Mortgage
Book
Folio
Ascension
June 25, 1969
100693
179
187
Assumption
June 25, 1969
90282
93
5
Avoyelles
June 25, 1969
231731
*28
650
Bienville
June 25, 1969
T-8300
115
562
Bossier
June 25, 1969
218038
239
853
Caldwell
June 25, 1969
122265
65
138
Catahoula
June 25, 1969
123777
71
797
Claiborne
June 25, 1969
250688
96
879
Concordia
June 25, 1969
107437
23
202
East Carroll
June 25, 1969
34086
95
797
East Feliciana
June 25, 1969
59094
49
320
Franklin
June 25, 1969
181995
88
589
Grant
June 26, 1969
26696
81
349
Iberville
June 25, 1969
368
107
302
Jackson
June 25, 1969
198079
*FF
106
Jefferson
June 25, 1969
462506
**6
37
Lafourche
June 25, 1969
309754
172
128
LaSalle
June 25, 1969
83075
71
624
Lincoln
June 26, 1969
C-67203
76
345
Livingston
June 25, 1969
72479
***29
176
Madison
July 2, 1969
35932
30A
318
Morehouse
June 25, 1969
32334
203
112
Natchitoches
June 25, 1969
104458
294
487
Orleans
June 26, 1969
0
2151A
143
Ouachita
June 25, 1969
610436
702
109
Plaquemines
June 25, 1969
15
62
9
Rapides
June 25, 1969
564578
641
439
Red River
June 27, 1969
117052
63
613
Richland
June 25, 1969
201794
160
658
Sabine
June 25, 1969
205470
82
497
St. Bernard
June 25, 1969
94700
97
660
St. Charles
June 25, 1969
33226
132
249
St. Helena
June 25, 1969
15176
59
105
St. James
June 25, 1969
30802
68
825
St. John the Baptist
June 25, 1969
36888
26
640
St. Martin
June 25, 1969
72381
192
614
St. Tammany
June 25, 1969
263225
387
152
Tangipahoa
June 25, 1969
170920
***60
491
Tensas
June 25, 1969
83194
9
805
Terrebonne
June 25, 1969
364223
304
256
Union
June 26, 1969
145190
82
401
Vernon
June 25, 1969
283840
375
32
Washington
June 25, 1969
26002
222
325
Webster
June 26, 1969
218593
172
187
West Carroll
June 25, 1969
137449
73
454
Winn
June 25, 1969
77562
75
590
____________
* Special Mortgage Book




** Bond Mortgage Book
*** Amortization Mortgage Book
; and
WHEREAS, in addition to the property described in the Mortgage, as supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, bonds of a series entitled and designated First Mortgage Bonds, 3% Series due 1974 (hereinafter called the bonds of the First Series), in the aggregate principal amount of Seventeen Million Dollars ($17,000,000), of which Fifteen Million Two Hundred Ninety-seven Thousand Dollars ($15,297,000) principal amount are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 3⅛% Series due 1978 (hereinafter called the bonds of the Second Series), in the aggregate principal amount of Ten Million Dollars ($10,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 3% Series due 1980 (hereinafter called the bonds of the Third Series), in the aggregate principal amount of Ten Million Dollars ($10,000,000), of which Nine Million Nine Hundred Thousand Dollars ($9,900,000) principal amount are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 4% Series due 1983 (hereinafter called the bonds of the Fourth Series), in the aggregate principal amount of Twelve Million Dollars ($12,000,000), none of which bonds of the Fourth Series is now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 3⅛% Series due 1984 (hereinafter called the bonds of the Fifth Series), in the aggregate principal amount of Eighteen Million Dollars ($18,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 4¾% Series due 1987 (hereinafter called the bonds of the Sixth Series), in the aggregate principal amount of Twenty Million Dollars ($20,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 5% Series due 1990 (hereinafter called the bonds of the Seventh Series), in the aggregate principal amount of Twenty Million Dollars ($20,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 4⅝% Series due 1994 (hereinafter called the bonds of the Eighth Series), in the aggregate principal amount of Twenty-five Million Dollars ($25,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 5¾% Series due 1996 (hereinafter called the bonds of the Ninth Series), in the aggregate principal amount of Thirty-five Million Dollars ($35,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 5⅝% Series due 1997 (hereinafter called the bonds of the Tenth Series), in the aggregate principal amount of Sixteen Million Dollars ($16,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 6½% Series due September 1, 1997 (hereinafter called the bonds of the Eleventh Series), in the aggregate principal amount of Eighteen Million Dollars ($18,000,000), all of which are now Outstanding; and bonds of a series entitled and designated First Mortgage Bonds, 7⅛% Series due 1998 (hereinafter called the bonds of the Twelfth Series), in the aggregate principal amount of Thirty-five Million Dollars ($35,000,000), all of which are now Outstanding; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to the coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and




WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restrictions if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein, or in any supplemental indenture, or may establish the terms and provisions of any series of bonds other than said First Series, by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
WHEREAS, the execution and delivery by the Company of this Thirteenth Supplemental Indenture, and the terms of the bonds of the Thirteenth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That Louisiana Power & Light Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment both of the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto Charles F. Ruge (successor to Carl E. Buckley) and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association) (successor to The Chase National Bank of the City of New York), as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all of the property now owned by the Company and specifically described in the Mortgage, as supplemented, and all the following described properties of the Company, whether now owned or hereafter acquired-that is to say:
PARAGRAPH ONE
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipe lines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, equipment and appurtenances, forming a part of said plants, sites, or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:




JEFFERSON PARISH
(1) Additions, improvements and replacements to the Ninemile Point Steam Electric Generating Station, and the 13.8/115 KV Step-Up Substation and 115 KV Substation in connection therewith, including switchyards and electric lines associated therewith, located at Ninemile Point, Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph One, Sub-Paragraph (3) of the Second Supplemental Indenture and in Paragraph One, Sub-Paragraph (2) of the Third Supplemental Indenture.

PLAQUEMINES PARISH
(2) The Buras Gas Engine, Gas Turbine Electric Generating Station, and the 2.4/34.5 KV and 13.8/34.5 KV Step-Up Substation in connection therewith, including switchyards and electric lines associated therewith, located at Buras in Plaquemines Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain tract of land situated in the Parish of Plaquemines, Louisiana, on the right descending bank of the Mississippi River, stated in the chain of title to be about sixty-nine miles below the City of New Orleans, Louisiana, at Buras, which said tract of land measures three hundred forty-one (341’) feet front on Louisiana State Highway, designated as No. 31, by a depth of three hundred feet (300’) on the upper property line, which adjoins the property retained by John S. Evasovich et al, and a depth of 300 feet on the lower property line, which adjoins the property now, or formerly, owned by E. F. Cognevich, and measuring three hundred forty-one (341’) feet in the rear, all as outlined in red on a sketch of land of Luke G. and John S. Evasovich, Buras, Plaquemines Parish, Louisiana, by Jno. C. DeArmas, Jr., C.E., dated August, 1946.
Being a part of the property acquired by the Company from Peoples Utilities, Inc. by Act of Transfer passed before Bartholomew P. Sullivan, Jr., Notary Public, on December 31, 1968, recorded in Conveyance Book 331, Folio 586 of the records of Plaquemines Parish.
ST. CHARLES PARISH
(3) Additions, improvements and replacements to the Little Gypsy Steam Electric Generating Station, and the 22/115 KV Step-Up Substation and 115 KV, 230 KV and 500 KV Substations in connection therewith, including switchyards and electric lines associated therewith, located at or near Montz in St. Charles Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraphs (13), (14), (15), (16) and (17) of the Sixth Supplemental Indenture and in Paragraph One, Sub-Paragraph (1) of the Seventh Supplemental Indenture.

PARAGRAPH TWO
The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations or UHF-VHF installations, or any of them, or used or enjoyed or capable of being




used or enjoyed in conjunction with any of them, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:
ASCENSION PARISH
(4) Additions, improvements and replacements to the Donaldsonville 230/34.5/13.8 KV Substation, located just southerly of Donaldsonville in Ascension Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (1) of the Eighth Supplemental Indenture.
ASSUMPTION PARISH
(5) Additions, improvements and replacements to the Napoleonville 115/34.5/13.8 KV Substation, located just northwesterly of Napoleonville in Assumption Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraph (3) of the Second Supplemental Indenture and in Paragraph Three, Sub-Paragraph (2) of the Third Supplemental Indenture.
CATAHOULA PARISH
(6) Additions, improvements and replacements to the Black River 34.5 KV Switching Station, converting it into a 115/34.5 KV Substation, located in Jonesville, Catahoula Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (2) of the Seventh Supplemental Indenture.

EAST FELICIANA PARISH
(7) The following described tract or parcel of land near Clinton in East Feliciana Parish, and the microwave tower and installation located thereon:

A certain tract or portion of land, together with all the buildings and improvements thereon, and all the rights, ways, prescriptions and appurtenances thereunto belonging or in anywise appertaining, lying and situated in the Parish of East Feliciana, Louisiana, being a portion of Section 72, Township 2 South, Range 3 East, St. Helena Meridian, and more particularly described as follows:
Beginning at the intersection of the southerly line of said tract and the easterly line of a gravel road, said point of beginning being the southwesterly corner of said tract and being located South 70° 30’ 00” West, 3.00 feet from a ¾ Iron Rod situated on said southerly line of said tract;
From said point of beginning, thence along the easterly line of said gravel road as follows to the northwesterly corner of said tract:




26.79 Feet
North 01° 20’ 35” West
25.08 Feet
North 00° 34’ 57” West
25.18 Feet
North 01° 41’ 11” East
25.13 Feet
North 00° 33’ 15” East
25.05 Feet
North 08° 35’ 26” West
25.00 Feet
North 05° 09’ 24” West
25.02 Feet
North 02° 51’ 57” West
25.02 Feet
North 07° 26’ 51” West
25.01 Feet
North 06° 18’ 09” West
25.01 Feet
North 04° 00’ 39” West
25.08 Feet
North 00° 34’ 57” West
25.08 Feet
North 00° 34’ 57” West
25.05 Feet
North 01° 43’ 22” West
25.02 Feet
North 07° 26’ 51” West
25.22 Feet
North 19° 38’ 50” West
29.16 Feet
North 36° 07’ 10” West
37.54 Feet
North 53° 23’ 49” West
36.07 Feet
North 51° 16’ 49” West
32.02 Feet
North 43° 49’ 00” West
25.71 Feet
North 18° 39’ 02” West

From said Northwesterly corner of the said tract, thence passing through a ¾” Iron Rod at 3.00 feet, North 84° 50’ 35” East, 667.44 feet to a ¾” Iron Rod marking the Northeasterly corner of said tract;
From said Northeasterly corner of the said tract, thence South 05° 09’ 25” East, 353.29 feet to a ¾” Iron Rod marking the Southeasterly corner of said tract;
From said Southeasterly corner of the said tract, thence South 70° 30’ 00” West, 597.02 feet to the southwesterly corner of said tract, and the point of beginning, passing through a ¾” Iron Rod located North 70° 30’ 00” East, 3.00 feet from the point of beginning;
Containing 5.74 acres, all as more fully shown on a plan of survey prepared by R. L. Schumann, Surveyor, dated December 4, 1967.
Being the same property acquired by the Company from Kathryn (Katie) Dunn Roddy by deed executed by the vendor on January 30, 1968 and by the Company on January 31, 1968, recorded in Conveyance Book L-3, Folio 422 of the records of East Feliciano Parish; in which said deed there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and sold, and hereby expressly reserved to VENDOR, all oil, gas or other minerals in or under the tract of land as above described. In connection with this reservation, however, no surface rights of any sort are reserved to VENDOR, her heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of VENDOR, her heirs or assigns, to explore for and to develop said reserved oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than one hundred fifty (150’) surface feet from the outside limits of said property as above described, and conducted only in such a way as to cause no interference with, interruption of,




or damage to, VENDEE’S operations, or damage to VENDEE’S property, including improvements placed thereon. In case of any such exploration or development by VENDOR, her heirs, successors or assigns, VENDOR, for herself, her heirs, successors and assigns, agrees to indemnify VENDEE for any damage resulting therefrom, and agrees that any lease, assignment or conveyance by VENDOR of said mineral interest shall contain a provision obligating the lessee, assignee or transferee to indemnify VENDEE for any such damage.
“VENDOR further agrees for herself, her successors and assigns, that she will not drill, or cause or permit to be drilled, any wells on any lands owned by VENDOR within one hundred fifty feet (150’) of the outside boundaries of the property above described, this agreement being intended to be and constitute, and being and constituting a covenant running with the land hereinabove described, as well as any other lands now owned or hereafter acquired by the VENDOR which are in part or in whole within one hundred fifty feet (150’) of the outside boundaries of the property above described. VENDOR further binds and obligates herself to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
IBERVILLE PARISH
(8) The Evergreen 230/34.5 KV Substation, located approximately 3.5 miles southeasterly of Plaquemine in Iberville Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain tract or portion of land, located and situated in the Parish of Iberville, State of Louisiana, being a portion of Sections 24 and 64 of Township 9 South, Range 13 East, Southeastern Land District of Louisiana, West of the Mississippi River, containing 4.96 acres as shown on plan of survey prepared by R. P. Bernard, Surveyor, dated August 1, 1968, revised January 15, 1969, entitled “Proposed Substation Site for Louisiana Power & Light Co. on the Property of Hercules Incorporated Sec. 24 and 64, T9S, R13E Iberville Parish, La. Evergreen”, according to which plan said tract is more fully described as follows:
Beginning at a point located on the northerly right of way line of the Louisiana Power & Light Company’s 500 KV Line right of way at the termination of that certain right of way for a 50’ access road granted by Hercules Incorporated to Louisiana Power & Light Company by instrument dated September 26, 1968, recorded in COB 181, folio 283 of the records of Iberville Parish, Louisiana, which point of beginning is further located and shown on a plan of survey prepared by R. P. Bernard, Surveyor, dated August 2, 1968, revised January 16, 1969, entitled “Proposed 50’ Access Road for Louisiana Power & Light Co. To Evergreen Substation Site on the Property of Hercules Incorporated in Sections 12, 24 & 49, T9S R13E Iberville Parish”, according to which plan said Point of Beginning is located as follows:
Commencing at a point on the lower property line of Hercules Incorporated, said point being on the section line dividing Sections 49 and 12, T9S R13E, located S17°39’10”W, 3480.23’ from the southerly right of way line of La. State Hwy. No. 405, thence along said lower property line of Hercules Incorporated as follows:
S17°39’10”W, 274.34’ to a grate bar, S18°02’20”W, 649.85’ to a grate bar, S09°28’50”E, 647.82’, S38°58’50”E, 642.59’ to a grate bar, S17°27’50”W, 3876.15’, S17°27’50”W, 63.14’ to a point located 50’ southerly, of and measured at right angles to the




Northerly right of way line of said Louisiana Power & Light Company 500 KV line right of way, thence from the aforesaid point on the lower property line of Hercules Incorporated S69°49’25”W, 527.77’ to the northerly side of Bayou La Butte, thence along the northerly side of Bayou La Butte N24°25’56”E, 26.99’ and N22°09’50”E, 41.65’ to the Point of Beginning of said 4.96 acre tract, which is on the northerly side of Bayou La Butte.
From said Point of Beginning proceed along the Northerly right of way line of the Louisiana Power & Light Company 500 KV line right of way S69°49’25”W, 684.81’
thence S20° 06’ 00”E, 377.32’, thence N75° 22’41” E, 36.47’,
thence N70° 03’ 46”E, 100.02’, thence N82° 31’07” E, 50.99’,
thence N63° 14’ 21”E, 50.49’, thence N70° 21’28” E, 67.36’,
thence N63° 41’ 51”E, 55.33’, thence N60° 03’40” E, 50.00’,
thence N52° 32’ 40”E, 49.69’, thence N45° 24’26” E, 56.03’,
thence N14° 56’ 29”E, 75.97’, thence N11° 15’47” W, 50.64’,
thence N16° 44’ 52”W, 51.66’, thence N01° 01’40” W, 50.01’,
thence N17° 37’ 56”E, 72.64’, thence N24° 25’56” E, 50.36’,
thence N22° 09’ 50”E, 41.65’, to the Point of Beginning.

Being the same property acquired by the Company from Hercules Incorporated by deed executed by the vendor on April 3, 1969 and by the Company on April 15, 1969, recorded in Conveyance Book 184, Folio 18 of the records of Iberville Parish; in which said deed there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and expressly reserved to VENDOR, its successors and assigns, all oil, gas and/or minerals in or under the tract of land above described, but VENDOR hereby covenants not to drill or explore on the above described property or within 150 surface feet thereof; VENDOR further retains no surface rights whatever thereon, and reserves no right to enter on said property above described in connection with this reservation; VENDOR further agrees hereby to indemnify PURCHASER against any damages resulting from the exercise of its said rights to the oil, gas and/or minerals excepted from this sale and reserved to VENDOR, its successors and assigns.”
JEFFERSON PARISH
(9) Additions, improvements and replacements to the Avondale 115/13.8 KV Substation at Avondale in Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Five, Sub-Paragraph (6) West Bank Tower and Anchor (c) of the Third Supplemental Indenture and in Paragraph Two, Sub-Paragraph (17)(a) (1) of the Fifth Supplemental Indenture.

(10) The Cleary 230X115/13.8 KV Substation, located in Metairie, Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraphs (2) and (3) of the Ninth Supplemental Indenture.

(11) Additions, improvements and replacements to the Harahan 115/13.8 KV Substation, located a short distance easterly of Harahan in Jefferson Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Four, Sub-Paragraph (3) of the Third Supplemental Indenture.





(12) The Peters Road 230X115/13.8 KV Substation, located along the Intracoastal Waterway at or near Harvey in Jefferson Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain tract of land situated in the Parish of Jefferson, State of Louisiana, on the right descending side of the Mississippi River in Section 56, Township 14 South Range 24 East and being more fully described as per map of survey by R. P. Bernard, Surveyor, dated December 13, 1967, revised April 29, 1968, as commencing at the point of intersection of the center line of Peters Road with the south line of a 120’ wide Louisiana Power & Light Company right of way, said point of intersection bearing coordinates X=2,402,909.534 and Y=434,835.138; thence proceed along the southerly line of the above mentioned 120’ right of way on a bearing of N 72° 20’ 20” E a distance of 529.90’ to the northwest corner of the tract herein described and sold, bearing coordinates X=2,403,414.458 and Y=434,995.902 herein designated as the Point of Beginning: Thence proceed along the southerly line of the 120’ right of way on a bearing of N 72° 20’ 20” E a further distance of 417.42’ to the northeast corner of the tract herein described and sold, said corner being located on the westerly right of way line of the Murphy Canal and bearing coordinates X=2,403,812.204 and Y=435,122.542; thence proceed along the westerly right of way line of the Murphy Canal on a bearing of S 16° 48’ 40” E a distance of 417.56’ to the southeast corner of the tract herein described and sold, said corner bearing coordinates X=2,403,932.970 and Y=434,722.827; thence proceed on a bearing of S 72° 20’ 20” W a distance of 417.42’ to the southwest corner of the tract herein described and sold, bearing coordinates X=2,403,535.224 and Y=434,596.187; thence proceed on a bearing of N 16° 48’ 40” W a distance of 417.56’ to the northwest corner of the tract herein described and sold, which bears coordinates X=2,403,414.458 and Y=434,995.902 being the Point of Beginning, containing 4 acres of land.
Being the same property acquired by the Company from Harvey Canal, Land and Improvement Company by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 28, 1968, recorded in Conveyance Book 678, Folio 895 of the records of Jefferson Parish; in which said Act of Sale there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and sold, and hereby expressly reserved to vendor, all oil, gas or other minerals in or under the tract of land as above described. In connection with this reservation, however, no surface rights of any sort are reserved to vendor, its successors or assigns, who shall have no right to enter said land or to conduct any drilling, exploring, or other operations on said property, and the rights of vendor, its successors or assigns, to explore for and to develop said reserved oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than one hundred fifty (150’) surface feet from the outside limits of said property as above described, and conducted only in such a way as to cause no interference with, interruption of, or damage to, purchaser’s operations, or damage to purchaser’s property, including improvements placed thereon. In case of any such exploration or development by vendor, its successors or assigns, vendor, for itself, its successors and assigns, agrees to indemnify purchaser for any damage resulting therefrom, and agrees that any future lease, assignment or conveyance by vendor of said mineral interest shall contain a provision obligating the said future lessee, assignee or transferee to indemnify purchaser for any such damage.
Vendor further agrees for itself, its successors and assigns, that it will not drill, or cause or permit to be drilled, any wells on any lands owned by vendor within one hundred fifty feet (150’) of the outside boundaries of the property above described, this agreement being intended to be and constitute, and being and constituting a covenant running with the land hereinabove described, as




well as any other lands now owned or hereafter acquired by the vendor which are in part or in whole within one hundred fifty feet (150’) of the outside boundaries of the property above described. Vendor further binds and obligates itself to obtain from any future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth, it being understood and agreed that vendor shall not be obligated to obtain such a covenant from the lessee, its successors and assigns under and by virtue of that certain oil, gas and mineral lease granted by vendor to Pubco Petroleum Corporation under date of February 5, 1967, recorded in Mineral Book 27, folio 70 of the records of Jefferson Parish, Louisiana.”
(13) Additions, improvements and replacements to the Snake Farm 230/115/13.8 KV Substation, located on a site fronting on the New Orleans-Baton Rouge Airline Highway near David Drive in Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Four, Sub-Paragraph (1) of the First Supplemental Indenture and in Paragraph Three, Sub-Paragraph (15) of the Second Supplemental Indenture.

LAFOURCHE PARISH
(14) Additions, improvements and replacements to the Raceland 115/34.5/13.8 KV Substation, located approximately one mile northeasterly of Raceland in Lafourche Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (19) of the Second Supplemental Indenture.

(15) Additions, improvements and replacements to the Thibodaux 115/34.5/13.8 KV Substation, located just northerly of Thibodaux in Lafourche Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (28) of the Fifth Supplemental Indenture.

(16) Additions, improvements and replacements to the Valentine 115/34.5 KV Substation, located approximately four miles southeasterly of Lockport in Lafourche Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (29) of the Fifth Supplemental Indenture.

OUACHITA PARISH
(17) Additions, improvements and replacements to the West Monroe 115/13.8 KV Substation and Storehouses located in West Monroe, Ouachita Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraph (22) of the Mortgage, in Paragraph Three, Sub-Paragraph (26) of the First Supplemental Indenture and in Paragraph Three, Sub-Paragraph (33) of the Fourth Supplemental Indenture, and on/and that certain tract or parcel of land particularly described as follows:

A certain tract or parcel of land situated in Section 43, Township 18 North, Range 3 East, in the Parish of Ouachita, State of Louisiana, more particularly described as follows: Commencing at the corner common to Sections 59, 43 and 40, Township 18 North, Range 3 East, thence along section lines between Section 43 and 40, North 64°, 04 minutes East, a distance of 3,294.83 feet to a point on said section line, thence South 25°, 56 minutes East, a distance of 421.40 feet to an iron pin on the line of property belonging to Louisiana Power & Light Company, for the point of beginning of the land herein described




1.
Thence, South 25°, 56 minutes East along the property line of property belonging to Louisiana Power & Light Company a distance of 150 feet to a point situated on the North right of way line of West Jackson Street.
2.
Thence, South 60°, 47 minutes West along the North right of way line of West Jackson Street a distance of 149.92 feet to an iron pin.
3.
Thence, North 25°, 37 minutes West a distance of 150 feet to an iron pin situated on the property line belonging to Louisiana Power & Light Company.
4.
Thence, North 60°, 47 minutes East along line of property belonging to Louisiana Power & Light Company a distance of 149.09 feet to, the point of beginning.
all as is shown on a plat drawn by J. T. Balfour, C. E. #727, dated July 19, 1968.
Being the same property acquired by the Company from Allen W. Hefley, Sr. and Gloria Faye Calhoun Hefley by deed executed by the vendors on September 12, 1968 and by the Company on September 20, 1968, recorded in Conveyance Book 904, Folio 477 of the records of Ouachita Parish.
PLAQUEMINES PARISH
(18) The Venice 34.5/24 KV Substation, located at Venice in Plaquemines Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain tract or parcel of land, together with all the buildings and improvements thereon and all the rights, ways, privileges, servitudes, advantages, appurtenances thereunto belonging or in anywise appertaining, situated, lying and being in the Parish of Plaquemines, State of Louisiana, on the right descending bank of the Mississippi River, about ninety (90) miles below the City of New Orleans, having and measuring as follows:
Beginning at a point which is North 57 degrees East a distance of 372.3 feet and South 28 degrees 35 minutes East a distance of 96.3 feet from the intersection of the East right of way line of Louisiana State Highway No. 23 and the lower monumented line of the Mrs. Eugene DeArmas tract; thence run North 57 degrees East a distance of 300.0 feet to the toe of the Mississippi River levee; thence South 28 degrees 35 minutes East on and along the toe of the aforesaid levee a distance of 96.3 feet; thence run South 57 degrees West a distance of 300.0 feet; thence run North 28 degrees 35 minutes West a distance of 96.3 feet to the point of beginning, all as per plat of survey for Peoples Utilities, Inc. and Mr. Mark Delesdernier, Sr. by H. G. Black, C. E., dated July 3, 1964; all located in the unincorporated community of Venice, Parish of Plaquemines, Louisiana, and marked by the letter “B” on said survey.
Being a part of the property acquired by the Company from Peoples Utilities, Inc. by Act of Transfer passed before Bartholomew P. Sullivan, Jr., Notary Public, on December 31, 1968, recorded in Conveyance Book 331, Folio 586 of the records of Plaquemines Parish.
RICHLAND PARISH
(19) Additions, improvements and replacements to the Delhi 115/13.8 KV Substation, located west of Delhi in Richland Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (25) of the Mortgage and on/and the following described tract or parcel of land on which a microwave tower and installation is situated:




A certain tract of land situated in the Northeast quarter of Section 14, Township 17 North, Range 9 East, Richland Parish, Louisiana, being more particularly described as follows:
Beginning at the northwest corner of the property acquired by Louisiana Power & Light Company from Louisiana Power Company by deed dated September 30, 1927, recorded in Notarial Book 53, Page 212 of the records of Richland Parish; thence East along the North line of said Louisiana Power & Light Company tract 500 feet; thence North 250 feet; thence West 500 feet; thence South 250 feet back to the POINT OF BEGINNING, comprising a total of 2.9 acres, more or less.
Being the same property acquired by the Company from Mrs. Agnes H. McEacharn, et al., by deed executed by the vendors on December 4, 6 and 7, 1967 and by the Company on December 18, 1967, recorded in Conveyance Book 216, Folio 550 of the records of Richland Parish; in which said deed there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and sold, and hereby expressly reserved to the Vendors, all oil, gas or other minerals in or under the land above described. In connection with this reservation, however, no surface rights of any sort are reserved to Vendors, their heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring, or other operations on said property, and the rights of Vendors, their heirs or assigns, to explore for and to develop said reserved oil, gas and other minerals shall be limited to directional drilling or other operation conducted not less than one hundred fifty (150’) surface feet from the outside limits of said property above described, and conducted only in such a way as to cause no interference with, interruption of, or damage to, Vendee’s operations, or damage to Vendee’s property, including improvements placed thereon. In case of any such exploration or development by Vendors, their heirs, successors or assigns, Vendors, for themselves, their heirs, successors and assigns, agree to indemnify Vendee for any damage resulting therefrom, and agree that any lease, assignment, or conveyance by Vendors of said mineral interests shall contain a provision obligating the lessee, assignee or transferee to indemnify Vendee for any such damage. Vendors further agree for themselves, their successors and assigns, that they will not drill or cause or permit to be drilled any well on any lands owned by Vendors within one hundred fifty (150’) feet of the outside boundaries of the property above described to develop or produce minerals under Vendors’ property, this agreement being intended to be and constitute, and being and constituting, a covenant running with the land hereinabove described, as well as any other lands owned or acquired by the Vendors which are in part or in whole within said one hundred fifty (150’) feet of the outside boundaries of the property above described. Vendors further bind and obligate themselves to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
ST. BERNARD PARISH
(20) Additions, improvements and replacements to the Pakenham 230X115/13.8 KV Substation, located approximately one mile southwesterly of Chalmette in St. Bernard Parish, situated on/and that certain tract or parcel of land particularly described as follows:

All that certain tract or portion of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of St. Bernard, State of Louisiana, on the east or left descending side of the Mississippi River, in Section 7, Township 13 South, Range 12 East, Southeastern Land District of




Louisiana, being a portion of what was formerly known as Battle Ground Plantation, at Chalmette, Louisiana, (and being a portion of and situated within the 12.369 acre tract of land acquired by Tenneco Oil Company from Kaiser Aluminum & Chemical Corporation by deed dated February 28, 1967, recorded in Conveyance Book 97, Folio 436 of the records of St. Bernard Parish on March 20, 1967) more fully and particularly located and described in accordance with a plan of survey certified correct by R. P. Bernard, Surveyor, dated February 22, 1967, as follows, to-wit (all bearings and grid coordinates hereinafter set forth being based upon and referring to the Louisiana State Plane Coordinate System-South Zone):
Commencing at a point (hereinafter referred to as the “Point of Beginning”) located South 11 degrees 08 minutes 32 seconds East 435.15 feet from Louisiana Geodetic Survey Monument E-3124, which said Point of Beginning bears grid coordinates of X equals 2,430,547.53 and Y equals 465,144.43 and is marked by an iron pin set in concrete and is the northeasterly corner of the aforesaid 12.369 acre tract of land; and thence, from said Point of Beginning, running on a bearing of South 24 degrees 29 minutes 05 seconds West for a distance of 400.00 feet to a point marked by an iron rod; thence running on a bearing of North 64 degrees 53 minutes 49 seconds West for a distance of 360.50 feet to a point marked by an iron rod; thence running on a bearing of North 25 degrees 06 minutes 11 seconds East for a distance of 466.91 feet to a point on a curve to the right having a radius of 1,241.40 feet, which last mentioned point is marked by an iron pin set in concrete; thence running along the arc of said curve to the right having a radius of 1,241.40 feet for a distance of 221.03 feet to a point marked by an iron pin set in concrete, which last mentioned point bears grid coordinates of X equals 2,430,436.94 and Y equals 465,233.51; thence running on a bearing of South 51 degrees 09 minutes 01 second East for a distance of 142.01 feet to the Point of Beginning; containing 3.61 acres of land.
Being the same property acquired by the Company from Tenneco Oil Company by deed executed on August 15, 1968, recorded in Conveyance Book 101, Folio 512 of the records of St. Bernard Parish.
ST. CHARLES PARISH
(21) Additions, improvements and replacements to the Luling 115/13.8 KV Substation, located approximately 1.5 miles southeasterly of Luling in St. Charles Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraph (43) of the Third Supplemental Indenture.

ST. JAMES PARISH
(22) The Convent 230X115/34.5 KV Substation, located approximately three miles northeasterly of Convent in St. James Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain portion of ground, situated in Section 79, Township 11 South, Range 4 East, St. James Parish, Louisiana, being more particularly described as follows:
Beginning at a 1½” galvanized iron pipe at the Northeast corner of Section 24, T-11-S, R-4-E; thence N. 73° 04’ 00” E, 550.00’; thence S 16° 56’ 00” E, 550.00; thence S 73° 04’ 00” W, 573.03’; thence N 14° 32’ 10” W, 550.48’ to the point of beginning; being more fully




shown on a plat of survey by J. L. Fontcuberta, Surveyor, dated August 1, 1967, revised September 22, 1967, further revised April 4, 1968, and containing 7.090 acres.
Being the same property acquired by the Company from Uncle Sam Plantation, Inc. by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 23, 1968, recorded in Conveyance Book 144, Folio 165 of the records of St. James Parish; in which said Act of Sale there appear the following provisions with respect to the minerals:
“There is excepted from the property hereinabove described and herein sold, and hereby reserved to the vendor, its successors and assigns, all oil, gas and other minerals in or under the land above-described and sold; PROVIDED, HOWEVER, that in connection with this reservation no surface rights of any sort or kind whatsoever are reserved to or retained by vendor, its successors or assigns, and vendor, its successors and assigns shall have no right to enter upon the said land hereinabove described and herein sold and shall have no right to conduct any drilling, exploring or other operations thereon, and the rights of vendor, its successors and assigns, to explore for and to develop said reserved oil, gas and other minerals, shall be limited to directional drilling or other operations conducted off and without the outside surface limits of the said property hereinabove described and herein sold, and conducted only in such a way as to cause no interference with, interruption of, or damage to purchaser’s operations, or damage to purchaser’s property, including improvements placed thereon.”
(23) The St. James 230/34.5 KV Substation, located approximately four miles northwesterly of St. James in St. James Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain tract of land situated in the Parish of St. James, State of Louisiana, on the right descending side of the Mississippi River, near Burton, Louisiana, said tract of land being located in Section 50, Township 12 South-Range 15 East and is bounded on all sides by lands of Hugh A. Hawthorne et al., and being more fully described as follows, to-wit:
Commencing at the northeasterly corner of said tract of land, at a point located 3’ south of the south line of a ditch paralleling a shell road referred to as an extension of Burton Road, and herein designated as the POINT OF BEGINNING and having coordinates y=485,613.556 and x=2,139,353.698: Thence proceed in a southeasterly direction on a bearing of S 39° 10’ 43” E a distance of 435.60’ to the southeasterly corner of said tract, said corner having coordinates y= 485,275.887 and x=2,139,628.884; thence proceed in a southwesterly direction on a bearing of S 67° 25’ 06” W a distance of 417.42’ to the southwesterly corner of said tract, said corner having coordinates y=485,115.598 and x=2,139,243.466; thence proceed in a northwesterly direction on a bearing of N 39° 10’ 43” W a distance of 435.60’ to the northwesterly corner of said tract, said corner having coordinates y=485,453.267 and x=2,138,968.280; thence proceed in a northeasterly direction on a bearing of N 67° 25’ 06” E a distance of 417.42’ to the northeasterly corner of said tract, said corner having coordinates y=485,613.556 and x=2,139,353.698 and being the POINT OF BEGINNING. All as more fully shown on a plan of survey by R.P. Bernard, Surveyor, dated September 19, 1967.
Being the same property acquired by the Company from Hugh A. Hawthorne and Peter E. DesJardins by deed executed by the vendors on September 15, 1969 and by the Company on September 16, 1969, recorded in Conveyance Book 150, Folio 790 of the records of St. James Parish; in which said deed there appear the following provisions with respect to the minerals:




“There is excepted from the property above described and sold and expressly reserved to VENDORS, all oil, gas and/or minerals in or under the tract of land above described. In connection with this reservation, however, no surface rights of any sort are reserved to VENDORS, their heirs, successors and/or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of VENDORS, their heirs, successors and/or assigns to explore for and to develop said oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property as above described. In case of any such exploration or development by VENDORS, their heirs, successors and/or assigns, VENDORS, for themselves, their heirs, successors and assigns, agree to indemnify PURCHASER against any damages caused by VENDORS as a result of the exercise by VENDORS of the oil, gas and mineral rights reserved by VENDORS.”
(24) The Uncle Sam 34.5/13.8 KV Substation, located approximately three miles northeasterly of Convent in St. James Parish, situated on/and that certain tract or parcel of land particularly described as follows:

A certain portion of ground, situated in Sections 20 & 21, Township 11 South, Range 4 East, in St. James Parish, Louisiana, being more particularly described as follows:
Commencing at the Grate Bar at the Southeast corner of Section 24, Township 11 South, Range 4 East; thence South 75° 04’ 00” West, 11,131.40’ to the Westerly line of Parcel 3; thence with the Westerly line of Parcel 3 North 14° 25’ 30” West, 598.44’ to the point of beginning; thence continuing North 14° 25’ 30” West, 275.00’ to the Southerly line of Parcel 1; thence with the Southerly line of Parcel 1 North 73° 52’ 37” East, 275.00’; thence South 14’ 25’ 30” East, 275.00’; thence South 73° 52’ 37” West, 275.00’ to the point of beginning; being more fully shown on a plat of a survey by J.L. Fontcuberta, Surveyor, dated January 3, 1968, revised April 4, 1968, and containing 1.735 acres.
Being the same property acquired by the Company from Freeport Sulphur Company by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on. May 23, 1968, recorded in Conveyance Book 144, Folio 157 of the records of St. James. Parish; in which said Act of Sale there appear the following provisions with respect to the minerals:
“There is excepted from the property hereinabove described and herein sold all oil, gas, and other minerals in or under the land above described and sold; PROVIDED, HOWEVER, to the extent that vendor owns or hereafter acquires any such mineral rights no surface rights of any sort or kind whatsoever are reserved to or retained by vendor, its successors or assigns, and vendor, its successors and assigns shall have no right to enter upon the said land hereinabove described and herein sold and shall have no right to conduct any drilling, exploring or other operations thereon, and the rights of vendor, its successors and assigns, to explore for and to develop said reserved oil, gas and other minerals, shall be limited to directional drilling or other operations conducted off and without the outside surface limits of the said property hereinabove described and herein sold, and conducted only in such a way as to cause no interference with, interruption of, or damage to purchaser’s operations, or damage to purchaser’s property, including improvements placed thereon.”
(25) The Vacherie 230/13.8 KV Substation, located approximately 1.5 miles southeasterly of Vacherie in St. James Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (10) of the Eighth Supplemental Indenture.





(26) The Welcome 230/34.5/13.8 KV Substation, located approximately eight miles northwesterly of St. James in St. James Parish, situated on/and those certain tracts or parcels of land particularly described as follows:

(a) A certain tract of ground situated in the Parish of St. James, State of Louisiana, on the right descending side of the Mississippi River, located in Sections 46 and 47 of Township 11 South, Range 15 East and being more fully described to-wit:
Commencing at the 3” concrete monument in the intersection of the westerly right-of-way line of Louisiana State Highway No. 18 with the line between Sections 45 and 46, T11S-R15E, St. James Parish, Louisiana, proceed thence S52°05’41”W, on and along said line between Sections 45 and 46, a distance of 3,162.61’; thence S37°54’19”E 447.0’ to the POINT OF BEGINNING, which is the most northerly corner of tract herein sold; thence S52°05’41”W 280.0’; thence S37°34’19”E 325.0’; thence N52°05’41”E 280.0’; thence N37°54’19”W 325.0’ to the POINT OF BEGINNING, all within said Sections 46 and 47, T11S-R15E, and containing 2.089 acres, all as more fully shown on the plan of survey by William Clifford Smith, registered Civil Engineer, dated July 17, 1967, revised August 1, 1967 and revised March 5, 1968, titled “Map Showing Louisiana Power & Light Company Proposed ‘Welcome’ Substation Site from Gulf Oil Corporation within Sections 46 and 47, T-11S-R15E, St. James Parish, Louisiana”.
Being the same property acquired by the Company from Gulf Oil Corporation by deed executed by the vendor on May 17, 1968 and by the Company on May 23, 1968, recorded in Conveyance Book 144, Folio 148 of the records of St. James Parish.
(b) A certain tract of ground situated in the Parish of St. James, State of Louisiana, on the right descending side of the Mississippi River, located in Section 46, Township 11 South, Range 15 East and being more fully described as follows:
Commencing at the 3” concrete monument in the intersection of the westerly right-of-way line of Louisiana State Highway No. 18 with the line between Sections 45 and 46, T11S, R15E, St. James Parish, Louisiana, proceed thence S52° 05’ 41” W, on and along said line between Sections 45 and 46, a distance of 3,162.61’; thence S37° 54’ 19”E 347.00’, to the POINT OF BEGINNING, which is the most northerly corner of the tract herein sold, thence S37° 54’ 19”E 100.00’, to the most northerly corner of that certain 2.089 acre tract sold by Gulf Oil Corporation to Louisiana Power & Light Company by act under private signature dated May 17, 1968 and recorded in COB 144, folio 148 of the records of St. James Parish; thence S 52° 05’ 41” W, along the line with said 2.089 acre tract, 280.00’; thence N37° 54’ 19”W 100.00’; thence N52° 05’ 41”E 280.00’ to the point of beginning; and containing 0.643 acres more or less, all as more fully shown on a plan of survey by R. P. Bernard, Land Surveyor dated October 31, 1968, titled “Proposed Addition to Welcome Substation, Section 46, T11S, R15E, St. James Parish, La.”
Being the same property acquired by the Company from Gulf Oil Corporation by deed executed by the vendor on February 4, 1969 and by the Company on February 19, 1969, recorded in Conveyance Book 147, Folio 707 of the records of St. James Parish.




ST. JOHN THE BAPTIST PARISH
(27) Additions, improvements and replacements to the Belle Point 115/34.5/24/13.8 KV Substation, located approximately 4 miles west of LaPlace in St. John the Baptist Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two, Sub-Paragraph (20) of the Seventh Supplemental Indenture.

ST. TAMMANY PARISH
(28) Additions, improvements and replacements to the Slidell 230/34.5 KV Substation, located in Slidell, St. Tammany Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (33) of the First Supplemental Indenture.

TANGIPAHOA PARISH
(29) Additions, improvements and replacements to the Amite 115/24/13.8 KV Substation, located north of Amite in Tangipahoa Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (29) of the Mortgage.

TERREBONNE PARISH
(30) Additions, improvements and replacements to the Coteau (formerly called Houma) 138/115/34.5/13.8 KV Substation, located northeast of Houma in Terrebonne Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (55) of the Third Supplemental Indenture.

(31) The Gibson 138/34.5/13.8 KV Substation, located on a site fronting on U. S. Highway 90 approximately three miles easterly of the intersection of said Highway with Bayou Boeuf in Terrebonne Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (8) of the Ninth Supplemental Indenture.

(32) Additions, improvements and replacements to the Humphreys 138/34.5 KV Substation, located at Humphreys in Terrebonne Parish, situated on land owned by others.

WASHINGTON PARISH
(33) Additions, improvements and replacements to the Franklinton 115/34.5 KV Substation, located southerly of Franklinton in Washington Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (39) of the Mortgage and on/and that certain tract or parcel of land particularly described as follows:

A certain tract or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Washington, State of Louisiana, in Section 17, Township 3 South, Range 11 East, which said tract or parcel of land is more fully and specifically located and described in accordance with a plan of survey certified by R. L. Schumann, Registered Land Surveyor, Surveys, Inc., dated November 15, 1966, as follows, to-wit:




Commencing at the Southwest corner of Section 17 Township 3 South, Range 11 East; thence North 89 degrees 30 minutes East for a distance of 442.92 feet to the Point of Beginning; thence continuing on a bearing of North 89 degrees 30 minutes East for a distance of 200 feet to the Southeast corner of said tract or parcel of land (said corner also being the southwest corner of the existing Louisiana Power & Light Company Substation Site); thence proceed in a North 0 degrees 30 minutes East direction for a distance of 501.6 feet along the West property line of the above mentioned Substation site; thence proceed in a South 89 degrees 30 minutes West direction for a distance of 200 feet; thence proceed in a South 0 degrees 30 minutes West direction for a distance of 501.6 feet to the Point of Beginning; containing 2.303 acres.
Being the same property acquired by the Company from Crown Zellerbach Corporation by deed executed on April 17, 1967, recorded in Conveyance Book 202, Folio 741 of the records of Washington Parish.
WEBSTER PARISH
(34) Additions, improvements and replacements to the Sarepta 138/115/34.5/13.8 KV Substation, located north of Sarepta in Webster Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraph (41) of the Mortgage and in Paragraph Two, Sub-Paragraph (21) of the Eleventh Supplemental Indenture, and on/and that certain tract or parcel of land particularly described as follows:

A certain tract or parcel of land situated in Section 12, Township 22 North, Range 11 West, Webster Parish, Louisiana, and more particularly described as follows:
From the southeast corner of the northwest quarter of the southeast quarter of said Section 12, run north along the east line of said quarter-quarter section 330 feet to the south line of a tract of land formerly owned by Robert V. Slack et ux (Now owned by Louisiana Power & Light Company), thence west along the common property line between Slack (formerly) and a tract of land formerly owned by Warren P. Langley (Now owned by Louisiana Power & Light Company) a distance of 87.94 feet to the POINT OF BEGINNING;
Thence continue west along the common property line between Wesley N. Williams and Slack (formerly), a distance of 210 feet to the easterly right of way line of the Kansas City Southern Railroad, thence south 8°35’ east along said right of way line a distance of 210 feet, thence east along the common property line between Williams and Langley (formerly) a distance of 210 feet, thence north 8°35’ west along the common property line between Williams and Langley (formerly) a distance of 210 feet to the POINT OF BEGINNING and containing 1.00 acres of land more or less and being the same property acquired by Wesley N. Williams from W. P. Langley by deed dated March 7, 1963 and recorded in Conveyance Book 331, page 194 of the records of Webster Parish, Louisiana.
All as is shown on a plat prepared by J. T. Balfour, C. E., No. 727, dated 7-13-67.
Being the same property acquired by the Company from Wesley N. Williams by deed executed by the vendor on May 16, 1968 and by the Company on May 28, 1968, recorded in Conveyance Book 377, Folio 230 of the records of Webster Parish; in which said deed there appear the following provisions with respect to the minerals:




“There is excepted from the property above described and sold, and hereby expressly reserved to Vendor, all oil, gas or other minerals therein or thereunder. In connection with this reservation, however, no surface rights of any sort are reserved to Vendor, his heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of Vendor, his heirs or assigns, to explore for and to develop said reserved oil, gas or other minerals shall be limited to directional drilling or other operations conducted not less than one hundred fifty (150’) surface feet from the outside limits of said property above described, and conducted only in such a way as to cause no interference with, interruption of, or damage to, Vendee’s operations, or damage to Vendee’s property, including improvements placed thereon. In case of any such exploration or development by Vendor, his heirs, successors or assigns, Vendor, for himself, his heirs, successors and assigns, agrees to indemnify Vendee, its successors and assigns, for any damage resulting therefrom, and agrees that any lease, assignment or conveyance by Vendor of said mineral interest shall contain a provision obligating the lessee, assignee or transferee to indemnify Vendee, its successors and assigns, for any such damage. Vendor further agrees for himself, his successors and assigns, that they will not drill, or cause or permit to be drilled, any well on any lands owned by Vendor within one hundred fifty (150’) feet of the outside boundaries of the property above described to develop or produce minerals under Vendor’s property, this agreement being intended to be and constitute, and being and constituting a covenant running with the land hereinabove described, as well as any other lands owned or acquired by the Vendor which are in part or in whole within said one hundred fifty (150’) feet of the outside boundaries of the property above described. Vendor further binds and obligates himself to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
PARAGRAPH THREE
All and Singular the Miscellaneous Lands and Real Estate or Rights and Interests Therein of the Company now owned, or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired during the existence of this trust, including the following property situated in the State of Louisiana, described as:
LINCOLN PARISH
(35) A certain tract or parcel of land situated in Section 4, Township 18 North, Range 3 West, Lincoln Parish, Louisiana, being more particularly described as follows:

From a pine knot marking the Northwest corner of the Southwest Quarter of the Northwest Quarter of said Section 4, run S 0° 44’ 28” W along the West line of said Section 4 a distance of 574.04 feet; thence S 89° 15’ E a distance of 504.21 feet; thence S 0° 45’ W a distance of 749.65 feet to a point on the North line of Gladys D. Kasar et vir property and the point of beginning; thence S 89° 16’ 46” along the North line of said property a distance of 818.07 feet; thence S 0° 09’ 28” E along the East property line of said property a distance of 750.86 feet; thence N 89° 15’ W a distance of 829.96 feet; thence N 0° 45’ E a distance of 750.35 feet to the point of beginning and containing 14.20 acres of land more or less.
Being the same property acquired by the Company from Gladys Delony Kaspar and Charles C. Kaspar by deed executed by the vendors on August 28, 1969 and by the Company on September 5, 1969, recorded in Conveyance Book 138, Folio 835 of the records of Lincoln Parish; in which said deed there appear the following provisions with respect to the minerals:




“There is excepted from the property above described and sold, and hereby expressly reserved to Vendors, all oil, gas or other minerals in or under the tract of land as above described. In connection with this reservation, however, no surface rights of any sort are reserved to Vendors, their heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of Vendors, their heirs or assigns to explore for and to develop said reserved oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property above described, and conducted only in such a way as to cause no interference with, interruption of or damage to Vendee’s operations or damage to Vendee’s property, including improvements placed thereon. In case of any such exploration or development by Vendors, their heirs, successors or assigns, Vendors, for themselves, their heirs, successors and assigns agree to indemnify Vendee for any damage resulting therefrom and agree that any lease, assignment or conveyance by Vendors of said mineral interest shall contain a provision obligating the lessee, assignee or transferee to indemnify Vendee for any such damage. Vendors further agree for themselves, their successors and assigns that they will not drill or cause or permit to be drilled any well on any lands owned by Vendors within 150 feet of the outside boundaries of the property above described to develop or produce minerals under Vendors’ property, this agreement being intended to be and constitute and being and constituting a covenant running with the land herein-above described, as well as any other lands owned or acquired by the Vendors which are in part or in whole within said 150 feet of the outside boundaries of the property above described. Vendors further bind and obligate themselves to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
(36) A certain tract or parcel of land situated in Section 4, Township 18 North, Range 3 West, Lincoln Parish, Louisiana, being more particularly described as follows:

From a pine knot marking the Northwest corner of the Southwest Quarter of the Northwest Quarter of said Section 4, run S 0°44’28” W along the West line of said Section 4 a distance of 574.04 feet; thence S 89°15’ E a distance of 504.21 feet to the point of beginning; thence continue S 89°15’ E a distance of 1300.00 feet; thence S 0°45’ W a distance of 1500.00 feet; thence N 89°15’ W a distance of 470.04 feet; thence N 0°09’28” W a distance of 750.86 feet; thence N 89°16’46” W a distance of 818.07 feet; thence N 0°45’ E a distance of 749.65 feet to the point of beginning and containing 30.57 acres of land more or less.
Being the same property acquired by the Company from Sturgis-Nix Lumber Company, et als. by deed executed by the vendors on August 29 and September 2, 1969 and by the Company on September 5, 1969, recorded in Conveyance Book 138, Folio 841 of the records of Lincoln Parish; in which said deed there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and sold and hereby expressly reserved to Vendors, all oil, gas or other minerals in or under the tract of land as above described. In connection with this reservation, however, no surface rights of any sort are reserved to Vendors, their heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of Vendors, their heirs or assigns to explore for and to develop said reserved oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than 150 feet from the outside limits of said property above described and conducted only in such a way as to cause




no interference with, interruption of or damage to Vendee’s operations or damage to Vendee’s property, including improvements placed thereon. In case of any such exploration or development by Vendors, their heirs, successors or assigns, Vendors, for themselves, their heirs, successors and assigns, agree to indemnify Vendee for any damage resulting therefrom, and agree that any lease, assignment or conveyance by Vendors of said mineral interest shall contain a provision obligating the lessee, assignee or transferee to indemnify Vendee for any such damage. Vendors further agree for themselves, their successors and assigns that they will not drill or cause or permit to be drilled any well on any lands owned by Vendors within 150 feet of the outside boundaries of the property above described to develop or produce minerals under Vendors’ property, this agreement being intended to be and constitute and being and constituting a covenant running with the land hereinabove described as well as any other lands owned or acquired by the Vendors which are in part or in whole within 150 feet of the outside boundaries of the property above described. Vendors further bind and obligate themselves to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
MADISON PARISH
(37) The following described property, together with all improvements and appurtenances thereunto belonging, situated in the Parish of Madison, State of Louisiana, to-wit:

From the Southwest corner of the Northwest Quarter of Section 45, Township 17 North, Range 13 East, Madison Parish, Louisiana proceed North along the Range Line common to Ranges 12 and 13 East a distance of 462.4 feet to a point on the Easterly right of way line of U.S. Highway No. 65; thence proceed N 27° 43’ E along the said Easterly right of way line of U. S. Highway No. 65 a distance of 968.88 feet to an iron pipe for the POINT OF BEGINNING, said point being the westerly corner common with the property of Nettie Johnson; thence continue N 27° 43’ E along the Easterly right of way line of U.S. Highway No. 65 a distance of 104.5 feet to an iron pipe at the corner common with the property of Louisiana Power & Light Company; thence proceed N 89° 54’ E along the line common with the property of Louisiana Power & Light Company a distance of 209.0 feet; thence proceed S 27° 36’ W along the line common with the property of Louisiana Power & Light Company a distance of 104.5 feet to an iron pipe; thence proceed S 89° 54’ W along the line common with the property of Nettie Johnson a distance of 209.2 feet to the POINT OF BEGINNING and containing 0.443 acres, more or less.
Being the same property acquired by the Company from Lige Armstrong and Nezzie Lee Armstrong Coley by deed executed by the vendors on August 19 and 27, 1969 and by the Company on September 5, 1969, recorded in Conveyance Book 21, Folio 897 of the records of Madison Parish.
ORLEANS PARISH
(38) Additions, improvements and replacements to the Transformer Shop in the City of New Orleans (Algiers), Orleans Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Four, Sub-Paragraph (11) of the Mortgage and on/and that certain tract or parcel of land particularly described as follows:

A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining,




located in the Fifth District of the City of New Orleans, in Square 42 thereof, bounded by Pacific Avenue, Pelican Avenue (formerly Peter Street), Elmira Street and Delaronde (formerly Thayer) Street, consisting, according to its record title, of the front portion of original Lot No. 25 and the front portion of a part of original Lot No. 24 adjoining; which said lot or portion of ground, in accordance with a plan of survey certified correct by R.L. Schumann, Surveyor, dated June 6, 1966, is designated as Lot “X”, and commences at a distance of 120 feet from the corner of Delaronde Street and Pacific Avenue and measures thence 45 feet front on Pacific Avenue, same in width in the rear, by a depth between equal and parallel lines of 90 feet.
Being the same property acquired by the Company from the City of New Orleans (for the use and benefit of the Sewerage & Water Board of New Orleans) by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 31, 1968, registered in Conveyance Office Book 688A, Folio 237 of the records of Orleans Parish.
(39) A certain lot of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes and advantages thereunto belonging, or in anywise appertaining, situated in the Fifth District of this City, in the square bounded by Delaronde Street, Pelican Avenue, Bouny and Seguin Streets, designated as Lot No. 6 of Square No. 8, New City Plan, and by Lot No. 3 of Square No. 14, Old Plan, and measures 31 feet 11 inches and 5 lines front on Delaronde Street, by a depth of 127 feet 10 inches and 5 lines, American Measure.

According to a plan of survey made by J.L. Fontcuberta, Surveyor, dated March 6, 1968, said lot has the same number, is located in the same square, commences 159 feet, 10 inches, 1 line from the corner of Delaronde and Bouny Streets, measures 31 feet, 11 inches 5 lines front on Delaronde Street, the same width in the rear, by a depth between equal and parallel lines of 127 feet, 10 inches and 5 lines.
The Improvements bear Municipal Nos. 153-155 Delaronde St.
Being the same property acquired by the Company from Joseph A. Petrie, Jr. by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 2, 1968, registered in Conveyance Office Book 688, Folio 123 of the records of Orleans Parish.
(40) A certain lot of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes and advantages thereunto belonging or in anywise appertaining, situated in the Fifth District of this City, in Square No. 9, bounded by Seguin, Bouny, Morgan and Delaronde Streets, designated as Lot No. 9 on Assessment Rolls of the City of New Orleans, and measuring in French Measure, 30 feet front on Morgan Street, by 85 feet in depth and front on Seguin Street.

According to a plan of survey made by J.L. Fontcuberta, Surveyor, dated March 6, 1968, said lot is designated as Lot 1, is located in the same Square, forms the corner of Seguin and Morgan Streets, and measures 31 feet 11 inches and 5 lines front on Morgan Street, the same width in the rear, by a depth between equal and parallel lines, with a front on Seguin Street, of 90 feet 7 inches 2 lines.
The Improvements thereon bear Municipal Number 207 Seguin Street.




Being the same property acquired by the Company from Thomas H. Yalets by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 2, 1968, registered in Conveyance Book 687, Folio 124 of the records of Orleans Parish.
(7) (FIRST) A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Fifth District of the City of New Orleans, in Square No. Eight (8) thereof, bounded by Delaronde, Seguin, Pelican (formerly Peter) and Bouny Streets, designated as Lot No. 32, which said Lot No. 32, in accordance with a plan of survey dated November 30, 1967, certified correct by J. L. Fontcuberta, Surveyor and in accordance with its record title description, commences at a distance of 87 feet 10 inches 5 lines from the corner of Delaronde and Bouny Streets and measures thence 40 feet front on Bouny Street, same in width in the rear along the line of Lot No. 4, by a depth of 95 feet 11 inches (90 feet French Measure) along the rear lines of Lots Nos. 1, 2 & 3 (or along the rear lines of the lots constituting the greater and front portions of the original Lots Nos. 1, 2 and 3) and a depth of 95 feet 11 inches (90 feet French Measure) along its other sideline, being the sideline nearer to Pelican Street and common to Lot No. 24, all as further shown on Lot and Block maps. The improvements thereon are a part of the improvements bearing the Municipal No. 137-139 Delaronde Street.
(SECOND) A certain lot or portion of ground, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages and prescriptions, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Fifth District of the City of New Orleans, in Square No. Eight (8) thereof, bounded by Delaronde, Seguin, Pelican (formerly Peter) and Bouny Streets, being the greater and front portion of the original Lot No. 2, which said lot or portion of ground, in accordance with a plan of survey dated November 30, 1967, certified correct by J.L. Fontcuberta, Surveyor, is designated as Lot No. 2 (or Lot No. 26 as shown on Lot and Block maps) and commences at a distance of 32 feet 2 inches 5 lines from the corner of Delaronde and Bouny Streets and measures thence 31 feet 6 inches front on Delaronde Street, same in width in the rear along the sideline of Lot No. 32, by 87 feet 10 inches 5 lines in depth between equal and parallel lines. The improvements thereon bear the Municipal No. 137-139 Delaronde Street.
Being the same properties acquired by the Company from Benjamin Weiner by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on January 11, 1968, registered in Conveyance Office Book 679, Folio 477 of the records of Orleans Parish.
(41) A certain lot of ground, together with all of the buildings and improvements thereon and all of the rights, ways, privileges, servitudes and advantages thereunto belonging or in anywise appertaining, situated in the Fifth District of this City in Square 8 (formerly Square 14) bounded by Delaronde Street, Seguin Street, Bouny Street and Pelican Avenue, and designated as Lot 5 on a plan of survey made by Errol E. Kelly, Surveyor, dated September 7, 1963, a copy of which is annexed to an act passed before Hugh E. Humphrey, Notary Public, dated September 24, 1963, and according to the said survey said Lot 5 lies at a distance of 127 feet 10 inches 5 lines from the corner of Bouny and Delaronde Streets and measures thence 31 feet 11 inches 5 lines front on Delaronde Street, a width of 31 feet 11 inches 5 lines in the rear, by a depth between equal and parallel lines of 127 feet 10 inches 6 lines.

According to a plan of survey made by J.L. Fontcuberta, Surveyor, dated March 6, 1968, said lot has the same number, is located in the same square, has the same measurements, and commences 127 feet 10 inches and 3 lines from the corner of Delaronde and Bouny Streets.




The Improvements thereon bear the Municipal No. 149-51 Delaronde Street.
Being the same property acquired by the Company from Ben Weiner and Joseph Gernsbacher by Act of Sale passed before Bartholomew P. Sullivan, Jr., Notary Public, on May 2, 1968, registered in Conveyance Book 686, Folio 120 of the records of Orleans Parish.
PLAQUEMINES PARISH
(42) The Delta District Office Building, located at Buras in the Parish of Plaquemines, situated in part on/and that certain tract or parcel of land particularly described in Paragraph One, Sub-Paragraph (2) of this Thirteenth Supplemental Indenture and in part on/and that certain tract or parcel of land particularly described as follows:

A certain piece or parcel of land, together with all the buildings and improvements thereon, and all of the rights, ways, privileges, servitudes, appurtenances and advantages thereunto belonging or in anywise appertaining, situated, lying and being at Buras, Parish of Plaquemines, Louisiana, on the right descending bank of the Mississippi River at a distance of about seventy-three miles below the City of New Orleans, measuring as follows:
Beginning at the intersection of the upper line of the property of the “Cognevich Family”, hereinabove described, and the lower line of the property formerly owned by Luke and John Evasovich and now owned by Peoples Utilities, Inc. with the south right of way line of State Highway 31, (sometimes referred to as State Highway 23) for a point of beginning: thence South 34 degrees 18 minutes West along the lower line of the properties of Peoples Utilities, Inc. and Luke and John Evasovich a distance of 400 feet; thence South 55 degrees 42 minutes East a distance of 50 feet; thence North 34 degrees 18 minutes East a distance of approximately 420 feet to the South line of the right of way of State Highway 31, sometimes referred to as 23; thence North 77 degrees 32 minutes West along the line of the said right of way a distance of 53 feet 9 inches to point of beginning, all as per plat of survey by Chalmers & Black, C.E., dated October 17, 1959.
Being a part of the property acquired by the Company from Peoples Utilities, Inc. by Act of Transfer passed before Bartholomew P. Sullivan, Jr., Notary Public, on December 31, 1968, recorded in Conveyance Book 331, Folio 586 of the records of Plaquemines Parish.
(43) A certain tract of land, together with all of the buildings and improvements thereon, and all rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Plaquemines, State of Louisiana, at Buras, Louisiana, consisting of and including the following described pieces or parcels or portions or tracts of land and/or ground:

(a)      A certain piece or parcel of ground, located and situated at Buras, Parish of Plaquemines, State of Louisiana, on the right bank of the Mississippi River, having and measuring one hundred (100’) feet front on the river, and running back to the public highway, bounded above by the property of Luke and John Evasovich and below by the property of E.F. Cognevich. The four corners of the above described piece or parcel of ground, the two at or near the Mississippi River, and the two at or near the public highway in the rear of the property, are marked by concrete posts or monuments.




(b)      A certain tract or parcel of land situated at Buras, Parish of Plaquemines, Louisiana, on the right or west bank of the Mississippi River, having and measuring 25 feet front on the river and extending back to the public highway, bounded above by the remaining property of Luke and John Evasovich, and bounded below by the property of the Peoples Utilities, Inc.
(c)      A certain piece or portion of land, situated at Buras, in the Parish of Plaquemines, Louisiana, on the right descending bank of the Mississippi River, at about sixty-nine miles below the City of New Orleans, which property is located between the present New Orleans paved highway and the Mississippi River, fronting on the said paved highway a distance of fifty-five and two tenths (55.2) feet and extending back to the Mississippi River, which property is bounded on the upper side by other lands belonging to Luke and John Evasovich, and on the lower side by property of Peoples Utilities, Inc., together with all the buildings and improvements thereon, and all rights, ways, privileges, servitudes, and appurtenances thereto belonging, including all riparian and rights of batture; which tract of land is designated as Plot “A” on plan of survey made by R.P. Rordam, Parish Engineer and Surveyor, dated October 6th, 1939, and is more fully described as follows:
Commencing at a point on the upper line of the Peoples Utilities, Inc., adjoining the property of Luke G. and John S. Evasovich, where said boundary line intersects the east boundary line of the New Orleans-Buras paved highway, thence proceeding with an angle of sixty-seven degrees, fifty-four minutes (67° 54’) to the said right of way line, thence along said right of way line a distance of fifty-five feet two tenths (55.2’) to a point which is seven (7’) feet from the upper side of the building of the Bertle Liquor Co., thence along a line making an angle of seventy-two degrees fifty minutes (72° 50’) with the right of way line, proceed to the edge of the Mississippi River, thence along the bank of the Mississippi River in a southerly direction to a point intersecting the upper line of the Peoples Utilities Co. property, thence along said upper line to the point of beginning, all as shown on the plan of survey by R. P. Rordam, Parish Engineer and Surveyor, hereinabove referred to.
(d)      A certain lot or tract of land, together with all the rights, ways, privileges, appurtenances and improvements thereon or thereunto belonging or in anywise appertaining, situated at Buras, in the Parish of Plaquemines, bounded on the lower side by property of Ernest F. Cognevich and on the upper side by property of Peoples Utilities, Inc., having and measuring fifteen feet (15’) front on the Mississippi River, by a depth extending to the main highway and measuring one hundred sixty-seven feet (167’) between equal and parallel lines from the right-of-way of the N.O. & L.C.R.R. Co. and the main highway, all as is more particularly shown by a sketch of survey made by R.P. Rordam, Parish Surveyor, on July 8th, 1931.
(e)      A certain piece or tract of land, together with all the buildings and improvements thereon, rights, ways, servitudes, and appurtenances thereto belonging or in anywise appertaining, including all riparian rights and rights of batture, situated at the upper end of Buras, in the Parish of Plaquemines, State of Louisiana, on the right bank of the Mississippi River, at a distance of about seventy (70) miles below the City of New Orleans, having and measuring sixty (60) feet front on the said river by a depth to the present New Orleans-Buras paved highway, and being bounded below by other property of Ernest F. Cognevich, and above by property formerly belonging to Ernest F. Cognevich, and now belonging to Peoples Utilities, Inc.
LESS AND EXCEPTING from the tract of land described in and covered by this Sub-Paragraph (10) the following described property sold by Peoples Utilities, Inc. to Delta Gas, Inc. by Act passed before Kenneth C. Barranger, Notary Public, on September 6, 1961, recorded in Conveyance Book 248, Folio 357 of the records of Plaquemines Parish, Louisiana:




A certain tract of land together with all buildings and improvements thereon and all rights, ways, privileges and servitudes thereunto belonging or in anywise appertaining situated in the Parish of Plaquemines, Louisiana, about fifty-five (55) miles below the City of New Orleans, La., on the right descending bank of the Mississippi River at a place called Buras, La., which property is more particularly described as follows:
Beginning at a point marked “A” on a sketch of property of Delta Gas, Inc., dated June 30, 1961 made from a survey of Jno. C. de Armas, Jr., C.E., dated October 27, 1949, thence South 77 degrees, 48 minutes East, a distance of 61.2 feet along State Highway 31, thence North 34 degrees, 18 minutes East, 161.8 feet to the Mississippi River, thence upstream to a point marked “F’ on said sketch, thence South 29 degrees, 22 minutes West, approximately 159.6 feet, a point of beginning marked “A”, together with all batture and riparian rights.
Being a part of the property acquired by the Company from Peoples Utilities, Inc. by Act of Transfer passed before Bartholomew P. Sullivan, Jr., Notary Public, on December 31, 1968, recorded in Conveyance Book 331, Folio 586 of the records of Plaquemines Parish.
TERREBONNE PARISH
(44) A certain tract or parcel of land, together with all the buildings and improvements thereon, and all the rights, ways, privileges, servitudes, appurtenances, advantages, batture and batture rights, riparian rights, prescriptions and rights of prescription, both liberative and acquisitive, thereunto belonging or in anywise appertaining, located in the Parish of Terrebonne, State of Louisiana, in Section 23, Township 19 South, Range 18 East, which said tract or parcel of land is more fully and specifically located and described in accordance with a plan of survey approved by Wm. Clifford Smith and R.C. Reed, Registered Civil Engineers, dated August 24, 1966, as follows, to-wit:

Commencing at a point located North 79 degrees 33 minutes 05 seconds West 592.61 feet from the upper front or Northeast corner of Section 23, Township 19 South, Range 18 East on Bayou Little Caillou; and thence from the Point of Beginning running on a bearing of South 17 degrees 50 minutes 43 seconds West for a distance of 360.00 feet; thence running on a bearing of South 69 degrees 15 minutes East on a line parallel to the upper or Northerly line of said Section 23 for a distance of 484.65 feet to a point on the Westerly right-of-way line of Louisiana State Highway No. 56; thence running on a bearing of North 17 degrees 50 minutes 43 seconds East, on and along said Westerly right-of-way line of Louisiana State Highway No. 56, for a distance of 360.00 feet; thence running on a bearing of North 69 degrees 15 minutes West on a line parallel to the upper or Northerly line of said Section 23 for a distance of 484.65 feet to the Point of Beginning; containing 4.00 acres of land.
Being the same property acquired by the Company from Nelo J. Hebert and Daisy Picou Hebert, et als., by various instruments, including the following: Judgment of the 17th Judicial District Court for the Parish of Terrebonne, State of Louisiana, rendered and signed on January 11, 1968 in the expropriation proceedings entitled “Louisiana Power & Light Company vs. Hector E. Picou, et als.”, No. 28,900 on the Docket of said Court, recorded in Conveyance Book 451, Folio 489 of the records of Terrebonne Parish, and by Act of Receipt by I. Robert Boudreaux, Clerk of Court of the 17th Judicial District Court in and for the Parish of Terrebonne, State of Louisiana, passed before Leontine Hymel, Deputy Clerk of Court and Ex-Officio Notary Public for the Parish of Terrebonne, Louisiana, on January 18, 1968, in the aforesaid proceedings, recorded in Conveyance Book 451, Folio 494 of the records of Terrebonne Parish; deed executed on November 30, 1966, recorded in




Conveyance Book 428, Folio 184 of the records of Terrebonne Parish; deed executed by the vendor on February 10, 1967 and by the Company on February 17, 1967, recorded in Conveyance Book 432, Folio 50 of the records of Terrebonne Parish; deed executed by the vendors on January 9 and 19, 1967 and by the Company on February 17, 1967, recorded in Conveyance Book 432, Folio 41 of the records of Terrebonne Parish; deed executed by the vendor on January 26, 1967 and by the Company on February 17, 1967, recorded in Conveyance Book 432, Folio 46 of the records of Terrebonne Parish; deed executed on December 27, 1966, recorded in Conveyance Book 429, Folio 262 of the records of Terrebonne Parish; deed executed by the vendor on December 27, 1966 and by the Company on December 28, 1966, recorded in Conveyance Book 429, Folio 213 of the records of Terrebonne Parish; deed executed by the vendor on December 21, 1966 and by the Company on December 28, 1966, recorded in Conveyance Book 429, Folio 221 of the records of Terrebonne Parish; deed executed by the vendors on December 16 and 19, 1966 and by the Company on December 20, 1966, recorded in Conveyance Book 429, Folio 225 of the records of Terrebonne Parish; deed executed by the vendors on December 23, 1966 and by the Company on December 28, 1966, recorded in Conveyance Book 429, Folio 217 of the records of Terrebonne Parish; deed executed by the vendor on December 27, 1966 and by the Company on December 28, 1966, recorded in Conveyance Book 429, Folio 209 of the records of Terrebonne Parish; deed executed by the vendor on December 27, 1966 and by the Company on December 28, 1966, recorded in Conveyance Book 429, Folio 205 of the records of Terrebonne Parish; deed executed by the vendors on December 5, 1966 and by the Company on December 6, 1966, recorded in Conveyance Book 428, Folio 388 of the records of Terrebonne Parish; deed executed by the vendor on December 14, 1966 and by the Company on December 20, 1966, recorded in Conveyance Book 429, Folio 11 of the records of Terrebonne Parish; deed executed on December 12, 1966, recorded in Conveyance Book 429, Folio 8 of the records of Terrebonne Parish; deed executed on December 12, 1966, recorded in Conveyance Book 429, Folio 4 of the records of Terrebonne Parish; deed executed by the vendor on December 16, 1966 and by the Company on December 20, 1966, recorded in Conveyance Book 429, Folio 15 of the records of Terrebonne Parish; quitclaim deed executed by the vendor on January 31, 1967 and by the Company on February 17, 1967, recorded in Conveyance Book 432, Folio 56 of the records of Terrebonne Parish; and quitclaim deed executed by the vendor on February 2, 1967 and by the Company on February 17, 1967, recorded in Conveyance Book 432, Folio 54 of the records of Terrebonne Parish; the aforesaid instruments, other than the quitclaim deeds, reserving the minerals but negativing any reservation of surface rights to the respective vendors and the defendants in the aforesaid expropriation suit.
WINN PARISH
(45) A certain tract or parcel of land containing eight acres, more or less, situated in the NW¼ of SW¼, Section 34, Township 9 North, Range 5 West, Parish of Winn, State of Louisiana and more particularly described as follows:

With THE POINT OF BEGINNING South, 435.2 feet and East, 729.7 feet from a 2” iron pipe in the ¼ section corner between Sections 33 and 34, Township 9 North, Range 5 West, run
1. Thence, S 85° 16’ E, 591.3 feet along a line 20 feet south of the centerline of Ebeneezer Camp Ground Parish Road to a point on the east line of the NW¼ of SW¼ of said Section 34, at a distance of 54.2’ west of the west right of way line of Louisiana Highway No. 34. This point is the northeast corner of the tract herein described.
2.      Thence, South, 259.3 feet along the east line of said NW¼ of SW¼ to a point in the west right of way line of Louisiana Highway No. 34.




3.      Thence, S 6° 30’ W, 308.9 feet along the west right of way line of said Highway No. 34 to a point and the southeast corner of the tract herein described.
4.      Thence, West, 555.4 feet to a point and the southwest corner of the tract herein described.
5.      Thence, North, 613.1 feet back to the point of beginning and the northwest corner of the tract herein described.
all as is shown on a plat drawn by J.T. Balfour, C. E. No. 727, dated February 12, 1968.
Being the same property acquired by the Company from Mrs. Polly Fowler Wright Beckley by deed executed by the vendor and certain intervenors on May 20, 1968 and by the Company on May 29, 1968, recorded in Conveyance Book 108, Folio 808 of the records of Winn Parish; in which said deed there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and sold and expressly reserved to Vendor, all oil, gas and/or minerals in or under the tract of land above described. In connection with this reservation, however, no surface rights of any sort are reserved to Vendor, her heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of Vendor, her heirs or assigns, to explore for and to develop said oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property as above described and conducted only in such a way as to cause no interference with, interruption of, or damage to, Vendee’s operations, or damage to Vendee’s property, including improvements placed thereon. In case of any such exploration or development by Vendor, her heirs, successors or assigns, Vendor, for herself, her heirs, successors and assigns, agrees to indemnify Vendee from any damage resulting therefrom, and agrees that any lease, assignment or conveyance by Vendor of said mineral interest shall contain a provision obligating to lessee, assignee or transferee to indemnify Vendee for any such damage. Vendor further agrees for herself, her successors and assigns, that she will not drill, or cause or permit to be drilled, any well on any lands owned by Vendor within 150 feet of the outside boundaries of said property above described to develop or produce minerals under Vendor’s property, this agreement being intended to be and constitute and being and constituting a covenant running with the land hereinabove described, as well as any other lands owned or acquired by the Vendor which are in part or in whole within 150 feet of the outside boundaries of the property above described. Vendor further binds and obligates herself to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
(46) A certain tract or parcel of land containing 0.18 acres, more or less, situated in the NE¼ of SW¼ of Section 34, Township 9 North, Range 5 West, Parish of Winn, State of Louisiana, being all that portion of said NE¼ of SW¼ lying south of the Ebeneezer Camp Ground Parish Road and west of Louisiana Highway No. 34, and more particularly described as follows: Commencing at a 2” iron pipe in the ¼ section corner between Sections 33 and 34, Township 9 North, Range 5 West thence, South, 435.2 feet; thence, East 729.7 feet to a point 20’ South of the centerline of Ebeneezer Camp Ground Parish Road; thence S 85° 16’ E, 591.3 feet along the south side of Ebeneezer Camp Ground Parish Road to a point on the west line of the NE¼ of SW¼ said Section 34 and THE POINT OF BEGINNING: Run,




1.      Thence, S 85° 16’ E, 54.2 feet along the south side of said Ebeneezer Camp Ground Parish Road to the west right of way line of Louisiana Highway No. 34 and the northeast corner of the tract herein described.
2.      Thence, S 12°’ 00’ W, 258.5 feet along the right of way of said Highway No. 34 to a point of intersection with the west line of said NE¼ of SW¼. This point being the south corner of the tract herein described.
3. Thence, North 259.3 feet along the west line of said NE¼% of SW¼ back to the point of beginning and the northwest corner of the tract herein described.
all as is shown on a plat drawn by J.T. Balfour, C. E., No. 727, dated February 12, 1968.
Being the same property acquired by the Company from Mrs. Audie Mae Cox Keiffer and Brenda Joy Kieffer Dyson by deed executed by the vendors on May 20, 1968 and by the Company on May 29, 1968, recorded in Conveyance Book 108, Folio 816 of the records of Winn Parish; in which said deed there appear the following provisions with respect to the minerals:
“There is excepted from the property above described and sold and expressly reserved to Vendors, all oil, gas and/or minerals in or under the tract of land above described. In connection with this reservation, however, no surface rights of any sort are reserved to Vendors, their heirs or assigns, who shall have no right to enter said land or to conduct any drilling, exploring or other operations on said property, and the rights of Vendors, their heirs or assigns, to explore for and to develop said oil, gas and other minerals shall be limited to directional drilling or other operations conducted not less than 150 surface feet from the outside limits of said property as above described and conducted only in such a way as to cause no interference with, interruption of, or damage to, Vendee’s operations, or damage to Vendee’s property, including improvements placed thereon. In case of any such exploration or development by Vendors, their heirs, successors or assigns, Vendors, for themselves, their heirs, successors and assigns, agree to indemnify Vendee from any damage resulting therefrom, and agree that any lease, assignment or conveyance by Vendors of said mineral interest shall contain a provision obligating to lessee, assignee or transferee to indemnify Vendee for any such damage. Vendors further agree for themselves, their successors and assigns, that they will not drill, or cause or permit to be drilled, any well on any lands owned by Vendors within 150 feet of the outside boundaries of said property above described to develop or produce minerals under Vendors’ property, this agreement being intended to be and constitute and being and constituting a covenant running with the land hereinabove described, as well as any other lands owned or acquired by the Vendors which are in part or in whole within 150 feet of the outside boundaries of the property above described. Vendors further bind and obligate themselves to obtain from any present or future lessee of said mineral rights a similar covenant not to drill or conduct other mineral development in accordance with the obligations herein assumed and hereinabove set forth.”
PARAGRAPH FOUR
The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, pole type substations, insulators and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the




construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the State of Louisiana, to-wit:
(47) Additions, improvements and replacements to the Bagatelle-Lutcher 230 KV Transmission Line in St. James Parish, described in Paragraph Four, Sub-Paragraph (2) of the Tenth Supplemental Indenture, said transmission line now beginning at the Bagatelle 230/115/13.8 KV Substation located at Union and extending in a generally easterly direction for a distance of approximately 8 miles, thence in a generally southerly direction for a distance of approximately 0.6 miles, thence in a generally westerly direction for a distance of approximately 0.3 miles to the Convent 230X115/34.5 KV Substation located approximately three miles northeasterly of Convent, thence in an easterly direction for a distance of approximately 03 miles, thence in a generally northerly direction for a distance of approximately 0.6 miles, and thence in a generally easterly direction for a distance of approximately 9 miles to the Lutcher 115/13.8 KV Substation located approximately two miles northeasterly of Gramercy.

(48) Additions, improvements and replacements to the Barataria-Golden Meadow 115 KV Transmission Line in Jefferson and Lafourche Parishes, described in Paragraph Four, Sub-Paragraph (4) of the Eighth Supplemental Indenture.

(49) The. Behrman-Peters Road 230 KV Transmission Line in Jefferson Parish. This single circuit, shielded, steel pole transmission line begins at the Behrman 230/115/13.8 KV Substation located in an area bounded in part by Behrman Highway and Industry Street and extends in a generally southwesterly direction for a distance of approximately 4.1 miles to the Peters Road 230X115/13.8 KV Substation located along the Intracoastal Waterway at or near Harvey.

(50) Additions, improvements and replacements to the Belle Point-Little Gypsy 115 KV Transmission Line in St. John the Baptist and St. Charles Parishes. This single circuit, shielded, part steel tower and part wood pole H-frame transmission line begins at the Belle Point 115/34.5/ 24/13.8 KV Substation located approximately four miles west of LaPlace in St. John the Baptist Parish and extends in a generally easterly direction for a distance of approximately five miles, thence in a generally southerly direction for a distance of approximately two miles to the Little Gypsy Steam Electric Generating Station switchyards located at or near Montz in St. Charles Parish, and constitutes a part of and/or replaces a part of the transmission line described in Paragraph Five, Sub-Paragraph (2) of the Mortgage and a part of the transmission line described in Paragraph Four, Sub-Paragraph (13) of the Seventh Supplemental Indenture.

(51) The Chalmette-Kaiser 230 KV Transmission Line in St. Bernard Parish. This single circuit, shielded, steel pole transmission line begins at the Chalmette 115/13.8 KV Substation located at Paris Road in Chalmette and extends in a generally southwesterly direction for a distance of approximately 2.3 miles to the Pakenham 230X115/13.8 KV Substation located approximately one mile southwesterly of Chalmette.

(52) The Columbia Tap 115 KV Transmission Line in Caldwell Parish. This single circuit, shielded, wood pole, H-frame transmission line begins at the Columbia 115/13.8 KV Substation located approximately one mile southwesterly of Columbia and extends in a westerly direction for a distance of approximately 4.5 miles to its intersection with the Sterlington-Standard 115 KV Transmission Line at a point located approximately twelve miles north of the Standard 115/13.8 KV Substation.

(53) The Holiday-Kaiser-Pakenham Substation 230 KV Transmission Tap Line in St. Bernard Parish. This single circuit, shielded, steel tower tap line commences at the Pakenham 230X115/13.8 KV




Substation located approximately one mile southwesterly of Chalmette and extends in a generally westerly direction for a distance of about one-fourth of a mile to its connection with the Holiday-Kaiser 115 KV Transmission Line described in Paragraph Four, Sub-Paragraph (8) of the Seventh Supplemental Indenture.

(54) Additions, improvements and replacements to the Houma-Bayou Boeuf 138 KV Transmission Line in Terrebonne and Assumption Parishes, described in Paragraph Four, Sub-Paragraph (12) of the Sixth Supplemental Indenture and in Paragraph Four, Sub-Paragraph (9) of the Ninth Supplemental Indenture, said transmission line now commencing at the Coteau (formerly called Houma) 138/115/34.5/13.8 KV Substation located northeast of Houma in Terrebonne Parish and extending in a generally westerly direction for approximately four miles of single circuit, shielded, H-frame, wood pole construction, thence in a generally southwesterly direction for approximately 0.3 miles of double circuit, shielded, steel tower construction to the Gibson 138/34.5/13.8 KV Substation located at U.S. Highway 90 approximately three miles easterly of the intersection of said Highway with Bayou Boeuf in Terrebonne Parish, thence in a generally westerly direction for approximately 24.38 miles of single circuit, shielded, H-frame, wood pole construction to Bayou Boeuf in Assumption Parish.

(55) The Kenner-New Orleans 230 KV Transmission Line in Jefferson Parish. This single circuit, shielded, steel-pole transmission line begins at the Kenner 115/13.8 KV Substation located in Kenner and extends in a generally easterly direction for a distance of approximately ten miles to the Orleans-Jefferson parish line, and includes the section of said transmission line described in Paragraph Four, Sub-Paragraph (7) of the Tenth Supplemental Indenture.

(56) Additions, improvements and replacements to the Little Gypsy-Lake Pontchartrain 230 KV Transmission Line in St. Charles Parish, described in Paragraph Four, Sub-Paragraph (12) of the Seventh Supplemental Indenture.

(57) The Luling Substation-Luling Junction 230 KV Transmission Line in St. Charles Parish. This triple circuit, shielded, steel tower transmission line begins at the Luling 115/13.8 KV Substation located approximately 1.5 miles southeasterly of Luling and extends in a generally westerly direction for a distance of approximately 1.6 miles to the Luling Junction located at or near Paul Mallard Road in Luling, and replaces a portion of the transmission line described in Paragraph Five, Sub-Paragraph (2) of the Third Supplemental Indenture.

(58) The McCall-Plaquemine 230 KV Transmission Line in Iberville Parish. This single circuit, shielded, steel pole transmission line begins at the McCall 115/13.8 KV Substation located approximately six miles westerly of Donaldsonville and two miles westerly of McCall and extends in a generally northwesterly direction for a distance of approximately 12.4 miles to its intersection with the Willow Glen-Bayou Plaquemine 500 KV Transmission Line at a point approximately four miles southerly of Plaquemine.

(59) The Midway-Jonesville 115 KV Transmission Line in LaSalle and Catahoula Parishes. This single circuit, shielded, wood pole, H-frame transmission line begins at the Midway 115/13.8 KV Substation located approximately one-tenth of a mile westerly of Jena in LaSalle Parish and extends in a generally southwesterly direction for a distance of approximately 21.5 miles to the Black River 115/13.8 KV Substation located in Jonesville, in Catahoula Parish.

(60) The Orleans Parish-Chalmette-Kaiser-Pakenham Substation 230 KV Transmission Tap Line in St. Bernard Parish. This single circuit, shielded, steel tower tap line begins at the Pakenham 230X115/13.8 KV Substation located approximately one mile southwesterly of Chalmette and extends in a generally westerly direction for a distance of approximately one-fourth of a mile to its connection with the Orleans Parish-




Chalmette-Kaiser 115 KV Transmission Line described in Paragraph Five, Sub-Paragraph (4) of the Third Supplemental Indenture.

(61) The Ponchatoula-Madisonville 230 KV Transmission Line in Tangipahoa and St. Tammany Parishes. This single circuit, shielded, part steel pole and part guyed aluminum tower transmission line begins at the Ponchatoula 115/24 KV Substation located approximately one-half mile easterly of Ponchatoula in Tangipahoa Parish and extends in a generally easterly direction for a distance of approximately 18.7 miles to a substation of Central Louisiana Electric Company, Inc. located near Madisonville in St. Tammany Parish.

(62) The St. Maurice-Montgomery 115 KV Transmission Line in Winn and Grant Parishes. This single circuit, shielded, wood pole, H-frame transmission line begins at its intersection with the Winnfield-Station “D” 115 KV Transmission Line described in Paragraph Five, Sub-Paragraph (9) of the First Supplemental Indenture at a point located approximately one mile northeasterly of the Red River in Winn Parish and extends in a generally southeasterly direction for a distance of approximately 6.3 miles to the site of the proposed Montgomery 115/13.8 KV Substation located approximately three miles north of Montgomery in Grant Parish.

(63) The Sarepta-Arkansas State Line section of the Shreveport-Sarepta-Eldorado 345 KV Transmission Line in Webster Parish. This single circuit, shielded, aluminum tower section of transmission line begins just northerly of the Sarepta 138/115/34.5/13.8 KV Substation located north of Sarepta, at the northeasterly terminus of the Sarepta-Bayou Bodcau section of said transmission line described in Paragraph Four, Sub-Paragraph (18) of the Tenth Supplemental Indenture, and extends in a generally northeasterly direction for a distance of approximately 13.8 miles to the Arkansas state line, said section of said transmission line together with said Sarepta-Bayou Bodcau section of said transmission line constituting all of that part of the Shreveport-Sarepta-Eldorado 345 KV Transmission Line to be owned by the Company.

(64) The Slidell-Pearl River 230 KV Transmission Line in St. Tammany Parish. This single circuit, shielded, part steel pole and part guyed aluminum tower transmission line begins at the Slidell 230/34.5 KV Substation located in Slidell and extends in a generally northeasterly direction for a distance of approximately 6.2 miles to a junction with an electric transmission line of Mississippi Power Company at the Louisiana-Mississippi state line in the middle of the East Pearl River Crossing, and replaces a portion of the transmission line described in Paragraph Five, Sub-Paragraph (16) of the Mortgage.

(65) Additions, improvements and replacements to the Taft-Luling 230 KV Transmission Line in St. Charles Parish, described in Paragraph Four, Sub-Paragraph (23) of the Ninth Supplemental Indenture.

(66) The Taft-Vacherie 230 KV Transmission Line in St. Charles, St. John and St. James Parishes. This single circuit, shielded, part steel tower and part steel pole transmission line begins at the Vacherie 230/13.8 KV Substation located approximately 1.5 miles southeasterly of Vacherie in St. James Parish and extends in a generally easterly direction for a distance of approximately 15.6 miles to the site of the proposed Waterford 500 KV Switching Station located near Taft in St. Charles Parish.

(67) The Vacherie-McCall 230 KV Transmission Line in St. James, Assumption and Ascension Parishes. This single circuit, shielded, part steel pole and part guyed aluminum tower transmission line begins at the Vacherie 230/13.8 KV Substation located approximately 1.5 miles southeasterly of Vacherie in St. James Parish and extends in a generally northwesterly direction for a distance of approximately 17.75 miles, thence in a generally northeasterly direction for a distance of approximately 3.1 miles to the Welcome 230/34.5/13.8 KV Substation located approximately 8 miles northwesterly of St. James in St. James Parish, thence in a generally southwesterly direction for a distance of approximately 3.1 miles, thence in a generally




northwesterly direction for a distance of approximately 3 miles to the Donaldsonville 230/34.5/13.8 KV Substation located just southerly of Donaldsonville in Ascension Parish.

(68) Additions, improvements and replacements to the Willow Glen-Bayou Plaquemine 500 KV Transmission Line in Iberville Parish, described in Paragraph Four, Sub-Paragraph (12) of the Eleventh Supplemental Indenture, now underbuilt with a single 230 KV circuit along that portion of said transmission line beginning at the West Bank dead-end structure of the Mississippi River crossing and extending in a generally westerly direction for a distance of approximately 7.1 miles to its intersection with the McCall-Plaquemine 230 KV Transmission Line.

PARAGRAPH FIVE
The Electric Submarine Cables of the Company, including the wires, cables, switch racks, conductors, conduits, transformers, substations, insulators and all appliances, devices and equipment used or useful in connection with said submarine cables, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof.
And also all extensions, replacements, branches, taps, developments and improvements of said submarine cables, or any of them, and all other submarine cables owned by the Company wherever situated whether now owned or hereafter acquired and/or constructed hereafter, as well as all of the Company’s rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SIX
The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company’s other property, real, personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all the Company’s rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under, or upon any public streets or highways, public or private lands, including all additions, improvements or replacements to all of the distribution systems located in the municipalities and parishes set forth in the Mortgage and in the First through Twelfth Supplemental Indentures and including the additional distribution systems situated in the State of Louisiana and located at, in, near, or in the vicinity of the municipalities and/or communities and parishes set forth below:




Name
Parish
Boothville
Plaquemines
Buras
Plaquemines
East Hodge
Jackson
Empire
Plaquemines
Nairn
Plaquemines
Port Sulphur
Plaquemines
Triumph
Plaquemines
Venice
Plaquemines

And also all branches, extensions, improvements and developments of or appertaining to or connected with said distribution lines, systems or any of them, and all other distributing systems of the Company and parts thereof, wherever situated, whether connected or not connected with any of the foregoing systems and whether now owned or hereafter acquired, as well as all of the Company’s rights-of-way, easements, privileges, prescriptions, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof or any part thereof, through, over, under or upon any public streets or highways or public or private lands, whether now owned or hereafter acquired, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SEVEN
The certain franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric systems in, on and under streets, alleys, highways, roads, and public grounds, areas and rights-of-way, and/or for the supply and sale of electricity, and all rights incident thereto, which were granted by the governing bodies of the respective municipalities, parishes and public authorities in the State of Louisiana, including, in addition to those described in the Mortgage and in the First through Twelfth Supplemental Indentures, those which are shown together with the expiration dates thereof in the following schedule:
MUNICIPAL ELECTRIC FRANCHISES
Municipality
Parish
Expiration
Clarks
Caldwell
April 11, 1993
East Hodge
Jackson
August 13, 1993
Heflin
Webster
April 16, 1993
North Hodge
Jackson
April 25, 1993
Shongaloo
Webster
December 26, 1992

PARISH ELECTRIC FRANCHISES
Parish
Expiration
Bienville
July 9, 2019
Lincoln
August 26, 2019
Plaquemines
October 19, 1979
Plaquemines
July 23, 2013
Plaquemines
July 7, 2014





Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric systems in, on or under streets, alleys, highways, roads, and public grounds, areas and rights-of-way, and/or for the supply and sale of electricity, and all rights incident thereto, subject, however, to the provisions. of Section 87 of the Mortgage.
All other property, real, personal and mixed, acquired by the Company after the date of the execution and delivery of the Mortgage, in addition to property covered by the First through Twelfth Supplemental Indentures (except any herein or in the Mortgage or in said First through Twelfth Supplemental Indentures expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Thirteenth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, race-ways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights-of-way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents, or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose, including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights-of-way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
Together with all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
It is hereby agreed by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), shall be and are as fully granted and conveyed hereby and as fully embraced within the lien hereof and the lien of the Mortgage, as if such property, rights and franchises were now owned by the Company and were specifically described herein and conveyed hereby.
Provided that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Thirteenth




Supplemental Indenture and from the lien and operation of the Mortgage, viz.: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; and (7) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto Charles F. Ruge (successor to Carl E. Buckley) and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association) (successor to The Chase National Bank of the City of New York), the Corporate Trustee, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as supplemented, this Thirteenth Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if the said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Mortgage, as follows:


ARTICLE I

Thirteenth Series of Bonds .

SECTION 1. There shall be a series of bonds designated “9⅜% Series due 1999” (herein sometimes referred to as the “Thirteenth Series”), each of which shall also bear the descriptive title First Mortgage Bond, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company,




shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Thirteenth Series shall mature on December 1, 1999, and shall be issued as fully registered bonds in denominations of One Thousand Dollars and in any multiple or multiples of One Thousand Dollars; they shall bear interest at the rate of nine and three-eighths per centum (9⅜% ) per annum, payable semi-annually on June 1 and December 1 of each year; the principal of and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts. Bonds of the Thirteenth Series shall be dated as in Section 10 of the Mortgage provided.

The Company reserves the right to establish, at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Thirteenth Series and to provide for exchangeability of such coupon bonds with the bonds of the Thirteenth Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose.
(I) Bonds of the Thirteenth Series shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed at least thirty (30) days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
GENERAL REDEMPTION PRICES
If redeemed during 12 months period ending November 30,
1970      110.64          1980      106.97          1990      103.31
1971      110.27          1981      106.61          1991      102.94
1972      109.91          1982      106.24          1992      102.57
1973      109.54          1983      105.87          1993      102.21
1974      109.17          1984      105.51          1994      101.84
1975      108.81          1985      105.14          1995      101.47
1976      108.44          1986      104.77          1996      101.11
1977      108.07          1987      104.41          1997      100.74
1978      107.71          1988      104.04          1998      100.37
1979      107.34          1989      103.67          1999      100.00
in each case, together with accrued interest to the date fixed for redemption; provided, however, that none of the bonds of the Thirteenth Series shall be redeemed at the general redemption prices prior to December 1, 1974 if such redemption is for the purpose or in anticipation of refunding such bond through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 9.3571% per annum.
(II) Bonds of the Thirteenth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 2 hereof or with the Proceeds of Released Property; provided, however, that in the case of application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 2 hereof, if the date fixed for such redemption shall be prior to January 1 of the calendar year in which such deposit of cash shall become due under the provisions of Section 2 hereof, they shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption; and provided further, that




(1) in the case of application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 2 hereof, if the date fixed for such redemption shall be on or after January 1 of the calendar year in which such deposit of cash shall become due under the provisions of Section 2 hereof, or

(2) in the case of redemption by the application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or with the Proceeds of Released Property,

they shall be redeemable at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 months period ending November 30,
1970      101.27          1980      101.13          1990      100.81
1971      101.26          1981      101.11          1991      100.76
1972      101.25          1982      101.09          1992      100.70
1973      101.24          1983      101.07          1993      100.64
1974      101.23          1984      101.04          1994      100.57
1975      101.21          1985      101.01          1995      100.50
1976      101.20          1986      100.97          1996      100.41
1977      101.19          1987      100.94          1997      100.33
1978      101.17          1988      100.90          1998      100.23
1979      101.15          1989      100.86          1999      100.00
in each case, together with accrued interest to the date fixed for redemption.
(III) At the option of the registered owner, any bonds of the Thirteenth Series, upon surrender thereof, for cancellation, at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.
Bonds of the Thirteenth Series shall be transferable, upon the surrender thereof, for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York. Upon any transfer or exchange of bonds of the Thirteenth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of the Thirteenth Series.






ARTICLE II

Sinking or Improvement FUnd for Bonds of the Thirteenth Series .

SECTION 2. The Company covenants that, so long as any of the bonds of the Thirteenth Series shall remain Outstanding, it will, on or before November 1, 1971, and on or before November 1 of each year thereafter, to and including the year 1999, deliver to the Corporate Trustee:
(A)      An Officers’ Certificate which shall state:
(a) the greatest principal amount of all bonds of the Thirteenth Series prior to January 1 of such year at any one time Outstanding;

(b) the aggregate principal amount of all bonds of the Thirteenth Series retired prior to the date of such Officers’ Certificate (i) pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property; or (ii) pursuant to the provisions of Section 64 of the Mortgage;

(c) the aggregate principal amount of bonds the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Thirteenth Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;

(d) the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;

(e) the amount which is one per centum (1% ) of the amount stated pursuant to clause (d) above; and

(f) an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Thirteenth Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise provided) if the Company elects to make its right to the authentication and delivery of such bond(s) or fraction of a bond the basis of a credit under this Section.

(B)      An amount in cash and/or principal amount of bonds of the Thirteenth Series equivalent to the amount stated in the Officers’ Certificate (due on or before November 1 of such year) provided for by this Section pursuant to the requirements of clause (e) of subdivision (A) of this Section; provided, however, that, against the amount of cash or bonds payable or deliverable pursuant to this subdivision (B), there shall be credited the principal amount of the bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.
For the purpose of subdivision (A) of this Section the term “Outstanding” shall not include bonds of the Thirteenth Series pledged to secure indebtedness of the Company and not at any time otherwise issued by the Company.




Such cash together with any bonds delivered to the Corporate Trustee under the provisions of this Section shall be dealt with as provided for by this Section.
Notwithstanding any other provisions of this Thirteenth Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on November 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the Thirteenth Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on November 1 of the then current year or of a subsequent year, may be from time to time withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivisions (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Thirteenth Series shall be made the basis of the withdrawal of cash deposited under this Section and, provided further that no bonds of any series other than the Thirteenth Series shall be purchased, paid or redeemed, as above provided, with cash deposited under the provisions of this Section and that no bonds of the Thirteenth Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date forty (40) days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost) and, provided further, that the Company may not deposit cash prior to December 1, 1974, in anticipation of the requirements of this Section, if the cash so deposited represents borrowed funds, or is in anticipation of funds to be borrowed, having an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 9.3571% per annum.
In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions of the Mortgage relating to such authentication and delivery; except that the Company shall not be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 28 of the Mortgage.
So long as any bonds of the Thirteenth Series shall remain Outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under the Mortgage.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Thirteenth Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I)      any cash deposited under the provisions of this Section or Section 40 of the Mortgage or Section 2 of the First through Eleventh Supplemental Indentures shall be deemed to be Funded Cash;
(II)      any bonds of the Thirteenth Series delivered to the Corporate Trustee pursuant to the provisions of this Section or any bonds of the Second through Twelfth Series delivered to the Corporate Trustee pursuant to the provisions of Section 2 of the First through Eleventh Supplemental Indentures or any bonds of the First Series delivered to the Corporate Trustee or credited pursuant to the provisions of




Section 40 of the Mortgage, shall, after such delivery or crediting, be deemed to have been retired by the use of Funded Cash; and
(III )      with respect to all credits taken under this Section or Section 2 of the First through Eleventh Supplemental Indentures on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that (in lieu of such credits being so taken) an amount of cash equal to each such credit was deposited pursuant to the provisions of this Section or of said Section 2 of the First through Eleventh Supplemental Indentures, as the case may be, and concurrently with such deposit was withdrawn on the same basis as that on which such credit was taken.
Any bonds issued under the Mortgage, delivered to, deposited with or purchased or redeemed by, the Corporate Trustee pursuant to the provisions of this Section, shall forthwith be canceled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA)      the aggregate cost for principal, interest, brokerage and premium, if any, on all bonds theretofore, or then to be, purchased and/or redeemed pursuant to the provisions of this Section;
after deducting therefrom
(BB)      the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.


ARTICLE III

Dividend Covenant .

SECTION 3. The Company covenants that, so long as any of the bonds of the Thirteenth Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to November 30, 1969 (other than any dividend declared by the Company on or before November 30, 1969 for payment on or before December 31, 1969) exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from earned surplus to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to November 30, 1969 to earned surplus, (b) $14,500,000, and (c) such additional amounts as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.




For the purpose of this Section 3 the aggregate amount credited subsequent to November 30, 1969 to earned surplus shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to earned surplus applicable to the period prior to December 1, 1969, including, but not limited to, charges to earned surplus for write-offs or write-downs of book values of assets owned by the Company on November 30, 1969. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to November 30, 1969, amounts equal to the sum of (1) amounts, not otherwise deducted, which would be required to be included in operating expenses in each Net Earning Certificate by the provisions of Section 5 of this Thirteenth Supplemental Indenture and (2) the Company’s provisions during such period for depreciation and retirement of property (but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this Section 3, shall not be less than the aggregate amounts required to be stated for the period from December 1, 1969 to the date of such dividend, distribution, purchase or acquisition in the Officers’ Certificate of Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 of the Mortgage, including proportionate amounts calculated as provided in subdivision (1) thereof for any portion of the period elapsed since November 30, 1969 not theretofore included in any Officers’ Certificate of Replacements.
For the purpose of this Section 3, the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the accumulated provision for depreciation account through charges to operating expenses, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Power Commission.


ARTICLE IV

Miscellaneous Provisions .

SECTION 4. Subject to the amendments provided for in this Thirteenth Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Thirteenth Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.

SECTION 5. The Company reserves the right, without any consent or other action by holders of bonds of the Thirteenth Series or of any subsequently created series, to amend the Mortgage, as supplemented, as follows:

(A)      By inserting the following provision at the end of Section 4(I):
“Anything in this Indenture to the contrary notwithstanding, the term ‘Property Additions’ shall include Nuclear Fuel.
The term ‘Nuclear Fuel’ shall mean (a) any fuel element, including nuclear fuel and associated means (and any similar or analogous device or substance), whether or not classified as fuel and whether or not chargeable to operating expenses, comprising or intended to comprise, or formerly comprising, the core, or other part, of a nuclear reactor or any similar or analogous device, (b) any fuel element, including nuclear fuel and associated means (and any similar or analogous device or substance) while in the process of fabrication or preparation and special nuclear or other materials held for use in such fabrication or preparation, (c) any substances or materials formerly comprising such nuclear fuel and associated means (or any similar or analogous device or substance) and which substances or materials




are undergoing or have undergone reprocessing and (d) uranium, thorium, plutonium, and any other substance or material from time to time used or selected for use by the Company as fuel material, or as potential fuel material, in a nuclear reactor or any similar or analogous device.”
(B)      By inserting the following provision at the end of the first paragraph of Section 6:
“The term ‘Excepted Encumbrances’ shall also include as of any particular time any controls, liens, restrictions, regulations, easements, exceptions or reservations of any governmental authority applying particularly to Nuclear Fuel.”
(C)      By inserting the following provision at the end of Section 58:
“Anything in this Indenture to the contrary notwithstanding, unless the Company is in default in the payment of the interest on any of the bonds then Outstanding hereunder or one or more of the Defaults defined in Section 65 hereof shall have occurred and be continuing, the Company may at any time and from time to time, without any release or consent by, or report to, the Trustees or either of them, sell or otherwise dispose of, free from the Lien of this Indenture, any Nuclear Fuel which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable, undesirable or unnecessary for use in the operations of the Company upon replacing the same by, or substituting for the same, other Nuclear Fuel of at least equal value to that of the Nuclear Fuel sold or otherwise disposed of and subject to the Lien hereof subject to no liens prior hereto except liens to which the Nuclear Fuel sold or otherwise disposed of was subject.”
SECTION 6. So long as any bonds of the Thirteenth Series shall remain Outstanding, in each Net Earning Certificate made pursuant to Section 7 of the Mortgage, there shall be included in operating expenses for the twelve (12) months period with respect to which such certificate is made, an amount, if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period.

SECTION 7. So long as any bonds of the Thirteenth Series are Outstanding, subdivision (2) of Section 7 of the Mortgage is hereby amended by adding thereto the following words “provided, further, that the amount so included in such operating expenses in lieu of the amounts actually appropriated out of income for retirement of the Mortgaged and Pledged Property used primarily and principally in the electric, gas, steam and/or hot water utility business and the Company’s automotive equipment used in the operation of such property shall not be less than the amounts so actually appropriated out of income”.

SECTION 8. So long as any bonds of the Thirteenth Series shall remain Outstanding, clause (5) of subsection (I) of Section 39 of the Mortgage shall be amended by deleting the word “expenditures” from the first line of such clause (5) and inserting in lieu thereof the words “net cash expenditures (after reflecting salvage) made”.

SECTION 9. Section 55 of the Mortgage, as heretofore amended, is hereby further amended to insert the words “and subject to the provisions of Section 2 of the Thirteenth Supplemental Indenture dated as of December 1, 1969”, after the date “March 1, 1968”.

SECTION 10. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore amended, set forth and upon the following terms and conditions:





The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Thirteenth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Thirteenth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Thirteenth Supplemental Indenture.
SECTION 11. Whenever in this Thirteenth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Thirteenth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

SECTION 12. Nothing in this Thirteenth Supplemental Indenture, ex-pressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Thirteenth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Thirteenth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and coupons Outstanding under the Mortgage.

SECTION 13. It is the intention and it is hereby agreed that so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana the general language of conveyance contained in this Thirteenth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that so far as the said Louisiana property is concerned, this Thirteenth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

SECTION 14. This Thirteenth Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

IN WITNESS WHEREOF LOUISIANA POWER & LIGHT COMPANY, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and The Chase Manhattan Bank (National Association), one of the parties hereto of the second part, in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and Charles F. Ruge, one of the parties hereto of the second part, for all like purposes has hereunto set his hand and affixed his seal, all in The City of New York, as of December 1, 1969.





Louisiana Power & Light Company,
By:   /s/ E.A. Rodrigue          
          (E.A. Rodrigue)
Senior Vice President

[CORPORATE SEAL]

Attest:
 /s/ J.H. Erwin, Jr.     
(J.H. Erwin, Jr.)
Assistant Secretary


Executed, sealed and delivered by Louisiana
Power & Light Company in the presence of:


  /s/ Robert C. Mangone      
(Robert C. Mangone)

  /s/ John M. Stuart      
(John M. Stuart)






The Chase Manhattan Bank
(National Association), as Trustee

By:   /s/ E.L. Loser     
            (E.L. Loser)
Vice President

[CORPORATE SEAL]

Attest:
 /s/ A.R. Bohm     
 (A.R. Bohm)
Assistant Secretary


Executed, sealed and delivered by The Chase
Manhattan Bank (National Association)
in the presence of:

 /s/  A. Delgrosso      
 (A. Delgrosso)

 /s/  D.O. Edwards      
 (D.O. Edwards)

   /s/  Charles F. Ruge              [L.S.]
    (Charles F. Ruge)
               As Trustee

Executed, sealed and delivered by Charles F.
Ruge in the presence of:

  /s/  A. Delgrosso      
 (A. Delgrosso)


  /s/  D.O. Edwards      
(D.O. Edwards)





STATE OF NEW YORK      )
)ss.:
COUNTY OF NEW YORK      )


On this 1st day of December, 1969, before me appeared E.A. RODRIGUE, to me personally known, who, being by me duly sworn, did say that he is the Senior Vice President of LOUISIANA POWER & LIGHT COMPANY, and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said E.A. RODRIGUE acknowledged said instrument to be the free act and deed of said corporation.
On the 1st day of December, in the year 1969, before me personally came E.A. RODRIGUE, to me known, who, being by me duly sworn, did depose and say that he resides at No. 109 Imperial Woods Drive, Harahan, State of Louisiana; that he is the Senior Vice President of LOUISIANA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARY’S SEAL]
 /s/ Morton Barad     
      Morton Barad
Notary Public, State of New York
No. 41-5170980
Qualified in Queen County
Certs. filed in Bronx, Kings, Nassau New York and Westchester Cos.
Commission Expires March 30, 1970





STATE OF NEW YORK      )
)ss.:
COUNTY OF NEW YORK      )


On this 1st day of December, 1969, before me appeared E.L. LOSER, to me personally known, who, being by me duly sworn, did say that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said E.L. LOSER acknowledged said instrument to be the free act and deed of said corporation.
On the 1st day of December, in the year 1969, before me personally came E.L. LOSER, to me known, who, being by me duly sworn, did depose and say that he resides at 141-19 Coolidge Avenue, Jamaica, New York; that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARY’S SEAL]
 /s/ Pauline Chaplik     
      Pauline Chaplik
Notary Public, State of New York
No. 24-5669900
Qualified in Kings County
Certificate filed with New York Co. Clerk
Commission Expires March 30, 1970






STATE OF NEW YORK      )
)ss.:
COUNTY OF NEW YORK      )


On this 1st day of December, 1969, before me personally appeared CHARLES F. RUGE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 1st day of December, 1969, before me personally came CHARLES F. RUGE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.
[NOTARY’S SEAL]
 /s/ Pauline Chaplik     
      Pauline Chaplik
Notary Public, State of New York
No. 24-5669900
Qualified in Kings County
Certificate filed with New York Co. Clerk
Commission Expires March 30, 1970






SUMMARY OF RECORDATION DATA
Parish
Date Filed
Entry Or File Number
Mortgage Book
Folio
Ascension
December 3, 1969
103032
182
398
Assumption
December 3, 1969
91890
94
123
Avoyelles
December 3, 1969
234012
29
376
Bienville
December 4, 1969
U-66
117
225
Bossier
December 4, 1969
221529
244
271
Caldwell
December 4, 1969
122958
66
540
Catahoula
December 4, 1969
125281
72
531
Claiborne
December 4, 1969
251773
98
66
Concordia
December 4, 1969
108646
25
659
East Carroll
December 4, 1969
34518
96
837
East Feliciana
December 3, 1969
59716
50
118
Franklin
December 4, 1969
183092
90
617
Grant
December 4, 1969
26986
83
103
Iberville
December 3, 1969
397
108
327
Jackson
December 4, 1969
200008
*GG
113
Jefferson
December 3, 1969
475583
**6
99
Lafourche
December 3, 1969
316457
177
403
LaSalle
December 4, 1969
84237
73
551
Lincoln
December 4, 1969
C-68850
79
60
Livingston
December 3, 1969
74417
***29
774
Madison
December 4, 1969
36694
31
611
Morehouse
December 4, 1969
32850
206
1
Natchitoches
December 4, 1969
M-A-2008
299A
220
Orleans
December 3, 1969
0
2151A
229
Ouachita
December 4, 1969
615889
710
172
Plaquemines
December 3, 1969
237
63
265
Rapides
December 4, 1969
569756
648
498
Red River
December 4, 1969
117685
64
595
Richland
December 4, 1969
203109
162
264
Sabine
December 4, 1969
206890
84
480
St. Bernard
December 3, 1969
97195
99
399
St. Charles
December 3, 1969
34156
137
55
St. Helena
December 3, 1969
16283
61
1
St. James
December 3, 1969
31407
70
80
St. John the Baptist
December 3, 1969
37694
28
539
St. Martin
December 3, 1969
73175
195
121
St. Tammany
December 3, 1969
266850
400
297
Tangipahoa
December 3, 1969
173822
***61
605
Tensas
December 4, 1969
84306
10
670
Terrebonne
December 4, 1969
372609
309
779
Union
December 4, 1969
146461
84
300
Vernon
December 4, 1969
287525
377
592
Washington
December 3, 1969
28018
225
34
Webster
December 4, 1969
220833
174
723
West Carroll
December 4, 1969
138076
74
669
Winn
December 4, 1969
78644
77
15




* Special Mortgage Book.
**Bond Mortgage Book.
***Amortization Mortgage Book.





 
Exhibit 4(d)1
LOUISIANA POWER & LIGHT COMPANY
to
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(successor to The Chase National Bank of the City of New York)
and
CHARLES F. RUGE
(successor to Carl E. Buckley),
As Trustees under Louisiana Power &
Light Company’s Mortgage and Deed
of Trust, dated as of April 1, 1944


Twenty-fifth Supplemental Indenture
Providing among other things for
First Mortgage Bonds, 10% Series due July 1, 2008
(Twenty-fourth Series)


Dated as of July 1, 1978

 







TWENTY-FIFTH SUPPLEMENTAL INDENTURE
INDENTURE , dated as of July 1, 1978, between LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Louisiana (successor by merger to Louisiana Power & Light Company, a corporation of the State of Florida), whose post office address is 142 Delaronde Street, New Orleans, Louisiana 70174 (hereinafter sometimes called the “Company”), and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association existing under the laws of the United States of America (successor to The Chase National Bank of the City of New York), whose principal corporate trust office is located at 1 New York Plaza, New York, New York 10015 (hereinafter sometimes called the “Corporate Trustee”), and CHARLES F. RUGE (successor to Carl E. Buckley), whose post office address is 80 Michael Street, Iselin, New Jersey 08830 (said Charles F. Ruge being hereinafter sometimes called the “Co-Trustee” and the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of April 1, 1944 (hereinafter called the “Mortgage”), which Mortgage was executed and delivered by Louisiana Power & Light Company, a corporation of the State of Florida (hereinafter sometimes called the “Florida Company”), to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this Indenture (hereinafter called the “Twenty-fifth Supplemental Indenture”) being supplemental thereto;
WHEREAS, the Mortgage was recorded in various Parishes in the State of Louisiana, which Parishes are the same Parishes in which this Twenty-fifth Supplemental Indenture is to be recorded; and
WHEREAS, by the Mortgage, the Florida Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
WHEREAS, the Florida Company executed and delivered to the Trustees the following supplemental indentures:




Designation
Dated as of
First Supplemental Indenture
March 1, 1948
Second Supplemental Indenture
November 1, 1950
Third Supplemental Indenture
September 1, 1953
Fourth Supplemental Indenture
October 1, 1954
Fifth Supplemental Indenture
January 1, 1957
Sixth Supplemental Indenture
April 1, 1960
Seventh Supplemental Indenture
June 1, 1964
Eighth Supplemental Indenture
March 1, 1966
Ninth Supplemental Indenture
February 1, 1967
Tenth Supplemental Indenture
September 1, 1967
Eleventh Supplemental Indenture
March 1, 1968
Twelfth Supplemental Indenture
June 1, 1969
Thirteenth Supplemental Indenture
December 1, 1969
Fourteenth Supplemental Indenture
November 1, 1970
Fifteenth Supplemental Indenture
April 1, 1971
Sixteenth Supplemental Indenture
January 1, 1972
Seventeenth Supplemental Indenture
November 1, 1972
Eighteenth Supplemental Indenture
June 1, 1973
Nineteenth Supplemental Indenture
March 1, 1974
Twentieth Supplemental Indenture
November 1, 1974

which supplemental indentures were recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Florida Company was merged into the Company on February 28, 1975, and the Company thereupon executed and delivered to the Trustees a Twenty-first Supplemental Indenture, dated as of March 1, 1975, pursuant to which the Company, among other things, assumed and agreed duly and punctually to pay the principal of and interest on the bonds at the time issued and outstanding under the Mortgage, as then supplemented, in accordance with the provisions of said bonds and of any appurtenant coupons and of the Mortgage as so supplemented, and duly and punctually to observe, perform and fulfill all of the covenants and conditions of the Mortgage, as so supplemented, to be kept or performed by the Florida Company, and said Twenty-first Supplemental Indenture was recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Company has succeeded to and has been substituted for the Florida Company under the Mortgage with the same effect as if it had been named as mortgagor corporation therein; and
WHEREAS, the Company executed and delivered to the Trustees the following supplemental indentures:
Designation                      Dated as of
Twenty-second Supplemental Indenture.      September 1, 1975
Twenty-third Supplemental Indenture…      December 1, 1976

which supplemental indentures were recorded in various Parishes in the State of Louisiana; and




WHEREAS, the Company executed and delivered to the Trustees a Twenty-fourth Supplemental Indenture, dated as of January 1, 1978, which was recorded in various Parishes in the State of Louisiana as follows:




Parish
Date Filed
Entry or
File Number
Mortgage Book
Folio
Ascension
January 30, 1978
155855
257
620
Assumption
January 30, 1978
124473
116
424
Avoyelles
January 30, 1978
290790
*41
674
Bienville
January 31, 1978
X-8632
143
472
Bossier
January 30, 1978
308356
361
770
Caldwell
January 31, 1978
138700
90
42
Catahoula
January 31, 1978
160151
96
142
Claiborne
January 31, 1978
283890
121
542
Concordia
January 31, 1978
137783
98
505
East Carroll
January 31, 1978
46729
122
840
East Feliciana
January 30, 1978
80875
67
187
Franklin
January 30, 1978
209331
136
207
Grant
January 31, 1978
33921
102
675
Iberville
January 30, 1978
22
150
141
Jackson
January 31, 1978
238882
*00
628
Jefferson
January 30, 1978
807166
**6
571
Lafourche
January 30, 1978
463930
311
564
LaSalle
January 31, 1978
103850
99
623
Lincoln
January 31, 1978
D-10867
129
271
Livingston
January 30, 1978
135047
147
765
Madison
January 30, 1978
53407
49
377
Morehouse
January 31, 1978
47895
274
718
Natchitoches
January 31, 1978
M-A-3087
364A
509
Orleans
January 31, 1978
+273934
2310-A
51
Ouachita
January 30, 1978
759713
887
430
Plaquemines
January 30, 1978
127
94
1014
Rapides
January 31, 1978
680903
815
212
Red River
January 31, 1978
135953
82
552
Richland
January 30, 1978
226943
198
677
Sabine
January 31, 1978
238648
119
586
St. Bernard
January 30, 1978
153438
151
770
St. Charles
January 30, 1978
59055
230
240
St. Helena
January 30, 1978
33438
94
398
St. James
January 30, 1978
47745
97
208
St. John the Baptist
January 30, 1978
60811
78
336
St. Martin
January 30, 1978
90783
251
254
St. Tammany
January 30, 1978
381673
673
54
Tangipahoa
January 30, 1978
248006
301
917
Tensas
January 30, 1978
107151
29
357
Terrebonne
January 30, 1978
557067
460
768
Union
January 30, 1978
179319
118
528
Vernon
January 31, 1978
356549
494
1
Washington
January 30, 1978
76336
287
55
Webster
January 30, 1978
269545
227
284
West Carroll
January 31, 1978
154294
103
418
Winn
January 31, 1978
102875
99
611
______________




* Special Mortgage Book
** Bond Mortgage Book
+Notarial Archives Number

;and

WHEREAS, in addition to the property described in the Mortgage, as supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Florida Company or the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage. Bonds:
Series
Principal Amount Issued
Principal Amount Outstanding
3 % Series due 1974
$17,000,000
None
3⅛% Series due 1978
$10,000,000
None
3 % Series due 1980
$10,000,000
$9,900,000
4 % Series due 1983
$12,000,000
None
3⅛/% Series due 1984
$18,000,000
$18,000,000
4 ¾% Series due 1987
$20,000,000
$20,000,000
5 % Series due 1990
$20,000,000
$20,000,000
4 ⅝% Series due 1994
$25,000,000
$25,000,000
5 ¾% Series due 1996
$35,000,000
$35,000,000
5 ⅝% Series due 1997
$16,000,000
$16,000,000
6 ½% Series due September 1, 1997
$18,000,000
$18,000,000
7 ⅛% Series due 1998
$35,000,000
$35,000,000
9 ⅜% Series due 1999
$25,000,000
$25,000,000
9 ⅜% Series due 2000
$20,000,000
$20,000,000
7 ⅞% Series due 2001
$25,000,000
$25,000,000
7 ½% Series due 2002
$25,000,000
$25,000,000
7 ½% Series due November 1, 2002
$25,000,000
$25,000,000
8 % Series due 2003
$45,000,000
$45,000,000
8 ¾% Series due 2004
$45,000,000
$45,000,000
9 ½% Series due November 1, 1981
$50,000,000
$50,000,000
9 ⅜% Series due September 1, 1983
$50,000,000
$50,000,000
8 ¾% Series due December 1, 2006
$40,000,000
$40,000,000
9 % Series due January 1, 1986
$75,000,000
$75,000,000

which bonds are also hereinafter sometimes called bonds of the First through Twenty-third Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and




WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restrictions if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein, or in any supplemental indenture, or may establish the terms and provisions of any series of bonds (other than the First Series) by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
WHEREAS, the execution and delivery by the Company of this Twenty-fifth Supplemental Indenture, and the terms of the bonds of the Twenty-fourth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
Now, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment both of the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto Charles F. Ruge and ( to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association), as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all of the property now owned by the Company and specifically described in the Mortgage, as supplemented, and all the following described properties of the Company, whether now owned or hereafter acquired, namely:
PARAGRAPH ONE
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipe lines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, equipment and appurtenances, forming a part of said plants, sites or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:
JEFFERSON PARISH
(1) Additions, improvements and replacements to the Ninemile Point Steam Electric Generating Station, and the 13.8/115 KV, 18/115 KV and 22/230 KV Step-Up Substations and 230 KV and 115




KV Substations in connection therewith, including switchyards and electric lines associated therewith, located at Ninemile Point, Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph One, Sub-Paragraph (3) of the Second Supplemental Indenture and in Paragraph One, Sub-Paragraph (2) of the Third Supplemental Indenture.

OUACHITA PARISH
(2) Additions, improvements and replacements to the Sterlington Steam Electric Generating Station, and the 18/115 KV, the 13.2/115 KV and the 13.8/115 KV Step-Up Substations and the 115 KV and the 115/13.8/34.5 KV Substations in connection therewith, including switchyards and electric lines associated therewith, located in Sterlington, Ouachita Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph One, Sub-Paragraph (5) of the Mortgage, Paragraph One, Sub-Paragraph (1) of the Sixth Supplemental Indenture, Paragraph One, Sub-Paragraph (2) of the Eighth Supplemental Indenture and Paragraph One, Sub-Paragraph (2) of the Tenth Supplemental Indenture.

ST. CHARLES PARISH
(3) Additions, improvements and replacements to the Little Gypsy Steam Electric Generating Station, and the 24/230 KV and the two 22/115 KV Step-Up Substations and the 115 KV, 230 KV and 500 KV Substations in connection therewith, including switchyards and electric lines associated therewith, located at or near Montz in St. Charles Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Three, Sub-Paragraphs (13), (14), (15), (16) and (17) of the Sixth Supplemental Indenture and in Paragraph One, Sub-Paragraph (1) of the Seventh Supplemental Indenture.

(4) Additions, improvements and replacements to the Waterford Steam Electric Generating Station, and the 230 KV Substation in connection therewith, including switchyards and electric lines associated therewith, located at or near Taft and Killona in St. Charles Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Five, Sub-Paragraph (2)(a) and ( b) of the Mortgage, in Paragraph Three, Sub-Paragraphs (16) and (17) of the Seventh Supplemental Indenture, and in Paragraph Three, Sub-Paragraph (7) of the Sixteenth Supplemental Indenture.

PARAGRAPH TWO
The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations or UHF-VHF installations, or any of them, or used or enjoyed or capable of being used or enjoyed in conjunction with any of them, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:
JEFFERSON PARISH
1. Additions, improvements and replacements to the Snake Farm 230/115/13.8 KV Substation, located on a site fronting on the New Orleans-Baton Rouge Airline Highway near David Drive in Jefferson Parish, situated on/and those certain tracts or parcels of land particularly described in




Paragraph Four, Sub-Paragraph (1) of the First Supplemental Indenture and in Paragraph Three, Sub-Paragraph (15) of the Second Supplemental Indenture.

ST. CHARLES PARISH
2. Additions, improvements and replacements to the Paradis 115/13.8KV Substation, located approximately two miles southeasterly of Paradis in St. Charles Parish, situated on land owned by others.
ST. JAMES PARISH
3. Additions, improvements and replacements to the Welcome 230/34.5/13.8 KV Substation, located approximately 8 miles northwesterly of St. James in St. James Parish, situated on/and those certain tracts or parcels of land particularly described in Paragraph Two, Sub-Paragraph (23) of the Thirteenth Supplemental Indenture.

ST. TAMMANY PARISH
4. Additions, improvements and replacements to the Slidell 230/34.5 KV Substation, located in Slidell, St. Tammany Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (33) of the First Supplemental Indenture.

PARAGRAPH THREE
All and Singular the Miscellaneous Lands and Real Estate or Rights and Interests Therein of the Company now owned, or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired during the existence of this trust.
PARAGRAPH FOUR
The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, pole type substations, insulators and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the State of Louisiana, to-wit:
1. Additions, improvements and replacements to the Little Gypsy-Snake Farm 230 KV Transmission Line in Jefferson and St. Charles Parishes, described in Paragraph Four, Sub-Paragraph (10) of the Tenth Supplemental Indenture, said additions, improvements and replacements including a slight re-routing of a portion of the segment thereof paralleling for approximately 3.28 miles the New Orleans-Baton Rouge Airline Highway, northwesterly of the Norco 115/13.8 KV Substation located at Norco in St. Charles Parish, said re-routed portion being located approximately 1¾ miles northwesterly of said Substation, to go into and out of the customer-owned 115 KV substation of Big Three Industries, Inc. located on its plant site fronting on said Highway.

2. The Thibodaux-Terrebonne 230 KV Transmission Line in Lafourche and Terrebonne Parishes (less the unbuilt portion thereof, being the portion intended to extend from the Thibodaux 115/34.5/13.8 KV Substation, located just northerly of Thibodaux in Lafourche Parish, in a generally




westerly direction for a distance of approximately 1½ miles to a point along Parish Road in Lafourche Parish), presently being operated at 34.5 KV. This single circuit, shielded transmission line, mostly of single steel pole construction but partly of steel pole H-frame construction, presently begins at the above-mentioned point along Parish Road in Lafourche Parish and extends in a generally southeasterly direction for a distance of approximately 14 miles to the Terrebonne 138/34.5/13.8 KV Substation, located approximately 4¼ miles northwesterly of Houma in Terrebonne Parish.

PARAGRAPH FIVE
The Electric Submarine Cables of the Company, including the wires, cables, switch racks, conductors, conduits, transformers, substations, insulators and all appliances, devices and equipment used or useful in connection with said submarine cables, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof.
And also all extensions, replacements, branches, taps, developments and improvements of said submarine cables, or any of them, and all other submarine cables owned by the Company wherever situated whether now owned or hereafter acquired and/or constructed, as well as all of the Company’s rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SIX
The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company’s other property, real, personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all of the Company’s rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under, or upon any public streets or highways, public or private lands, including all additions, improvements or replacements to all of the distribution systems located in the municipalities and parishes set forth in the Mortgage and in the First through Twenty-fourth Supplemental Indentures and including the additional distribution systems and parts and portions of distribution systems situated in the State of Louisiana and located at, in, near, or in the vicinity of the municipalities and/or communities and parishes set forth below:
Name                      Parish
Homer                      Claiborne
Monroe                  Ouachita

And also all branches, extensions, improvements and developments of or appertaining to or connected with said distribution lines, systems or any of them, and all other distributing systems of the Company and parts and portions thereof, wherever situated, whether connected or not connected with any of the foregoing systems and whether now owned or hereafter acquired, as well as all of the Company’s rights-of-way, easements, privileges, prescriptions, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof or any part or portion thereof, through, over, under or upon any public streets or highways or public or private lands, whether now owned or hereafter acquired, subject, however, to the provisions of Section 87 of the Mortgage.




PARAGRAPH SEVEN
The certain franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric systems in, on and under streets, alleys, highways, roads, and public grounds, areas and rights-of-way, and/or for the supply and sale of electricity, and all rights incident thereto, which were granted by the governing bodies of the respective municipalities, parishes and public authorities in the State of Louisiana, including, in addition to those described in the Mortgage and in the First through Twenty-fourth Supplemental Indentures, those which are shown together with the expiration dates thereof in the following schedule:
MUNICIPAL ELECTRIC FRANCHISES
Municipality
Parish
Expiration
Arcadia
Bienville
January 10, 2003
Chatham
Jackson
February 7, 2003
Homer
Claiborne
January 7, 2003
Monroe
Ouachita
Indefinite
Mound
Madison
January 24, 2003
Napoleonville
Assumption
December 12, 2002
Sikes
Winn
February 18, 2003

Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric systems in, on or under streets, alleys, highways, roads, and public grounds, areas and rights-of-way and/or for the supply and sale of electricity, and all rights incident thereto, subject, however, to the provisions of Section 87 of the Mortgage.
All other property, real, personal and mixed, acquired by the Company after the date of the execution and delivery of the Mortgage, in addition to property covered by the First through Twenty-fourth Supplemental Indentures (except any herein or in the Mortgage or in said Supplemental Indentures expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Twenty-fifth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts and all other rights or means for appropriating, conveying, storing and supplying water; all rights-of-way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents, or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose, including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights-of-way and other rights in or




relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), shall be and are as fully granted and conveyed hereby and as fully embraced within the lien hereof and the lien of the Mortgage, as if such property, rights and franchises were now owned by the Company and were specifically described herein and conveyed hereby.
PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Twenty-fifth Supplemental Indenture and from the lien and operation of the Mortgage, namely: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2 ) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; and (7) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
To HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto Charles F. Ruge and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association), as Trustees, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as supplemented, this Twenty-fifth Supplemental Indenture being supplemental thereto.




AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Mortgage as follows:


ARTICLE I

TWENTY-FOURTH SERIES OF BONDS

Section 1. There shall be a series of bonds designated “10% Series due July 1, 2008” (herein sometimes referred to as the “Twenty-fourth Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Twenty-fourth Series (which shall be initially issued in the aggregate principal amount of $60,000,000) shall be dated as in Section 10 of the Mortgage provided, shall mature on July 1, 2008, shall be issued as fully registered bonds in denominations of One Thousand Dollars and in any multiple or multiples of One Thousand Dollars, and shall bear interest at the rate of 10% per annum, payable semi-annually on January 1 and July 1 of each year, the principal of and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.

The Company reserves the right to establish, at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Twenty-fourth Series and to provide for exchangeability of such coupon bonds with the bonds of said Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose.
(I) Bonds of the Twenty-fourth Series shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed at least 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:




GENERAL REDEMPTION PRICES
If redeemed during 12 months period ending June 30,
1979
110.25%
1989
106.72%
1999
103.19%
1980
109.90%
1990
106.37%
2000
102.83%
1981
109.55%
1991
106.01%
2001
102.48%
1982
109.19%
1992
105.66%
2002
102.13%
1983
108.84%
1993
105.31%
2003
101.77%
1984
108.49%
1994
104.95%
2004
101.42%
1985
108.13%
1995
104.60%
2005
101.07%
1986
107.78%
1996
104.25%
2006
100.71%
1987
107.43%
1997
103.89%
2007
100.36%
1988
107.07%
1998
103.54%
2008
100.00%
together, in each case, with accrued interest to the date fixed for redemption; provided, however, that none of the bonds of the Twenty-fourth Series shall be redeemed at the general redemption prices prior to July 1, 1983, if such redemption is for the purpose or in anticipation of refunding such bond through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 10.05% per annum.
(II)      Bonds of the Twenty-fourth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 2 hereof or with the Proceeds of Released Property at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 months period ending June 30,
1979
100.25%
1989
100.23%
1999
100.17%
1980
100.25%
1990
100.23%
2000
100.16%
1981
100.25%
1991
100.22%
2001
100.15%
1982
100.25%
1992
100.22%
2002
100.14%
1983
100.25%
1993
100.21%
2003
100.12%
1984
100.25%
1994
100.21%
2004
100.11%
1985
100.24%
1995
100.20%
2005
100.09%
1986
100.24%
1996
100.19%
2006
100.07%
1987
100.24%
1997
100.19%
2007
100.05%
1988
100.24%
1998
100.18%
2008
100.00%
together, in each case, with accrued interest to the date fixed for redemption; provided, however, that if the date fixed for redemption in the case of the application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 2 hereof shall be prior to January 1 of the calendar year in which such deposit of cash shall become due under the provisions of said Section 2, bonds of the Twenty-fourth Series shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption.




(III)      At the option of the registered owner, any bonds of the Twenty-fourth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.
Bonds of the Twenty-fourth Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York.
Upon any exchange or transfer of bonds of the Twenty-fourth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of said Series.


ARTICLE II

SINKING OR IMPROVEMENT FUND FOR BONDS
OF THE TWENTY-FOURTH SERIES

Section 2. The Company covenants that, so long as any of the bonds of the Twenty-fourth Series shall remain Outstanding, it will, on or before June 1, 1980, and on or before June 1 of each year thereafter to and including the year 2008, deliver to the Corporate Trustee:

(A) An Officers’ Certificate which shall state:

(a) the greatest principal amount of all bonds of the Twenty-fourth Series prior to January 1 of such year at any one time Outstanding;

(b) the aggregate principal amount of all bonds of the Twenty-fourth Series retired prior to the date of such Officers’ Certificate (i) pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property; or (ii) pursuant to the provisions of Section 64 of the Mortgage;

(c) the aggregate principal amount of bonds the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Twenty-fourth Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;

(d) the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;

(e) the amount which is one per centum (1%) of the amount stated pursuant to clause (d) above; and





(f) (i) an aggregate principal amount of bond(s) or fraction of a bond, not to exceed $104,000 principal amount for any such year, the authentication and delivery of which the Company has theretofore waived in compliance with Section 2 of the First Supplemental Indenture upon the basis of Property Additions, which waiver or waivers shall not theretofore have been used as a credit under this clause (i); plus (ii) an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Twenty-fourth Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise provided) if the Company elects to make its right to the authentication and delivery of such bond(s) or fraction of a bond the basis of a credit under this Section.

(B) An amount in cash and/or principal amount of bonds of the Twenty-fourth Series equivalent to the amount stated in the Officers’ Certificate (due on or before June 1 of such year) provided for by this Section pursuant to the requirements of clause( e) of subdivision (A) of this Section; provided, however, that against the amount of cash or bonds payable or deliverable pursuant to this subdivision (B), there shall be credited the principal amount, if any, of the bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.

For the purpose of subdivision (A) of this Section the term “Outstanding” shall not include bonds of the Twenty-fourth Series pledged to secure indebtedness of the Company and not at any time otherwise issued by the Company.
Such cash together with any bonds delivered to the Corporate, Trustee under the provisions of this Section shall be dealt with as provided for by this Section.
Notwithstanding any other provisions of this Twenty-fifth Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on June 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the Twenty-fourth Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on June 1 of the then current year or of a subsequent year, may be from time to time withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivisions (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Twenty-fourth Series shall be made the basis of the withdrawal of cash deposited under this Section; and provided further, that no bonds of any series other than the Twenty-fourth Series shall be purchased, paid or redeemed, as above provided, with cash deposited under the provisions of this Section and that no bonds of the Twenty-fourth Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date 40 days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost); and provided further, that the Company may not deposit cash prior to July 1, 1983, in anticipation of the requirements of this Section if the cash so deposited represents borrowed funds, or is in anticipation of funds to be borrowed, having an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 10.05% per annum.
In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions




of the Mortgage relating to such authentication and delivery; except that the Company shall not be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 28 of the Mortgage.
So long as any bonds of the Twenty-fourth. Series shall remain Outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under the Mortgage.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Twenty-fourth Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I)      any cash deposited under the provisions of this Section or Section 40 of the Mortgage or Section 2 of the First through Eleventh, Thirteenth through Twentieth and Twenty-second through Twenty-fourth Supplemental Indentures shall be deemed to be Funded Cash;
(II)      any bonds of the Twenty-fourth Series delivered to the Corporate Trustee pursuant to the provisions of this Section or any bonds of the Second through
Twenty-third Series delivered to the Corporate Trustee pursuant to the provisions of Section 2 of the First through Eleventh, Thirteenth through Twentieth, Twenty-second through Twenty-fourth Supplemental Indentures or any bonds of the First Series delivered to the Corporate Trustee or credited pursuant to the provisions of Section 40 of the Mortgage, shall, after such delivery or crediting, be deemed to have been retired by the use of Funded Cash; and
(III)      with respect to all credits taken under this Section or Section 2 of the First through Eleventh, Thirteenth through Twentieth and Twenty-second through
Twenty-fourth Supplemental Indentures on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that (in lieu of such credits being so taken) an amount of cash equal to each such credit was deposited pursuant to the provisions of this Section or of said Section 2 of the First through Eleventh, Thirteenth through Twentieth, and Twenty-second through Twenty-fourth Supplemental Indentures, as the case may be, and concurrently with such deposit was withdrawn on the same basis as that on which such credit was taken.
Any bonds issued under the Mortgage delivered to, deposited with or purchased or redeemed by the Corporate Trustee pursuant to the provisions of this Section shall forthwith be canceled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA) the aggregate cost for principal, interest, brokerage and premium, if any, on all bonds theretofore, or then to be, purchased and/or redeemed pursuant to the provisions of this Section;




after deducting therefrom
(BB) the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.


ARTICLE III

DIVIDEND COVENANT

Section 3. The Company covenants that, so long as any of the bonds of the Twenty-fourth Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to June 30, 1978 (other than any dividend declared by the Company on or before June 30, 1978 for payment on or before July 31, 1978) exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from earned surplus to stated capital accounts) the sum of (a) the aggregate amount credited subsequent to June 30, 1978 to earned surplus, (b) $52,000,000, and (c) such additional amounts as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.

For the purpose of this Section 3, the aggregate amount credited subsequent to June 30, 1978 to earned surplus shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to earned surplus applicable to the period prior to July 1, 1978, including, but not limited to, charges to earned surplus for write-offs or write-downs of book values of assets owned by the Company on June 30, 1978. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to June 30, 1978 amounts equal to the sum of (1) amounts, not otherwise deducted, which would be required to be included in operating expenses in each Net Earning Certificate by the provisions of Section 6 of this Twenty-fifth Supplemental Indenture and (2) the Company’s provisions during such period for depreciation and retirement of property ( but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this Section 3, shall not be less than the aggregate amounts required to be stated for the period from July 1, 1978 to the date of such dividend, distribution, purchase or acquisition in the Officers’ Certificate of Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 of the Mortgage, including proportionate amounts calculated as provided in subdivision (1) thereof for any portion of the period elapsed since June 30, 1978 not theretofore included in any Officers’ Certificate of Replacements.
For the purpose of this Section 3, the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the accumulated provision for depreciation account through




charges to operating expenses, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Energy Regulatory Commission.


ARTICLE IV

MISCELLANEOUS PROVISIONS

Section 4. Subject to any amendments provided for in this Twenty-fifth Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Twenty-fifth Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.

Section 5. The Company reserves the right, without any consent or other action by holders of bonds of the Twenty-fourth Series or of any subsequently created series, to make such amendments to the Mortgage, as supplemented, as shall be necessary in order to modify the present first paragraph of Section 4 of the Mortgage to read as follows:

“SECTION 4. (I) The term ‘Property Additions’ shall mean plants, lines, pipes, mains, cables, machinery, boilers, transmission lines, Space Satellites, pipe lines, distribution systems, service systems and supply systems and other property, real or personal, and improvements, extensions, additions, renewals or replacements, acquired by the Company by purchase, consolidation, merger, donation, construction, erection or in any other way whatsoever, subsequent to December 31, 1943, or in the process of construction or erection in so far as actually constructed or erected subsequent to December 31, 1943, and used or useful or to be used in or in connection with the business of generating, manufacturing, producing, transmitting, transporting, distributing or supplying electricity or gas for light, heat, power, refrigeration or other purposes, or steam or hot water for power, heat or other purposes. The term ‘Property Additions’ shall not, however, include (1) any shares of stock, bonds, notes or other obligations or other securities or contracts, leases, or operating agreements, bills, notes, accounts receivable, or choses in action, or (2) except as herein otherwise specifically provided, going value, good will, franchises or governmental permits or licenses granted to or acquired by the Company, as such, separate and distinct from the property operated thereunder or in connection therewith or incident thereto, or (3) any merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business or fuel, oil or similar materials and supplies consumable in the operation of any of the properties of the Company; or rolling stock, buses, motor coaches, automobiles or other vehicles, or any aircraft, or (4) any property (other than ‘Space Satellites’) which is located outside of the limits of the United States of America, or (5) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation up to the point of connection with any distribution system, or timber, minerals, mineral rights and royalties, or (6) any property, the cost of acquiring, making or constructing which is chargeable under accepted principles of accounting to operating expenses. The term ‘Space Satellites’ shall mean any form of space satellites (including but not limited to solar power satellites), space stations and other analogous facilities whether or not in the earth’s atmosphere.”
Section 6. So long as any bonds of the Twenty-fourth Series shall remain Outstanding, in each Net Earning Certificate made pursuant to Section 7 of the Mortgage there shall be included in operating expenses for the twelve (12) months period with respect to which such certificate is made an amount, if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period.





Section 7. So long as any bonds of the Twenty-fourth Series shall remain Outstanding, subdivision (2) of Section 7 of the Mortgage is hereby amended by adding thereto the following words “provided, further, that the amount so included in such operating expenses in lieu of the amounts actually appropriated out of income for retirement of the Mortgaged and Pledged Property used primarily and principally in the electric, gas, steam and/or hot water utility business and the Company’s automotive equipment used in the operation of such property shall not be less than the amounts so actually appropriated out of income”.

Section 8. So long as any bonds of the Twenty-fourth Series shall remain Outstanding, clause (5) of subsection (I) of Section 39 of the Mortgage is amended by deleting the word “expenditures” from the first line of such clause (5) and inserting in lieu thereof the words “net cash expenditures (after reflecting salvage) made”.

Section 9. Section 55 of the Mortgage, as heretofore amended, is hereby further amended to insert the words “and subject to the provisions of Section 2 of the Twenty-fifth Supplemental Indenture dated as of July 1, 1978”, after the date “January 1, 1978”.

Section 10. Effective with and applicable to the application to the Corporate Trustee for the authentication and delivery of the first series of bonds created after March 31, 1979, or such later date as shall be authorized or approved by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935, clause (10) of Section 7 of the Mortgage is hereby amended to read as follows:

“(10) the amount, if any, by which the aggregate of (a) such other income (net) and ( b ) that portion of the amount required to be stated in such certificate by clause (7) of this Section which, in the opinion of the signers, is directly derived from the operation of property (other than paving, grading and other improvements to, under or upon public highways, bridges, parks or other public properties of analogous character) not subject to the Lien of this Indenture at the date of such certificate, exceeds eleven per centum (11%) of the sum required to be stated by clause (9) of this Section; provided, however, that in computing the foregoing, there may be used such per centum greater than eleven per centum (11%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935; and provided further, that if the amount required to be stated in such certificate by clause ( 7) of this Section includes revenues from the operation of property not subject to the Lien of this Indenture, there shall be included in the calculation to be made pursuant to this clause (10) such reasonable interdepartmental or interproperty revenues and expenses between the Mortgaged and Pledged Property and the property not subject to the Lien hereof as shall be allocated to such respective properties by the Company; and”
Section 11. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore amended, set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Twenty-fifth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Twenty-fifth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such




omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Twenty-fifth Supplemental Indenture.
Section 12. Whenever in this Twenty-fifth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all covenants and agreements in this Twenty-fifth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 13. Nothing in this Twenty-fifth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Twenty-fifth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Twenty-fifth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and coupons Outstanding under the Mortgage.

Section 14. It is the intention and it is hereby agreed that, so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Twenty-fifth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as the said Louisiana property is concerned, this Twenty-fifth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 15. This Twenty-fifth Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

IN WITNESS WHEREOF, LOUISIANA POWER & LIGHT COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or one of its Second Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and CHARLES F. RUGE for all like purposes has hereunto set his hand and affixed his seal, all in The City of New York, as of the day and year first above written.




LOUISIANA POWER & LIGHT COMPANY

By /s/ J. H. Erwin, Jr.                                       
J. H. Erwin, Jr.
Vice President

Attest:
/s/ W. H. Talbot                                     
W. H. Talbot
Secretary
Executed, sealed and delivered by
LOUISIANA POWER & LIGHT COMPANY
in the presence of:
/s/ Dorothea E. Matthews                     
Dorothea E. Matthews

/s/John M. Stuart                                  
John M. Stuart





THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
As Trustee

By /s/ J. A. Payne                              
J. A. Payne
Vice President
Attest:

/s/ F. W. Clark                                   
F. W. Clark
Assistant Secretary     

/s/ Charles F. Ruge                [ L.S. ]
Charles F. Ruge
As Co-Trustee


Executed, sealed and delivered by
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION) and
CHARLES F. RUGE in the presence of:


/s/ Donald Stasiak                                  
Donald Stasiak

/s/ Carmela Ehret                                   
Carmela Ehret






STATE OF NEW YORK
 
ss:
COUNTY OF NEW YORK


On this 18th day of July, 1978, before me appeared J. H. ERWIN, JR., to me personally known, who, being by me duly sworn, did say that he is a Vice President of LOUISIANA POWER & LIGHT COMPANY, and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said J. H. ERWIN, JR., acknowledged said instrument to be the free act and deed of said corporation.
On the 18th day of July, in the year 1978, before me personally came J. H. ERWIN, JR., to me known, who, being by me duly sworn, did depose and say that he resides at 5147 MacArthur Boulevard, New Orleans, State of Louisiana; that he is a Vice President of LOUISIANA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARY SEAL]

……………………………………………….
MORTON BARAD
Notary Public, State of New York
No. 41-5170980
Certs. Filed in Bronx, Kings, Nassau,
New York and Westchester Cos.
Qualified in Queens County
Commission Expires March 30, 1980





STATE OF NEW YORK
 
ss:
COUNTY OF NEW YORK

On this 17th day of July, 1978, before me appeared J. A. PAYNE, to me personally known, who, being by me duly sworn, did say that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said J. A. PAYNE acknowledged said instrument to be the free act and deed of said corporation.
On the 17th day of July, in the year 1978, before me personally came J. A. PAYNE, to me known, who, being by me duly sworn, did depose and say that he resides at Hiram Road, Cold Spring, N.Y.; that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARY SEAL]

……………………………………………….
DELLA M. KILLETT
Notary Public, State of New York
No. 24-4659667
Qualified in Kings County
Certificate filed in New York County
Commission Expires March 30, 1979






STATE OF NEW YORK
 
ss:
COUNTY OF NEW YORK

On the 17th day of July, 1978, before me personally appeared CHARLES F. RUGE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 17th day of July, 1978, before me personally came CHARLES F. RUGE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.
[NOTARY SEAL]

……………………………………………….
DELLA M. KILLETT
Notary Public, State of New York
No. 24-4659667
Qualified in Kings County
Certificate filed in New York County
Commission Expires March 30, 1979







Exhibit 4(d)1






LOUISIANA POWER & LIGHT COMPANY

to

THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(successor to The Chase National Bank of the City of New York)


and


CHARLES F. RUGE
(successor to Carl E. Buckley),

As Trustees under Louisiana Power & Light Company’s Mortgage and Deed of Trust, dated as of April 1, 1944

__________

TWENTY-FIRST SUPPLEMENTAL INDENTURE

__________


Dated as of March 1, 1975








TWENTY-FIRST SUPPLEMENTAL INDENTURE
INDENTURE, dated as of March 1, 1975, between LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Louisiana, whose post office address is 142 Delaronde Street, New Orleans, Louisiana 70174 (hereinafter sometimes called the Company), and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association existing under the laws of the United States of America (successor to The Chase National Bank of the City of New York), whose post office address is 1 Chase Manhattan Plaza, New York, New York 10015 (hereinafter sometimes called the Corporate Trustee), and CHARLES F. RUGE (successor to Carl E. Buckley), whose post office address is 80 Michael Street, Iselin, New Jersey 08830 (hereinafter sometimes called the Co-Trustee), as Trustees (the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the Trustees), as Trustees under the Mortgage and Deed of Trust, dated as of April 1, 1944 (hereinafter called the Mortgage), which Mortgage was executed and delivered by Louisiana Power & Light Company, a corporation of the State of Florida (hereinafter sometimes called the Florida Company), to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this Indenture (hereinafter called the Twenty-first Supplemental Indenture) being supplemental thereto;
WHEREAS, the Mortgage was recorded in various Parishes in the State of Louisiana, which Parishes are the same Parishes in which this Twenty-first Supplemental Indenture is to be recorded; and
WHEREAS, by the Mortgage, the Florida Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
WHEREAS, the Florida Company executed and delivered to the Trustees the following supplemental indentures:
Designation
Dated as of
First Supplemental Indenture
March 1, 1948
Second Supplemental Indenture
November 1, 1950
Third Supplemental Indenture
September 1, 1953
Fourth Supplemental Indenture
October 1, 1954
Fifth Supplemental Indenture
January 1, 1957
Sixth Supplemental Indenture
April 1, 1960
Seventh Supplemental Indenture
June 1, 1964
Eighth Supplemental Indenture
March 1, 1966
Ninth Supplemental Indenture
February 1, 1967
Tenth Supplemental Indenture
September 1, 1967
Eleventh Supplemental Indenture
March 1, 1968
Twelfth Supplemental Indenture
June 1, 1969
Thirteenth Supplemental Indenture
December 1, 1969
Fourteenth Supplemental Indenture
November 1, 1970
Fifteenth Supplemental Indenture
April 1, 1971
Sixteenth Supplemental Indenture
January 1, 1972
Seventeenth Supplemental Indenture
November 1, 1972
Eighteenth Supplemental Indenture
June 1, 1973
Nineteenth Supplemental Indenture
March 1, 1974
 
 
which supplemental indentures were recorded in various Parishes in the State of Louisiana; and




WHEREAS, the Florida Company executed and delivered to the Trustees a Twentieth Supplemental Indenture, dated as of November 1, 1974, which was recorded in Parishes in the State of Louisiana as follows :
Parish
Date Filed
Entry or File Number
Mortgage Book
Folio
Ascension
November 8, 1974
132297
221
209
Assumption
November 12, 1974
114100
104
575
Avoyelles
November 11, 1974
265355
*36
639
Bienville
November 12, 1974
W-2739
133
402
Bossier
November 12, 1974
269700
304
370
Caldwell
November 12, 1974
132105
80
152
Catahoula
November 12, 1974
146190
85
230
Claiborne
November 12, 1974
268542
111
59
Concordia
November 12, 1974
125485
67
231
East Carroll
November 12, 1974
41992
112
202
East Feliciana
November 12, 1974
72408
57
224
Franklin
November 12, 1974
197809
117
78
Grant
November 12, 1974
30826
94
161
Iberville
November 8, 1974
16
127
44
Jackson
November 12, 1974
221801
* LL
452
Jefferson
November 8, 1974
660660
**6
397
Lafourche
November 8, 1974
396931
252
428
LaSalle
November 12, 1974
96226
89
656
Lincoln
November 12, 1974
C-90662
107
693
Livingston
November 8, 1974
104461
***39
466
Madison
November 12, 1974
46847
41-A
403
Morehouse
November 12, 1974
41182
244
169
Natchitoches
November 12, 1974
M-A-2601
333 A
524
Orleans
November 8, 1974
†145344
2202 A
403
Ouachita
November 12, 1974
697959
810
257
Plaquemines
November 8, 1974
121
78
295
Rapides
November 12, 1974
633714
742
729
Red River
November 12, 1974
127395
74
249
Richland
November 12, 1974
216308
182
150
Sabine
November 12, 1974
225478
106
277
St. Bernard
November 8, 1974
130051
123
249
St. Charles
November 12, 1974
46840
190
716
St. Helena
November 12, 1974
26299
80
60
St. James
November 8, 1974
39987
83
559
St. John the Baptist
November 12, 1974
49022
55
719
St. Martin
November 12, 1974
82882
226
225
St. Tammany
November 8, 1974
325390
563
166
Tangipahoa
November 8, 1974
214341
259
624
Tensas
November 12, 1974
96990
20
894
Terrebonne
November 8, 1974
477046
390
97
Union
November 12, 1974
163352
104
1
Vernon
November 12, 1974
328017
440
678
Washington
November 8, 1974
56752
260
217
Webster
November 12, 1974
248463
203
802
West Carroll
November 12, 1974
147222
90
396




Winn
November 12, 1974
91454
89
689
 
 
 
 
 
  * Special Mortgage Book
 
 
 
** Bond Mortgage Book
 
 
 
*** Amortization Mortgage Book
 
 
 
† Notarial Archives Number
 
 
 
 
 
 
 
WHEREAS, the Florida Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:
Series
Principal Amount Issued
Principal Amount Outstanding
3% Series due 1974
$17,000,000
None
3⅛% Series due 1978
$10,000,000
$10,000,000
3% Series due 1980
$10,000,000
$ 9,900,000
4% Series due 1983
$12,000,000
None
3⅛% Series due 1984
$18,000,000
$18,000,000
4¾% Series due 1987
$20,000,000
$20,000,000
5% Series due 1990
$20,000,000
$20,000,000
4⅝% Series due 1994
$25,000,000
$25,000,000
5¾% Series due 1996
$35,000,000
$35,000,000
5⅝% Series due 1997
$16,000,000
$16,000,000
6½% Series due September 1, 1997
$18,000,000
$18,000,000
7⅛% Series due 1998
$35,000,000
$35,000,000
9⅜% Series due 1999
$25,000,000
$25,000,000
9⅜% Series due 2000
$20,000,000
$20,000,000
7⅞% Series due 2001
$25,000,000
$25,000,000
7½% Series due 2002
$25,000,000
$25,000,000
7½% Series due November 1, 2002
$25,000,000
$25,000,000
8% Series due 2003
$45,000,000
$45,000,000
8¾% Series due 2004
$45,000,000
$45,000,000
9½% Series due November 1, 1981
$50,000,000
$50,000,000
which bonds are also hereinafter sometimes called bonds of the First through Twentieth Series, respectively; and
WHEREAS, subject to the provisions thereof, Section 85 of the Mortgage permits the merger of the Florida Company into any corporation having corporate authority to carry on any of the businesses mentioned in the first sentence of Section 4 of the Mortgage; and
WHEREAS, Section 86 of the Mortgage provides, among other things, that if the Florida Company shall be merged into any other corporation, the corporation into which the Florida Company shall have been merged - upon executing with the Trustees and causing to be recorded an indenture whereby such successor corporation shall assume and agree to pay, duly and punctually, the principal of and interest on the bonds issued under the Mortgage in accordance with the provisions of said bonds and of any appurtenant coupons and of the Mortgage, and shall agree to perform and fulfill all the covenants and conditions of the Mortgage to be kept or performed by the Florida Company thereunder - shall succeed to and be substituted for the Florida Company with the same effect as if such successor corporation had been named in the Mortgage,




and shall have and may exercise under the Mortgage the same powers and rights as the Florida Company; and
WHEREAS, the Company has corporate authority to carry on businesses mentioned in the first sentence of Section 4 of the Mortgage and, as permitted by Section 85 of the Mortgage, the Florida Company has been merged into the Company, and the Company is the continuing and surviving corporation or successor corporation resulting from such merger; and
WHEREAS, pursuant to and in accordance with said Section 86 of the Mortgage the Company now desires to execute with the Trustees and to cause to be recorded an indenture of the tenor aforesaid; and
WHEREAS, the execution, delivery and recordation by the Company of this Twenty-first Supplemental Indenture have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That Louisiana Power & Light Company, a corporation of the State of Louisiana (successor by merger to Louisiana Power & Light Company, a corporation of the State of Florida), in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment both of the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect, and the performance of all of the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, and in compliance with, in satisfaction of and pursuant to the provisions of Sections 85 and 86 of the Mortgage, (a) hereby assumes and agrees to pay, duly and punctually, the principal of and interest on the bonds issued and now outstanding under the Mortgage, as supplemented, in accordance with the provisions of said bonds and of any appurtenant coupons and of the Mortgage, as supplemented, and agrees to duly and punctually observe, perform and fulfill all the covenants and conditions of the Mortgage, as supplemented, to be kept or performed by the Florida Company thereunder; and (b) hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto Charles F. Ruge and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association), as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all of the property, real, personal or mixed (except any herein or in the Mortgage, as supplemented, expressly excepted), now owned or hereafter acquired by the Company or, subject to the provisions of Section 87 of the Mortgage, by any successor corporation (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts and all other rights or means for appropriating, conveying, storing and supplying water; all rights-of-way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other




franchises, consents, or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose, including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights-of-way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that all the property, rights and franchises acquired by the Company or, subject to the provisions of Section 87 of the Mortgage, by any successor corporation (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), shall be and are as fully granted and conveyed hereby and as fully embraced within the lien hereof and the lien of the Mortgage, as if such property, rights and franchises were now owned by the Company and were specifically described herein and conveyed hereby.
PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Twenty-first Supplemental Indenture and from the lien and operation of the Mortgage, namely: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; and (7) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto Charles F. Ruge and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association), as Trustees, and their successors and assigns forever.




IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as supplemented, this Twenty-first Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if the said property had been owned by the Florida Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees by the Mortgage as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Mortgage, as follows:


ARTICLE I

MISCELLANEOUS PROVISIONS

Section 1. Subject to the amendments provided for in this Twenty-first Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Twenty-first Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.

Section 2. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore amended, set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Twenty-first Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Twenty-first Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Twenty-first Supplemental Indenture.
Section 3. Whenever in this Twenty-first Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all the covenants and agreements in this Twenty-first Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 4. Nothing in this Twenty-first Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Twenty-first Supplemental Indenture or any covenant, condition,




stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Twenty-first Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and coupons Outstanding under the Mortgage.

Section 5. It is the intention and it is hereby agreed that, so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Twenty-first Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as the said Louisiana property is concerned, this Twenty-first Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 6. This Twenty-first Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

IN WITNESS WHEREOF, LOUISIANA POWER & LIGHT COMPANY, a Louisiana corporation, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, in the City of New Orleans, Louisiana, and The Chase Manhattan Bank (National Association), in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or one of its Second Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and Charles F. Ruge for all like purposes has hereunto set his hand and affixed his seal, in The City of New York, as of the day and year first above written.





 
Louisiana Power & Light Company
By /s/ J. M. Wyatt
J. M. Wyatt
Senior Vice President
[CORPORATE SEAL]

Attest:

/s/ W. H. Talbot
W. H. Talbot
Secretary
 
Executed, sealed and delivered by Louisiana Power & Light Company
in the presence of:

/s/ John H. Erwin Jr.
John H. Erwin Jr.
 
/s/ Nolin J. Briley
Nolin J. Briley
 

 
The Chase Manhattan Bank (National Association), as Trustee
By /s/ J. A. Payne
J. A. Payne
Vice President
[CORPORATE SEAL]

Attest:

/s/ David Leverich [L.S.]
David Leverich,
Assistant Secretary
 
 
/s/ Charles F. Ruge [L.S.]
Charles F. Ruge
As Co-Trustee
Executed, sealed and delivered by The Chase Manhattan Bank (National Association) and Charles F. Ruge in the presence of:

/s/ Donald Stasiak
Donald Stasiak
 
/s/ Lillian Oertel
Lillian Oertel
 






STATE OF LOUISIANA
PARISH OF ORLEANS
 
ss.:


On this ___ day of March, 1975, before me appeared J. M. WYATT, to me personally known, who, being by me duly sworn, did say that he is the Senior Vice President of LOUISIANA POWER & LIGHT COMPANY, and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said J. M. WYATT acknowledged said instrument to be the free act and deed of said corporation.
On the ___ day of March, in the year 1975, before me personally came J. M. WYATT, to me known, who, being by me duly sworn, did depose and say that he resides at 102 Berkley Drive, New Orleans, State of Louisiana; that he is the Senior Vice President of LOUISIANA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
/s/ MELVIN I. SCHWARTZMAN
MELVIN I. SCHWARTZMAN
Notary Public, Parish of Orleans, State of La.
My Commission is issued for life.






STATE OF NEW YORK
PARISH OF NEW YORK
 
ss.:


On this ____ day of March, 1975, before me appeared J. A. PAYNE, to me personally known, who, being by me duly sworn, did say that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said J. A. PAYNE acknowledged said instrument to be the free act and deed of said corporation.
On the ____ day of March, in the year 1975, before me personally came J. A. PAYNE, to me known, who, being by me duly sworn, did depose and say that he resides at Hiram Road, Cold Spring, New York; that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
/s/ ISABELLE B. SHAW
ISABELLE B. SHAW
Notary Public, State of New York
Qualified in Richmond County
No. 43-3619760
Certificate Filed with New York Co. Clerk
Commission Expires March 30, 1975







STATE OF NEW YORK
PARISH OF NEW YORK
 
ss.:

On this ____ day of March, 1975, before me personally appeared CHARLES F. RUGE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the ____ day of March, 1975, before me personally came CHARLES F. RUGE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.

ISABELLE B. SHAW
Notary Public, State of New York
Qualified in Richmond County
No. 43-3619760
Certificate Filed with New York Co. Clerk
Commission Expires March 30, 1975






[CONFORMED COPY]

Exhibit 4(d)1

LOUISIANA POWER & LIGHT COMPANY
to
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(successor to The Chase National Bank of the City of New York)
and
J. A. PAYNE
(successor to Carl E. Buckley)
As Trustees under Louisiana Power & Light Company’s Mortgage and Deed of Trust, dated as of April 1, 1944
_________________
TWENTY-NINTH SUPPLEMENTAL INDENTURE
Providing among other things for
First Mortgage Bonds, 16% Series due April 1, 1991
(Twenty-eighth Series)
_________________
Dated as of April 1, 1981





TWENTY-NINTH SUPPLEMENTAL INDENTURE
INDENTURE , dated as of April 1, 1981, between LOUISIANA POWER & LIGHT COMPANY, a corporation of the State of Louisiana (successor by merger to Louisiana Power & Light Company, a corporation of the State of Florida), whose post office address is 142 Delaronde Street, New Orleans, Louisiana 70174 (hereinafter sometimes called the “Company”), and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association existing under the laws of the United States of America (successor to The Chase National Bank of the City of New York), whose principal corporate trust office is located at 1 New York Plaza, New York, New York 10081 (hereinafter sometimes called the “Corporate Trustee”), and J. A. PAYNE (successor to Carl E. Buckley), whose post office address is Hiram Road, Cold Spring, New York (said J. A. PAYNE being hereinafter sometimes called the
“Co-Trustee” and the Corporate Trustee and the Co-Trustee being hereinafter together sometimes called the “Trustees”), as Trustees under the Mortgage and Deed of Trust, dated as of April 1, 1944 (hereinafter called the “Mortgage”), which Mortgage was executed and delivered by Louisiana Power & Light Company, a corporation of the State of Florida (hereinafter sometimes called the “Florida Company”), to secure the payment of bonds issued or to be issued under and in accordance with the provisions of the Mortgage, reference to which Mortgage is hereby made, this Indenture (hereinafter called the “Twenty-ninth Supplemental Indenture”) being supplemental thereto;
WHEREAS, the Mortgage was recorded in various Parishes in the State of Louisiana, which Parishes are the same Parishes in which this Twenty-ninth Supplemental Indenture is to be recorded; and
WHEREAS, by the Mortgage, the Florida Company covenanted that it would execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as might be necessary or proper to carry out more effectually the purposes of the Mortgage and to make subject to the lien of the Mortgage any property thereafter acquired and intended to be subject to the lien thereof; and
WHEREAS, the Florida Company executed and delivered to the Trustees the following supplemental indentures:




Designation
Dated as of
First Supplemental Indenture
March 1, 1948
Second Supplemental Indenture
November 1, 1950
Third Supplemental Indenture
September 1, 1953
Fourth Supplemental Indenture
October 1, 1954
Fifth Supplemental Indenture
January 1, 1957
Sixth Supplemental Indenture
April 1, 1960
Seventh Supplemental Indenture
June 1, 1964
Eighth Supplemental Indenture
March 1, 1966
Ninth Supplemental Indenture
February 1, 1967
Tenth Supplemental Indenture
September 1, 1967
Eleventh Supplemental Indenture
March 1, 1968
Twelfth Supplemental Indenture
June 1, 1969
Thirteenth Supplemental Indenture
December 1, 1969
Fourteenth Supplemental Indenture
November 1, 1970
Fifteenth Supplemental Indenture
April 1, 1971
Sixteenth Supplemental Indenture
January 1, 1972
Seventeenth Supplemental Indenture
November 1, 1972
Eighteenth Supplemental Indenture
June 1, 1973
Nineteenth Supplemental Indenture
March 1, 1974
Twentieth Supplemental Indenture
November 1, 1974
which supplemental indentures were recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Florida Company was merged into the Company on February 28, 1975, and the Company thereupon executed and delivered to the Trustees a Twenty-first Supplemental Indenture, dated as of March 1, 1975, pursuant to which the Company, among other things, assumed and agreed duly and punctually to pay the principal of and interest on the bonds at the time issued and outstanding under the Mortgage, as then supplemented, in accordance with the provisions of said bonds and of any appurtenant coupons and of the Mortgage as so supplemented, and duly and punctually to observe, perform and fulfill all of the covenants and conditions of the Mortgage, as so supplemented, to be kept or performed by the Florida Company, and said Twenty-first Supplemental Indenture was recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Company has succeeded to and has been substituted for the Florida Company under the Mortgage with the same effect as if it had been named as mortgagor corporation therein; and
WHEREAS, the Company executed and delivered to the Trustees the following supplemental indentures:
Designation
Dated as of
Twenty-second Supplemental Indenture
September 1, 1975
Twenty-third Supplemental Indenture
December 1, 1976
Twenty-fourth Supplemental Indenture
January 1, 1978
Twenty-fifth Supplemental Indenture
July 1, 1978
Twenty-sixth Supplemental Indenture
May 1, 1979
Twenty-seventh Supplemental Indenture
November 1, 1979






Which supplemental indentures were recorded in various Parishes in the State of Louisiana; and
WHEREAS, the Company executed and delivered to the Trustees a Twenty-eighth Supplemental Indenture, dated as of December 1, 1980; which was recorded in various Parishes in the State of Louisiana as follows:




Parish
Date Filed
Entry or File Number
Mortgage Book
Folio
Ascension
December 22, 1980
179491
297
551
Assumption
December 22, 1980
134598
128
221
Avoyelles
December 23, 1980
80-8292
*47
682
Bienville
December 23, 1980
Z-6631
156
26
Bossier
December 23, 1980
351955
422
492
Caldwell
December 23, 1980
147131
101
42
Catahoula
December 23, 1980
174153
108
91
Claiborne
December 23, 1980
300682
131
600
Concordia
December 23, 1980
149200
125
283
East Carroll
December 23, 1980
51359
134
58
East Feliciana
December 22, 1980
90233
78
751
Franklin
December 23, 1980
223365
156
119
Grant
December 23, 1980
37157
111
688
Iberville
December 22, 1980
38
171
91
Jackson
December 23, 1980
258263
SS
201
Jefferson
December 22, 1980
950335
**6
885
Lafourche
December 22, 1980
533448
372
522
LaSalle
December 23, 1980
112834
111
179
Lincoln
December 23, 1980
D-31947
157
147
Livingston
December 22, 1980
176853
184
582
Madison
December 23, 1980
60522
58
160
Morehouse
December 23, 1980
55797
302
615
Natchitoches
December 23, 1980
M-A-4107
407A
337
Orleans
December 22, 1980
†395482
2310A
472
Ouachita
December 23, 1980
827627
971
674
Plaquemines
December 22, 1980
161
110
474
Rapides
December 23, 1980
730352
903
1
Red River
December 23, 1980
146728
93
27
Richland
December 23, 1980
238584
218
767
Sabine
December 23, 1980
252914
136
54
St. Bernard
December 22, 1980
178716
209
356
St. Charles
December 22, 1980
79024
277
357
St. Helena
December 22, 1980
041850
106
450
St. James
December 22, 1980
56471
117
34
St. John the Baptist
December 22, 1980
75645
110
387
St. Martin
December 22, 1980
99941
288
112
St. Tammany
December 22, 1980
454667
816
740
Tangipahoa
December 22, 1980
287147
354
433
Tensas
December 23, 1980
117489
37
260
Terrebonne
December 22, 1980
640848
539
610
Union
December 23, 1980
194966
138
326
Vernon
December 23, 1980
383141
538
607
Washington
December 22, 1980
95069
316
171
Webster
December 23, 1980
290541
253
29
West Carroll
December 23, 1980
162394
120
439
Winn
December 23, 1980
114316
111
133
_____________
*      Special Mortgage Book




**      Bond Mortgage Book
†      Notarial Archives Number
; and
WHEREAS, in addition to the property described in the Mortgage, as supplemented, the Company has acquired certain other property, rights and interests in property; and
WHEREAS, the Florida Company or the Company has heretofore issued, in accordance with the provisions of the Mortgage, as supplemented, the following series of First Mortgage Bonds:
Series
Principal Amount Issued
Principal Amount Outstanding
3 % Series due 1974
$17,000,000
None
3 1/8% Series due 1978
$10,000,000
None
3 % Series due 1980
$10,000,000
None
4 % Series due 1983
$12,000,000
None
3 1/8% Series due 1984
$18,000,000
$18,000,000
4 3/4% Series due 1987
$20,000,000
$20,000,000
5 % Series due 1990
$20,000,000
$20,000,000
4 5/8% Series due 1994
$25,000,000
$25,000,000
5 3/4% Series due 1996
$35,000,000
$35,000,000
5 5/8% Series due 1997
$16,000,000
$16,000,000
6 1/2% Series due September 1, 1997
$18,000,000
$18,000,000
7 1/8% Series due 1998
$35,000,000
$35,000,000
9 3/8% Series due 1999
$25,000,000
$25,000,000
9 3/8% Series due 2000
$20,000,000
$20,000,000
7 7/8% Series due 2001
$25,000,000
$25,000,000
7 1/2% Series due 2002
$25,000,000
$25,000,000
7 1/2% Series due November 1, 2002
$25,000,000
$25,000,000
8 % Series due 2003
$45,000,000
$45,000,000
8 3/4% Series due 2004
$45,000,000
$45,000,000
9 1/2% Series due November 1, 1981
$50,000,000
$50,000,000
9 3/8% Series due September 1, 1983
$50,000,000
$50,000,000
8 3/4% Series due December 1, 2006
$40,000,000
$40,000,000
9 % Series due January 1, 1986
$75,000,000
$75,000,000
10 % Series due July 1, 2008
$60,000,000
$60,000,000
10 7/8% Series due May 1, 1989
$45,000,000
$45,000,000
13 1/2% Series due November 1, 2009
$55,000,000
$55,000,000
15 3/4% Series due December 1, 1988
$50,000,000
$50,000,000

which bonds are also hereinafter sometimes called bonds of the First through Twenty-seventh Series, respectively; and
WHEREAS, Section 8 of the Mortgage provides that the form of each series of bonds (other than the First Series) issued thereunder and of the coupons to be attached to coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company and that the form of such series, as established by said Board of Directors, shall specify the descriptive title of the bonds and various other terms thereof, and may also contain such provisions not inconsistent with the provisions of the Mortgage as the




Board of Directors may, in its discretion, cause to be inserted therein expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 120 of the Mortgage provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Mortgage, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restrictions if already restricted, and the Company may enter into any further covenants, limitations or restrictions for the benefit of any one or more series of bonds issued thereunder, or the Company may cure any ambiguity contained therein, or in any supplemental indenture, or may establish the terms and provisions of any series of bonds (other than the First Series) by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to record in all of the states in which any property at the time subject to the lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add to its covenants and agreements contained in the Mortgage, as heretofore supplemented, certain other covenants and agreements to be observed by it and to alter and amend in certain respects the covenants and provisions contained in the Mortgage, as heretofore supplemented; and
WHEREAS, the execution and delivery by the Company of this Twenty-ninth Supplemental Indenture, and the terms of the bonds of the Twenty-eighth Series, hereinafter referred to, have been duly authorized by the Board of Directors of the Company by appropriate Resolutions of said Board of Directors;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in consideration of the premises and of One Dollar to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in further evidence of assurance of the estate, title and rights of the Trustees and in order further to secure the payment both of the principal of and interest and premium, if any, on the bonds from time to time issued under the Mortgage, according to their tenor and effect and the performance of all the provisions of the Mortgage (including any instruments supplemental thereto and any modification made as in the Mortgage provided) and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms (subject, however, to Excepted Encumbrances as defined in Section 6 of the Mortgage) unto J. A. Payne and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association), as Trustees under the Mortgage, and to their successor or successors in said trust, and to said Trustees and their successors and assigns for-ever, all of the property now owned by the Company and specifically described in the Mortgage, as supplemented, and all the following described properties of the Company, whether now owned or hereafter acquired, namely:
PARAGRAPH ONE
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipe lines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, equipment and appurtenances, forming a part of said plants, sites or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property.




PARAGRAPH TWO
The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations or UHF-VHF installations, or any of them, or used or enjoyed or capable of being used or enjoyed in conjunction with any of them, including all the Company’s right, title and interest in and to the following property situated in the State of Louisiana:
IBERVILLE PARISH
(1)      Additions, improvements and replacements to the Evergreen 230/34.5 KV Substation, located approximately 3.5 miles southeasterly of Plaquemine in Iberville Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Two,
Sub-Paragraph (5) of the Thirteenth Supplemental Indenture.
JEFFERSON PARISH
(2)      The Estelle 230/13.8 KV Substation, located on a site fronting on Louisiana State Highway No. 45 approximately 5 miles southerly of the intersection of said Louisiana State Highway No. 45 with Louisiana State Highway No. 90, at or near Marrero in Jefferson Parish, situated on/and that certain tract or parcel of land particularly described in Paragraph Three, Sub-Paragraph (2) of the Sixteenth Supplemental Indenture.
PARAGRAPH THREE
All and Singular the Miscellaneous Lands and Real Estate or Rights and Interests Therein of the Company now owned, or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired during the existence of this trust.
PARAGRAPH FOUR
The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, pole type substations, insulators and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways or other lands, public or private.
PARAGRAPH FIVE
The Electric Submarine Cables of the Company, including the wires, cables, switch racks, conductors, conduits, transformers, substations, insulators and all appliances; devices and equipment used or useful in connection with said submarine cables, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits,




privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof.
And also all extensions, replacements, branches, taps, developments and improvements of said submarine cables, or any of them, and all other submarine cables owned by the Company wherever situated whether now owned or hereafter acquired and/or constructed, as well as all of the Company’s rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SIX
The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company’s other property, real, personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all of the Company’s rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under, or upon any public streets or highways, public or private lands, including all additions, improvements or replacements to all of the distribution systems located in the municipalities and parishes set forth in the Mortgage and in the First through Twenty-eighth Supplemental Indentures.
And also all branches, extensions, improvements and developments of or appertaining to or connected with said distribution lines, systems or any of them, and all other distributing systems of the Company and parts and portions thereof, wherever situated, whether connected or not connected with any of the foregoing systems and whether now owned or hereafter acquired, as well as all of the Company’s rights-of-way, easements, privileges, prescriptions, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof or any part or portion thereof, through, over, under or upon any public streets or highways or public or private lands, whether now owned or hereafter acquired, subject, however, to the provisions of Section 87 of the Mortgage.
PARAGRAPH SEVEN
The certain franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric systems in, on and under streets, alleys, highways, roads, and public grounds, areas and rights-of-way, and/or for the supply and sale of electricity, and all rights incident thereto, which were granted by the governing bodies of the respective municipalities, parishes and public authorities in the State of Louisiana, including, in addition to those described in the Mortgage and in the First through Twenty-eighth Supplemental Indentures, those which are shown together with the expiration dates thereof in the following schedule:
MUNICIPAL ELECTRIC FRANCHISES
Municipality
Parish
Expiration
Marksville
Avoyelles
October 14, 2005
Waterproof
Tensas
November 10, 2005
Clayton
Concordia
November 11, 2005




PARISH ELECTRIC FRANCHISE
Parish
 
Expiration
Concordia
 
October 13, 2030
Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric systems in, on or under streets, alleys, highways, roads, and public grounds, areas and rights-of-way and/or for the supply and sale of electricity, and all rights incident thereto, subject, however, to the provisions of Section 87 of the Mortgage.
All other property, real, personal and mixed, acquired by the Company after the date of the execution and delivery of the Mortgage, in addition to property covered by the First through Twenty-eighth Supplemental Indentures (except any herein or in the Mortgage or in said Supplemental Indentures expressly excepted), now owned or, subject to the provisions of Section 87 of the Mortgage, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing or of any general description contained in this Twenty-ninth Supplemental Indenture) all lands, power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, dams, dam sites, aqueducts and all other rights or means for appropriating, conveying, storing and supplying water; all rights-of-way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto, telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, electric, gas and other machines, regulators, meters, transformers, generators, motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, wires, cables, tools, implements, apparatus, furniture and chattels; all municipal and other franchises, consents, or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose, including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights-of-way and other rights in or relating to real estate or the occupancy of the same and (except as herein or in the Mortgage, as heretofore supplemented, expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore or in the Mortgage, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 57 of the Mortgage) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 87 of the Mortgage, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof (except any herein or in the Mortgage, as heretofore supplemented, expressly excepted), shall be and are as fully granted and conveyed




hereby and as fully embraced within the lien hereof and the lien of the Mortgage, as if such property, rights and franchises were now owned by the Company and were specifically described herein and conveyed hereby.
PROVIDED THAT the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder and are hereby expressly excepted from the lien and operation of this Twenty-ninth Supplemental Indenture and from the lien and operation of the Mortgage, namely: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereafter specifically pledged, paid, deposited, delivered or held under the Mortgage or covenanted so to be; (2) merchandise, equipment, materials or supplies held for the purpose of sale in the usual course of business and fuel, oil and similar materials and supplies consumable in the operation of any properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; (3) bills, notes and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Mortgage or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the lien of the Mortgage; (5) electric energy, gas, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; all timber, minerals, mineral rights and royalties; (6) the Company’s franchise to be a corporation; and (7) any property heretofore released pursuant to any provisions of the Mortgage and not heretofore disposed of by the Company; provided, however, that the property and rights expressly excepted from the lien and operation of the Mortgage in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XIII of the Mortgage by reason of the occurrence of a Default as defined in Section 65 thereof.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed by the Company as aforesaid, or intended so to be, unto J. A. Payne and (to the extent of its legal capacity to hold the same for the purposes hereof) to The Chase Manhattan Bank (National Association), as Trustees, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Mortgage, as supplemented, this Twenty-ninth Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Mortgage, as supplemented, shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if said property had been owned by the Company at the time of the execution of the Mortgage, and had been specifically and at length described in and conveyed to said Trustees by the Mortgage as a part of the property therein stated to be conveyed.




The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Mortgage as follows:


ARTICLE I

TWENTY-EIGHTH SERIES OF BONDS

Section 1. There shall be a series of bonds designated “16% Series due April 1, 1991” (herein sometimes referred to as the “Twenty-eighth Series”), each of which shall also bear the descriptive title “First Mortgage Bond”, and the form thereof, which shall be established by Resolution of the Board of Directors of the Company, shall contain suitable provisions with respect to the matters hereinafter in this Section specified. Bonds of the Twenty-eighth Series (which shall he initially issued in the aggregate principal amount of $75,000,000) shall be dated as in Section 10 of the Mortgage provided, shall mature on April 1, 1991, shall be issued as fully registered bonds in denominations of One Thousand Dollars and in any multiple or multiples of One Thousand Dollars, and shall bear interest at the rate of 16% per annum, payable semi-annually on October 1 and April 1 of each year, the principal of and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts.
The Company reserves the right to establish, at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Twenty-eighth Series and to provide for exchangeability of such coupon bonds with the bonds of said Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose.
(I)      Bonds of the Twenty-eighth Series shall be redeemable at the option of the Company in whole at any time, or in part from time to time, prior to maturity, upon notice, as provided in Section 52 of the Mortgage, mailed at least 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
GENERAL REDEMPTION PRICES
If redeemed during 12 months period ending March 31,
1982115.51%
1987106.90%
1983113.79%
1988105.17%
1984112.07%
1989103.45%
1985110.34%
1990101.73%
1986108.62%
1991100.00%
together, in each case, with accrued interest to the date fixed for redemption; provided, however, that none of the bonds of the Twenty-eighth Series shall be redeemed at the general redemption prices prior to April 1, 1986, if such redemption is for the purpose or in anticipation of refunding such bond through the use, directly or indirectly, of funds borrowed by the Company at an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 16.2864% per annum.
(II)      Bonds of the Twenty-eighth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Mortgage) of cash deposited with the Corporate Trustee pursuant to the provisions of Section 39 or Section 64 of the Mortgage or of Section 2 hereof or with the Proceeds of




Released Property at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 months period ending March 31,
1982      100.00%
1987 100.00%
1983 100.00%
1988 100.00%
1984 100.00%
1989 100.00%
1985 100.00%
1990 100.00%
1986 100.00%
1991 100.00%
together, in each case, with accrued interest to the date fixed for redemption; provided, however, that if the date fixed for redemption in the case of the application of cash deposited with the Corporate Trustee pursuant to the provisions of Section 2 hereof shall be prior to January 1 of the calendar year in which such deposit of cash shall become due under the provisions of said Section 2, bonds of the Twenty-eighth Series shall be redeemable at the general redemption prices set forth in subdivision (I) of this Section, together with accrued interest to the date fixed for redemption.
(III) At the option of the registered owner, any bonds of the Twenty-eighth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.
Bonds of the Twenty-eighth Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York.
Upon any exchange or transfer of bonds of the Twenty-eighth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 12 of the Mortgage, but the Company hereby waives any right to make a charge in addition thereto for any exchange or transfer of bonds of said Series.

ARTICLE II

SINKING OR IMPROVEMENT FUND FOR BONDS
OF THE TWENTY-EIGHTH SERIES

Section 2. The Company covenants that, so long as any of the bonds of the Twenty-eighth Series shall remain Outstanding, it will, on or before March 1, 1983, and on or before March 1 of each year there-after to and including the year 1991, deliver to the Corporate Trustee:

(A) An Officers’ Certificate which shall state:

(a) the greatest principal amount of all bonds of the Twenty-eighth Series prior to January 1 of such year at any one time Outstanding;





(b) the aggregate principal amount of all bonds of the Twenty-eighth Series retired prior to the date of such Officers’ Certificate (i) pursuant to the provisions of subdivision (3) or subdivision (4) of Section 61 of the Mortgage by use or application of the proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property; or (ii) pursuant to the provisions of Section 64 of the Mortgage;

(c) the aggregate principal amount of bonds the right to the authentication and delivery of which (on the basis of the retirement of bonds of the Twenty-eighth Series) shall have been waived prior to the date of such Officers’ Certificate pursuant to the provisions of clause (c) of subdivision (4) of Section 59 of the Mortgage as the basis of the release of property or pursuant to the provisions of subdivision (2) of Section 61 of the Mortgage as the basis of the withdrawal of cash representing proceeds of insurance on, the release or other disposition of, or the taking by eminent domain of, property;

(d) the amount remaining after deducting the sum of the amounts stated pursuant to clauses (b) and (c) above from the amount stated pursuant to clause (a) above;

(e) the amount which is one per centum (1%) of the amount stated pursuant to clause (d) above; and

(f) (i) an aggregate principal amount of bond(s) or fraction of a bond, not to exceed $600,000 principal amount for any such year, the authentication and delivery of which the Company has theretofore waived in compliance with Section 2 of the Second Supplemental Indenture or Section 2 of the Twentieth Supplemental Indenture upon the basis of Property Additions, which waiver or waivers shall not theretofore have been used as a credit under this clause (i) or under clause (i) of Subdivision (A) of Section 2 of the Twenty-eighth Supplemental Indenture; plus (ii) an aggregate principal amount of bond(s) or fraction of a bond to the authentication and delivery of which the Company shall then be entitled on the basis of Property Additions or on the basis of the retirement of bonds of the Twenty-eighth Series by virtue of compliance with all applicable provisions of the Mortgage (except as hereinafter in this Section otherwise provided) if the Company elects to make its right to the authentication and delivery of such bond(s) or fraction of a bond the basis of a credit under this Section.

(B) An amount in cash and/or principal amount of bonds of the Twenty-eighth Series equivalent to the amount stated in the Officers’ Certificate (due on or before March 1 of such year) provided for by this Section pursuant to the requirements of clause (e) of subdivision (A) of this Section; provided, however, that against the amount of cash or bonds payable or deliverable pursuant to this subdivision (B), there shall be credited the principal amount, if any, of the bonds which shall be stated in such Officers’ Certificate pursuant to the requirements of clause (f) of subdivision (A) of this Section.

For the purpose of subdivision (A) of this Section the term “Outstanding” shall not include bonds of the Twenty-eighth Series pledged to secure indebtedness of the Company and not at any time otherwise issued by the Company.
Such cash together with any bonds delivered to the Corporate Trustee under the provisions of this Section shall be dealt with as provided for by this Section.




Notwithstanding any other provisions of this Twenty-ninth Supplemental Indenture or of the Mortgage, (i) the Company shall be permitted from time to time to anticipate in whole or in part the requirements of this Section becoming due on March 1 of the then current year or any subsequent year or years by depositing cash and/or a principal amount of bonds of the
Twenty-eighth Series with the Corporate Trustee in full satisfaction or in partial satisfaction of the requirements of this Section and (ii) any cash so deposited, whether in full satisfaction or in partial satisfaction of the requirements of this Section and whether becoming due on March 1 of the then current year or of a subsequent year, may be from time to time withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 31 of the Mortgage or in subdivisions (3) and/or (4) of Section 61 of the Mortgage; provided, however, that the retirement of no bonds of any series other than the Twenty-eighth Series shall be made the basis of the withdrawal of cash deposited under this Section; and provided further, that no bonds of any series other than the Twenty-eighth Series shall be purchased, paid or redeemed, as above provided, with cash deposited under the provisions of this Section and that no bonds of the Twenty-eighth Series shall be purchased with cash deposited under this Section at such price (including accrued interest and brokerage) that the cost thereof to the Company is in excess of the cost of redeeming such bonds on a date 40 days after the date of such purchase (including premium, if any, and accrued interest from the interest date next preceding the date of purchase to such redemption date in such cost); and provided further, that the Company may not deposit cash prior to April 1, 1986, in anticipation of the requirements of this Section if the cash so deposited represents borrowed funds, or is in anticipation of funds to be borrowed, having an effective interest cost to the Company (computed in accordance with generally accepted financial practice) of less than 16.2864% per annum.
In case credit under the provisions of this Section is applied for in whole or in part upon the basis of the right to the authentication and delivery of bonds, the Company shall comply with all applicable provisions of the Mortgage relating to such authentication and delivery; except that the Company shall not be required to comply with any earning requirements or to deliver to the Corporate Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6), and (8) of Section 28 of the Mortgage.
So long as any bonds of the Twenty-eighth Series shall remain Outstanding, any election by the Company pursuant to clause (f) of subdivision (A) of this Section to make its right to the authentication and delivery of any bond(s) or fraction of a bond the basis of a credit under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of such bond(s) or fraction of a bond and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered under the Mortgage, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of a credit under the Mortgage.
For all purposes of the Mortgage (including all calculations thereunder), so long as any bonds of the Twenty-eighth Series remain Outstanding, as defined in Section 2 of the Mortgage:
(I)
any cash deposited under the provisions of this Section or Section 40 of the Mortgage or Section 2 of the First through Eleventh, Thirteenth through Twentieth and Twenty-second through Twenty-eighth Supplemental Indentures shall be deemed to be Funded Cash;

(II)
any bonds of the Twenty-eighth Series delivered to the Corporate Trustee pursuant to the provisions of this Section or any bonds of the Second through Twenty-seventh Series delivered to the Corporate Trustee pursuant to the provisions of Section 2 of the First through Eleventh, Thirteenth through Twentieth, Twenty-second through Twenty-eighth Supplemental




Indentures or any bonds of the First Series delivered to the Corporate Trustee or credited pursuant to the provisions of Section 40 of the Mortgage, shall, after such delivery or crediting, be deemed to have been retired by the use of Funded Cash; and

(III)
with respect to all credits taken under this Section or Section 2 of the First through Eleventh, Thirteenth through Twentieth and Twenty-second through Twenty-eighth Supplemental Indentures on the basis of waivers of the right to the authentication and delivery of bonds or otherwise, it shall be deemed that (in lieu of such credits being so taken) an amount of cash equal to each such credit was deposited pursuant to the provisions of this Section or of said Section 2 of the First through Eleventh, Thirteenth through Twentieth, and Twenty-second through Twenty-eighth Supplemental Indentures, as the case may be, and concurrently with such deposit was withdrawn on the same basis as that on which such credit was taken.

Any bonds issued under the Mortgage delivered to, deposited with or purchased or redeemed by the Corporate Trustee pursuant to the provisions of this Section shall forthwith be canceled by the Corporate Trustee.
The Company shall forthwith from time to time on demand of the Corporate Trustee make further payments pursuant to the provisions of this Section on account of accrued interest, brokerage and premium, if any, on bonds purchased or redeemed or then to be purchased or redeemed but not in excess of
(AA) the aggregate cost for principal, interest, brokerage and premium, if any, on all bonds theretofore, or then to be, purchased and/or redeemed pursuant to the provisions of this Section;
after deducting therefrom
(BB) the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased and/or redeemed pursuant to the provisions of this Section, plus the aggregate of all such further payments theretofore made pursuant to the provisions of this Section on account of accrued interest, brokerage and/or premium, if any.


ARTICLE III

DIVIDEND COVENANT

Section 3. The Company covenants that, so long as any of the bonds of the Twenty-eighth Series are Outstanding, it will not declare any dividends on its Common Stock (other than (a) a dividend payable solely in shares of its Common Stock, or (b) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its Common Stock) or make any distribution on outstanding shares of its Common Stock or purchase or otherwise acquire for value any outstanding shares of its Common Stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its Common Stock) if, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to March 31, 1981 (other than any dividend declared by the Company on or before March 31, 1981 for payment on or before April 30, 1981) exceeds (without giving effect to (i) any of such dividends, distributions, purchases or acquisitions, or (ii) any net transfers from earned surplus to stated capital accounts) the sum of




(a) the aggregate amount credited subsequent to March 31, 1981, to earned surplus, (b) $108,000,000 and (c) such additional amounts as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935.

For the purpose of this Section 3, the aggregate amount credited subsequent to March 31, 1981 to earned surplus shall be determined in accordance with generally accepted accounting principles and practices after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, but in such determination there shall not be considered charges to earned surplus applicable to the period prior to April 1, 1981, including, but not limited to, charges to earned surplus for write-offs or write-downs of book values of assets owned by the Company on March 31, 1981. There shall be included as a deduction, however, in determining the net balance to be transferred from the income account for any period subsequent to March 31, 1981, amounts equal to the sum of (1) amounts, not otherwise deducted, which would be required to be included in operating expenses in each Net Earning Certificate by the provisions of Section 6 of this Twenty-ninth Supplemental Indenture and (2) the Company’s provisions during such period for depreciation and retirement of property (but excluding from this subdivision (2) amounts included under subdivision (1) above), which sum, for the purposes of this Section 3, shall not be less than the aggregate amounts required to be stated for the period from April 1, 1981, to the date of such dividend, distribution, purchase or acquisition in the Officers’ Certificate of Replacements by the provisions of subdivision (1) of subsection (I) of Section 39 of the Mortgage, including proportionate amounts calculated as provided in subdivision (1) thereof for any portion of the period elapsed since March 31, 1981, not theretofore included in any Officers’ Certificate of Replacements.
For the purpose of this Section 3, the Company’s provisions for depreciation and retirement of property shall be deemed to be the amount credited to the accumulated provision for depreciation account through charges to operating expenses, or otherwise to income, as provided in the Uniform System of Accounts prescribed for Public Utilities and Licensees by the Federal Energy Regulatory Commission.


ARTICLE IV

MISCELLANEOUS PROVISIONS

Section 4. Subject to any amendments provided for in this Twenty-ninth Supplemental Indenture, the terms defined in the Mortgage, as heretofore supplemented, shall, for all purposes of this Twenty-ninth Supplemental Indenture, have the meanings specified in the Mortgage, as heretofore supplemented.

Section 5. So long as any bonds of the Twenty-eighth Series shall remain Outstanding, in each Net Earning Certificate made pursuant to Section 7 of the Mortgage there shall be included in operating expenses for the twelve (12) months period with respect to which such certificate is made an amount, if any (not otherwise included), equal to the provisions for amortization of any amounts included in utility plant acquisition adjustment accounts for such period.

Section 6. So long as any bonds of the Twenty-eighth Series shall remain Outstanding, subdivision (2) of Section 7 of the Mortgage is hereby amended by adding thereto the following words “provided, further, that the amount so included in such operating expenses in lieu of the amounts actually appropriated out of income for retirement of the Mortgaged and Pledged Property used primarily and principally in the electric, gas, steam and/or hot water utility business and the Company’s automotive




equipment used in the operation of such property shall not be less than the amounts so actually appropriated out of income”.

Section 7. So long as any bonds of the Twenty-eighth Series shall remain Outstanding, clause (5) of subsection (I) of Section 39 of the Mortgage is amended by deleting the word “expenditures” from the first line of such clause (5) and inserting in lieu thereof the words “net cash expenditures (after reflecting salvage) made”.

Section 8. Section 55 of the Mortgage, as heretofore amended, is hereby further amended to insert the words “and subject to the provisions of Section 2 of the Twenty-ninth Supplemental Indenture dated as of April 1, 1981”, after the date “December 1, 1980”.

Section 9. Effective with and applicable to the application to the Corporate Trustee for the authentication and delivery of the first series of bonds created after May 30, 1981, or such later date as shall be authorized or approved by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935, clauses (9), (10) and (11) of Section 7 of the Mortgage are hereby amended to read as follows:

“(9) the amount, if any, by which the amount required to be stated in such certificate by clause (8) of this Section exceeds 10 per centum (10%) of the amount required to be stated in such certificate by clause (7) of this Section; provided, however, that there may be substituted for 10 per centum (10%) such per centum greater than ten per centum (10%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or any successor commission thereto, under the Public Utility Holding Company Act of 1935;
(10) the amount remaining after deducting in such certificate the amount, if any, required to be stated by clause (9) of this Section from the amount required to be stated by clause (8) of this Section; provided, however, that, so long as any bonds issued prior to January 1, 1981, shall remain Outstanding, the amount to be deducted from clause (8) of this Section shall not be less than the amount, if any, by which the aggregate of (a) such other income (net) and (b) that portion of the amount required to be stated, in such certificate by clause (7) of this Section which, in the opinion of the signers, is directly derived from, the operation of property (other than paving, grading and other improvements to, under or upon public highways, bridges, parks or other public properties of analogous character) not subject to the Lien of this Indenture at the date of such certificate, exceeds ten per centum (10%) of the sum of clauses (7) and (8) of this Section; and provided further, that in computing the foregoing, there may be used such per centum greater than ten per centum (10%) but not greater than fifteen per centum (15%) as shall be authorized or approved, upon application by the Company, by the Securities and Exchange Commission, or by any successor commission thereto, under the Public Utility Holding Company Act of 1935; and provided further, that if the amount required to be stated in such certificate by clause (7) of this Section includes revenues from the operation of property not subject to the Lien of this Indenture, there shall be included in the calculation to be made pursuant to this clause (10) such reasonable interdepartmental or interproperty revenues and expenses between the Mortgaged and Pledged Property and the property not subject to the Lien hereof as shall be allocated to such respective properties by the Company; and
(11) the Adjusted Net Earnings of the Company for such period of twelve (12) consecutive calendar months (being the sum of clauses (7) and (10) of this Section);”.




Section 10. The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Mortgage, as heretofore amended, set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Twenty-ninth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general each and every term and condition contained in Article XVII of the Mortgage, as heretofore amended, shall apply to and form part of this Twenty-ninth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Twenty-ninth Supplemental Indenture.
Section 11. Whenever in this Twenty-ninth Supplemental Indenture either of the parties hereto is named or referred to, this shall, subject to the provisions of Articles XVI and XVII of the Mortgage, as heretofore amended, be deemed to include the successors and assigns of such party, and all covenants and agreements in this Twenty-ninth Supplemental Indenture contained by or on behalf of the Company, or by or on behalf of the Trustees, or either of them, shall, subject as aforesaid, bind and inure to the respective benefits of the respective successors and assigns of such parties, whether so expressed or not.

Section 12. Nothing in this Twenty-ninth Supplemental Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim under or by reason of this Twenty-ninth Supplemental Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Twenty-ninth Supplemental Indenture contained by or on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and coupons Outstanding under the Mortgage.

Section 13. It is the intention and it is hereby agreed that, so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Twenty-ninth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that, so far as the said Louisiana property is concerned, this Twenty-ninth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued under the Mortgage, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued under the Mortgage and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 14. This Twenty-ninth Supplemental Indenture shall be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.





IN WITNESS WHEREOF, LOUISIANA POWER & LIGHT COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or one of its Second Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and J. A. PAYNE for all like purposes has hereunto set his hand and affixed his seal, all in The City of New York, as of the day and year first above written.
 
Louisiana Power & Light Company
 
 
 
By:
/s/ J. M. Mooney
 
 
J. M. Mooney
Vice President
 
 
 
 
 
 
[CORPORATE SEAL]
 
 
 
Attest:
 
 
 
/s/ R. J. Estrada
 
         R. J. Estrada
 
 
Assistant Secretary
 
 
 
 
 
Executed, sealed and delivered by
Louisiana Power & Light Company
in the presence of:
 
 
 
 
 
/s/ D. E. Matthews
 
Dorothea E. Matthews
 
 
 
/s/ John M. Stuart
 
John M. Stuart
 







 
The Chase Manhattan Bank
(National Association),
As Trustee
 
 
 
 
 
/s/ V. J. Marino                                                
 
 
       V. J. Marino
 
        Vice President
 
 
[CORPORATE SEAL]
 
Attest:
 
 
 
 
 
/s/ Diane E. Heaney    
/s/ J.A. Payne   [L.S.]
Diane E. Heaney
  J. A. Payne
Assistant Secretary
  As Co-Trustee
Executed, sealed and delivered by
The Chase Manhattan Bank
(National Association) and
J. A. Payne in the presence of:
 
 
 
 
 
/s/ Mary Bogad                                                
 
Mary Bogad
 
 
 
/s/ Kevin Logue                                                
 
Kevin Logue
 
 
 







STATE OF NEW YORK      )
)      ss:
COUNTY OF NEW YORK      )

On this 21st day of April, 1981, before me appeared J. M. MOONEY, to me personally known, who, being by me duly sworn, did say that he is a Vice President of LOUISIANA POWER & LIGHT COMPANY, and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said J. M. MOONEY acknowledged said instrument to be the free act and deed of said corporation.
On the 21st day of April, in the year 1981, before me personally came J. M. MOONEY, to me known, who, being by me duly sworn, did depose and say that he resides at 2701 Somerset Drive, New Orleans, State of Louisiana; that he is a Vice President of LOUISIANA POWER & LIGHT COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARIAL SEAL]
 
/s/ Loretta Sandano
 
            Loretta Sandano
 
NOTARY PUBLIC, State of New York            
No. 30-8753225                                
Qualified in Nassau County                        
Certificate filed in New York County             
Commission Expires March 30, 1982             
 
 
 
 
 
 






STATE OF NEW YORK      )
)      ss:
COUNTY OF NEW YORK      )
On this 15th day of April, 1981, before me appeared V. J. MARINO, to me personally known, who, being by me duly sworn, did say that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), and that the seal affixed to the above instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said V. J. Marino acknowledged said instrument to be the free act and deed of said corporation.
On the 15th day of April, in the year 1981, before me personally came V. J. MARINO, to me known, who, being by me duly sworn, did depose and say that he resides at 37 Crane Circle, New Providence, New Jersey; that he is a Vice President of THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corpo-rate seal, that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARIAL SEAL]
 
/s/ Della M. Killett
 
                 Della M. Killett
 
NOTARY PUBLIC, State of New York       
No. 24-4659667                                  
Qualified in Kings County                      
Certificate filed in New York County          
Commission Expires March 30, 1983          
 
 
 
 
 
 






STATE OF NEW YORK      )
)      ss:
COUNTY OF NEW YORK      )

On the 15th day of April, 1981, before me personally appeared J. A. PAYNE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 15th day of April, 1981, before me personally came J. A. PAYNE, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.
[NOTARIAL SEAL]
 
/s/ Della M. Killett
 
                 Della M. Killett
 
NOTARY PUBLIC, State of New York       
No. 24-4659667                                  
Qualified in Kings County                      
Certificate filed in New York County          
Commission Expires March 30, 1983          
 
 






SUMMARY OF RECORDATION DATA
Parish
Date Filed
Entry or
File Number
Mortgage
Book
Folio
Ascension
April 27, 1981
182045
301
73
Assumption
April 27, 1981
135787
129
616
Avoyelles
April 28, 1981
81-2970
*48
369
Bienville
April 28, 1981
Z-8724
156
802
Bossier
April 28, 1981
356886
428
360
Caldwell
April 28, 1981
147978
102
98
Catahoula
April 28, 1981
176015
109
621
Claiborne
April 28, 1981
302724
132
740
Concordia
April 28, 1981
150543
128
160
East Carroll
April 28, 1981
51980
136
646
East Feliciana
April 27, 1981
92320
80
195
Franklin
April 28, 1981
225138
159
594
Grant
April 28, 1981
37538
113
47
Iberville
April 27, 1981
313
172
709
Jackson
April 28, 1981
260712
*SS
535
Jefferson
April 27, 1981
965418
**6
901
Lafourche
April 27, 1981
540042
378
381
LaSalle
April 28, 1981
114165
112
386
Lincoln
April 28, 1981
D-34174
163
31
Livingston
April 27, 1981
181118
188
570
Madison
April 28, 1981
61372
60
96
Morehouse
April 28, 1981
59527
305
736
Natchitoches
April 28, 1981
M-A-4252
411A
150
Orleans
April 27, 1981
†408734
2310A
549
Ouachita
April 28, 1981
834409
980
535
Plaquemines
April 27, 1981
108
112
391
Rapides
April 28, 1981
736100
912
98
Red River
April 28, 1981
148345
94
474
Richland
April 28, 1981
240267
221
692
Sabine
April 28, 1981
254944
137
625
St. Bernard
April 27, 1981
181208
214
411
St. Charles
April 27, 1981
81104
282
746
St. Helena
April 27, 1981
042786
108
21
St. James
April 27, 1981
57461
118
660
St. John the Baptist
April 27, 1981
77374
114
185
St. Martin
April 27, 1981
101127
292
793
St. Tammany
April 27, 1981
461475
830
325
Tangipahoa
April 27, 1981
291195
360
150
Tensas
April 28, 1981
118919
39
239
Terrebonne
April 27, 1981
651168
549
701
Union
April 28, 1981
197154
144
60
Vernon
April 28, 1981
386343
547
302
Washington
April 27, 1981
97051
319
271
Webster
April 28, 1981
292827
255
660
West Carroll
April 28, 1981
163611
123
442
Winn
April 28, 1981
115522
112
315




_____________
*      Special Mortgage Book
**      Bond Mortgage Book
†      Notarial Archives Number






Exhibit 4(d)10

FUEL LEASE


Dated as of January 31, 1989


between


RIVER FUEL COMPANY #2, INC.,
as Lessor
and


LOUISIANA POWER & LIGHT COMPANY,
as Lessee
AS OF THE DATE OF THIS LEASE, THE LESSOR UNDER THIS LEASE (THE “LESSOR”) HAS GRANTED TO MORGAN GUARANTY TRUST COMPANY OF NEW YORK A SECURITY INTEREST IN THIS LEASE AND IN ALL OF LESSOR’S RIGHTS AND INTERESTS UNDER THIS LEASE, INCLUDING, WITHOUT LIMITATION, ALL LESSOR’S RIGHTS TO AND INTERESTS IN NUCLEAR FUEL AS DEFINED IN THIS LEASE.
THIS LEASE HAS BEEN MANUALLY EXECUTED IN FIFTEEN COUNTERPARTS, NUMBERED CONSECUTIVELY FROM 1 TO 15. NO SECURITY INTEREST IN THIS LEASE OR IN ANY OF LESSOR’S RIGHTS AND INTERESTS UNDER THIS LEASE MAY BE PERFECTED BY THE POSSESSION OF ANY SUCH COUNTERPART OTHER THAN COUNTERPART NO. 1.
Counterpart No. __.






Table of Contents

Section          Page
i

1.
Defined Terms      1
2.
Representations and Warranties of Lessee      7
3.
Lease of Nuclear Fuel; Term      8
4.
Title to Remain in the Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used for Generation; Location; Contract Assignment      9
5.
Basic Rent and Additional Rent; Procedure for Paying Basic Rent      10
6.
Payment of Costs by the Lessor      11
7.
Taxes      12
8.
Condition and Use of Nuclear Fuel; Quiet Enjoyment      12
9.
Maintenance of the Nuclear Fuel      14
10.
Removals; Transfer to the Lessee; Commingling; Substitution; Location      14
11.
Indemnification by the Lessee      16
12.
Inspection; Right to Enter Generating Facility      17
13.
Payment of Impositions; Recording      17
14.
Compliance with Legal and Insurance Requirements, and with Instruments      17
15.
Liens      18
16.
Permitted Contests      18
17.
Insurance      19
18.
Damage or Destruction      20
19.
Condemnation or Eminent Domain      20
20.
Termination After Certain Events      22
21.
Conditions of Termination and Conveyance      24
22.
Estoppel Certificates; Information      25
23.
Rights to Perform the Lessee’s Covenants      26
24.
Assignments      26
25.
Events of Default and Remedies      26
26.
Permanent Storage or Disposal      29
27.
No Merger      29
28.
Notices      29
29.
Allocation of Amounts      30
30.
Amendments      30




31.
Severability      30
32.
Job Incentive Credit and Investment Credit      31
33.
Miscellaneous      31


Attachments
Schedule A - -
Description of Nuclear Fuel
Schedule B - -
Quarterly Rent Schedule
Schedule C - -
Bill of Sale to River Fuel Company #2, Inc.
Schedule D - -
Fuel Schedule No. _____
Schedule E - -
Bill of Sale from River Fuel Company #2, Inc. to Louisiana Power & Light Company
Schedule F - -
Form of Assignment Agreement







    





FUEL LEASE
FUEL LEASE dated as of January 31, 1989 (as the same may be amended from time to time, “this Lease”), between LOUISIANA POWER & LIGHT COMPANY, a Louisiana corporation (the “Lessee”), and RIVER FUEL COMPANY #2, INC., a Delaware corporation (the “Lessor”).
SECTION 1.
Defined Terms .
Unless the context otherwise specifies or requires, each term defined in this Section 1 shall, when used in this Lease, have the meaning indicated:
“ Acquisition Cost ” shall mean the purchase price paid by the Lessor in order to acquire any portion of the Nuclear Fuel including progress payments, if any, made by the Lessor in respect of Nuclear Fuel, together with costs of milling, conversion, enrichment, fabrication, installation, delivery, containerization, transportation, storage, processing, Reprocessing and any other direct costs with respect to acquiring, recovering or preparing such portion of the Nuclear Fuel for use in or for cycling or recycling thereof or for management thereof through any stage of its Nuclear Fuel Cycle, and costs with respect to repairs, replacements and renewals or Restoration of any portion of the Nuclear Fuel but excluding therefrom all Capitalized Cost with respect thereto. The purchase price for any part of the Nuclear Fuel acquired by the Lessor from the Lessee shall include all payments made by the Lessee to Manufacturers for such Nuclear Fuel plus all costs, expenses and allowances which have been incurred or made by Lessee in connection with such Nuclear Fuel and which are properly includible as a cost of such Nuclear Fuel in Lessee’s books of account in accordance with Lessee’s normal accounting practice.
“ Additional Rent ” shall mean all amounts (other than Basic Rent and Advance Rent) that the Lessee agrees to pay in this Lease (including, without limitation, indemnification payable under this Lease) and interest at the rate incurred by the Lessor or any Assignee as a result of any delay in payment by the Lessee to meet obligations that would have been satisfied out of prompt payment by the Lessee.
“ Advance Rent ” shall have the meaning assigned to that term in Section 5(g) of this Lease.
“ Affiliate ” of any person means any other person controlling, controlled by or under direct or indirect common control with such person. For the purposes of this definition, “ control ,” when used with respect to any specified person, means the power to direct the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “ controlling ” and “ controlled ” have meanings correlative to the foregoing.
“ Assignee ” shall mean each person, firm, corporation or other entity to which any part of the Lessor’s interest under this Lease, or any rents or other rights of the Lessor under this Lease, shall at the time have been assigned, conditionally or otherwise, by the Lessor. Until the Lessee shall be otherwise notified by the Lessor, the Assignee shall be Morgan Guaranty Trust Company of New York (“Morgan”), as collateral agent under the Security and Collateral Agency Agreement, dated as of January 31, 1989 between the Lessor and Morgan.
“ Atomic Energy Act ” shall mean the Atomic Energy Act of 1954, as amended, as the same may be further amended from time to time (42 U.S.C. § 2011 et seq.).
“ Basic Rent ” payable on any Basic Rent Payment Date, shall mean the sum of the Quarterly Lease Charge, less those Daily Lease Charges included in Capitalized Cost, plus the Burn-Up Charge, in each case with respect to the quarter prior to such Basic Rent Payment Date.




“ Basic Rent Payment Date ” shall have the meaning assigned to that term in Section 5(a) of this Lease.
“ Bill of Sale ” shall mean a bill of sale in substantially the form of either Schedule C or Schedule E attached to and made a part of this Lease, pursuant to which title to all or any portion of the Nuclear Fuel is transferred to the Lessor or to the Lessee.
“ Burn-Un Charge ” shall mean the amount shown as Total Burn-Up Charge on Annex I to the Quarterly Rent Schedule delivered to the Lessor pursuant to Section 5(c) hereof in respect of such Basic Rent Payment Date.
“ Business Day ” shall mean any day other than a day on which banking institutions in the State of New York or in the City of New Orleans are authorized by law to close.
“ Capitalized Cost ” shall mean the sum of all legal, printing, reproduction, closing and other normally capitalizable administrative fees and expenses actually paid by the Lessor in connection with any acquisition of Nuclear Fuel and in connection with the transactions contemplated by a Credit Agreement (including interest expense and amortization of debt discount with respect to Commercial Paper and loans under a Credit Agreement and all commitment and other fees, costs and expenses, including the issuing agent’s fees, relating to liabilities of the Lessor under a Credit Agreement) or contemplated by a Secured Note Agreement (including interest expense and amortization of discount with respect to Secured Notes and other fees, costs and expenses incurred in connection with a Secured Note Agreement), and Daily Lease Charges accrued pursuant to this Lease which, in the Lessee’s sole judgment, are allocable to such Nuclear Fuel (i) during any stage of its Nuclear Fuel Cycle other than its Heat Production stage or (ii) during the period beginning on the Termination Notice Date and ending on the Termination Settlement Date (in each case as defined in Section 20(b) of this Lease) if and to the extent that the Lessee elects to capitalize any such Daily Lease Charges; provided, however, that Daily Lease Charges may be allocated to and included in Capitalized Cost by the Lessee only so long as the commitment under a Credit Agreement and the aggregate principal amount of Secured Notes outstanding shall exceed the sum of the Stipulated Loss Value of all of the Nuclear Fuel (including such Daily Lease Charges in the computation of Capitalized Cost for purposes of determining the amount of Investment) and $3,000,000.
“ Collateral Account ” shall have the meaning specified in the Security Agreement.
“ Commercial Paper ” shall mean commercial paper notes issued by the Lessor pursuant to a Credit Agreement.
“ Cooling ” shall mean the stage of the Nuclear Fuel Cycle pursuant to which Nuclear Fuel is placed in storage upon completion of the Heat Production stage of the Nuclear Fuel Cycle.
“ Credit Agreement ” shall mean that certain credit agreement, dated as of January 31, 1989, between the Lessor and The Bank of New York, as the same may from time to time be amended, modified or supplemented, and any other successor credit agreement entered into between the Lessor and any bank or other entity for use in financing the cost of Nuclear Fuel.
“ Daily Lease Charge ” shall mean for any calendar day (whether or not a Business Day) during the term of this Lease the sum of:
(i)      an accrual for such day of all interest expense and of the amortization of debt discount, whether or not paid, with respect to (A) all Commercial Paper issued, (B) all other indebtedness incurred




pursuant to a Credit Agreement and (C) all Secured Notes issued, which, in each case, is outstanding at the close of business on such day (net of Lessor’s earnings on such day on investment of moneys received in connection with the transactions contemplated by this Lease, a Credit Agreement or a Secured Note Agreement), and
(ii)      an accrual for such day with respect to (A) all commitment and other fees, costs and expenses (including, without limitation, issuing agent’s fees and commercial paper dealer’s fees) relating to the liabilities of the Lessor under a Credit Agreement, (B) all fees, costs and expenses incurred by the Lessor in connection with a Secured Note Agreement and (C) all fees, costs and expenses incurred by the Lessor under any Security Agreement.
Any figure used in the computation of any component of the Daily Lease Charge shall be stated to ten decimal places. No accrual, charge or other item which would constitute a part of the Acquisition Cost shall be included in the computation of Daily Lease Charge.
“ Event of Default ” shall mean any Event of Default referred to in Section 25 hereof.
“ Fuel Management ” shall mean the design of, contracting for, setting the price and terms of acquisition of, management, movement, removal, disengagement and other activities in connection with the utilization of the Nuclear Fuel, and sometimes referred to as “management”.
“ Fuel Schedule ” shall mean an instrument in substantially the form of Schedule D attached hereto and made a part hereof, pursuant to which Schedule A to this Lease is amended in connection with a request by the Lessee for payment with respect to Nuclear Fuel pursuant to Section 6 hereof or in connection with a removal or a replacement of Nuclear Fuel pursuant to Section 10, 18(a) or 19(b) hereof.
“ Generating Facility ” shall mean the Lessee’s pressurized water reactor nuclear electric generating facilities located near Killona, Louisiana, known as Waterford No. 3.
“ Heat Production ” shall mean the stage of the Nuclear Fuel Cycle in which the Nuclear Fuel or any portion thereof is engaged in a reactor core of the Generating Facility and is being consumed to produce heat, pursuant to the process of nuclear fission, in the production of electric energy.
“ Impositions ” shall mean all payments required by public or governmental authority in respect of any property subject to this Lease or any transaction pursuant to this Lease or any right or interest held by virtue of this Lease.
“ Insurance Requirements ” shall mean all terms of any insurance policy covering or applicable to the Nuclear Fuel or any portion thereof, all requirements of the issuer of any such policy, and all orders, rules, regulations and other requirements of the Nuclear Regulatory Commission, the National Board of Fire Underwriters, or any other body exercising similar functions with respect to electric utility properties or any other body hereafter constituted exercising similar functions, which are applicable to or affect insurance with respect to the Generating Facility, the Nuclear Fuel or any portion thereof or any operation, use or condition of the Generating Facility, the Nuclear Fuel or any portion thereof.
“ Insured Person ” shall have the meaning assigned to that term in Section 17 of this Lease.
“ Investment ” shall mean with respect to any portion of the Nuclear Fuel, the sum of (i) the Acquisition Cost for such portion plus (ii) the Capitalized Cost for such portion.




“ Legal Requirements ” shall mean all requirements having the force of law applicable to the Lessee (as owner and operator of the Generating Facility), the Generating Facility or the Nuclear Fuel.
“ Lessee ” shall mean Louisiana Power & Light Company, a Louisiana corporation, or any successor or successors to its rights and obligations as lessee hereunder.
“ Lessor ” shall mean River Fuel Company #2, Inc., a Delaware corporation, or any successor or successors to the rights and obligations of River Fuel Company #2, Inc. as lessor hereunder, including at any time after the date hereof, the then owner of the Nuclear Fuel.
“ Manufacturers ” shall mean any suppliers of Nuclear Fuel, or any component thereof, or of Reprocessing or other service in connection therewith (including for this definition Bayou Fuel Company).
“ Mortgage and Deed of Trust ” shall mean the Lessee’s Mortgage and Deed of Trust, dated as of April 1, 1944 to the Chase National Bank of the City of New York (Bank of Montreal Trust Company, successor) and Carl E. Buckley (Z. George Klodnicki, successor), as Trustees, as supplemented and any general and refunding mortgage entered into in the ordinary course of the Lessee’s business.
“ MWhr Factor ” shall mean a factor determined by deducting (i) the estimated residual value stated in dollars of each assembly of the Nuclear Fuel after it shall have completed Heat Production from (ii) the Stipulated Loss Value for each such assembly and dividing the remainder by the estimated amount of heat remaining, measured in thermal megawatt hours, that such assembly will produce during Heat Production. The quotient shall be computed to the nearest fifth decimal place.
“ Nuclear Fuel ” shall mean the separate assemblies of Nuclear Fuel and components thereof more particularly described in Schedule A hereto, as amended from time to time by means of a Fuel Schedule, in the respective forms in which such assemblies and components exist at each stage of the Nuclear Fuel Cycle, beginning with Nuclear Fuel in the form of ore which has already been mined, consisting of substances and equipment which, when loaded into a nuclear reactor, are intended to produce heat through the fission process, together with all replacements thereof and additions thereto. But “Nuclear Fuel” shall not include any assemblies, components or other items purchased and paid for by the Lessee pursuant to the provisions of Sections 10(b) and 10(c) hereof.
“ Nuclear Fuel Contract ” shall mean any contract entered into by the Lessee with one or more Manufacturers relating to the acquisition of any Nuclear Fuel or service in connection therewith.
“ Nuclear Fuel Cycle ” shall mean the various stages herein defined in the process, whether physical or chemical, by which the component parts of the Nuclear Fuel are processed, enriched, designed, fabricated into assemblies utilizable for Heat Production, loaded into a reactor core, utilized, disengaged, cooled, stored and/or reprocessed, together with all incidental processes with respect to the Nuclear Fuel at any stage of said Nuclear Fuel Cycle.
“ Nuclear Incident ” shall have the meaning specified in the Atomic Energy Act.
“ Nuclear Regulatory Commission ” shall mean the independent regulatory commission of the United States government existing under the authority of the Energy Reorganization Act of 1974, as amended, or any successor organization or organizations or administrator or administrators performing any identical or substantially identical licensing and related regulatory functions.




“ Person ” shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
“ Quarterly Lease Charge ” shall mean the sum, for any quarter ending on the last day of each March, June, September and December, of the aggregate of the Daily Lease Charges incurred with respect to all portions of the Nuclear Fuel subject to this Lease at any time during such quarter.
“ Quarterly Rent Schedule ” shall mean an instrument in substantially the form of Schedule B attached hereto and made a part hereof from time to time executed by the Lessor and the Lessee for the purpose of setting forth and confirming the S.L.V. of the Nuclear Fuel and the Burn-Up Charges and Daily Lease Charges for the Nuclear Fuel.
“ Reprocessing ” shall mean the stage of the Nuclear Fuel Cycle in which the Nuclear Fuel, after it has completed Heat Production and Cooling, is transported to a reprocessing plant, mechanically disassembled, dissolved in acidic solution and separated into recovered forms of uranium, plutonium and other radioactive materials, or any process or processes used in place thereof.
“ Restoration ” shall mean the repair, reconstruction or replacement of all or any portion of the Nuclear Fuel which has been damaged or destroyed or lost or stolen or which has been affected by a Taking, as nearly as possible to the value, condition and character of such portion, and in its location, immediately prior to such damage, destruction, loss, theft or Taking, or the replacement of any assembly of the Nuclear Fuel so damaged, destroyed or lost or stolen or affected by a Taking, with Nuclear Fuel having an equivalent value and Heat Production capacity with only such alterations and additions as may be made at the Lessee’s election and as will not diminish the fair market value or usefulness of the Nuclear Fuel so repaired, reconstructed or replaced.
“ Secured Note ” shall mean each promissory note of the Lessor having a maturity date more than 270 days from its date of issuance, issued pursuant to a Secured Note Agreement and the proceeds of which are used to pay Acquisition Cost or Capitalized Cost or to pay borrowings previously incurred by the Lessor in connection with the financing of its acquisition or ownership of Nuclear Fuel and the holder of which is entitled to the benefit of the security interest granted to the Assignee pursuant to a Security Agreement.
“ Secured Note Agreement ” shall mean each note agreement, dated as of January 31, 1989, between the Lessor and lenders with respect to the sale by the Lessor of Secured Notes, Series A, and any similar agreement entered into between the Lessor and institutional investors relating to the issuance and sale by the Lessor of any other series of Secured Notes.
“ Security Agreement ” shall mean an agreement from the Lessor to an Assignee, which creates a security interest in the Nuclear Fuel, as the same may be entered into and/or amended from time to time, and the collateral chattel mortgage, collateral chattel mortgage note, pledge agreement, periodic supplements thereto, and notice of security interest, substantially in the form of exhibits to the Security Agreement, together with periodic supplements to the collateral chattel mortgage.
“ Stipulated Loss Value ” or “ S.L.V. ” shall mean with respect to any portion of the Nuclear Fuel at any time leased hereunder, the excess of the amount of the Investment in such portion over the aggregate amount of the Burn-Up Charges theretofore paid by the Lessee to the Lessor in respect of such portion.
“ Taking ” shall mean a loss, during the term hereof, of the title to, ownership of or use and possession of the Nuclear Fuel, or any material portion thereof, or any material interest therein or right




accruing thereto, as the result of or in lieu of or in anticipation of the exercise of the rights of condemnation or eminent domain pursuant to any law, general or special, or by reason of the temporary requisition of the use of the Nuclear Fuel, or any material portion thereof, by any governmental authority, civil or military.
“ Termination Event Date ” shall have the meaning assigned to that term in Section 20(b) of this Lease.
“ Termination Rent ” shall mean an amount which, when added to the Stipulated Loss Value then payable by the Lessee pursuant to Section 20(b) or Section 25(b) hereof, as the case may be, will be sufficient to enable the Lessor (i) to retire, at their respective maturities, all of Lessor’s then outstanding obligations under (A) any Credit Agreement, including all Commercial Paper issued thereunder and all loans obtained thereunder and (B) any Secured Note Agreement, including all Secured Notes issued pursuant thereto, and (ii) to pay all charges, premiums and fees owed to any lender under a Credit Agreement or Secured Note Agreement or to the Assignee.
“ Termination Settlement Date ” shall have the meaning assigned to that term in Section 20(b) of this Lease.
“ Unavoidable Delays ” shall mean delays due to strikes, acts of God, governmental restrictions or regulatory delays, enemy action, civil commotion, fire, unavoidable casualty causes affecting the integrity of generating or transmission systems, or other causes beyond the control of the Lessee.
SECTION 2.
Representations and Warranties of Lessee .
The Lessee represents and warrants to the Lessor:
(a) Organization, Standing, etc . The Lessee is a corporation duly organized, validly existing and in good standing under the laws of the State of Louisiana and has all requisite corporate power and authority, and has obtained all necessary governmental licenses and permissions, to carry on its business and to execute, deliver and perform this Lease.

(b) Financial Statements . The Lessee has furnished to the Lessor copies of its Annual Report on Form 10-K for the year ended December 31, 1987, its Annual Report to Shareholders for the year 1987, and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1988, June 30, 1988 and September 30, 1988. The financial statements contained in such documents fairly present the financial condition and results of operations of the Lessee as of the dates and for the periods indicated therein and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be otherwise disclosed in the footnotes thereto).

(c) Changes, etc . Since September 30, 1988 no change has occurred in the condition or business of the Lessee which is continuing and which in any way impairs the ability of the Lessee to perform its obligations under the Lease.

(d) Litigation, etc . Except as may be disclosed in or contemplated by the Lessee’s Annual Report on Form 10-K for the year ended December 31, 1987 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 1988, June 30, 1988 and September 30, 1988, there is no action, suit, proceeding or investigation at law or in equity or by or before any governmental instrumentality or other agency now pending or, to the knowledge of the Lessee, threatened (or any basis therefor) against or affecting the Lessee or any property or rights of the Lessee which questions the validity of this Lease or




which is reasonably likely to be adversely determined, and which, if so determined, would impair the ability of the Lessee to perform its obligations hereunder.

(e) Compliance with Other Instruments, etc . The execution, delivery and performance of this Lease will not result in any violation of any term of the Restated Articles of Incorporation, as amended, or the By-Laws of the Lessee or of any material agreement, indenture or similar instrument, license, judgment, decree, order, law, statute, ordinance or governmental rule or regulation applicable to the Lessee, including, without limitation, the Lessee’s Mortgage and Deed of Trust.

(f) Governmental Consent, etc . No consent, license, order, authorization or approval of, or registration, declaration or filing with, any governmental or public body or authority on the part of the Lessee is required in connection with the valid execution, delivery and performance of this Lease, except the approving Order of the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, as amended, and official action of approval or non-opposition by the Louisiana Public Service Commission, both of which have heretofore been applied for and obtained and which remain in full force and effect, and the filing of a certificate pursuant to Rule 24 of the Public Utility Holding Company Act of 1935, as amended, following the execution and delivery of this Lease.

SECTION 3.
Lease of Nuclear Fuel; Term .

(a) The Lessor hereby leases to the Lessee, and the Lessee hereby leases from the Lessor, the Nuclear Fuel for the term provided in this Lease and subject to the terms and provisions hereof.

(b) The term of this Lease shall begin at 12:01 A.M., New York City time, on February 3, 1989, and unless extended as herein provided or unless sooner terminated as hereunder provided pursuant to Section 20, shall end at the later to occur of (i) if any Secured Notes are issued, the final maturity date of one or more Secured Notes on a date on which no other Secured Notes are outstanding or (ii) the close of business in New York City on January 31, 1994; provided, however, that unless either the Lessor or the Lessee shall have given notice to the other by January 1 in 1992, or in any subsequent year, stating that this Lease shall terminate at the close of business in New York City on January 31 of the second following year, then the term of this Lease shall thereupon automatically be extended for one additional year, without the necessity of any action by the Lessor or the Lessee; provided further, that, not less than 15 and not more than 30 days prior to each date on which the parties could give such notice of termination, Lessor shall in writing inform Lessee of its right to give such notice and of the automatic extension of this Lease if neither Lessee nor Lessor gives such notice of termination. This Lease shall in any event terminate at the close of business in New York City on January 31, 2039, if the term shall be extended until then.

SECTION 4.
Title to Remain in the Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used for Generation; Location; Contract Assignment .

(a) Title to and ownership of the Nuclear Fuel shall at all times remain in the Lessor and at no time become vested in the Lessee, except in accordance with an express provision of this Lease. This is a lease only, and shall not give or grant to the Lessee any right, title or interest in or to the Nuclear Fuel, or any portion thereof, except the rights of a lessee in accordance with the provisions hereof.

(b) So long as no Event of Default shall have occurred and be continuing and the Lessor shall not have elected to exercise any of its remedies under Section 25 hereof, the Lessee shall have full right and lawful authority to engage in Fuel Management. The Lessee is hereby designated the lawful




representative of the Lessor in all dealings with Manufacturers and any regulatory agency having jurisdiction over the ownership or possession of the Nuclear Fuel.

(c) The Nuclear Fuel is personal property and the Lessee shall, at its expense, take all such action as may be required to cause the Nuclear Fuel to retain its character as personal property and to refrain from taking any action that would cause it to lose its character as personal property. The Nuclear Fuel shall not become part of any real property on which it or any portion thereof may from time to time be situated, notwithstanding the means by which it is installed or attached thereto and notwithstanding any law or custom or the provision of any lease, mortgage or other instrument applicable to any such real property. The Lessee agrees to indemnify the Lessor against and to hold the Lessor harmless from, all losses, costs and expenses resulting from any of the Nuclear Fuel becoming part of real property, and such indemnification shall survive the termination of this Lease, in whole or in part.

(d) The Lessee represents and warrants to the Lessor that the Nuclear Fuel location will be limited to: (x) a Manufacturer’s facilities, (y) transit between Manufacturers’ facilities and other Manufacturers’ facilities or the Generating Facility and (z) the Generating Facility. Each assembly of the Nuclear Fuel will be located during its Heat Production or Cooling stage in the Generating Facility. The Lessee shall advise the Lessor and the Assignee of the States in which Nuclear Fuel may be located during the Nuclear Fuel Cycle. The Lessee shall advise the Lessor and the Assignee of any additional State and location in which the Nuclear Fuel may be located thirty days prior to its movement to such State and location.

(e) Except to the extent otherwise agreed to by the Lessor, prior to obtaining pursuant to Section 6 hereof any payment by the Lessor to a Manufacturer pursuant to a Nuclear Fuel Contract, the Lessee shall deliver to the Lessor an executed Assignment Agreement (substantially in the form attached as Schedule F hereto) with respect to such Contract (thereafter an “Assigned Nuclear Fuel Contract”) together with a Consent and Agreement (in the form attached to Schedule F hereto) executed by the Manufacturer that is a party to said Assigned Nuclear Fuel Contract.

SECTION 5.
Basic Rent and Additional Rent; Procedure for Paying Basic Rent .

(a) The Lessee covenants to pay to the Lessor or, if so directed by the Lessor, the Assignee, on April 30, 1989 and on the last day of each January, April, July and October thereafter (or if such day is not a Business Day, on the next preceding Business Day) (each such date being herein called a “Basic Rent Payment Date”), at not later than 11:00 A.M., New York City time, the respective amounts of Basic Rent shown on Annex I to the Quarterly Rent Schedule delivered to the Lessor in accordance with clause (i) of Section 5(c) hereof in respect of such Basic Rent Payment Date.

(b) The Lessee hereby covenants and agrees that it will not cause or suffer any assembly of the Nuclear Fuel to be engaged in any nuclear reactor until the Lessee delivers to the Lessor a certificate, dated the date of delivery and signed by a qualified engineer, who may be an employee of the Lessee, describing all assemblies of Nuclear Fuel then being engaged in any nuclear reactor as they are described in Schedule A hereto; provided that such a certificate for assemblies initially listed in Schedule A shall be delivered to the Lessor at the time of execution of this Lease.

(c) At least 15 days before each Basic Rent Payment Date, the Lessor shall deliver to the Lessee a Quarterly Rent Schedule completed as to Columns 1, 2, 3 and 4 and as to Annex II thereto. On such Basic Rent Payment Date, the Lessee shall





(i) deliver to the Lessor the Quarterly Rent Schedule so received duly completed as to the remaining Columns and as to Annex I; and

(ii) pay to the Lessor or such Assignee as the Lessor may direct in writing the amount shown for Basic Rent in such Annex I for the calendar quarter ended on the last day of the month preceding the month during which such Basic Rent Payment Date occurs.

Each such Quarterly Rent Schedule shall be signed and delivered in triplicate.
(d) All sums payable by the Lessee to the Lessor shall be payable in Federal funds and shall be paid to the Lessor at the Lessor’s address for purposes of notices hereunder or to such other Person or at such other address as the Lessor may from time to time designate.

(e) In addition to the Basic Rent, the Lessee shall also pay from time to time as provided in this Lease or on demand of the Lessor, all Additional Rent as and when due and payable. In the event of any failure by the Lessee to pay any Additional Rent, the Lessor shall have all the rights, powers and remedies as in the case of failure to pay Basic Rent.

(f) The Lessee may prepay Basic Rent at any time. Such payment shall be credited against subsequent amounts owed by the Lessee on account of Basic Rent.

(g) In addition to Basic Rent and Additional Rent, the Lessee will also pay, from time to time, upon demand of the Lessor or any Assignee (to the extent such Assignee may exercise the Lessor’s rights hereunder), advance rent (the “Advance Rent”) in such amounts as may be required to permit the Lessor to pay in full the amount of any component of Daily Lease Charge which is then due and payable by the Lessor to the extent that funds for the payment of such component may not then be obtainable by the Lessor by effecting borrowings permitted by a Credit Agreement or any Secured Note Agreement. Any such payment of Advance Rent shall be credited against subsequent amounts owed by the Lessee on account of Basic Rent. In the event of any failure by the Lessee to pay any Advance Rent, the Lessor shall have all of the rights, powers and remedies as in the case of a failure to pay Basic Rent.

(h) The obligations of the Lessee to pay Basic Rent, Additional Rent, Advance Rent, Termination Rent and the amounts specified in Section 10(c), Section 20(b) and Section 25(b)(ii) shall be absolute and unconditional and the payment of such amounts shall not be subject to any right of set-off, counterclaim, recoupment, defense, abatement, suspension, deferment or reduction. The foregoing agreement by the Lessee is without prejudice to its right to pursue, by separate action, any claim which the Lessee may have against any Person, including, without limitation, the Lessor, the Assignee or each Person who is a lender under a Credit Agreement or a Secured Note Agreement.

SECTION 6.
Payment of Costs by the Lessor .

So long as no Event of Default or event which, with the giving of notice or the lapse of time or both, would be an Event of Default has occurred and is then continuing and the Lessee’s representations and warranties set forth in Section 2 are true, whenever the Lessee desires the Lessor to acquire title to property which, upon such acquisition, shall become part of the Nuclear Fuel and to pay any Acquisition Cost relating thereto, or the Lessee desires to obtain payment to a Manufacturer or payment to the Lessee of any Acquisition Cost or Capitalized Cost or both of any portion of the Nuclear Fuel, including Nuclear Fuel acquired after the date of this Lease either as additional Nuclear Fuel or as replacement Nuclear Fuel, the Lessee may deliver to the Lessor a Fuel Schedule in substantially the form of Schedule D, dated as of




the date of delivery and fully executed by the Lessee, which shall (i) describe in Annex II thereto, in the same manner as in Schedule A hereto, such portion of the Nuclear Fuel, (ii) set forth in Annex I thereto, in the manner specified in Section 29 hereof, the Acquisition Cost and Capitalized Cost payable to such Manufacturer or incurred by the Lessee as of the date of such Fuel Schedule with respect to such portion of the Nuclear Fuel and (iii) set forth in item 2 of the Fuel Schedule that portion of such Acquisition Cost and Capitalized Cost which has not previously been the basis of payment to such Manufacturer or payment to the Lessee pursuant to this Section 6, and with respect to which the Lessee desires payment. At such time as a Nuclear Fuel Contract provides for transfer of title to any portion of the Nuclear Fuel for which a Fuel Schedule has been or is being submitted to the Lessor by the Lessee, the Lessee shall cause the appropriate Manufacturer to deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing such portion of the Nuclear Fuel unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale; and at such time as a Fuel Schedule is delivered the Lessee shall deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing any portion of the Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such Bill or Bills of Sale. Not earlier than five days nor later than ten days after the Lessor shall have received a Fuel Schedule hereunder, the Lessor shall pay to the Manufacturer designated in the Fuel Schedule or, as the case may be, to the Lessee the amount of the requested payment and shall complete such Fuel Schedule so delivered to it by (y) setting forth in Annex I thereto the Investment in such portion of the Nuclear Fuel as of the date of such payment and (z) executing such Fuel Schedule and delivering copies thereof to the Lessee, provided, however, that the Lessor shall not be required to make any payment pursuant to this Section 6 if and to the extent that such payment exceeds (a) the amount of the proceeds of borrowings which would be available to it under any Credit Agreement and any Secured Note Agreement then in effect under which the Lessor could make borrowings for such purpose contemporaneously with such payment, minus (b) $3,000,000.
SECTION 7.
Taxes .

The Lessee agrees that it will promptly pay all taxes, assessments and other governmental charges and fees levied or assessed upon the interest of the Lessee during the term of this Lease in the Nuclear Fuel or any part thereof and against the Lessor on account of the transactions, including investments, contemplated by this Lease, including without limitation, any Federal or state income, excess profits or franchise taxes against the Lessor on or measured by any moneys payable hereunder or the net income therefrom; provided, that this Section 7 shall not be deemed to obligate the Lessee to pay any taxes, assessments and other governmental charges and fees which may have been included in the Capitalized Cost of any Nuclear Fuel. The Lessee further agrees at its expense to do all things required to be done by the Lessor in connection with the levy, assessment, billing or payment of any such taxes (other than Federal or state income, excess profits or franchise taxes) and is hereby authorized by the Lessor to act for and on behalf of the Lessor in any and all such respects, and to file, on behalf of the Lessor, all required tax returns and reports (other than returns and reports in respect of Federal or state income, excess profits or franchise taxes) concerning the Nuclear Fuel. The obligations of the Lessee under this Section 7 shall survive any termination of this Lease, in whole or in part.
SECTION 8.
Condition and Use of Nuclear Fuel; Quiet Enjoyment .

(a) Each assembly of the Nuclear Fuel is leased subject to the rights of any parties in possession thereof and the state of the title thereto and the rights of ownership therein whenever the same first becomes subject to this Lease, and to all applicable zoning regulations, restrictions, rules, licenses and ordinances, building restrictions and other laws and regulations now in effect or hereafter adopted by




any governmental authority having jurisdiction, and in the state and condition thereof when the same first becomes subject to this Lease, without representations or warranties of any kind by the Lessor, the Assignee, or any Person acting on behalf of any of them. THE LESSEE ACKNOWLEDGES AND AGREES THAT THE TYPE AND DESIGN OF THE NUCLEAR FUEL HAS NOT BEEN SELECTED BY THE LESSOR, THAT THE LESSOR OR THE ASSIGNEE HAVE NOT SUPPLIED ANY SPECIFICATIONS WITH RESPECT TO THE MANUFACTURE OF ANY PORTION THEREOF AND THAT NEITHER THE LESSOR, THE ASSIGNEE, EACH PERSON WHO IS A LENDER UNDER A CREDIT AGREEMENT OR A SECURED NOTE AGREEMENT NOR ANY PERSON (EXCEPT THE LESSEE) ACTING ON BEHALF OF ANY THEREOF (I) IS A MANUFACTURER OF, OR DEALER IN, NUCLEAR MATERIAL OF ANY KIND OR HAS ANY LICENSE TO USE OR POSSESS SUCH MATERIAL, (II) HAS MADE ANY RECOMMENDATION, GIVEN ANY ADVICE OR TAKEN ANY OTHER ACTION WITH RESPECT TO (A) THE CHOICE OF ANY SUPPLIER, VENDOR, PROCESSOR, DESIGNER, FABRICATOR OR TRANSPORTER OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO, THE NUCLEAR FUEL OR ANY PORTION THEREOF OR (B) ANY ACTION TAKEN OR TO BE TAKEN WITH RESPECT TO THE NUCLEAR FUEL OR ANY PORTION THEREOF AT ANY STAGE OF THE NUCLEAR FUEL CYCLE, (III) HAS AT ANY TIME HAD PHYSICAL POSSESSION OF ANY PORTION OF THE NUCLEAR FUEL OR MADE ANY INSPECTION THEREOF OR (IV) HAS MADE ANY WARRANTY OR OTHER REPRESENTATION, EXPRESS OR IMPLIED, THAT THE NUCLEAR FUEL (X) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY, (Y) HAS BEEN PROPERLY DESIGNED OR FABRICATED OR WILL ACCOMPLISH THE RESULTS WHICH THE LESSEE INTENDS THEREFOR OR (Z) IS SAFE IN ANY MANNER OR RESPECT. NO WARRANTY HAS BEEN OR IS MADE BY THE LESSOR, THE ASSIGNEE OR ANY PERSON ACTING ON BEHALF OF ANY OF THEM, EXPRESS OR IMPLIED, RELATING TO THE NUCLEAR FUEL OR ANY PORTION THEREOF, WITH RESPECT TO MERCHANTABILITY, FITNESS OR OTHERWISE, WHETHER ARISING PURSUANT TO THE UNIFORM COMMERCIAL CODE OR ANY OTHER PRESENT OR FUTURE LAW, OR OTHERWISE.

(b) So long as no Event of Default shall have occurred and be continuing, the Lessor hereby authorizes the Lessee at the Lessee’s cost and expense, to assert all rights and claims, and to bring suits, actions and proceedings, in its own name or in the name of the Lessor, in respect of any seller’s, Manufacturer’s (including miller’s, converter’s, enricher’s or reprocessor’s), transporter’s, designer’s or fabricator’s warranties or undertakings, express or implied, relating to any portion of the Nuclear Fuel and to retain the proceeds of any such suits, actions and proceedings.

(c) The Lessee has investigated the state of the title to and rights of ownership in the Nuclear Fuel subject to this Lease at the commencement of the term hereof, and has made a physical inspection of the Nuclear Fuel subject to this Lease at the commencement of the term hereof or reasonably prior thereto, and is satisfied with and has approved the same for all purposes hereof. The Lessee will, from time to time after such commencement, make a similar investigation and inspection of each portion of the Nuclear Fuel as the same becomes subject to this Lease, and will not permit any such portion to become subject to this Lease unless the Lessee is similarly satisfied with and has similarly approved the same for all purposes thereof. No approval by the Lessee pursuant to this Section 8(c) shall affect or impair any of the Lessee’s rights under Section 8(b).

(d) So long as no Event of Default shall have occurred and be continuing, the Lessee shall have exclusive possession and use of the Nuclear Fuel. The Nuclear Fuel may be used for any lawful purpose. The Lessee will not do or permit any act or thing which is contrary to any Legal Requirement or




Insurance Requirement or which might impair the value or usefulness of the Nuclear Fuel or any part thereof other than in the normal usage thereof in the production of electric energy.

SECTION 9.
Maintenance of the Nuclear Fuel .

The Lessee will (i) at its own expense (without limiting the Lessee’s right to request payment by the Lessor of such expense provided in Section 6) keep the Nuclear Fuel in good condition and will promptly make or cause to be made all necessary or appropriate repairs, replacements and renewals or Restoration thereof, and (ii) at its own expense (without limiting the Lessee’s rights to request payment by the Lessor of such expense provided in Section 6) arrange for the proper Fuel Management. All repairs, replacements and renewals shall be done in a workmanlike manner. The Lessee will be responsible for all actions and expense necessary or appropriate for the proper utilization, preservation and safety of the Nuclear Fuel. The Lessor shall not be required to perform any construction, or to alter, repair, rebuild or replace the Nuclear Fuel or any portion thereof, or to maintain, service or manage the Nuclear Fuel or any portion thereof in any way, and the Lessee hereby expressly waives the right to perform any construction or to make such alterations or repairs or to effect any such Fuel Management at the expense of the Lessor which may be required by any law now in effect or hereafter enacted.
SECTION 10.
Removals; Transfer to the Lessee; Commingling; Substitution; Location .

(a) If no Event of Default under this Lease shall have occurred and be continuing, the Lessee shall have the right at any time and from time to time during the continuance of this Lease, at the Lessee’s expense (without limiting the Lessee’s rights to request payment by the Lessor of such expense provided in Section 6) to move any assembly of the Nuclear Fuel from the Generating Facility to any other location in the continental United States for the purpose of having services performed thereon in connection with any stage of the Nuclear Fuel Cycle other than the Heat Production and Cooling stages, provided that no such action shall materially reduce the then fair market value of such assembly, and provided, further, that unless such assembly shall have been released from this Lease pursuant to Section 10(b), (i) such assembly shall be and remain the property of the Lessor, subject to this Lease and the Security Agreement, and (ii) as a condition to such removal and relocation, all necessary governmental approvals and licenses with respect thereto shall have been procured and shall be in full force and effect, all necessary recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) shall have been duly made in the public offices in which such recordings and filings must be made in order to publish notice, or otherwise protect the validity and effectiveness, of this Lease and the security interest created by the Security Agreement, and all fees, taxes and charges payable in connection with such recordings and filings shall have been paid in full by the Lessee. Any such removal shall constitute the agreement of the Lessee that the Lessee will continue to be obligated in respect of such assembly as provided in this Lease notwithstanding such removal, that the Lessee will pay or cause to be paid (except as provided in Section 6) all taxes and expenses incurred or to be incurred by the Lessor, the Lessee and the Assignee by reason of such removal and relocation, and that the indemnities by the Lessee contained in Section 11 shall extend to the use, possession, conduct or management, or any work, improvement, demolition or thing done in or about or in respect, of such assembly so removed to the same extent as if its place of relocation were the Generating Facility. The provisions of this Section 10(a) shall be applicable to each subsequent removal of any assembly of the Nuclear Fuel so removed from the place of relocation to which it was removed after its initial removal from the Generating Facility.

(b) At any time and from time to time, the Lessee shall have the right to purchase any portion, but not all, of the Nuclear Fuel. Whenever the Lessee desires to purchase any portion, but not all, of the Nuclear Fuel regardless of the then present stage of its Nuclear Fuel Cycle, then the Lessee shall deliver to




the Lessor a certificate in the form of Schedule B hereto showing the Stipulated Loss Value of such portion of the Nuclear Fuel at the date of such certificate and shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. Thereupon the Lessor shall execute and deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon such portion of the Nuclear Fuel shall cease to be Nuclear Fuel and shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

(c) The Lessee shall, upon (i) the regularly scheduled final maturity of the Lessor’s borrowings under a Credit Agreement following a determination by the lenders under such Credit Agreement not to extend the maturity of such borrowings and (ii) the regularly scheduled final maturity date of one or more Secured Notes of the Lessor, in each case under circumstances where the Lessor cannot obtain funds to meet such maturities through the proceeds of borrowings which would be available to the Lessor under any Credit Agreement and any Secured Note Agreement then in effect, purchase an amount of Nuclear Fuel to be designated by the Lessee not less than 15 days prior to such purchase, by delivering to the Lessor a certificate in the form of Schedule B hereto showing that the Stipulated Loss Value of the designated Nuclear Fuel is not less than the amount of the Lessor’s borrowings maturing under the circumstances set forth above. The Lessor shall give the Lessee at least 60 days’ notice of the above maturities and circumstances. The Lessee shall pay to the Lessor, in the manner provided in Section 5(d) hereof, an amount equal to such Stipulated Loss Value. In addition, the Lessee shall at such time pay all Additional Rent and Advance Rent then due and payable to the Lessor. Thereupon, the Lessor shall deliver to the Lessee a Bill of Sale in the form of Schedule E hereto transferring to the Lessee for no additional consideration, all right, title, interest and claim of the Lessor to such portion of the Nuclear Fuel free and clear of all liens and security interests under the Security Agreement. Thereupon such portion of the Nuclear Fuel shall cease to be subject to any provision of this Lease or of the Security Agreement. Upon delivery of such Bill of Sale, the Lessor and the Lessee shall execute a Fuel Schedule eliminating the description of such portion of the Nuclear Fuel from Schedule A to this Lease as theretofore supplemented and amended.

(d) The Lessor and the Lessee recognize that during the processing and reprocessing of Nuclear Fuel leased hereunder before and after its utilization in the Generating Facility, a Manufacturer performing services on such Nuclear Fuel may require that title thereto be transferred to such Manufacturer and such Nuclear Fuel be commingled with other nuclear fuel, with an obligation on such Manufacturer, upon completion of the services to reconvey a specified amount of Nuclear Fuel. Accordingly, the Lessor and the Lessee agree that (i) Nuclear Fuel leased hereunder may become subject to such a contract notwithstanding any provision of this Lease to the contrary, (ii) as between the Lessor and the Lessee, such Nuclear Fuel shall be deemed to be and remain leased hereunder while title thereto is in such Manufacturer and (iii) title to the Nuclear Fuel delivered by such Manufacturer upon completion of its services automatically shall vest in the Lessor and such Nuclear Fuel automatically shall be leased hereunder in substitution for the Nuclear Fuel originally delivered to such Manufacturer.

(e) After the utilization of the Nuclear Fuel leased hereunder in the Generating Facility, the Lessor will at the Lessee’s request, and upon approval of such request by the Lessor, which approval shall not be unreasonably withheld, transfer title to Nuclear Fuel leased hereunder in accordance with Section 21 hereof to a third party in exchange for the simultaneous transfer to the Lessor of clear and unencumbered title to replacement Nuclear Fuel having a fair market value not less than that of the




Nuclear Fuel conveyed to such third party. The Nuclear Fuel received by the Lessor pursuant to any such exchange shall be automatically substituted for the Nuclear Fuel delivered by the Lessor and shall be deemed to be subject to this Lease. Subject to the limitation on payment contained in Section 6, the Lessor shall pay any additional amounts required to effect such exchange. Such payments shall increase the Acquisition Cost of the substituted Nuclear Fuel and a new Fuel Schedule reflecting transfers and such increased Acquisition Cost shall be executed and delivered by the Lessor and the Lessee.

SECTION 11.
Indemnification by the Lessee .

The Lessee shall pay, and shall protect, indemnify and save harmless the Lessor, any Affiliate of the Lessor, United States Trust Company of New York, the Assignee, each Person who is a lender under a Credit Agreement or a Secured Note Agreement, Merrill Lynch & Co., Inc., Merrill Lynch Money Markets Inc., and their respective officers, directors, incorporators, shareholders, partners, employees, affiliates, agents and servants from and against, all Impositions, all liabilities, taxes, losses, obligations, claims, damages, penalties, causes of action, suits, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) or judgments of any nature arising from any and all of the following during the term of this Lease and thereafter arising in connection with this Lease: (a) any injury to or disease, sickness or death of persons, or loss of or damage to property, occurring through or resulting from any Nuclear Incident involving or connected in any way with the Nuclear Fuel or any portion thereof, or in any manner growing out of or relating to the acquisition, ownership, possession, disposition, sale, use, nonuse, misuse, fabrication, design, cycling, recycling, transportation, containerization, cooling, processing, reprocessing, storing, condition, operation, construction, maintenance, management, repair or rebuilding of the Nuclear Fuel or any portion thereof or resulting from the condition of the land underlying the Nuclear Fuel, (b) any use, nonuse or condition of the Generating Facility or the land underlying the Generating Facility, (c) any violation, or alleged violation, of this Lease, or of any contracts or agreements to which the Lessee is a party or by which it is bound, or any Legal Requirements, (d) performance of any labor or services or the furnishing of any materials or other property in respect of the Nuclear Fuel or any portion thereof, (e) any infringement or alleged infringement of any patent, copyright, trade secret or other similar right relating to the Nuclear Fuel or any portion thereof, and (f) qualification to do business in any jurisdiction necessary in connection with its obligations under this Lease; provided that , Lessee shall not be required to indemnify any of the above parties with respect to any of the above arising out of such party’s gross negligence or willful misconduct. In the event that any action, suit or proceeding is brought against the Lessor, the Assignee or any other Person indemnified or intended to be indemnified pursuant to this Section 11 by reason of any such occurrence, the Lessee will, at the Lessee’s expense, resist and defend such action, suit or proceeding or cause the same to be resisted and defended by counsel designated by the Lessee and reasonably acceptable to the Person or Persons indemnified or intended to be indemnified under this Section 11. The obligations of the Lessee under this Section 11 shall survive any termination of the Lease, in whole or in part.
SECTION 12.
Inspection; Right to Enter Generating Facility .

The Lessor and its authorized representatives may enter the Generating Facility at reasonable times for the purpose of inspecting the Nuclear Fuel and the reactor in which it may be loaded from time to time (subject to availability for inspection) and discussing its condition and performance with the responsible officers, agents and employees of the Lessee. The Lessee agrees, subject to applicable state and Federal laws and regulations, to make the Nuclear Fuel and the reactor in which it may be loaded from time to time available (to the extent practicable) for such inspection and to provide customary protective procedures and devices in connection therewith, and to make such officers, agents and employees available for such discussion promptly after receiving notice thereof. The Lessor shall not




have any duty to make any such inspection or conduct any such discussion and shall not incur any liability or obligation for not making any such inspection or for not conducting any such discussion.
SECTION 13.
Payment of Impositions; Recording .

(a) Subject to the provisions of Section 16 hereof, the Lessee will pay all Impositions before any fine, penalty, interest or cost may be added for non-payment, and will furnish to the Lessor, upon request, copies of official receipts or other satisfactory proof evidencing such payment.

(b) The Lessee, at its expense, shall execute, acknowledge and deliver from time to time such further counterparts of this Lease or such affidavits, certificates, Bills of Sale, financing and continuation statements and other instruments as may be reasonably requested by the Lessor in order to evidence the respective interests of the Lessor and the Lessee in the Nuclear Fuel or any portion thereof and in order to establish the character thereof as personal property, and shall, at its expense, cause such documents and any Credit Agreement and any Security Agreement if so requested by the Lessor to be recorded, filed or registered and to be re-recorded, refiled or re-registered in such manner and at such times and in such places as may be required by any present or future law applicable to the Nuclear Fuel or any portion thereof in order to publish notice and perfect the validity of such interests.

SECTION 14.
Compliance with Legal and Insurance Requirements, and with Instruments .

Subject to the provisions of Section 16 hereof, the Lessee at its expense will promptly (i) comply in all material respects with all Legal Requirements and Insurance Requirements, whether or not compliance therewith shall require structural or basic mechanical changes in the Generating Facility, or in any design or fabrication of the Nuclear Fuel or any portion thereof, and whether or not such compliance will interfere with the use and enjoyment of the Nuclear Fuel or any portion thereof, (ii) procure, maintain and comply with all permits, licenses and other authorizations required for the ownership of the Nuclear Fuel or any portion thereof by the Lessor, or for any operation or use of the Nuclear Fuel or any portion thereof then being made and for the proper maintenance thereof, and for the taking of all necessary and proper steps in the management of the Nuclear Fuel through each stage of the Nuclear Fuel Cycle, and (iii) comply with any other instruments of record or any contract or agreement at the time in force affecting title to or ownership of the Nuclear Fuel or any portion thereof.
SECTION 15.
Liens .

The Lessee will not directly or indirectly create or permit to be created or to remain, and will discharge, any mortgage, lien, encumbrance or charge on, security interest in, or conditional sale or other title retention agreement with respect to, the Nuclear Fuel or any portion thereof, or upon the Lessee’s leasehold interest therein, or upon the Basic Rent, Additional Rent, Advance Rent or any other sum payable under this Lease, other than (i) this Lease and any assignment hereof permitted hereby, (ii) liens for Impositions not yet payable, or payable without the addition of any fine, penalty, interest or cost for nonpayment, or being contested as permitted by Section 16 hereof, (iii) liens and security interests created by any Security Agreement and other liens, charges or encumbrances resulting from acts of the Lessor or securing obligations of the Lessor which the Lessee is not obligated to pay or discharge under the terms of this Lease, (iv) the title transfer and commingling of the Nuclear Fuel contemplated by Section 10(d) hereof and (v) liens of mechanics, laborers, materialmen, suppliers or vendors, or rights thereto, incurred in the ordinary course of business for sums of money which under the terms of the related contracts are not at the time due, provided that such reserve or other appropriate provision, if any, as shall be required by generally accepted accounting principles shall have been made in respect thereto.




SECTION 16.
Permitted Contests .

The Lessee, at its expense, may contest after prior notice to the Lessor, by appropriate legal proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any Imposition or lien therefor, or any Legal Requirement, or any other mortgage, lien, encumbrance, charge, security interest, conditional sale or other contract or agreement referred to in Section 15 hereof; provided that (i) in the case of an unpaid Imposition or lien therefor, such proceedings shall suspend the collection thereof from the Lessor, (ii) neither the Nuclear Fuel nor any portion thereof or interest therein would be subject to being sold, forfeited, confiscated, condemned or lost, (iii) neither the use of the Nuclear Fuel or any portion thereof, nor the taking of any step necessary or proper with respect thereto in the management thereof through any stage of the Nuclear Fuel Cycle, nor the performance of any other act required to be performed by the Lessee under this Lease would be enjoined, prevented or otherwise interfered with, (iv) the Lessor would not be subject to any additional civil liability (other than interest which the Lessee agrees to pay), or any criminal liability, for failure to pay any such Imposition or to comply with any such Legal Requirement or any such other mortgage, lien, encumbrance, charge, contract or agreement, and (v) the Lessee shall have set aside on its books adequate reserves (in accordance with generally accepted accounting principles) with respect thereto and shall have furnished such security, if any, as may be required in the proceedings or reasonably requested by the Lessor. The Lessee will pay, and save the Lessor harmless against, all losses, judgments, decrees and costs, including reasonable attorneys’ fees and expenses, in connection with any such contest and will, promptly after the determination of such contest, pay and discharge the amounts which shall be levied, assessed or imposed or determined to be payable therein, together with all penalties, fines, interest, costs and expenses thereon or in connection therewith, and such indemnification by the Lessee shall survive the termination of this Lease, in whole or in part.
SECTION 17.
Insurance .

The Lessee shall, at its own cost and expense, procure and maintain, or cause to be procured and maintained, liability insurance and indemnification agreements with respect to the Generating Facility, including Nuclear Fuel, insuring and indemnifying the respective interests of the Lessor, United States Trust Company of New York, the Lessee, each Person who is a lender under a Credit Agreement or a Secured Note Agreement and the Assignee (each of the foregoing is hereinafter sometimes called an “Insured Person”) to the full extent required under the Atomic Energy Act, or under any other law, rule or regulation. In the event the provisions of the Atomic Energy Act with respect to liability insurance and the indemnification of owners, licensees and operators of Nuclear Fuel thereunder shall change, then the Lessee shall use its best efforts to obtain equivalent insurance and indemnification from the Nuclear Regulatory Commission or from such other governmental, public and/or private sources from whom such coverage is available. The Lessee shall, at its own cost and expense, procure and maintain, or cause to be procured and maintained, physical damage insurance with respect to the Nuclear Fuel insuring the Lessor and the Assignee against loss or damage to the Nuclear Fuel. All nuclear liability insurance, indemnification agreements and physical damage insurance maintained in accordance with these requirements shall be maintained in a manner and in amounts which are consistent at all times with then current prudent utility industry practice in the United States for utilities similarly situated and in any case to the full extent required by law or rules or regulations having the force of law. Such liability and physical damage insurance may be subject to such deductible amounts and the Lessee may self-insure with respect to such liability and physical damage insurance to the extent that the Lessor and the Assignee and the Lessee may consent in writing, which consent on the part of the Lessor and the Assignee shall not be unreasonably withheld, provided that such deductible amounts and such self-insurance are permitted under all applicable laws, rules and regulations. The Lessor and the Assignee shall be additional insureds




where possible, and, with respect to physical damage coverage, the Lessor and the Assignee shall be loss payees, as their interests may appear under this Lease, in all insurance policies and indemnification agreements required under this Section 17. All such policies and indemnification agreements, where possible, shall provide for at least ten days prior written notice to the Lessor and the Assignee of any cancellation of or any material adverse change in such policies by the insurer. The Lessee will advise the Lessor and the Assignee of all expirations (including any expiration upon cancellation by the Lessee) and renewals of policies and will upon request of the Lessor and the Assignee provide the Lessor and the Assignee with insurance certificates in respect of the insurance procured pursuant to the provisions of this Section 17. Upon execution of this Lease and at yearly intervals thereafter, the Lessee will furnish to the Lessor and the Assignee a detailed statement as to the insurance coverage provided pursuant to this Section 17 and will further give notice as soon as practicable as to any material adverse change in the nature or availability of such coverage, including any material adverse change of which the Lessee has knowledge in the provisions of the Atomic Energy Act or any other applicable law, rule or regulation with respect to liability insurance and indemnification agreements, or any material adverse change in the application, interpretation or enforcement thereof. The Lessor and the Assignee shall be under no duty to examine such insurance policies or indemnification agreements or to advise the Lessee in case the insurance or indemnification is not in compliance herewith.
SECTION 18.
Damage or Destruction .

(a) If any incident of damage to or destruction of the Generating Facility, the Nuclear Fuel or any portion thereof should occur, which damage or destruction (i) is in excess of $10,000,000, or (ii) is of such a nature as to prevent Heat Production by the Nuclear Fuel, the Lessee will promptly give notice thereof to the Lessor, generally describing the nature and extent of such damage or destruction, and unless the Lessee shall have delivered to the Lessor the certificate described in Section 20(a)(i) hereof or shall have exercised its right to obtain a release of such Nuclear Fuel or portion thereof pursuant to Section 10(b) within 90 days after the happening of such incident, the Lessee, at its cost and expense (without limiting the Lessee’s right to request payment by the Lessor of such expenses provided in Section 6), will promptly commence and will complete (subject to Unavoidable Delays but in any event within 18 months after the happening of such incident) the Restoration of the Generating Facility, the Nuclear Fuel or such portion thereof, as the case may be, whether or not the insurance proceeds, if any, on account of such damage or destruction shall be sufficient for the purpose. Upon completion of the Restoration, the Lessee shall execute and deliver to the Lessor a Fuel Schedule and shall cause the appropriate Manufacturer of the replacement Nuclear Fuel to execute and deliver to the Lessor a Bill of Sale substantially in the form of Schedule C, unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale; and the Lessor shall accept such Bill or Bills of Sale. As to any damaged or destroyed Nuclear Fuel originally included on Schedule A, as amended, and replaced by such Restoration, the Lessor shall deliver to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of Schedule E hereto.

(b) If no Event of Default shall have occurred and be then continuing, all insurance proceeds received by the Lessor or any Assignee on account of any damage to or destruction of the Nuclear Fuel or any portion thereof (less the actual costs, fees and expenses incurred in the collection thereof for which the Person incurring the same shall be reimbursed from such proceeds) shall be paid to the Lessee.

SECTION 19. Condemnation or Eminent Domain .

(a) In case of a Taking or the commencement of any proceedings or negotiations which might result in any Taking, the Lessee will promptly give notice thereof to the Lessor, generally describing the




nature and extent of such Taking which might result therefrom, as the case may be. The Lessee hereby assigns to the Lessor any award or payment on account of any Taking of the Nuclear Fuel or any portion thereof which is payable to the Lessee. The Lessor shall have the right to participate fully in any proceedings or negotiations in connection with any such Taking of the Nuclear Fuel or any portion thereof, provided that Lessee shall be entitled to control such proceedings or negotiations as long as no Event of Default shall have occurred and be then continuing. The Lessee will pay all reasonable costs, fees and expenses incurred by the Lessor in connection with any Taking of the Nuclear Fuel or any portion thereof and seeking and obtaining any award or payment on account thereof.

(b) In the case of any Taking, (i) the provisions of this Lease shall remain in effect, except as expressly provided below in this Section 19, without any abatement or reduction of Basic Rent, Additional Rent, Advance Rent or any other sum payable hereunder, and (ii) unless the Lessee shall have exercised within 90 days after the happening of such Taking its right to obtain a release of such Nuclear Fuel or portion thereof pursuant to Section 10(b), the Lessee, whether or not the awards or payments, if any, on account of such Taking shall be sufficient for the purpose, at its cost and expense (without limiting the Lessee’s right to request payment by the Lessor of such expenses provided in Section 6) will promptly commence and will complete (subject to Unavoidable Delays but in any event within 18 months after the happening of such Taking) Restoration of the Nuclear Fuel or the portion thereof affected by such Taking, unless the Lessee shall have delivered to the Lessor the certificate described in Section 20(a)(i) hereof within 90 days after the happening of such Taking, provided that in the case of a Taking for temporary use the Lessee shall not be required to effect such Restoration until such Taking has terminated. A Taking for temporary use shall mean a requisition of the use of the Nuclear Fuel, or any portion thereof, which by its terms does not exceed the original term of this Lease or the then current extended term. Upon completion of Restoration, the Lessee shall execute and deliver to the Lessor a Fuel Schedule, shall cause the relevant Manufacturer of the replacement Nuclear Fuel to execute and deliver to the Lessor a Bill of Sale substantially in the form of Schedule C, unless the Nuclear Fuel Contract provides for the transfer of title to the Lessor without execution and delivery by the relevant Manufacturer of a Bill of Sale, and shall deliver to the Lessor a duly executed Bill of Sale substantially in the form of Schedule C hereto describing any portion of the Nuclear Fuel to which the Lessee has title; and the Lessor shall accept such Bill or Bills of Sale. As to any condemned or requisitioned (or otherwise taken) Nuclear Fuel originally included on Schedule A, as amended, and replaced by such Restoration, the Lessor shall deliver to the Lessee a Fuel Schedule and a Bill of Sale substantially in the form of Schedule E hereto.

(c) If no Event of Default shall have occurred and be then continuing, all awards and payments received by the Lessor on account of any Taking of the Nuclear Fuel or any portion thereof (less the actual costs, fees and expenses incurred in the collection thereof, for which the Person incurring the same shall be reimbursed from such awards or payments) shall be paid over to the Collateral Account and, at the Lessee’s option, credited against the purchase price of Nuclear Fuel released pursuant to Sections 10(b) and 19(b) or paid to the Lessee in reimbursement of the cost of Restoration, as contemplated by Section 19(b).

(d) For purposes of this Lease, all amounts paid pursuant to any agreement with any condemning authority which has been made in connection with any Taking shall be deemed to constitute an award on account of such Taking.

SECTION 20. Termination After Certain Events .

(a) This Lease shall terminate in the manner and with the effect hereinafter set forth in Section 20(b) upon the happening of any of the following events:





(i) The Lessee shall have delivered to the Lessor a certificate of the Lessee, signed by its President or any Vice President, stating that the Lessee desires to terminate this Lease and the Lessor is permitted to prepay at or prior to the Termination Settlement Date all Secured Notes then outstanding pursuant to the terms of such Secured Notes;

(ii) Any change in, or new interpretation by a governmental authority having jurisdiction relating to the Price-Anderson Act, as amended, or the Atomic Energy Act, or the regulations of the Nuclear Regulatory Commission thereunder, in each case as in effect on the date of this Lease, as a result of which, in the opinion of independent counsel to the Lessor, the Lessor is prohibited from asserting any material right, protection or defense available under applicable law as of the date of this Lease with respect to civil or criminal actions brought in connection with a Nuclear Incident;

(iii) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by the Securities and Exchange Commission to be, an “electric utility company” as defined in the Public Utility Holding Company Act of 1935, as amended, or its officers, directors, shareholders, partners or employees shall become subject to regulation under such Act;

(iv) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by the Federal Energy Regulatory Commission to be a “public utility” as defined in the Federal Power Act, as amended, or its officers, directors, shareholders, partners or employees shall become subject to regulation under such Act;

(v) If as a result of the continuing transactions contemplated by this Lease, the Lessor or any Insured Person becomes (or with the passage of time would become), or is declared by any appropriate governmental body to be, a public utility or similar entity under the laws of any state or its officers, directors, shareholders, partners or employees shall become subject to regulation under any such laws;

(vi) A change in any law or regulation or interpretation of any law or regulation as in effect on the date of this Lease shall be adopted or enforced by any governmental or regulatory authority (including, without limitation, the Nuclear Regulatory Commission, the Louisiana Public Service Commission, the Securities and Exchange Commission, the Federal Energy Regulatory Commission and the New York Stock Exchange), and as a result of such adoption or enforcement, approval of the transactions contemplated by this Lease shall be required and shall not have been obtained within any grace period after such adoption or enforcement, or as a result of which adoption or enforcement this Lease or any transaction contemplated hereby, including any payments to be made by the Lessee or the ownership of the Nuclear Fuel by the Lessor, shall be or become unlawful or the performance of this Lease shall be rendered impracticable in any material way;

(vii) The occurrence of a Nuclear Incident at the Generating Facility as a result of which the Generating Facility ceases to operate (or if the Generating Facility is not in operation immediately prior to such Nuclear Incident, the failure to resume operation as a result of such Nuclear Incident) for a period of 24 consecutive months;





(viii) If the Generating Facility shall not be operated for a period of 24 consecutive months, and the Lessor shall have given notice to the Lessee that the Lessor desires to terminate this Lease on such account;

(ix) The permanent suspension, revocation or expiration of the Nuclear Regulatory Commission operating license relating to the Generating Facility, or any portion thereof, with the result that the operation of the Generating Facility is no longer permitted; or

(x) If the Lessor or the Lessee shall have given to the other the notice of termination provided for in Section 3(b) hereof and the termination date stated in such notice shall have occurred or the termination date of January 31, 2039 provided for in Section 3(b) shall have occurred by lapse of time.

(b) Upon the date of occurrence of any of the events listed in Section 20(a) hereof (the earliest such date being herein called the “Termination Event Date”), this Lease shall cease and terminate, except with respect to obligations and liabilities of the Lessee, actual or contingent, which arose under this Lease on or prior to the Termination Event Date and except for the Lessee’s obligations set forth in Sections 5, 7, 9, 13, 14 and 17 hereof, and in this Section 20(b), all of which obligations will continue until the delivery of documentation by the Lessor and the payment by the Lessee provided for below in this Section 20(b), and except that Lessee’s obligations under Section 11 hereof shall continue as set forth therein, and forthwith also upon such termination, title to, and the entire interest of the Lessor in, the Nuclear Fuel shall automatically transfer to and be vested in the Lessee, without the necessity of any action by either the Lessor or the Lessee, but subject to the rights of the Assignee under a Security Agreement and to the lien and security interest created thereby, provided, that title to, and the entire interest of the Lessor in, the Nuclear Fuel or any portion thereof shall, forthwith upon such termination, automatically transfer to and be vested in any Person or Persons designated by the Lessee and approved by the Lessor in writing, rather than transferring to and being vested in the Lessee as aforesaid, if but only if (i) any such Person shall, upon such termination, be lawfully entitled to accept and be vested with title to the Nuclear Fuel and (ii) prior to such termination, any such Person shall have delivered an instrument to the Lessor, in form and substance satisfactory to it, executed and acknowledged by such Person and by the Lessee, pursuant to which such Person shall irrevocably (A) undertake to accept title to, and the entire interest of the Lessor in, the Nuclear Fuel forthwith upon such termination, subject to the rights of any Assignee under a Security Agreement and to the lien and security interest created thereby, (B) agree that the transfer to and the vesting in such Person of such title and interest shall occur automatically upon such termination without the necessity of any action by either the Lessor or the Lessee or such Person, and (C) undertake to execute, upon such termination, the instrument referred to below in this Section 20(b) acknowledging, among other things, that title to and ownership of the Nuclear Fuel has transferred to and vested in such Person. As soon as possible after either the Lessor or the Lessee shall learn of the happening of any of the events listed in Section 20(a) hereof, such party shall give notice thereof to the other party hereto (and in the case of such a notice to the Lessor, signed also by such other Person in whom title to the Nuclear Fuel shall have vested as aforesaid), which notice shall (X) acknowledge that this Lease has terminated, subject to the continuing obligations of the Lessee mentioned above, and that title to and ownership of the Nuclear Fuel has transferred to and vested in the Lessee or such other Person, as the case may be, subject as aforesaid, (Y) state that on a settlement date occurring not less than 30 nor more than 120 days after the giving of notice pursuant to Section 20(a)(i) hereof and not less than 90 nor more than 120 days after the giving of notice pursuant to Sections 20(a)(ii)-(ix) hereof and on the termination date provided in Section 3(b) in the case of notice pursuant to Section 20(a)(x), which settlement date shall be specified therein (such date being herein called the “Termination Settlement Date”), the Lessee shall be obligated to pay or cause to be paid to the Lessor as the purchase price for the Nuclear Fuel an amount equal to the sum of (1)




the Stipulated Loss Value of the Nuclear Fuel as of the Termination Settlement Date plus (2) the Termination Rent on the Termination Settlement Date, provided that in the case of a termination arising by virtue of the Lessor’s exercise of its rights under Section 25(b)(i) hereof, the Termination Settlement Date shall in no event be later than the termination date provided for under Section 3(b) hereof, and (Z) state that on the Termination Settlement Date, the Lessor shall be obligated to deliver to the Lessee or such other Person as the Lessee may have designated as aforesaid both a confirmatory Bill of Sale acknowledging the above-described transfer and vesting of title and ownership of the Nuclear Fuel, and an appropriate instrument or appropriate instruments duly executed by the Assignee, cancelling and discharging such Security Agreement and the liens and security interest created thereby upon the Nuclear Fuel. Upon the delivery of such notice, the Lessor and the Lessee shall become obligated to make the payment and to deliver the documentation referred to therein on such Termination Settlement Date to the same extent as if each had acknowledged in writing its obligation so to do. The Lessee’s obligation to make such payment shall be unconditional and unaffected by any event or matter whatsoever including, without limitation, failure of the Lessor to deliver such confirmatory documentation, or the quality, condition, existence, utility or title of or to the Nuclear Fuel. Any such payment made by the Lessee shall not prejudice, or constitute a waiver of, any right, claim or cause of action which the Lessee shall have against the Lessor. Such payment and delivery of documentation shall be made in accordance with Section 21 hereof.

SECTION 21. Conditions of Termination and Conveyance .

(a) Upon the purchase by the Lessee or such other Person pursuant to this Lease of the Lessor’s interest in the Nuclear Fuel or any portion thereof or of the Lessor’s interest in any insurance proceeds or condemnation awards (or the right to receive the same) which the Lessee is entitled to receive in connection with any such purchase by it, the Lessor will transfer the same title thereto or ownership interest therein that existed on the respective dates when the various items of property so sold first became subject to this Lease, and the Lessee or such other Person, as the case may be, shall accept the same subject to all liens, encumbrances, charges, exceptions and restrictions attaching thereto on or after the date of this Lease which have not been created by voluntary act of the Lessor or for the discharge of which the Lessee is responsible under this Lease, and to all applicable laws, regulations and ordinances, but free and clear of the lien of any Security Agreement.

(b) Upon the Termination Settlement Date specified in the notice delivered by the Lessor or the Lessee, the Lessee shall pay to the Lessor at its address for purposes of notices hereunder or to such other Person at such other place designated by the Lessor, the purchase price therefor specified herein, in Federal funds, and the Lessor shall deliver to the Lessee a confirmatory Bill of Sale acknowledging the transfer and vesting of ownership of the Nuclear Fuel and an appropriate instrument duly executed by the Assignee and/or any other necessary Person or Persons, cancelling and discharging all Security Agreements and the liens and security interests created thereby upon the Nuclear Fuel. The Lessee shall pay all expenses in connection with such transfer, including all escrow fees, search and recording and filing fees, reasonable attorneys’ fees and all applicable Federal, state and local sales, use and other taxes which may be incurred or imposed by reason of the transfer then being made by the Lessor, or by reason of the delivery of said instrument or instruments of transfer.

(c) Notwithstanding any other provision of this Lease, whenever the Lessee has the right or obligation to purchase the Nuclear Fuel or any portion thereof or any other property pursuant to any provision of this Lease (other than Section 20(b)), the Lessee may cause such purchase to be effected by, and the Lessor shall transfer title and ownership to the subject matter of such purchase to, any other Person specified by the Lessee in a notice to the Lessor given at least 15 days prior to the date of such




purchase, provided , however, that nothing specified in this subsection (c) shall in any way impair or affect the obligations of the Lessee under this Lease in connection with such purchase and provided , further , that, at the time of any such transfer to such other Person, the Lessee shall deliver to the Lessor the undertaking of the Lessee indemnifying and holding the Lessor harmless from and against any loss or liability incurred by the Lessor by reason of such transfer.

SECTION 22. Estoppel Certificates; Information .

The Lessee will from time to time deliver to the Lessor, promptly upon reasonable request of the Lessor, (i) a statement, executed by any Vice President of the Lessee, certifying the dates to which Basic Rent, Additional Rent, Advance Rent and other sums payable hereunder have been paid, that this Lease is unmodified and in full effect (or, if there have been modifications, that this Lease is in full effect as modified, and identifying such modifications) and that no Event of Default has occurred and is continuing (or, if any Event of Default has occurred and is continuing, specifying the nature and period of existence thereof and what action the Lessee is taking or proposes to take with respect thereto), and (ii) such information with respect to the Nuclear Fuel or any portion thereof, including the amounts of Stipulated Loss Value of the Nuclear Fuel or portions thereof in accordance with the Lessee’s records, as from time to time may reasonably be requested, it being intended that any such statement delivered pursuant to this Section 22 may be relied upon by the Lessor.
SECTION 23.
Rights to Perform the Lessee’s Covenants .

If the Lessee shall fail to make any payment or perform any act required to be made or performed by it hereunder, the Lessor, without notice to or demand upon the Lessee and without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of the Lessee therefor. All payments so made by the Lessor and all costs and expenses (including, with limitation, reasonable attorneys’ fees and expenses) incurred in connection therewith or in connection with the performance by the Lessor of any such act shall constitute Additional Rent hereunder and the Lessee agrees to pay the same as provided in Section 5 hereof.
SECTION 24.
Assignments .

The interest of the Lessee in this Lease may be assigned, provided that such assignment shall expressly be made subject to the provisions of this Lease, and provided , further , that no such assignment shall affect or reduce any obligations of the Lessee or rights of the Lessor hereunder, and all obligations of the Lessee hereunder shall continue in full effect as the obligations of a principal, to the same extent as though no assignment had been made.
The Lessor may assign to an Assignee. Upon written request of the Lessor, the Lessee agrees to acknowledge notice of any such assignment or the granting of a security interest in the Nuclear Fuel.
SECTION 25.
Events of Default and Remedies .

(a) Any of the following events of default by the Lessee shall constitute an “Event of Default” and give rise to the rights on the part of the Lessor described in Section 25(b) hereof:

(i) default in the payment of any amount payable by the Lessee under Section 10(c); or





(ii) default in the payment of any other amount payable by the Lessee hereunder and the continuance of such default for 5 days; or

(iii) default in the payment or performance of any other liability or other obligation or covenant of the Lessee to the Lessor hereunder and the continuance of such default for 30 days after the occurrence thereof; or

(iv) the Lessee admits insolvency or bankruptcy or is unable to pay its debts as they mature, or makes an assignment for the benefit of creditors or applies for or consents to the appointment of a trustee or receiver for the Lessee, or for the major part of its property other than the trustees pursuant to the Mortgage and Deed of Trust; or

(v) bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings for relief under any bankruptcy law or similar law for the relief of debtors, are instituted by or against the Lessee, and if instituted against the Lessee are allowed against the Lessee or are consented to or are not dismissed, stayed or otherwise nullified within 60 days after such institution; or

(vi) any representation or warranty made by the Lessee in this Lease, or in any related instrument, or in any report, certificate, financial statement or other instrument furnished in connection with this Lease shall prove to be false or misleading in any material respect; or

(vii) a default or event of default under any instrument evidencing indebtedness for borrowed money (or under the provisions of any agreement pursuant to which such instrument was issued) in excess of $10,000,000 and providing the holder thereof with recourse against the Lessee shall cause such indebtedness to become due prior to its stated maturity; or

(viii) one or more final judgments for the payment of money shall be rendered against the Lessee in an aggregate amount in excess of $10,000,000 and the same shall remain undischarged for a period of 30 days during which execution of such judgment shall not be effectively stayed.

(b) Upon the occurrence of any Event of Default, the Lessor may in its discretion do any one or more of the following:

(i) treat the Event of Default as an event under Section 20(a) hereof, entitling Lessor to the consequent benefits of Section 20(b) hereof and in general proceed by appropriate judicial proceedings, either at law or in equity, to enforce performance or observance by the Lessee of the applicable provisions of this Lease, or to recover damages for the breach of any thereof; or

(ii) by notice to the Lessee terminate this Lease, whereupon the Lessee’s interest and all rights of the Lessee and Persons claiming through or under the Lessee to the use of the Nuclear Fuel shall forthwith terminate but the Lessee shall remain liable with respect to obligations and liabilities, actual or contingent, which arose under this Lease on or prior to the date of such termination and the Lessee’s obligations set forth in Section 11 and this Section 25(b)(ii) and, until the earlier of (1) Lessor’s taking possession of the Nuclear Fuel or Lessee’s delivering the Nuclear Fuel as set forth below or (2) final and uncontested payment of the amounts referred to in (A) and (B) below, Sections 9, 13, 14 and 17; and upon such termination the Lessor shall have the immediate right of possession of the Nuclear Fuel (to the extent not prohibited by law) and the right, at the Lessor’s election, either to enter the Generating Facility or any other premises where




the Nuclear Fuel or any portion thereof is located and remove the Nuclear Fuel or such portion thereof there located (to the extent not prohibited by law) or cause the same to be done by any Person entitled by law so to do, in which case the Lessor shall not be responsible for any damage to the Generating Facility or such premises, except for damage resulting from the Lessor’s willful misconduct or gross negligence (the Lessee hereby agreeing to indemnify and hold the Lessor harmless from all losses and liabilities in respect of any such damage to the Generating Facility, such premises or the Nuclear Fuel or injury to the Lessor’s, the Lessee’s or such other Person’s employees sustained in the course of such removal, except any such damage resulting from the Lessor’s willful misconduct or gross negligence, provided that the Lessee hereby further agrees that the misconduct or negligence of any Assignee shall not be imputed to the Lessor), or to require the Lessee, at the Lessee’s expense, to deliver the Nuclear Fuel or any portion thereof, properly containerized and insulated for shipping, at the Generating Facility and consigned to a Person specified by the Lessor and licensed to receive such Nuclear Fuel, in which case the risk of loss shall be upon the Lessee until such delivery is made; and the Lessor may thenceforth hold, possess and enjoy the Nuclear Fuel (to the extent not prohibited by law) and may sell the Lessor’s interest in the Nuclear Fuel or any portion thereof upon any terms deemed satisfactory to the Lessor, free from any rights of the Lessee and any Person claiming through or under the Lessee; but the Lessor shall, nevertheless, have the right to recover forthwith from the Lessee:

(A) any and all Basic Rent, Additional Rent, Advance Rent and all other amounts payable by the Lessee hereunder which may be due and unpaid immediately prior to such termination or which may then be accrued and unpaid;

(B) as liquidated damages for loss of the bargain and not as a penalty, an amount equal to the excess of (x) the sum of (i) the Stipulated Loss Value of the Nuclear Fuel as of the date of such termination of this Lease plus (ii) the Termination Rent, over (y) the amount, if any, realized by the Lessor in a sale of the Nuclear Fuel (at which the Lessor may be a purchaser), without set-off, defense or reduction other than a deduction from the sale price of all the costs of such sale, including reasonable legal fees, commissions, sales taxes and other customary charges; it being understood that the Lessor shall have no obligation to conduct any such sale, and that the Lessor may, in lieu of conducting such sale, transfer and convey title to, and its entire ownership interest in, the Nuclear Fuel to the Lessee or any trustee or liquidator therefor upon the terms and conditions set forth in Section 21, but that, if the Lessor conducts such sale, the Nuclear Fuel may be sold free and clear of all rights of the Lessee; and

(C) any and all other damages and expenses (including, without limitation, reasonable attorneys’ fees and expenses), which the Lessor shall have sustained by reason of the breach of any provision of this Lease.

The Lessee hereby waives, to the full extent not prohibited by law, any right it may now or hereafter have to require the sale, in mitigation of damages, of the Nuclear Fuel or any portion thereof consequent to an Event of Default.
(c) Pending Lessor’s exercise of any available remedy to take or grant to a third party possession of any Nuclear Fuel, the Lessee shall be responsible for the storage of the Nuclear Fuel.

(d) The remedies herein provided in favor of the Lessor in case of an Event of Default as hereinabove set forth shall not be deemed to be exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law, in equity or in bankruptcy.





SECTION 26. Permanent Storage or Disposal .

(a) Any other provisions of this Lease to the contrary notwithstanding, provided that the Lessor has not exercised its rights to sell such Nuclear Fuel after an Event of Default has occurred and provided that the Lessee has not disposed of such Nuclear Fuel upon termination of the Lease, the Lessee shall be obligated to, at its expense, either store, dispose of or Reprocess Nuclear Fuel which has completed Heat Production. The Lessee shall be entitled to choose whether to store, dispose of or Reprocess such Nuclear Fuel at its discretion.

(b) When any assembly of Nuclear Fuel is no longer useful for Heat Production, the Lessor shall be entitled to transfer title to such assembly of Nuclear Fuel to the Lessee pursuant to a Bill of Sale in the form of Schedule E hereto. A Fuel Schedule reflecting such transfer shall be executed and delivered by the Lessor and the Lessee.

(c) Any provision of this Lease to the contrary notwithstanding, the Lessee will not move any assembly of Nuclear Fuel which has been in Heat Production from the Generating Facility unless it shall notify the Lessor, and shall, if requested by the Lessor, have repurchased such assembly. A Fuel Schedule reflecting such transfer shall be executed and delivered by the Lessor and the Lessee.

SECTION 27. No Merger .

There shall be no merger of this Lease or of the leasehold interest created by this Lease with the absolute ownership interest in the Nuclear Fuel or any portion thereof by reason of the fact that the same Person may acquire or own or hold, directly or indirectly, (i) this Lease or the leasehold interest created by this Lease or any interest in this Lease or in any such leasehold interest and (ii) the absolute ownership or other interest in the Nuclear Fuel or any portion thereof, and no such merger shall occur unless and until all Persons, including the Assignee, having any interest in (y) this Lease or the leasehold interest created by this Lease and (z) the absolute ownership or other interest in the Nuclear Fuel or any portion thereof shall join in an instrument effecting such merger and shall duly record the same.
SECTION 28.
Notices .

Any notices provided for in this Lease shall be in writing and shall be deemed to have been duly given when delivered personally or otherwise actually received or five days after the same have been deposited in the United States mail, registered, postage prepaid, addressed as follows:
If to the Lessor:
(with a copy to the Assignee)

River Fuel Company #2, Inc.
c/o United States Trust Company of New York
45 Wall Street
New York, New York 10005
Attention: Corporate Trust and Agency Division, Department B

If to the Lessee:
Louisiana Power & Light Company
317 Baronne Street, N-80
New Orleans, Louisiana 70112
Attention: President





and if to the Assignee, then at such address as shall have been designated by such Assignee by notice duly given to the Lessee, or at such other place as any of the parties may designate by notice duly given in accordance with this Section.
SECTION 29.
Allocation of Amounts .

The Lessee agrees to cooperate in good faith with the Lessor in determining appropriate accruals and allocations pursuant to the terms of this Lease and to provide any other calculations and information which are necessary or appropriate in order to assist the Lessor in performing its obligations. Whenever, under Section 1, 5, 6, 10, 18(a), 19(b) or 22, computations are required to be made involving a cost, price, payment, charge, factor, discount or any other amount relating to a single assembly of the Nuclear Fuel, such cost, price, payment, charge, factor, discount or other amount shall be determined in the reasonable judgment of the Lessee. Unless the Lessee shall have informed the Lessor otherwise in writing or unless otherwise set forth in any of the Schedules attached hereto or furnished pursuant to this Lease, allocation shall be made by dividing the aggregate of all such costs, prices, payments, charges, discounts or any other amounts which are known to have been incurred, paid, accrued or arisen, at approximately the same time and in the same general transaction or computation, with respect to such assembly and one or more other assemblies of the Nuclear Fuel, into as many equal parts as there are such assemblies, and allocating one of the parts so divided to each such assembly. In the event that any such cost, price, payment, charge, discount or any other amount must be certified pursuant to this Lease, the Person making such certification shall be the sole judge of the propriety of making any such allocation, and such Person need only place the term “(allocated)” before any or after any cost, price, payment, charge, discount, or other amount so certified in order to (i) establish the propriety of making such an allocation and (ii) give the warranty of such Person as to the accuracy of the allocation so certified and its compliance with the provisions of this Section 29.
SECTION 30.
Amendments .

This Lease may not be amended, modified or terminated, nor may any obligation hereunder be waived orally, and no such amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing, signed by the party against whom enforcement thereof is sought, except that amendments of Schedule A hereto pursuant to Section 6, 10, 18(a) or 19(b) hereof shall be made in accordance with the provisions of such Sections.
SECTION 31.
Severability .

Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the Lessor and Lessee hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.
SECTION 32.
Job Incentive Credit and Investment Credit .

To the extent that the Nuclear Fuel is or becomes eligible for the job incentive credit or the investment credit or service credit under the Internal Revenue Code as in effect on the date of this Lease or thereafter as amended from time to time, the Lessor at the Lessee’s request shall elect to treat the Lessee as having acquired the Nuclear Fuel, and shall provide the Lessee with an appropriate credit election. The Lessee shall provide the Lessor with a report or statement with respect to all Nuclear Fuel




as to which such credit election is applicable, and such report or statement shall be in such form as may be required for Internal Revenue Service reporting.
SECTION 33.
Miscellaneous .

(a) The Lessor’s obligations hereunder are intended to be the corporate obligations of the Lessor only and no recourse for the payment of any amount due under this Lease, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future of the Lessor or of any successor corporation, or against any direct or indirect parent corporation of the Lessor or any other subsidiary or Affiliate of any such direct or indirect parent corporation or any incorporator, shareholder, officer or director, as such, past, present or future, of any such parent or other subsidiary or Affiliate, it being understood that the Lessor is a special purpose corporation formed for the purpose of the transactions involved in and relating to this Lease on the express understanding aforesaid. Nothing contained in this Section 33(a) shall be construed to limit the exercise or enforcement, in accordance with the terms of this Lease and any other documents referred to herein, of rights and remedies against the Lessor or the assets of the Lessor.

(b) The Lessor agrees that (i) the Lessor will not enter into any Credit Agreement, Secured Note Agreement or Security Agreement or amend or modify or consent to any amendment or modification of a Credit Agreement, Secured Note Agreement or Security Agreement without the prior written consent of the Lessee, and (ii) the Lessor shall at all times use its best efforts to comply with, observe and perform all of the covenants and agreements required to be complied with, observed or performed by the Lessor under a Credit Agreement, Secured Note Agreement or Security Agreement. The Lessee agrees to furnish such documents and certificates as may be required in this regard.

(c) The Lessor and the Lessee agree that certain of the rights, duties and obligations of the Lessee hereunder may be exercised or performed, as the case may be, by System Energy Resources, Inc. (“SERI”) as agent for the Lessee, pursuant to the terms of the Operating Agreement to be entered into between the Lessee and SERI as filed with the Securities and Exchange Commission in File No. 70-7570 and to the extent such filing shall be approved; provided that the ability of the Lessee to exercise its rights under this Lease, and the requirement of the Lessee to perform its duties and obligations shall not be affected by the appointment of SERI as the Lessee’s agent.

(d) The terms and provisions of this Lease supersede all prior negotiations and oral understandings, if any, between the Lessor and the Lessee with respect to the transactions contemplated hereby. The captions in this Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

This Lease shall in all respects be governed by, and construed in accordance with, the laws of the State of New York including all matters of construction, validity and performance.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed by their respective officers thereunto duly authorized, as of the day and year first above written.
RIVER FUEL COMPANY #2, INC.
By: /s/ Louis P. Young
LESSOR
LOUISIANA POWER & LIGHT COMPANY
By: /s/ M.H. McLetchie
LESSEE




STATE OF NEW YORK
 
) ss.:
COUNTY OF NEW YORK
)

On this 2nd day of February, 1989, before me, a Notary Public in the State of New York personally appeared Louis P. Young, to me personally known, who being by me duly sworn did say that he is an officer of River Fuel Company #2, Inc., and that said instrument was signed on behalf of the said corporation and the said officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
/s/ Michael R. Stolfi
Notary Public


Michael R. Stolfi
NOTARY PUBLIC, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires October 05, 1989
[NOTARIAL SEAL]





STATE OF NEW YORK
 
) ss.:
COUNTY OF NEW YORK
)

On this 2nd day of February, 1989, before me, a Notary Public in the State of New York personally appeared M.H. McLetchie, to me personally known, who being by me duly sworn did say that he is a Sr. V.P. of LOUISIANA POWER & LIGHT COMPANY, and that said instrument was signed on behalf of the said corporation by authority of its Board of Directors and the said undersigned acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
/s/ Michael R. Stolfi
Notary Public


Michael R. Stolfi
NOTARY PUBLIC, State of New York
No. 24-4906294
Qualified in Kings County
Commission Expires October 05, 1989

    
[NOTARIAL SEAL]





SCHEDULE A

DESCRIPTION OF NUCLEAR FUEL
Date:
Revision:
 

Assembly Serial No.
Contained Uranium
in Kg. U.
at B.O.L*
Average Enrichment (Weight Percentage U235)
Allocated Acquisition Cost
Allocated Capitalized Cost
Allocated Investment
 
 
 
 
 
 
 
 
 
 
 
 


* B.O.L. = Beginning of Life





Date:
Revision:
 

SCHEDULE B
QUARTERLY RENT SCHEDULE
STIPULATED LOSS VALUE CONFIRMATION
Cost Attributable to Quarter Ending

1
2
3
4
5
6
7
8
Assembly Serial No
S.L.V. as of the End of Prior Quarter
Allocated Acquisition Costs
Allocated Capitalized Costs (other than Allocated Capitalized Daily Lease Charges)
Daily Lease Charges to be Allocated to and Included in Capitalized Cost
Burn-Up Charges
S.L.V. At the Date Hereof (to be Used Only if Fuel is Being Added or Removed)
S.L.V. at the End of this Quarter
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

(Lessor)
(Lessee)
By:
Title
(acknowledging acceptance)
By:
Title
(acknowledging acceptance)

NOTES:
Columns 1.2.3 and 4 filled in by the Lessor when it forwards quarterly Daily Lease Charges to Lessee.
Colums 5.6.7 and 8-inserted by the Lessee.
Column 5-represents that portion of Daily Lease Charges attributable to a period during which Nuclear Fuel is not in commercial operation or in Heat Production.
Column 6-the Lessee’s calculation of Burn-Up Charge.
Column 7-used only when Fuel is added or removed.
Annexes I and II are a part hereof.
Any allocation shall be made in the sole judgment of Lessee.



    





ANNEX I TO SCHEDULE B
(To be filled in by the Lessee)
Calculation of Burn-Up Charges and Basic Rent

1
2
3
4
5
6
7
 
 
 
Fill in only if first time or if MWhr Factor being revised
 
 
 
 
Assembly Serial No.
Allocated S.L.V.
Estimated Residual Value
Est. Design MWhr Output Remaining
MWhr* Factor
MWhr** Output
Burn-Up Charge
(Col. 5 x Col. 6)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Burn-Up Charge =
 
 
 
 
 
 
 
 
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RENT CALCULATION
 
 
 
1. Burn-Up Charge (from above)
 
$
 
2.A. Quarterly Lease Charge$
 
 
 
B. Less: Amount Capitalized (see
Column 5 of Quarterly Rent Schedule)$
 
  
 
Basic Rent for Quarter =
 
$
 
 
 
$
 
Estimated Burn-Up Charge next quarter
(for information only)
$
 
 
 
 
 
 
 
 
 
 
* Col. 2-Col. 3  = Col. 5
Col. 4
 
 
 
**For the preceding quarter-annual period in connection with Heat Production.





ANNEX II TO SCHEDULE B
(To be filled in by the Lessor) *
Summary of Daily Lease Charges **  
Date
Interest Cost or Discount Amortization
Credit Agreement Fees
Other Fees, Costs and Expenses
Total Daily Lease Charge
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Unamortized Discount on Commercial
Paper Notes, if any, as of end of
Quarter      $__________Quarterly Lease Charge      $__________
    


*
To be completed separately for Nuclear Fuel not in Heat Production. Check applicable box:
[ ] In Heat Production
[ ] Not in Heat Production
**  
To be calculated in accordance with the definition in the Lease.

    





SCHEDULE C

BILL OF SALE
TO
RIVER FUEL COMPANY #2, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, _______________, a __________________________ corporation (the “Vendor”), whose post office address is __________________________, for and in consideration of the sum of $_________ paid to the Vendor upon or before the execution and delivery of this Bill of Sale to River Fuel Company #2, Inc., a Delaware corporation (the “Purchaser”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, hereby conveys, transfers, sells and sets over all of its right, title and interest in the personal property consisting of the assemblies of nuclear fuel or components thereof or other nuclear material described in Annex I hereto (the “Nuclear Fuel”), and by this Bill of Sale does hereby grant, bargain, sell, convey, transfer and deliver the Nuclear Fuel unto the Purchaser, to have and to hold the Nuclear Fuel, for itself, its successors and assigns, forever.
The Vendor hereby warrants itself to be the true and lawful owner of the Nuclear Fuel and to have full power, good right and lawful authority to dispose of the same in the aforesaid manner, and the Vendor for itself, its successors and assigns, does hereby covenant and agree with the Purchaser, its successors and assigns, to warrant and defend the true ownership of the Nuclear Fuel by the Purchaser against the claims and demands of all and every person and persons.
The Vendor and the Purchaser hereby acknowledge that, notwithstanding the sale of the Nuclear Fuel by the Vendor to the Purchaser hereunder, the Nuclear Fuel will be in the possession of Louisiana Power & Light Company, or in the possession of a manufacturer processing or reprocessing the Nuclear Fuel for the account of Louisiana Power & Light Company, pursuant to a Fuel Lease dated as of January 31, 1989, between the Purchaser, as lessor, and Louisiana Power & Light Company, as lessee. On the date hereof, the Purchaser is licensed to own, but not to possess, the Nuclear Fuel, and under no circumstances shall a transfer of possession of the Nuclear Fuel to the Purchaser be necessary for the transfer of ownership effected and intended to be effected by this Bill of Sale.










IN WITNESS WHEREOF, the Vendor has caused this Bill of Sale to be executed in its corporate name, by                  , and to be dated ____________________, 19___.
By
3





ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
RIVER FUEL COMPANY #2, INC.
By:
Title:
ANNEX I

Description of Nuclear Fuel
    

    





STATE OF
)
 
) ss.:
COUNTY OF
)

On this _____ day of ______________, 19___, before me, a Notary Public in the State of ____________, personally appeared _______________, to me personally known, who being by me duly sworn did say that he is the             of __________________________, and that said instrument was signed on behalf of the said corporation by authority of its Board of Directors and the said __________________ acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
 
Notary Public
My Commission Expires:
 







STATE OF
)
 
 
) ss.:
 
COUNTY OF
)
 

On this _____ day of __________, 19__, before me, a Notary Public in the State of _______________, personally appeared_______________, to me personally known, who being by me duly sworn did say that he is an officer of River Fuel Company #2, Inc., and that said instrument was signed on behalf of the said corporation and such officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.
 
Notary Public
My Commission Expires:
 


    





SCHEDULE D

FUEL SCHEDULE NO. _____
FUEL SCHEDULE NO. _____ dated as of __________, 19_____, between RIVER FUEL COMPANY #2, INC., a Delaware corporation (“Lessor”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, and LOUISIANA POWER & LIGHT COMPANY, a Louisiana corporation (“Lessee”) whose post office address is 142 Delaronde Street, New Orleans, Louisiana 70174.
W I T N E S S E T H :
WHEREAS, the Lessor and the Lessee have heretofore entered into that certain Fuel Lease dated as of January 31, 1989 (herein as heretofore supplemented and amended, called the “Lease”), the defined terms therein being used herein with the same meanings as provided in the Lease; and
WHEREAS, the Lease provides in Sections 6, 10, 18 and 19 thereof for Fuel Schedules, amending Schedule A to the Lease, to be executed and delivered from time to time.
NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration and in compliance with the requirements of the Lease, the Lessor and the Lessee hereby agree as follows:
1.      The Lessee certifies that the amounts set forth in Annex I hereto as Acquisition Costs, Capitalized Costs and Investment, respectively, are true and correct and have been computed in accordance with the provisions of the Lease.
2.      The Lessee requests the Lessor to make direct payment to the Manufacturers named in Annex I of the amounts specified in Annex I and to pay the Lessee in an amount equal to $__________ for Costs previously incurred by the Lessee or paid by the Lessee directly to the Manufacturers. All of the amounts for which payment is hereby requested are included in Acquisition Costs and Capitalized Costs certified in paragraph 1 above and none of said amounts have been previously paid by Lessor pursuant to Section 6 of the Lease.
3.      (a)      Schedule A to the Lease is hereby supplemented and amended so as to include those assemblies of Nuclear Fuel or the component parts thereof described in Annex II hereto (the “Additional Nuclear Fuel”) and to subject such Additional Nuclear Fuel to the Lease (and if any Nuclear Fuel is simultaneously being removed, to eliminate from Schedule A as theretofor supplemented and amended the description of Assemblies Nos._____, _____, _____ and _____). The Lessee represents and warrants that the Additional Nuclear Fuel complies with all requirements of the Lease and of law, and all necessary recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) have been duly made in the public offices in which such recordings and filings must be made in order to subject, and publish notice of the subjection of such Additional Nuclear Fuel to the Lease, and all fees, taxes and charges payable in connection with such recordings and filings have been paid in full by the Lessee.
(b)      The Lessee hereby covenants and agrees with the Lessor to warrant and defend the true ownership by the Lessor of the Additional Nuclear Fuel against the claims and demands of every person. The Lessee further warrants that such property is, and is intended to be and remain, personal




property, is not and has not been affixed to any land and is free and clear of all claims, liens, security interests and other encumbrances whatsoever, except as permitted by all Security Agreements.
4.      Except as hereinbefore expressly modified and amended, the Lease is ratified and confirmed in all respects, including, without limitation, the obligation of the Lessee to pay all installments of Basic Rent and Additional Rent and other amounts to be paid by the Lessee under the Lease.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Fuel Schedule to be duly executed as of the date first above written.
RIVER FUEL COMPANY #2, INC.
By
Title:  
LOUISIANA POWER & LIGHT COMPANY
By
               Authorized Officer






ANNEX I TO SCHEDULE D
DESCRIPTION OF NUCLEAR FUEL

Date:
 
Revision:
 

Material or Service Supplied
Vendor (and location of Vendor Facility)
Cumulative Allocated Acquisition Cost
Cumulative Allocated Capitalized Cost
Cumulative Allocated Investment
U 3 O 8 Supply
 
 
 
 
Conversion
 
 
 
 
Enrichment
 
 
 
 
Fabrication
 
 
 
 
Reprocessing
 
 
 
 
Other (Identify)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COSTS TO BE PAID BY LESSOR
Invoice Number
Batch
Service
Invoice Amount
Interest Accrued
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$
$
$






ANNEX II TO SCHEDULE D

Date:
 
Revision:
 

Batch
Assembly Serial Number
Contained Uranium in kg. U. at B.O.L.
Average Enrichment (Weight Percent U235)
(1)
Additional Allocated Acquisition
Cost
(2)
Additional Allocated Acquisition
Cost
(3)
Cumulative Allocated Acquisition
Cost
(4)
Cumulative
Allocated Capitalized
Cost
(3+4)

Cumulative Allocated Investment
 
 
 
 
$
$
$
$
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

    
B.O.L. = Beginning of Life.





SCHEDULE E
BILL OF SALE
from
RIVER FUEL COMPANY #2, INC.
to
LOUISIANA POWER & LIGHT COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned River Fuel Company #2, Inc., a Delaware corporation (the “Corporation”), whose post office address is c/o United States Trust Company of New York, 45 Wall Street, New York, New York 10005, for and in consideration of the sum of $1.00 paid to the Corporation upon or before the execution and delivery of this Bill of Sale to Louisiana Power & Light Company, a Louisiana corporation (the “Utility”), whose post office address is 317 Baronne Street, N-80, New Orleans, Louisiana 70112, and for other good, valuable, adequate, sufficient and serious consideration, the receipt of which is acknowledged by the Corporation, hereby conveys, transfers, sells and sets over all of its right, title, interest and Fuel described in Annex I hereto and by this Bill of Sale does hereby grant, bargain, sell, transfer and deliver all of its right, title, interest and claim in and to such property to the Utility to have and to hold, for itself, its successors and assigns, forever. THE NUCLEAR FUEL IS TRANSFERRED AND CONVEYED BY THE CORPORATION ON AN “AS-IS”, “WHERE-IS” BASIS, WITHOUT RECOURSE AGAINST OR REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) OF ANY KIND WHATSOEVER, INCLUDING ANY WARRANTY OF FITNESS FOR PARTICULAR PURPOSE OR MERCHANTABILITY, ON THE PART OF THE CORPORATION, EXCEPT THAT THE CORPORATION REPRESENTS AND WARRANTS THAT IT HAS NOT VOLUNTARILY GRANTED OR CREATED ANY LIEN ON THE NUCLEAR FUEL OTHER THAN THOSE PERMITTED BY SECTION 15 OF THE FUEL LEASE.
Morgan Guaranty Trust Company of New York, as Collateral Agent, whose post office address is 30 West Broadway, New York, New York 10015, joins in the execution of this Bill of Sale but only to consent as secured party under the Security and Collateral Agency Agreement dated as of January 31, 1989, between it and the Corporation to the execution and delivery of this Bill of Sale, and does hereby cancel and discharge the Security Agreement with respect to the property described in Annex I hereto and releases such property from all liens and security interests under the Security Agreement.
IN WITNESS WHEREOF, the Corporation has caused this Bill of Sale to be executed, and Morgan Guaranty Trust Company of New York, as Collateral Agent, joins herein as aforesaid, in their respective corporate names by one or more of their respective duly authorized officers.      3







Dated:
RIVER FUEL COMPANY #2, INC.
By:
Title:
 
Consented to by:
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Collateral Agent
By
Title:

4





ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
LOUISIANA POWER & LIGHT COMPANY
By:
Authorized Signature
ANNEX I

Description of the Nuclear Fuel
    

    





STATE OF
)
 
: ss.:
COUNTY OF
)

On this _____ day of _____________, 19___, before me, a Notary Public in the State of ____________ personally appeared _______________, to me personally known, who being by me duly sworn did say that he is the __________ of LOUISIANA POWER & LIGHT COMPANY, and that said instrument was signed on behalf of the said corporation by authority of its Board of Directors and the said __________ acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.

 
Notary Public
My Commission Expires:
 





STATE OF
)
 
 
: ss.:
 
COUNTY OF
)
 

On this _____ day of __________, 19__, before me, a Notary Public in the State of _______________ personally appeared_______________, to me personally known, who being by me duly sworn did say that he is an officer of River Company Trust #2, Inc., and that said instrument was signed on behalf of the said corporation and such officer acknowledged the execution of said instrument to be the voluntary act and deed of said corporation by it voluntarily executed.

 
Notary Public
My Commission Expires:
 





STATE OF
)
 
 
: ss.:
 
COUNTY OF
)
 

On this _____ day of __________, 19__, before me, a Notary Public in the State of _______________ personally appeared ___________________ to me personally known, who being by me duly sworn did say that he is a ______________ of Morgan Guaranty Trust Company of New York, and that said instrument was signed on behalf of the said Morgan Guaranty Trust Company of New York by authority of its Board of Directors and the said _______________ acknowledged the execution of said instrument to be the voluntary act and deed of said Morgan Guaranty Trust Company of New York by it voluntarily executed.
 
Notary Public
My Commission Expires:
 

    
    





SCHEDULE F
FORM OF ASSIGNMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS THAT:
                                                                                                          (the “Assignor”), in consideration of one dollar and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, does hereby sell, grant, bargain, convey and assign to                                                   (the “Assignee”), a Delaware corporation, all right, title and interest of the Assignor in, to and under all the property described in Exhibit 1 attached hereto (all of such property being herein collectively called the “Property”).
TO HAVE AND TO HOLD the Property unto the Assignee, its successors and assigns, to its and their own use forever.
1.      The interest of the Assignor in the Property, and the interest transferred by this Assignment, is that of absolute ownership.
2.      The Assignor hereby warrants that it is the lawful owner of the rights and interests conveyed by this Assignment and that its title to such rights and interests is hereby conveyed to the Assignee free and clear of all liens, charges, claims and encumbrances of every kind whatsoever, other than (i) the amounts, if any, owing under the Contract (as such term is defined in Exhibit 1 attached hereto), (ii) other claims, if any, of the Assignor and the Contractor (as such term is defined in Exhibit 1 attached hereto) which may exist as between themselves and (iii) other liens, charges, claims and encumbrances permitted by the Lease Agreement (as hereinafter defined); and that the Assignor will warrant and defend such title forever against all claims and demands whatsoever.
3.      In order that the Contractor may transfer to the Assignee clear title to the Nuclear Fuel (as such term is defined in Exhibit 1 attached hereto) on its delivery date, the Assignor hereby releases and transfers to the Assignee any right, title or interest in the Nuclear Fuel which may have been acquired by the Assignor under the Contract prior to the date hereof.
4.      This Assignment is made in accordance with a Fuel Lease dated as of January _____, 1989, between the Assignor and the Assignee (said Lease Agreement, as the same may be from time to time amended, modified or supplemented, being herein called the “Lease Agreement”). Pursuant to a Security and Collateral Agency Agreement dated as of January _____, 1989 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by Assignee in favor of                                                           (the “Collateral Agent”), the Assignee is assigning and granting a security interest in the Property and the Assignment to the Collateral Agent for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties, as such obligations are described in the Security Agreement.
5.      It is expressly agreed that, anything contained herein to the contrary notwithstanding, (a) the Assignor shall at all times remain liable to the Contractor to observe and perform all of its duties and obligations under the Contract to the same extent as if this Assignment and the Security Agreement had not been executed, (b) the exercise by the Assignee or the Collateral Agent of any of the rights assigned hereunder or under the Security Agreement, as the case may be, shall not release the Assignor from any of its duties or obligations to the Contractor under the Contract, and (c) neither the Assignee nor the




Collateral Agent, nor any of the other Secured Parties shall have any obligation or liability under the Contract by reason of or arising out of this Assignment, the Lease Agreement or the Security Agreement, or be obligated to perform or fulfill any of the duties or obligations of the Assignor under the Contract, or to make any payment thereunder, or to make any inquiry as to the nature or sufficiency of any Property received by it thereunder, or to present or file any claim, or to take any action to collect or enforce the payment of any amounts or the delivery of any Property which may have been assigned to it or to which it may be entitled at any time or times; provided , however , the Assignee agrees, solely for the benefit of the Assignor, and subject to the terms and conditions of the Lease Agreement, (i) to purchase the Nuclear Fuel from the Contractor pursuant to the Contract and (ii) to pay to the Contractor and/or to the Assignor or their order the respective amounts specified in the Lease Agreement with respect to such Nuclear Fuel.
6.      Notwithstanding anything contained herein to the contrary, subject to the terms and conditions of the Lease Agreement, the Assignor may continue to engage in Fuel Management (as such term is defined in the Lease Agreement) with respect to the Property, including, without limitation, all dealings with the Contractor and, subject to such terms and conditions, the Assignee reassigns to the Assignor the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract with respect to the Nuclear Fuel.
7.      The Assignor agrees that at any time and from time to time, upon request of the Assignee or the Collateral Agent, and, subject to Section 13(b) of the Lease Agreement, at the sole expense of the Assignor, the Assignor will promptly and duly execute and deliver any and all such further instruments and documents and take such further action as the Assignee or the Collateral Agent may reasonably request in order to obtain the full benefits of this Assignment and the security interest therein granted in the Security Agreement and of the rights, powers and interests herein and therein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the transfer of Assignor’s right, title and interest in the Property provided for hereby and the security interest granted by the Security Agreement and the appearance in the prosecution or defense of any lawsuit with respect to the rights, powers and interests herein granted (or with respect to the grant herein of such rights, powers and interests) where such appearance, prosecution or defense by the Assignor is necessary to allow Assignee or the Collateral Agent to obtain the full benefits of this Agreement. The Assignor hereby also authorizes the Assignee and the Collateral Agent to file any such financing or continuation statement without the signature of the Assignor to the extent permitted by applicable law. The Assignor will mark its books and records pertaining to the Contract to evidence this Assignment and the transfer of Assignor’s right, title and interest in the Property provided for hereby.
8.      In any suit, proceeding or action brought by the Assignee under the Contract to enforce any provisions thereof, the Assignor will save, indemnify and keep the Assignee harmless from and against all expenses, loss or damage suffered by reason of any defense, set-off, counterclaim, recoupment or reduction of liability whatsoever of the Contractor, arising out of a breach by the Assignor of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of the Contractor or its successors from the Assignor, and all such obligations of the Assignor shall be and remain enforceable against and only against the Assignor and shall not be enforceable against the Assignee.
9.      The Assignor hereby agrees that it will not enter into or consent to or permit any cancellation, termination, amendment, supplement or modification of or waiver with respect to the Contract insofar as it relates to the Nuclear Fuel except for cancellations, terminations, amendments, supplements, modifications or waivers which do not materially adversely affect the Assignee or the




Collateral Agent, nor will the Assignor sell, assign, grant any security interest in or otherwise transfer its rights or other interests in the Property or any part thereof, except as permitted by the Lease Agreement.
10.      The Assignor hereby represents and warrants that the Contract is in full force and effect and represents that it is the only agreement between the Assignor and the Contractor with respect to the Nuclear Fuel.
11.      Any obligations of the Assignee hereunder are intended to be the corporate obligations of the Assignee only and no recourse for the payment of any amount due hereunder, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, shareholder, officer or director, as such, past, present or future of the Assignee or of any successor corporation, or against any direct or indirect parent corporation of the Assignee or any other subsidiary or Affiliate (as defined in the Lease Agreement) of any such direct or indirect parent corporation or any incorporator, shareholder, officer or director, as such, past, present or future, of any such parent or other subsidiary or Affiliate, it being understood that the Assignee is a special purpose corporation formed for the purpose of the transactions involved in and relating to the Lease Agreement on the express understanding aforesaid. Nothing contained hereunder shall be construed to limit the exercise or enforcement, in accordance with the terms of this Assignment and any other documents referred to herein, of rights and remedies against the Assignee or the assets of the Assignee.
12.      The Assignor hereby agrees to send the Contractor a copy of this Assignment.
13.      This Assignment shall be governed by and construed in accordance with the laws of the State of New York.




IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly executed and delivered as of the __________________ day of _______________, 1989.
By
Title

The foregoing Assignment is hereby accepted:
By
Title

    





EXHIBIT 1
to
Assignment

(a)      The Contract, dated as of                                                                     , as amended, between                                                                                                                      , as buyer and                                                                                                                                  , as seller (the “Contractor”) (said Contract, as the same may from time to time be amended, modified or supplemented, being herein called the “Contract”), insofar as, and only to the extent that, the Contract relates to _______________________ paid for by the Assignee or now or hereafter owned by the Assignee (the “Nuclear Fuel”); but not insofar as the Contract provides for the provision of other nuclear materials and services to the Assignor; and
(b)      The Property shall include, without limitation, (i) any and all amendments and supplements to the Contract from time to time executed and delivered to the extent that any such amendment or supplement relates to the Nuclear Fuel, (ii) the Nuclear Fuel, including the right to receive title thereto, (iii) all rights, claims and proceeds, now or hereafter existing, under any insurance, indemnities, warranties and guaranties provided for in or arising out of the Contract, to the extent that such rights or claims relate to the Nuclear Fuel, (iv) any claim for damages arising out of or for breach or default by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel, (v) any other amount, whether resulting from refunds or otherwise, from time to time paid or payable by the Contractor under or in connection with the Contract insofar as it relates to the Nuclear Fuel and (vi) the right of the Assignor to terminate the Contract or to perform or to exercise or enforce any and all covenants, remedies, powers and privileges thereunder, insofar as it or they relate to the Nuclear Fuel.









EXHIBIT 2
to
Assignment

CONSENT AND AGREEMENT
The undersigned,                                                                                                     (the “Contractor”), has entered into a Subcontract dated as of October 27, 1982, as amended, with                                                                                           (the “Assignor”) (said Contract, as the same may from time to time be further amended, modified or supplemented, being herein called the “Contract”).
The Contractor hereby acknowledges notice that (i) in accordance with the terms of a Fuel Lease dated as of January _____, 1989, between the Assignor and ___________________________________________ , (in such capacity called the “Assignee”), the Assignor has assigned to the Assignee a part of the Assignor’s rights under the Contract pursuant to an Assignment, in the form of Annex A hereto (such Assignment, as the same may from time to time be amended, modified or supplemented, being herein collectively called the “Assignment”), and (ii) pursuant to a Security and Collateral Agency Agreement dated as of January _________, 1989 (said Security and Collateral Agency Agreement, as the same may from time to time be amended, modified or supplemented, being herein called the “Security Agreement”) made by the Assignee in favor of __________________________________________ (the “Collateral Agent”), for the ratable benefit of the secured parties (the “Secured Parties”) named in the Security Agreement, the Assignee has assigned and granted a security interest in all rights under the Contract from time to time assigned to it by Assignor, as collateral security for all obligations and liabilities of the Assignee to the Secured Parties. The Contractor also acknowledges receipt of a copy of the Lease Agreement and of the Security Agreement.
The Contractor hereby consents to (i) the assignment by the Assignor to the Assignee of the Assignor’s right, title and interest in, to and under the Contract and the other Property described in the Assignment, pursuant to the Assignment and (ii) the assignment and security interest in favor of the Collateral Agent as described above. The Contractor further consents to all of the terms and provisions of the Security Agreement.
The Contractor agrees that, if requested by either the Assignor or the Assignee, it will acknowledge in writing the Assignment delivered by the Assignor to the Assignee; provided , that neither the lack of notice to nor acknowledgment by the Contractor of the Assignment shall limit or otherwise affect the validity or effectiveness of this consent to such Assignment.
The Contractor hereby confirms to the Assignee and the Collateral Agent that:
(a)
all representations, warranties and agreements of the Contractor under the Contract which relate to the Nuclear Fuel described in the Assignment shall inure to the benefit of, and shall be enforceable by, the Assignee or the Collateral Agent to the same extent as if originally named in the Contract as the purchaser of such Nuclear Fuel,
(b)
the Contractor understands that, pursuant to the Lease Agreement, the Assignee has agreed to lease the Nuclear Fuel described in the Assignment to the Assignor, and consents to the assignment to the Assignor, for so long as the Lease Agreement shall be in effect or until otherwise notified by the Assignee, of the Assignee’s rights under any warranty or agreement made by the Contractor in the Contract and with respect to such Nuclear Fuel, and




(c)
The Contractor is in the business of selling nuclear fuel or related services of the kind described in the Assignment, and the proposed sale of such nuclear fuel under the Contract will be in the ordinary course of business of the Contractor.
(d)
Notwithstanding any provision to the contrary contained in the Contract, the Contractor agrees that title to any Nuclear Fuel covered by the Assignment shall pass directly to the Assignee under the Contract and shall not pass to the Assignor; provided that the foregoing shall not apply to any Nuclear Fuel for which title has already passed to Assignor prior to the execution and delivery of the Assignment.
It is understood that neither the Assignment, the Security Agreement nor this Consent and Agreement shall in any way add to the obligations of the Contractor or the Assignor under the Contract.
This Consent and Agreement shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Consent and Agreement to be duly executed and delivered by its duly authorized officer as of _____ day of _____________, 1989.
By:
Title:








Exhibit 4(d)11
THE MANUALLY EXECUTED COUNTERPARTS OF THIS FUEL LEASE ARE SERIALLY NUMBERED FROM 1 TO 20. NO SECURITY INTEREST IN, OR ASSIGNMENT OF, THIS FUEL LEASE MAY BE PERFECTED BY POSSESSION EXCEPT BY THE TRANSFER OF POSSESSION OF COUNTERPART NO. 1
COUNTERPART NO.   2

FUEL LEASE

--------------------

Dated as of February 7, 1989

Between

RIVER BEND FUEL SERVICES, INC.,
as Lessor

And
GULF STATES UTILITIES COMPANY,
as Lessee




Table of Contents

Section          Page

Parties
1
1.
Defined Terms      1
2.
Lease of Nuclear Fuel; Term      1
3.
Payments by Lessee; Net Lease; Independent Obligations of Lessee      2
4.
Payment of Fuel Costs by Lessor      4
5.
Allocation of Fuel Costs      5
6.
Title to Remain in Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used Only for Generation; Location; Contract Assignment      6
7.
Removals; Release to Lessee; Commingling; Substitution; Permanent Storage      7
8.
Payment of Impositions; Further Assurances      8
9.
Compliance with Legal and Insurance Requirements and with Instruments      9
10.
No Representation as to Nuclear Fuel; Possession and Use of Fuel      9
11.
Maintenance of the Nuclear Fuel      11
12.
Liens      11
13.
Permitted Contests      11
14.
Insurance      12
15.
Damage, Destruction or Malfunction      14
16.
Condemnation or Eminent Domain      15
17.
Terminating Events      16
18.
Conditions of Conveyance      20
19.
Lease Events of Default and Remedies      21
20.
Indemnification by Lessee      24
21.
Surrender; Acceptance of Surrender      25
22.
Estoppel Certificates; Information; Financial Information      25
23.
Inspection; Right to Enter Generating Facilities      26
24.
Right to Perform Lessee’s Covenants      26
25.
Representations, Warranties and Consents of Lessee      27
26.
Assignments      28
27.
No Merger      28
28.
Notices      28
29.
Amendments      29
30.
Severability; Waiver      29




31.
Special Considerations      29
32.
Assignment of Rights Under Nuclear Fuel Contracts and Assigned Agreements      30
33.
General      31
34.
Joint Ownership Agreement      32

Schedules
Schedule A --
Form of Fuel Company Expense Schedule
Schedule B --
Form of SLV Confirmation Schedule
Annex I --      Basic Rent Schedule
Annex II --      Nuclear Fuel Not in Heat Production
Schedule C --
Form of Vendor’s Bill of Sale
Schedule D --
Form of Fuel Schedule
Annex I -- Fuel Costs Payable
Part I to Annex II -- Contract Rights of Lessee to Nuclear Fuel
Part II to Annex II -- Description of Nuclear Fuel
Schedule E --
Form of Lessor’s Bill of Sale
Schedule F-1 -- Form of Assignment Agreement
Schedule F-2 -- Form of U.S. Government Assignment Agreement
Schedule G -- Form of Demand for Special Payment





FUEL LEASE
FUEL LEASE, dated as of February 7, 1989, between RIVER BEND FUEL SERVICES, INC., a Delaware corporation (“Lessor”), and GULF STATES UTILITIES COMPANY, a Texas corporation (“Lessee”).
W I T N E S S E T H:
Recital
With respect to certain of the Nuclear Fuel subject to this Fuel Lease, Lessee has hereby conveyed to Lessor and leased back or will convey to Lessor and lease-back either (a) an undivided interest (such undivided interest at the date of this Fuel Lease being 70%) in such Nuclear Fuel as a tenant in common under a Joint Ownership Participation and Operating Agreement described below or (b) a 100% interest in such Nuclear Fuel. The parties hereto acknowledge that: (i) this Fuel Lease relates only to Lessee’s interest in Nuclear Fuel for a Generating Facility, as that interest may change from time to time; (ii) nothing contained in this Fuel Lease shall be deemed to prohibit Lessee from conveying to any other person a portion of its undivided ownership interest in Nuclear Fuel for a Generating Facility, provided that the interest so conveyed is purchased from Lessor pursuant to the provisions of this Fuel Lease; and (iii) with respect to the Nuclear Fuel referred to in clause (a) above, the rights and remedies of Lessor and any person claiming through Lessor shall be subject to the provisions of said Joint Ownership Participation and Operating Agreement.
Lessor and Lessee hereby agree as follows:
Section 1. Defined Terms.

Terms defined in Exhibit A to the Trust Indenture, dated as of February 7, 1989 (the “Indenture”), between Lessor, as a Delaware corporation wholly owned by Manufacturers Hanover Trust Company solely in its capacity as owner trustee (the “Owner Trustee”), and United States Trust Company of New York, as trustee (the “Indenture Trustee”), shall, when used in this Fuel Lease (including the Schedules hereto), have the respective meanings defined in Exhibit A to the Indenture.
Section 2. Lease of Nuclear Fuel; Term.

(a) Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Nuclear Fuel for the term provided in this Fuel Lease and subject to the terms and provisions hereof.

(b) The term of this Fuel Lease shall commence at 12:01 A.M. New York City time on the date hereof and, unless sooner terminated pursuant to the provisions hereof, shall end at 12:00 midnight, New York City time, on January 31, 2039.

Section 3. Payments by Lessee; Net Lease; Independent Obligations of Lessee.

(a) Lessee covenants to pay to Lessor or to such Persons as Lessor may direct, on each Basic Rent Payment Date, the Basic Rent due for the preceding Basic Rent Period and to pay such Basic Rent to Lessor at such place as Lessor or such Persons may direct, prior to 11:00 A.M., New York City time, on such date. At least ten days before each Basic Rent Payment Date (except when such Basic Rent Payment Date is a Settlement Date, in which event as soon as practicable but not later than such Basic Rent Payment Date), Lessor shall deliver to Lessee (1) a completed Fuel Company Expense Schedule which




lists the daily totals for the items shown on such Schedule that in the aggregate equal the Quarterly Financing Charge for the Basic Rent Period preceding such Basic Rent Payment Date and (2) an SLV Confirmation Schedule for such Basic Rent Period completed as to items 1, 4, and 5 thereof. Upon receipt of such Schedules, Lessee shall complete (i) the Basic Rent Schedule for such Basic Rent Period by calculating the Basic Rent for such Basic Rent Period as the sum of (x) the Burn-Up Charge and (y) that portion of Quarterly Financing Charge not allocated to Fuel Cost in accordance with Section 5 hereof and (ii) the SLV Confirmation Schedule affirming and acknowledging the SLV at the end of such Basic Rent Period. On the Basic Rent Payment Date, Lessee shall deliver to Lessor six copies of the signed and completed SLV Confirmation Schedule with the Basic Rent Schedule completed and attached as Annex I thereto and, if required by the SLV Confirmation Schedule, with Annex II to the SLV Confirmation Schedule completed and attached thereto. All Schedules, Annexes and Exhibits delivered by Lessee pursuant to the provisions of this Fuel Lease shall constitute representations of Lessee as to the accuracy of the matters contained therein. Insofar as such matters include estimates or projections by Lessee, Lessee shall make such estimates or projections in good faith and with a diligent application of engineering and accounting expertise. Lessee shall and may revise such estimates and projections from time to time in accordance with the standards of the preceding sentence.

(b) During the term of this Fuel Lease (or thereafter prior to any Settlement Date provided for in subsection 17(d) hereof), whether or not a Lease Event of Default or a Terminating Event shall have occurred, Lessor shall have the right, from time to time, to demand special payments (“Special Payments”) from Lessee in amounts sufficient to enable Lessor to pay, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), its obligations hereunder and any other obligations and liabilities of Lessor if Lessor does not have, or cannot reasonably expect to have, from the issuance of the Notes and Additional Notes, from rentals or other payments made by Lessee and from amounts available to Lessor for disbursement from the Collateral Account, funds on hand sufficient to meet the Obligations and such other obligations and liabilities. Such demand shall be made by delivery of a certificate substantially in the form of Schedule G to this Fuel Lease. Lessee agrees, upon receipt of each such certificate, to unconditionally comply with all such demands therein in the amount and at the time (both amount and time being of the essence) and otherwise as set forth in that certificate; provided, however, that nothing contained therein shall require the payment by Lessee of any amounts in advance of the due date (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) of the Obligations or the other obligations or liabilities with respect to which such demand is made. In the event of any failure by Lessee to make any Special Payment as requested by Lessor, then Lessor shall have all the rights, powers and remedies as in the case of failure to pay Basic Rent. Lessee shall have the right, upon the making of any Special Payment, to deliver to Lessor a Fuel Schedule reducing the SLV of Nuclear Fuel specified by it in such Fuel Schedule by an amount up to the amount of such Special Payment; provided, however, that no such reduction shall be made with respect to Special Payments relating to payments (other than those which have been paid as, or at the time are payable as, Burn-Up Charges) made in connection with (i) the indemnifications contained in the Basic Documents, (ii) fees, costs and expenses referred to in Sections 7.7 and 7.10 of the Indenture, (iii) amounts payable under Section 24 of the Fuel Lease, and (iv) any other amounts payable as a part of Daily Financing Charges. Lessee’s obligation to make a Special Payment shall not be contingent upon there being SLV of Nuclear Fuel equal to or in excess of such Special Payment.

(c) This Fuel Lease is a completely net lease; all costs and expenses, liabilities, obligations and responsibilities of every kind and nature relating to any and all of the Nuclear Fuel shall be paid and performed by Lessee, except as otherwise expressly provided in this Fuel Lease. Basic Rent, Special Payments and all other amounts payable by Lessee hereunder (including, without limitation, following a Terminating Event or a Lease Event of Default) shall be paid without counterclaim, setoff, deduction or




defense and without abatement, suspension, deferment, diminution or reduction, it being the intention of the parties hereto that the obligations of Lessee hereunder shall be separate and independent covenants and agreements that the Basic Rent, Special Payments and all other amounts payable by Lessee hereunder shall be payable unconditionally in all events, and that the obligations of Lessee hereunder shall continue unaffected by any event whatsoever, unless the requirement to pay or perform the same shall have been modified or terminated pursuant to an express provision of this Fuel Lease; provided that nothing contained herein shall be deemed to prejudice Lessee’s rights and remedies against any person after having made payment hereunder. Except as expressly provided herein, Lessee waives all rights now or hereafter conferred by statute or otherwise (i) to quit, terminate, modify or surrender this Fuel Lease or Nuclear Fuel or any portion thereof or (ii) to any abatement, suspension, deferment, diminution or reduction of Basic Rent payable by Lessee hereunder. Lessee hereby waives, to the full extent permitted by law, any right it may now or hereafter have to require the sale, in mitigation of damages, of any Nuclear Fuel or any interest in any Assigned Agreement or any Partially Assigned Agreement.

(d) Subject to the provisions of Sections 13 hereof, Lessee agrees that it will promptly pay all Impositions, taxes, assessments, and other governmental charges and fees levied or assessed upon the interest of Lessee in the Nuclear Fuel and against Lessor on account of its acquisition, ownership or leasing of the Nuclear Fuel or any part thereof, including any net income, excess profits or franchise taxes against Lessor on or measured by any moneys payable hereunder or the net income therefrom (including any payments made pursuant to this sentence) and including any personal property taxes on the Nuclear Fuel and all other costs assessed against Lessor on account of its acquisition, ownership or leasing of the Nuclear Fuel, provided that this subsection 3(d) shall not be deemed to obligate Lessee to pay (A) any taxes, assessments and other governmental charges and fees paid or payable by or on behalf of Lessor as part of the Fuel Cost of any Nuclear Fuel or (B) any income taxes on fees payable to the Owner Trustee. Lessee further agrees to do, at its own expense, all things required to be done by Lessor in connection with the levy, assessment, billing or payment of any such taxes and is hereby authorized by Lessor to act for and on behalf of Lessor in any and all such respects, and to file, on behalf of Lessor, all required tax returns and reports (other than returns and reports in respect of income, excess profits or franchise taxes) concerning the Nuclear Fuel, the Assigned Agreements and the Partially Assigned Agreements.

(e) If any lien, encumbrance or charge of any kind or any judgment, decree or order of any court or other governmental authority (including, without limitation, any tax lien affecting the income of Lessor), whether or not valid, shall be asserted or entered which interferes with the due and timely payment of any sum payable hereunder, Lessee shall, on receipt of notice to that effect from Lessor, promptly take such legally permissible action as may be necessary to prevent or terminate such interference. Lessee shall indemnify and hold harmless Lessor, the Owner Trustee, and each Assignee from and against any and all losses and damages caused by any such interference.

(f) Unless otherwise provided herein or in the Basic Documents, all amounts payable hereunder to Lessor or any Assignee shall be made to such Person at the address designated for notices in Section 28 hereof, or otherwise designated by notice given by such Person, and such amounts shall be payable in Federal funds or in other funds immediately available at such address. All past due amounts payable under this Fuel Lease shall bear interest at a rate per annum equal to 1% plus the Prime Rate during the period from and including the due date until the date of repayment.

Section 4. Payment of Fuel Costs by Lessor.

(a) Whenever Lessee desires Lessor to pay any Fuel Costs, to acquire Nuclear Fuel from any Person, to pay a Manufacturer for any Fuel Cost, or to reimburse Lessee for any Fuel Cost, Lessee shall




deliver to Lessor (i) three fully executed copies of a Fuel Schedule in the form of Schedule D to this Fuel Lease, setting forth in Annex I to such Fuel Schedule the Fuel Cost for which payment or reimbursement is desired and describing in Annex II to such Fuel Schedule the Nuclear Fuel to which such Fuel Cost is allocable and (ii) if Lessee or any other Person then has title to any of such Nuclear Fuel, a Vendor’s Bill of Sale with respect to such Nuclear Fuel executed by Lessee or the other Person, as appropriate. At such time as a Nuclear Fuel Contract provides for transfer of title to any Nuclear Fuel to Lessor or Lessee, as the case may be, for which a Fuel Schedule has been or is being submitted to Lessor, Lessee shall deliver or cause to be delivered to Lessor, and Lessor shall accept, a duly executed Vendor’s Bill of Sale with respect thereto or an invoice of sale or other instrument applicable to such Nuclear Fuel evidencing passage of title to Lessor, which Vendor’s Bill of Sale, invoice of sale or other instrument shall be in form and substance satisfactory to Lessor. Lessor and Lessee agree that any invoice of sale for services shall be in form and substance satisfactory to each of them, provided that such invoice relates to a Nuclear Fuel Contract which, in substance, provides that title to the Nuclear Fuel covered thereby passes no later than at delivery.

(b) Not later than ten Business Days after Lessor shall have received a Fuel Schedule hereunder (unless otherwise advised in such Fuel Schedule), Lessor shall cause the payment specified therein to be made out of the Collateral Account and shall redeliver to Lessee a copy of a Fuel Schedule executed by Lessor as advice of such payment and the date thereof; provided, however, that Lessor shall not be required to cause such payment to be made pursuant to this Section 4 (i) if a Terminating Event, a Lease Event of Default or an event which with the giving of notice or lapse of time or both would constitute a Terminating Event or a Lease Event of Default has occurred and is continuing, or (ii) to the extent that such proposed payment exceeds the amount of funds available to Lessor from the Collateral Account and to Lessor from the issuance of Notes and Additional Notes or from rentals or other amounts paid by Lessee hereunder at the time of such proposed payment or (iii) if such proposed payment relates to a Nuclear Fuel Contract between Lessee and a Manufacturer which has not theretofore been duly assigned (in form and substance satisfactory to Lessor) by Lessee to Lessor as an Assigned Agreement or a Partially Assigned Agreement and as to which assignment such Manufacturer has not theretofore consented (in form and substance satisfactory to Lessor).

Section 5. Allocation of Fuel Costs.

(a) Whenever any portion of any Fuel Cost cannot be allocated by Lessee as being applicable to specifically identifiable items of the Nuclear Fuel, such portion shall be prorated to all of the Nuclear Fuel on the basis of Lessee’s prudent business judgment consistent with generally accepted accounting principles. Any such proration of a portion of the Fuel Cost shall be shown on a Fuel Schedule to be delivered to Lessor. Whenever any portion of any Fuel Cost can be allocated by Lessee as being applicable to specifically identifiable items of the Nuclear Fuel, such portion shall be added to the Fuel Cost of such Nuclear Fuel and shown on a Fuel Schedule to be delivered to Lessor. Any factor used in any computation required to be made under this Fuel Lease shall be stated to an accuracy of ten decimal places.

(b) If on a Basic Rent Payment Date, no Terminating Event has occurred and no Lease Event of Default has occurred and is continuing and Lessee has not been notified that an event which with the giving of notice or lapse of time or both would constitute a Terminating Event or a Lease Event of Default has occurred and is continuing, Lessee may elect to include in the Fuel Cost of any Nuclear Fuel not in Heat Production the Quarterly Financing Charge allocable to such Nuclear Fuel as shown in Item 9 of the Basic Rent Schedule for such Basic Rent Payment Date, but only to the extent that the amount so included in the Fuel Cost of such Nuclear Fuel does not exceed the amount of funds available to Lessor from the




Collateral Account and to Lessor from the issuance of Notes and Additional Notes or from rentals or other amounts paid by Lessee hereunder. Lessee may not include in the Fuel Cost of any Nuclear Fuel in Heat Production any portion of the Quarterly Financing Charge which may be allocable to such Nuclear Fuel.

(c) Lessee shall maintain on a current basis for each item of Nuclear Fuel records which shall contain (i) the current SLV of each item of Nuclear Fuel, (ii) a statement of all adjustments or modifications to the SLV of each item of Nuclear Fuel and the reasons therefor, (iii) with respect to Nuclear Fuel not in Heat Production, its stage in the Nuclear Fuel Cycle, the Manufacturer or other Person in possession of such Nuclear Fuel and the location of such Nuclear Fuel, and (iv) copies of all Nuclear Fuel Contracts and copies of all consents to the assignment thereof to Lessor.

Section 6. Title to Remain in Lessor; Fuel Management; Nuclear Fuel to be Personal Property and Used Only for Generation; Location; Contract Assignment.

(a) Title to the Nuclear Fuel shall, as between Lessor and Lessee, be in Lessor and shall at no time, except as provided in Section 31(a) hereof, become vested in Lessee.

(b) Except as otherwise expressly limited by this Fuel Lease, Lessee shall have the exclusive right and lawful authority and shall be obligated to engage in Fuel Management and neither Lessor nor the Owner Trustee nor any Assignee shall have any obligation or responsibility in respect thereof. Until such time as a Lease Event of Default has occurred hereunder and Lessor has notified Lessee of the revocation of such power and authority, Lessee is hereby designated the lawful representative of Lessor in all dealings with Manufacturers and any regulatory agency having jurisdiction over the ownership, possession or utilization of the Nuclear Fuel. With respect to any Nuclear Fuel located at a Manufacturer’s facility, Lessee shall cause delivery thereof to be made to any other Manufacturer or to Lessor at any of the Generating Facilities, and Lessor (in the case of a delivery to Lessor), in turn, shall deliver the same to Lessee at such location.

(c) The Nuclear Fuel is personal property and Lessee shall, at its expense, take all such action as may be required to cause the Nuclear Fuel to retain its character as personal property. The Nuclear Fuel shall not become part of any real property on which it or any portion thereof may from time to time be situated, notwithstanding the means by which it is installed or attached thereto and notwithstanding any law or custom or the provisions of any lease, mortgage or other instrument applicable to any such real property and shall not become an accession to any personalty not leased hereunder. Lessee agrees to indemnify Lessor, the Owner Trustee, and each Assignee against, and to hold Lessor, the Owner Trustee, and each Assignee harmless from, all losses, costs and expenses resulting from any of the Nuclear Fuel becoming part of real property or becoming such an accession.

(d) Lessee represents and warrants to Lessor and the Owner Trustee that neither the Nuclear Fuel nor any part thereof shall constitute a facility for the transmission or sale of electric energy. Lessee agrees that all Nuclear Fuel will be utilized during its Heat Production stage exclusively in the Generating Facilities and with due care to prevent injury thereto or to persons or property.

(e) Lessee represents and warrants to Lessor that, at the Effective Date, the Nuclear Fuel will be located only in one or more of the States of Oklahoma, Louisiana, North Carolina, Kentucky, Ohio, and Tennessee. Lessee agrees that it will not permit any Nuclear Fuel to be located outside the continental United States. Lessee further agrees that (other than in transit) it will not permit any Nuclear Fuel to be taken into or remain in any State of the continental United States (except Tennessee) without first having taken all steps so that Lessor’s right, title and interest therein shall be duly perfected. Lessee further




agrees that it will not permit any Nuclear Fuel to be taken into or remain in the State of Tennessee without first having notified Lessor in writing at least 30 days prior thereto and having taken all steps requested in writing by Lessor to protect Lessor’s right, title and interest therein. If title to any Nuclear Fuel passes to Lessor in the State of Tennessee and Lessee anticipates that any portion of such Nuclear Fuel will remain in Tennessee for more than 10 days after such passage of title, Lessee will give notice to Lessor, within 6 Business Days after such passage of title, of the amount of Nuclear Fuel in respect of which title has passed to Lessor in Tennessee.

(f) Except to the extent otherwise agreed to by Lessor, prior to obtaining pursuant to Section 4 hereof any payment by Lessor to a Manufacturer pursuant to a Nuclear Fuel Contract, Lessee shall deliver to Lessor an executed Assignment Agreement with respect to such Contract (thereafter an “Assigned Agreement” or a “Partially Assigned Agreement”), together with a Consent applicable thereto executed by the Manufacturer which is a party to said Contract.

Section 7. Removals; Release to Lessee; Commingling; Substitution; Permanent Storage.

(a) If no Lease Event of Default shall have occurred and be continuing, Lessee may during any stage of the Nuclear Fuel Cycle prior to the Heat Production stage move Nuclear Fuel to any Manufacturer’s facility for the purpose of having services performed thereon by executing and delivering to Lessor a Fuel Schedule; provided that no such action shall materially reduce the then fair market value of such Nuclear Fuel except as may be incidental to the Nuclear Fuel Cycle; and provided further that (i) such Nuclear Fuel shall be and remain the property of Lessor, except as contemplated by subsection 6(a) hereof, subject to this Fuel Lease (except as permitted by subsection 7(d) hereof), and (ii) all Legal Requirements and Insurance Requirements with respect to such move shall have been met and all necessary or advisable recordings, filings and registrations shall have been duly made in order to protect the validity and effectiveness of this Fuel Lease and the security interest created therein and in the Nuclear Fuel and the Nuclear Fuel Contracts under the Basic Documents. Lessee will continue to be obligated in respect of such Nuclear Fuel as provided in this Fuel Lease, will pay or cause to be paid all taxes and reasonable expenses incurred by Lessor, Lessee, the Owner Trustee or any Assignee by reason of such removal, and the indemnities contained in this Fuel Lease (including without limitation in Section 20 hereof) shall continue in full force and effect with respect to such Nuclear Fuel. The provisions of this subsection 7(a) shall be applicable to each subsequent removal of any such Nuclear Fuel from each place of relocation.

(b) At any time and from time to time, Lessee shall have the right to disengage any portion of the Nuclear Fuel from a reactor core or to remove it from Heat Production; provided, however, that before any portion of the Nuclear Fuel which had been engaged in a reactor core is permanently removed from any core and removed from Heat Production, Lessee shall cause such portion of the Nuclear Fuel to be released from this Fuel Lease in accordance with the provisions of subsection 7(c) hereof and provided further that any portion of the Nuclear Fuel which has been engaged in a reactor core and is permanently removed from Heat Production shall be released within 12 months after it has been so removed.

(c) Lessee may from time to time obtain the release from this Fuel Lease of a portion (but not all) of the Nuclear Fuel by executing and delivering to Lessor two copies of a Fuel Schedule and Annex II thereto and paying or causing to be paid to Lessor or any other Person entitled to receive such payment an amount equal to the SLV for such portion of the Nuclear Fuel, as shown on such Annex II thereto. Thereupon Lessor shall deliver to Lessee or any other Person designated by Lessee a Lessor’s Bill of Sale (including therein the release of any security interest under the Collateral Agreements in such portion of the Nuclear Fuel as is shown on Annex II thereto), and such portion of the Nuclear Fuel shall cease to be




Nuclear Fuel and shall cease to be subject to any provision of this Fuel Lease, the Collateral Agreements and the Basic Documents (other than any indemnities contained therein).

(d) Notwithstanding any provision of this Fuel Lease to the contrary, Nuclear Fuel may become subject to an Assigned Agreement or a Partially Assigned Agreement with a Manufacturer for services on such Nuclear Fuel which requires that title thereto be transferred to such Manufacturer and that such Nuclear Fuel be commingled with similar materials, with an obligation on such Manufacturer, upon completion of the services, to reconvey clear and unencumbered title to Nuclear Fuel of the amount and type customarily resulting from such services. Such Nuclear Fuel shall be deemed to be and remain leased hereunder while title thereto is in such Manufacturer, and any Nuclear Fuel delivered by such Manufacturer upon completion of its services shall be automatically leased hereunder in substitution for the Nuclear Fuel originally delivered to such Manufacturer. Upon such delivery to such Manufacturer and redelivery from such Manufacturer, Lessee shall deliver to Lessor each of the following (i) a Fuel Schedule and Annex II or Exhibits thereto and (ii) either (x) a receipt executed by such Manufacturer for such Nuclear Fuel or (y) a delivery invoice of such Manufacturer acknowledged by Lessee for such Nuclear Fuel, as the case may be.

(e) Whenever Nuclear Fuel is moved from one physical location to another physical location, and whenever Nuclear Fuel is moved from one stage of the Nuclear Fuel Cycle to another stage of the Nuclear Fuel Cycle, Lessee shall notify Lessor as to such movement and shall upon Lessor’s request execute and deliver to Lessor a Fuel Schedule and appropriate Annexes and Exhibits thereto reflecting such movement. At least 45 days prior to moving Nuclear Fuel into the state of Louisiana or any other state not listed in Section 6(e), Lessee shall notify Lessor as to such proposed movement.

(f) Any other provisions of this Fuel Lease to the contrary notwithstanding, provided that Lessor has not exercised its rights to sell such Nuclear Fuel after a Lease Event of Default and provided that Lessee has not surrendered such Nuclear Fuel pursuant to Section 19(b) hereof upon termination of this Fuel Lease, Lessee shall be obligated, at its expense, either to store, dispose of or reprocess Nuclear Fuel which has completed Heat Production. Lessee shall be entitled to choose whether to store, dispose of or reprocess the Nuclear Fuel at its discretion. If required by Lessee in connection with permanent storage, disposal or reprocessing of such Nuclear Fuel, Lessor will transfer title to such Nuclear Fuel to Lessee at Lessee’s request, pursuant to a Lessor’s Bill of Sale in the form of Schedule E hereto, and Lessor and Lessee shall execute a Fuel Schedule reflecting such transfer.

(g) When any assembly of Nuclear Fuel is no longer useful for Heat Production, Lessor shall be entitled to transfer title to such assembly of Nuclear Fuel to Lessee, pursuant to a Lessor’s Bill of Sale in the form of Schedule E hereto. A Fuel Schedule reflecting such transfer shall be executed and delivered by Lessor and Lessee.

Section 8. Payment of Impositions; Further Assurances.

(a) Subject to the provisions of Section 13 hereof, Lessee will pay all Impositions before any fine, penalty, interest or cost may be added for nonpayment, and will furnish to Lessor, upon request, copies of official receipts or other satisfactory proof evidencing such payment.

(b) Lessee, at its expense, shall execute, acknowledge, obtain and deliver from time to time such further counterparts of this Fuel Lease or such affidavits, certificates, Bills of Sale, financing and continuation statements, consents and other instruments as may be reasonably requested by Lessor in order to evidence the respective interests of Lessor, Lessee and any Assignee in this Fuel Lease, any




Nuclear Fuel, any Assigned Agreement and any Partially Assigned Agreement and in order to establish the character of the Nuclear Fuel as personal property and the security interest therein intended to be created by the Collateral Agreements, and shall, at its expense, cause such documents, if necessary or so requested by Lessor, to be recorded, filed or registered and to be rerecorded, refiled or reregistered in such manner and at such times and in such places as may be required by any present or future law applicable to this Fuel Lease, any Assigned Agreement or Partially Assigned Agreement or the Nuclear Fuel in order to perfect and preserve the validity of such interests or as may be reasonably requested by Lessor.

Section 9. Compliance with Legal and Insurance Requirements and with Instruments.

Subject to the provisions of Section 13 hereof, Lessee at its expense will promptly comply with (i) all Legal Requirements and Insurance Requirements necessary to maintain insurance with adequate limits, terms and conditions as required by this Fuel Lease, and (ii) any instruments, contracts or agreements affecting title to or ownership of the Nuclear Fuel, provided however that the foregoing shall not be construed to prevent Lessee from contesting such requirements so long as Lessor’s or any Assignee’s rights in the Nuclear Fuel or this Fuel Lease shall not be jeopardized.
Section 10. No Representation as to Nuclear Fuel; Possession and Use of Fuel.

(a) Any and all Nuclear Fuel to be leased hereunder is leased (i) as-is, where-is, and subject to the rights of any Person in possession thereof, the state of the title thereto and the rights of ownership therein, in each case as in existence when the same first become subject to this Fuel Lease, (ii) subject to all applicable Legal Requirements then or thereafter existing, and (iii) without representations and warranties, express or implied, of any kind by Lessor (except for the warranties of Lessor to be made pursuant to subsection 18(a) hereof), the Owner Trustee, any Assignee or any Person acting on behalf of any of them.

LESSEE ACKNOWLEDGES AND AGREES THAT THE TYPE AND DESIGN OF THE NUCLEAR FUEL HAS NOT BEEN SELECTED BY LESSOR, THE OWNER TRUSTEE, ANY ASSIGNEE OR ANY CREDIT PARTY, THAT NEITHER LESSOR, NOR THE OWNER TRUSTEE, NOR ANY ASSIGNEE NOR ANY CREDIT PARTY HAS SUPPLIED ANY SPECIFICATIONS WITH RESPECT TO THE MANUFACTURE OF ANY PORTION THEREOF AND THAT NEITHER LESSOR, NOR THE OWNER TRUSTEE, NOR ANY ASSIGNEE NOR ANY CREDIT PARTY NOR ANY PERSON ACTING ON BEHALF OF ANY THEREOF (i) IS A MANUFACTURER OF, OR DEALER IN, SPECIAL NUCLEAR MATERIAL OR SOURCE MATERIAL OF ANY KIND OR HAS ANY LICENSE TO USE OR POSSESS SUCH MATERIAL, (ii) HAS MADE ANY RECOMMENDATION, GIVEN ANY ADVICE OR TAKEN ANY OTHER ACTION WITH RESPECT TO (y) THE CHOICE OF ANY MANUFACTURER, VENDOR, PROCESSOR, DESIGNER, FABRICATOR, SUPPLIER OR TRANSPORTER OF, OR ANY OTHER CONTRACTOR WITH RESPECT TO, ANY NUCLEAR FUEL OR (z) ANY ACTION TAKEN OR TO BE TAKEN WITH RESPECT TO ANY NUCLEAR FUEL AT ANY STAGE OF THE NUCLEAR FUEL CYCLE, (iii) HAS AT ANY TIME HAD PHYSICAL POSSESSION OF ANY NUCLEAR FUEL OR MADE ANY INSPECTION THEREOF, OR (iv) HAS MADE OR, PURSUANT TO ANY PROVISION OF THIS FUEL LEASE OR OTHERWISE, IS MAKING ANY REPRESENTATION OR WARRANTY WHATSOEVER (EXCEPT FOR THE WARRANTIES OF LESSOR TO BE MADE PURSUANT TO SUBSECTION 18(A) HEREOF), EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY OR REPRESENTATION THAT ANY NUCLEAR FUEL (x) WILL NOT RESULT IN INJURY OR DAMAGE TO PERSONS OR PROPERTY, (y) HAS BEEN PROPERLY DESIGNED




OR FABRICATED OR WILL ACCOMPLISH THE RESULTS WHICH LESSEE INTENDS THEREFOR, OR (z) IS SAFE IN ANY MANNER OR RESPECT.
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED HAS BEEN OR IS MADE PURSUANT TO ANY PROVISION OF THIS FUEL LEASE OR OTHERWISE OR UNDER THE UNIFORM COMMERCIAL CODE OR ANY OTHER PRESENT OR FUTURE LAW BY LESSOR (EXCEPT FOR THE WARRANTIES OF LESSOR TO BE MADE PURSUANT TO SUBSECTION 18(A) HEREOF), THE OWNER TRUSTEE, ANY ASSIGNEE OR ANY CREDIT PARTY OR ANY PERSON ACTING ON BEHALF OF ANY OF THEM RELATING TO ANY NUCLEAR FUEL (INCLUDING WITHOUT LIMITATION, WITH RESPECT TO THE MERCHANTABILITY THEREOF OR THE FITNESS FOR A PARTICULAR PURPOSE THEREOF).
(b) So long as no Lease Event of Default has occurred and is continuing, Lessor hereby authorizes Lessee, at Lessee’s expense, to assert any and all claims, and to bring suits, actions and proceedings, in its own name or in the name of Lessor, in respect of any Manufacturer’s warranties or undertakings, express or implied, relating to any portion of the Nuclear Fuel and, so long as no Lease Event of Default has occurred and is continuing, to retain the proceeds of any such claims, suits, actions and proceedings.

(c) (i) Lessee shall investigate the state of the title to and rights of ownership in and possession of the Nuclear Fuel, and shall make or cause to be made any physical inspection of such Nuclear Fuel that Lessee deems necessary, and (ii) Lessee will not permit any such Nuclear Fuel to become subject to this Fuel Lease unless Lessee is satisfied with and has approved the same in writing for all purposes hereof. No approval by Lessee pursuant to this subsection 10(c) shall affect or impair any of Lessee’s rights under subsection 10(b) hereof or otherwise in respect of any Manufacturer’s or other Person’s warranties or undertakings.

(d) So long as no Lease Event of Default shall have occurred and be continuing, Lessee shall have exclusive possession and use of the Nuclear Fuel. Notwithstanding any other provision of this Fuel Lease, Lessee will not do or permit any act or thing to be done (i) which might impair the value or usefulness of the Nuclear Fuel or any part thereof (other than (y) in the normal usage thereof during Heat Production or (z) as may be incidental to the Nuclear Fuel Cycle) or (ii) which is contrary to any Legal Requirement or Insurance Requirement or (iii) which might impair the security interest of any Assignee in the Nuclear Fuel or in Lessor’s interest in this Fuel Lease.

Section 11. Maintenance of the Nuclear Fuel.

Lessee, at its own expense, will keep the Nuclear Fuel in good condition, promptly make or cause to be made in a workmanlike manner all necessary or appropriate repairs, replacements, renewals and Restoration thereof and arrange for proper Fuel Management. Lessee will be responsible for all actions and expenses necessary or appropriate for the proper acquisition, transportation, utilization, preservation, storage, disposal and safety of the Nuclear Fuel. Neither Lessor, nor the Owner Trustee, nor any Assignee shall be required to perform any construction, or to alter, repair, rebuild or replace the Nuclear Fuel, or to maintain, service or manage the Nuclear Fuel in any way or to engage in Fuel Management, and Lessee hereby expressly waives the right to perform any construction or to make such alterations or repairs to or effect any such Fuel Management at the expense of Lessor, the Owner Trustee, or any Assignee which may be provided for in any law now in effect or hereafter enacted.




Section 12. Liens.

Lessee will not directly or indirectly create or permit to be created or to remain, and will at its expense promptly discharge, any Lien with respect to the Nuclear Fuel, or upon Lessee’s leasehold interest therein or under this Fuel Lease (except that the lien of the First Mortgage Bond Indenture may, if it so provides, attach to Lessee’s said leasehold interest), or upon any amount payable by it under this Fuel Lease, other than (i) this Fuel Lease and any assignment hereof permitted by Section 26 hereof, (ii) Liens for Impositions not yet payable or being contested as permitted by Section 13 hereof, (iii) Liens created in favor of any Assignee, including without limitation Liens arising from the Collateral Agreements and other liens, charges or encumbrances resulting from acts of Lessor or any Assignee, or Liens securing obligations of Lessor or any Assignee which Lessee is not obligated to pay or discharge under the terms of this Fuel Lease, (iv) Liens arising by operation of law of mechanics, laborers, materialmen, carriers, suppliers or vendors, or rights thereto, incurred in the ordinary course of business for sums of money which under the terms of the related contracts are not at the time due or being contested as permitted by Section 13 hereof, provided that such reserve or other appropriate provision, if any, as shall be required by generally accepted accounting principles and policies shall have been made in respect thereof; and (v) the provisions of the Joint Ownership Agreement.
Section 13. Permitted Contests.

Lessee at its expense may contest after prior notice to Lessor, by appropriate legal proceedings conducted in good faith and with due diligence, any Legal Requirement, any Imposition or any Lien referred to in Section 12 hereof; provided, however, that all substantive actions of Lessee as authorized by this Section 13 shall be subject to the express prior written consent of Lessor, which consent shall not be unreasonably withheld; and provided further that such actions would not subject Lessee, Lessor, the Owner Trustee, and any Assignee to any criminal liability for failure to pay any such Imposition or to comply with any such Legal Requirement or any such Lien. Lessee will pay, and shall protect and save harmless Lessor, the Owner Trustee, and each Assignee and their respective officers, directors, incorporators, shareholders, direct or indirect controlling Persons or parents, partners, employees, agents and servants from and against all losses, judgments, decrees and costs, including reasonable attorneys’ fees and expenses, in connection with any contest conducted pursuant to this Section 13 and will, promptly after the final determination of such contest, pay and discharge the amounts which shall be imposed or determined to be payable therein, together with all penalties, costs and expenses incurred in connection therewith.
Section 14. Insurance.

(a) Lessee shall, at its own expense, procure and maintain nuclear liability insurance and indemnification agreements with respect to each of the Generating Facilities and the Nuclear Fuel insuring and indemnifying the respective interests of Lessor, Lessee, the Owner Trustee, each Assignee and each Credit Party, and all other covered persons to the full extent required, from time to time, under the Atomic Energy Act or any other applicable law, rule or regulation and to the extent that any additional coverage may be reasonably available and customarily carried in the nuclear utility industry. In the event the provisions of the Atomic Energy Act with respect to liability insurance or indemnification provided thereunder shall change (whether by legislation, judicial action or otherwise), then Lessee shall use its best efforts to obtain comparable insurance and indemnification agreements from governmental and/or private sources which are reasonably acceptable to Lessor, the Owner Trustee and any Assignee and which make such coverage available. As to any liability insurance in excess of the liability insurance provided for above, Lessee may self-insure to the extent customary in the nuclear utility industry.





(b) Lessee shall, at its own expense, procure and maintain physical damage insurance with respect to the Nuclear Fuel insuring Lessor, the Owner Trustee, each Assignee and each Credit Party, and all other covered persons against loss or damage to the Nuclear Fuel in an amount not less than the SLV thereof. Any such insurance may provide for such deductibles not in excess of $5,000,000 or such higher amounts as Lessee shall elect with the prior written consent of Lessor, the Owner Trustee and any Assignee, which consents shall not be unreasonably withheld (it being understood that all deductibles shall be for the account and at the risk of Lessee), may include the standard coinsurance provision contained in nuclear property insurance and may exclude the types of property and kinds of risks customarily included in and excluded from the standard coverage of such nuclear property insurance. Lessee may insure with respect to such physical damage insurance through public or private sources reasonably acceptable to Lessor. The insurance to be provided under this paragraph (b) may be furnished by Lessee under its blanket coverage for the Generating Facilities as a whole. Lessee may self‑insure with respect to physical damage insurance to the extent customary in the nuclear utility industry.

(c) In addition to the insurance required to be obtained under subsection 14(a) hereof, Lessee will at all times maintain insurance against third party liability on account of loss or damage to persons and properties (which insurance shall also insure Lessor, the Owner Trustee, each Assignee and each Credit Party on account of loss or damage caused by the Generating Facilities or Nuclear Fuel) in the manner (including, without limitation, by way of self‑insurance) usually maintained by companies engaged in comparable activities and which own or operate like properties.

(d) Any portion of the Nuclear Fuel in the possession of or to be delivered to any third party (including a Manufacturer) for transportation, storage, processing or other services, shall be covered by the insurance and indemnification agreements having the scope required by subsection 14(a) hereof to the extent available and Lessee shall cause to be maintained physical damage insurance in accordance with subsection 14(b) and liability insurance in the maximum amount available from time to time from American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters jointly, or their successor organization, except as follows:

i. While the Nuclear Fuel is at or in the course of transportation to or from a gaseous diffusion enrichment facility, during which time the provisions of Section 170(d) of the Price-Anderson Act shall apply; and

ii. While the Nuclear Fuel is in any stage of the Nuclear Fuel Cycle prior to the beginning of its transportation to a gaseous diffusion enrichment facility, in which case the provisions of subsection 14(c) shall apply.

All insurance required under this subsection 14(d) shall insure or indemnify the respective interests of Lessee, Lessor, the Owner Trustee, each Assignee and each Credit Party, and other covered persons. Any other provision of this Fuel Lease to the contrary notwithstanding, if the insurance and indemnification agreements with respect to such portion of the Nuclear Fuel in the possession of or to be delivered to a third party for transportation, storage, processing or other services are not substantially in the form and amounts provided for in this subsection 14(d), Lessee shall be required to obtain a release of such portion of the Nuclear Fuel from this Fuel Lease in accordance with subsection 7(c) hereof.
(e) Lessee will provide Lessor with insurance certificates in respect of the insurance procured pursuant to the provisions of subsections 14(a), (b) and (c) hereof and will advise Lessor in writing of all expirations of policies, all renewals of policies and all endorsements issued by the




insurers thereunder. Copies of such policies will be provided to Lessor and any Assignee or Credit Party upon request. On the commencement of the term of this Fuel Lease and annually thereafter, Lessee will furnish to Lessor a reasonably detailed statement as to the insurance coverage provided pursuant to subsections 14(a), (b) and (c) hereof. Lessee will further give prompt notice to Lessor and any Assignee as to any change in the nature of the insurers, coverages, amounts or terms of such insurance (including any change in the provisions of the Atomic Energy Act or any other applicable law, rule or regulation with respect to liability insurance or indemnification, or in the application, interpretation or enforcement thereof), which change could reasonably be expected to adversely affect Lessee, Lessor, the Owner Trustee, any Assignee or any Credit Party. Lessor, the Owner Trustee, each Assignee and each Credit Party, and other covered persons shall be respectively an insured and indemnitee (and, if possible, named as such) in all insurance policies and indemnification agreements maintained by Lessee as required under subsections 14(a), (b) and (c) hereof. All such policies and, where possible, indemnification agreements shall provide for at least 20 days’ written notice to Lessor, the Owner Trustee, and each Assignee or Credit Party prior to any cancellation and, if and to the extent possible, any material alteration of such policies and agreements, and shall provide that loss thereunder shall be payable to each Assignee as its interest may appear. Upon receipt of proceeds under any insurance policy or indemnification agreement, Lessee shall pay over to Lessor, each Assignee, each Credit Party, the Owner Trustee, and the other covered persons, the amount of their respective interests therein subject to any restrictions imposed by the Nuclear Regulatory Commission or any other governmental authority. Lessee shall deliver to Lessor, promptly upon Lessee’s receipt thereof, copies of each recommendation made by its unaffiliated insurance consultants as to the inadequacy of its existing insurance and indemnification coverage or as to any additional insurance or indemnification which is available to Lessee and which is required for the protection of the interests of Lessee, Lessor, each Assignee, each Credit Party, and the Owner Trustee in accordance with subsections 14(a), (b) and (c) hereof. Lessor shall have the right to require Lessee to deliver to Lessor a statement from an unaffiliated insurance consultant selected by Lessee and approved by Lessor (which approval shall not be unreasonably withheld) setting forth the insurance and indemnification obtained pursuant to subsections 14(a), (b) and (c) and stating, to the best of the consultant’s knowledge and belief, that the insurance and indemnification coverage maintained by Lessee complies with the requirements of subsections 14(a), (b) and (c). Such unaffiliated insurance consultant shall not incur any liability in connection with any such statement furnished pursuant to this subsection 14(e).

Section 15. Damage, Destruction or Malfunction.

(a) If an event resulting in any damage to, destruction of or malfunction of any or all of the Nuclear Fuel should occur, which damage or destruction is of such a nature as to prevent Heat Production by any Nuclear Fuel, Lessee will promptly advise Lessor and any Assignee as to such event and will, no later than 180 days after such event, give complete written notice thereof to Lessor and any Assignee, generally describing such event and such damage, destruction or malfunction and stating whether Restoration thereof can be completed within 24 months after such event. If such event affects all or substantially all of the Nuclear Fuel and such written notice by Lessee does not state that Restoration can be completed within 24 months, Lessor shall have the right to terminate this Fuel Lease by giving the notice provided for in subsection 17(a)(vi) hereof. If such event affects some but not all or substantially all of the Nuclear Fuel and Lessee’s written notice with respect thereto does not state that Restoration thereof can be completed within such 24 months, Lessee shall, within 180 days after such event, obtain the release pursuant to subsection 7(c) hereof of the Nuclear Fuel affected by such event. If Lessee shall state in its written notice that Restoration can be completed within 24 months after such event, it shall as promptly as practicable commence Restoration and shall complete the same no later than 24 months after




such event, such Restoration to be at Lessee’s own expense and whether or not the insurance proceeds, if any, on account of such damage or destruction shall be sufficient for the purpose. Any such written notice that Restoration can be so completed shall be deemed a representation by Lessee to that effect. If at any time during said 24 month period such representation could not be reaffirmed, Lessee shall so notify Lessor and any Assignee and upon such notification Lessor may terminate this Fuel Lease by giving the notice provided for in subsection 17(a)(vi) hereof with the effect set forth in Section 17.

(b) If an event resulting in any damage to, destruction of or malfunction of operation of any or all of the Generating Facilities should occur, which event is of such a nature as to prevent Heat Production at such Generating Facility or Facilities, Lessee will promptly advise Lessor and any Assignee as to such event and will, no later than 180 days after such event, give complete written notice thereof to Lessor and any Assignee, generally describing such event and stating whether the repair or reconstruction thereof can be completed within 24 months after such event or, if such repair or reconstruction cannot be completed within 24 months, whether the Nuclear Fuel which was intended to have been engaged in Heat Production at the Generating Facilities where such event occurred (i.e., the Nuclear Fuel located in, and the Nuclear Fuel intended to be used within 24 months at, such Generating Facility or Facilities), can be relocated or reassigned within 24 months after such event to another Generating Facility and engaged in Heat Production within 24 months after such event. If such event affects all or substantially all of the Generating Facilities and such written notice by Lessee does not state that such repair, or reconstruction or relocation and engagement or reassignment can be completed within such 24 months, Lessor shall have the right to terminate this Fuel Lease by giving the notice provided for in subsection 17(a) (vi) hereof. If such event affects some but not all or substantially all of the Generating Facilities and Lessee’s written notice with respect thereto does not state that such repair or reconstruction or relocation and engagement or reassignment can be completed within such 24 months, Lessee, if so requested by Lessor, shall within 180 days after such event obtain the release pursuant to subsection 7(c) hereof of the Nuclear Fuel located in, and if no reassignment can be made the Nuclear Fuel intended to be used at, the Generating Facility or Facilities where such event occurred. If Lessee shall state in its notice that repair or reconstruction or relocation and engagement or reassignment can be completed within 24 months after such event, it shall promptly commence such repair or reconstruction or relocation and engagement or reassignment and shall complete the same no later than 24 months after such event, such repair or reconstruction or relocation and engagement or reassignment to be at Lessee’s own expense and whether or not the insurance proceeds, if any, on account of such damage, destruction or malfunction shall be sufficient for the purpose. Any such written notice that repair or reconstruction can be so completed shall be deemed a representation by Lessee to that effect. If at any time during said 24 month period such representation could not be reaffirmed, Lessee shall so notify Lessor and any Assignee and upon such notification Lessor may terminate this Fuel Lease by giving the notice provided for in subsection 17(a)(vi) hereof with the effect set forth in Section 17.

(c) If no Lease Event of Default, or event which with the giving of notice or the lapse of time or both would constitute a Lease Event of Default, shall have occurred and be continuing, (i) all insurance proceeds received by Lessor, the Owner Trustee, any Assignee or any Credit Party on account of any damage to, or destruction or malfunction of, the Nuclear Fuel (less the actual costs incurred in the collection thereof) shall be paid to Lessee and (ii) Lessee shall have the right to bring and control litigation with respect to claims arising out of damage, destruction or malfunction of Nuclear Fuel or out of insurance with respect thereto. Lessee expressly waives the provisions of any present or future law relating to damage, malfunction or destruction and agrees that the provisions of this Fuel Lease shall control the rights of Lessor, the Owner Trustee, each Assignee or Credit Party and Lessee with respect to the Nuclear Fuel and any insurance proceeds received with respect thereto.





Section 16. Condemnation or Eminent Domain.

(a) In case of a Taking or the commencement of any proceedings or negotiations which might result in a Taking, Lessee will promptly give notice thereof to Lessor, generally describing the nature and extent thereof. Lessee hereby assigns to Lessor any award or payment payable to Lessee on account of a Taking of the Nuclear Fuel. Lessor shall have the right to participate fully in any proceedings or negotiations in connection with any Taking of Nuclear Fuel; provided that Lessee shall be entitled to control such proceedings or negotiations so long as no Lease Event of Default shall have occurred and be continuing. Lessee will pay all reasonable costs and expenses incurred by Lessor in connection with any Taking of Nuclear Fuel and seeking and obtaining any award or payment on account thereof.

(b) In the case of any Taking, (i) the provisions of this Fuel Lease shall remain in effect, except as expressly provided below in this Section 16, without any abatement or reduction of any amount payable hereunder, and (ii) unless Lessee shall have exercised, within 180 days after the happening of such Taking, its right to obtain a release of such Nuclear Fuel pursuant to subsection 7(c) hereof, Lessee, whether or not the awards or payments, if any, on account of such Taking shall be sufficient for the purpose, at its expense, will promptly commence and complete Restoration of the Nuclear Fuel affected by such Taking; provided, however, Lessee may request payment by Lessor of such expenses of Restoration pursuant to Section 4 hereof. Upon completion of Restoration, Lessee shall execute and deliver to Lessor a Fuel Schedule, together with any necessary Bills of Sale, to subject such replacement Nuclear Fuel to this Fuel Lease. Restoration shall be promptly commenced and completed no later than 24 months after a Taking. If Restoration is not completed within 24 months after a Taking, Lessee must obtain a release of the Nuclear Fuel affected by such Taking pursuant to subsection 7(c) hereof.

(c) If no Lease Event of Default shall have occurred and be continuing and if Lessee exercises its right to obtain a release of any Nuclear Fuel pursuant to Section 7(c) hereof, then all awards and payments received prior to, contemporaneous with or following such release on account of any Taking of such Nuclear Fuel (less the actual costs incurred in the collection thereof) shall be paid to Lessee.

(d) For purposes of this Fuel Lease, all amounts paid pursuant to any agreement with any condemning authority which has been made in connection with or in anticipation of any Taking shall be deemed to constitute an award on account of such Taking.

Section 17. Terminating Events.

(a) This Fuel Lease shall terminate prior to the scheduled expiration of its term upon the happening of any of the events enumerated in clauses (i) through (ix) below (each herein called a “Terminating Event”), in accordance with the further provisions set forth in this Section 17:

(i) If, so long as no Lease Event of Default shall have occurred and be continuing and provided that at the time of termination Lessor has the right and available funds to pay, including any optional prepayment premium in connection therewith, all Notes then outstanding, Lessee shall have delivered to Lessor a certificate of Lessee, signed by its President or a Vice President, stating that Lessee desires to terminate this Fuel Lease, and 30 days shall have elapsed after such notice;

(ii) If Lessor shall have given notice that it is not satisfied with (A) any material adverse change since the date hereof (whether by legislative act, administrative or judicial determination or otherwise) in the provisions of the Atomic Energy Act or any other applicable




law, rule or regulation with respect to liability insurance or indemnification or in the application, interpretation or enforcement thereof, or (B) any material adverse change in the insurers, coverage, amount or terms of any insurance policy or indemnity agreement required to be obtained and maintained by Lessee pursuant to subsections 14(a) and (b) hereof, or (C) an event which has occurred which has the effect of substantially decreasing such insurance coverage, and that Lessor desires that this Fuel Lease be terminated;

(iii) If (a) Lessor becomes, or is declared by any relevant governmental or regulatory body or authority to be (and such declaration is not stayed upon terms satisfactory to the Owner Trustee and any Assignee), as a consequence of being a party to this Fuel Lease or its acquisition, ownership or leasing of the Nuclear Fuel, an “electric utility company”, a “public-utility” or a similarly regulated entity under the Public Utility Holding Company Act, the Federal Power Act, or any other federal law or regulation, or under the laws of any state, or (b) Lessor or the Owner Trustee or any Assignee. or their respective officers, directors, shareholders, direct or indirect controlling Persons or parents, agents, partners or employees shall become subject to regulation under such laws as a result of being a party to the transactions contemplated by this Fuel Lease, or (c) Lessor, with the passage of a specific period of time would become, a public utility (or the equivalent) or subject to regulation under the Acts or laws referred to in subclause (a) of this clause (iii) as a result of the consequences described therein, or Lessor or the Owner Trustee or any Assignee or their respective officers, directors, shareholders, partners, direct or indirect controlling Persons or parents, agents, partners or employees would after such period become subject to regulation under such laws and said specific period of time less one week shall have elapsed;

(iv) If any law or regulation or interpretation of any law or regulation shall be adopted after the date hereof or enforced by any governmental or regulatory body or authority (including the New York Stock Exchange) (which adoption or enforcement shall not be stayed upon terms satisfactory to the Owner Trustee and any Assignee) and as a result of such adoption or enforcement approval of the transactions contemplated by the Basic Documents shall be required and shall not have been obtained within any grace period after such adoption or enforcement (if there is no grace period or a grace period of less than 10 days, within 10 days after such adoption or enforcement), or as a result of which adoption or enforcement, this Fuel Lease or any transaction contemplated hereby or the Basic Documents, including without limitation any payments to be made by Lessee or Lessor or the acquisition, ownership or leasing of the Nuclear Fuel by Lessor, shall be or become unlawful or the performance of this Fuel Lease shall be rendered impracticable in any material way;

(v) If a nuclear incident (as that term is defined in the Atomic Energy Act of 1954) involving or connected in any way with any of the Nuclear Fuel or any of the Generating Facilities shall have occurred, and such nuclear incident may reasonably be expected to give rise to liability or to damage, destruction or personal injury, in an aggregate amount in excess of $15,000,000 (whether or not covered by insurance or indemnification agreements) and Lessor, the Owner Trustee, or any Assignee shall have given notice to Lessee stating that Lessor, the Owner Trustee or such Assignee desires that this Fuel Lease be terminated;

(vi) If an event described in Section 15(a) or (b) hereof and affecting all or substantially all of the Nuclear Fuel or all or substantially all of the Generating Facilities shall have occurred and Lessee shall not have stated in its notice required under Section 15(a) or (b) with respect thereto that repair or reconstruction or relocation and engagement or reassignment or Restoration as provided therein can be completed within 24 months after such event, and Lessor, the Owner




Trustee or any Assignee shall have given notice to Lessee stating that Lessor, the Owner Trustee or such Assignee desires that this Fuel Lease be terminated and five days shall have elapsed after such notice;

(vii) If an event described in Section 15(a) or (b) hereof and affecting all or substantially all of the Nuclear Fuel or all or substantially all of the Generating Facilities shall have occurred and Lessee shall have stated in its notice required under Section 15(a) or (b) with respect thereto that repair or reconstruction, relocation and engagement or reassignment or Restoration can be completed within 24 months after such event, but Lessee shall have failed within such 24 months to complete the same and Lessor, the Owner Trustee or any Assignee shall have given notice to Lessee stating that Lessor, the Owner Trustee or such Assignee desires that this Fuel Lease be terminated and five days shall have elapsed after such notice; or

(viii) If any government license, approval, or consent granted to Lessee with respect to the Generating Facilities, without which license, approval or consent Lessee cannot continue to operate the Generating Facilities shall have been revoked and (A) Lessee does not, in good faith, within 180 days of such revocation, represent in writing to Lessor that Lessee has made a good faith determination that the Generating Facilities will return to operation (i) within 24 months of such revocation if the reason for such revocation shall relate specifically to Nuclear Fuel or the Generating Facilities or Lessee or (ii) within 24 months if the revocation shall be for other reasons (Lessee’s representation to state the reason for the revocation) shall have delivered such representation, (B) at any time during such twenty-four month period, such representation could not be reaffirmed after Lessee shall have delivered such representation, or (C) within such twenty-four month period, the Generating Facilities are not, in fact, returned to operation after Lessee shall have delivered such representation; or

(ix) If the Generating Facilities shall cease to be in Heat Production for a period of 24 consecutive months after Heat Production is commenced and Lessor, the Owner Trustee, or any Assignee shall have given notice to Lessee stating that Lessor, the Owner Trustee, or such Assignee desires that this Fuel Lease be terminated and five days shall have elapsed after such notice.

(b) Upon the happening of any Terminating Event, or upon the scheduled expiration of the term of this Fuel Lease as to all of the Nuclear Fuel, this Fuel Lease shall cease and terminate, except (i) with respect to obligations and liabilities of Lessee, actual or contingent, which arose under this Fuel Lease on or prior to the date of termination, (ii) for the provisions of Sections 3, 6(c), 7 (except to the extent modified by this Section 17), 8, 9, 10, 11, 12, 13, 14, 16 and 25(d) hereof and in this Section 17, and all obligations of Lessee thereunder shall continue independently of the termination of this Fuel Lease until the delivery of documentation by Lessor and the payment by Lessee provided for below in this Section 17, and (iii) that Lessee’s obligations under Section 20 hereof shall survive any termination of this Fuel Lease.

(c) Upon such termination, the entire interest of Lessor in the Nuclear Fuel shall (except as provided in the last sentence of this subsection 17(c)) automatically transfer to and be vested in Lessee, without the necessity of any further action by either Lessor or Lessee, but subject to the rights of any Assignee under the Collateral Agreements, and to the liens and security interests created thereby; provided, however, that if Lessee shall have assigned its interest therein to any Person lawfully entitled to receive the same as in accordance with Section 18(b) hereof and Lessor shall not have in writing disapproved such assignment for reasonable cause within 20 days after notice thereof, the entire interest of




Lessor in the Nuclear Fuel shall, upon such termination, automatically transfer to and be vested in such Person designated by Lessee, subject, however, to compliance with such approved terms of such transfer and subject also to the rights of any Assignee under the Collateral Agreements, and to the liens and security interests created thereby. If this Fuel Lease shall terminate as a result of the occurrence of a Terminating Event described in clauses (ii) through (v) of subsection 17(a) hereof, then, in such event, immediately following the transfer of Lessor’s interest in the Nuclear Fuel as provided in this subsection 17(c), at the request of Lessor, Lessee at its own expense shall execute and deliver from time to time such security agreements, financing and continuation statements and such other instruments as may be reasonably requested by Lessor in order to confirm the existence of, or create, a security interest in the Nuclear Fuel, and shall, at its expense, cause such documents to be recorded, filed or registered and to be re-recorded, refiled or re-registered in such manner and at such times and in such places as may be required by any present or future law applicable to the Nuclear Fuel in order to perfect and preserve such interest or as may be reasonably requested by Lessor. If this Fuel Lease shall terminate for any reason other than as a result of the occurrence of a Terminating Event described in clauses (ii) through (v) of subsection 17(a) hereof, then, in such event, at the request of Lessor, Lessee at its own expense shall execute and deliver from time to time such security agreements, financing and continuation statements and such other instruments as may be reasonably requested by Lessor in order to confirm the existence of, or create, a security interest in the Nuclear Fuel, and shall, at its expense, cause such documents to be recorded, filed or registered and to be re-recorded, refiled or re-registered in such manner and at such times and in such places as may be required by any present or future law applicable to the Nuclear Fuel in order to perfect and preserve such interest or as may be reasonably requested by Lessor, and Lessor’s interest in the Nuclear Fuel shall not be transferred to Lessee or such other Person until such actions have been duly and properly taken.

(d) Promptly after either party hereto shall learn of the happening of any Terminating Event, such party shall give written notice thereof to the other party hereto (and in the case of such a notice to Lessor, signed also by any other Person in whom title to the Nuclear Fuel shall have vested or is to vest as aforesaid) which notice shall (x)      acknowledge that this Fuel Lease has terminated, subject to the continuing obligations of Lessee specified above in this Section 17, and that title to and ownership of the Nuclear Fuel has transferred to and vested in or will transfer to and vest in Lessee or such other Person, and (y) subject to the next sentence of this subsection, specify a settlement date (the “Settlement Date”) occurring, if the notice is given by Lessor, 60 days after the giving of such notice or, if the notice is given by Lessee, not more than 60 days after the giving of such notice; provided, however, that in case of a Terminating Event described in any of clauses (ii), (iii), (iv), or (v) or, if the Lessee does not make the representation referred to therein, clause (viii) of subsection 17(a), the Settlement Date shall be 120 days if the notice is given by Lessor, and not more than 120 days if given by Lessee, after the giving of such notice; and provided further that in no event shall the Settlement Date in respect of any Terminating Event be later than January 31, 2039. In the event the termination shall be by reason of the scheduled expiration of the term of this Fuel Lease as to all of the Nuclear Fuel, each of the parties shall give to the other a notice as of the scheduled expiration date to the effect described in clause (x) of the preceding sentence (and in the case of such a notice to Lessor, signed also by any other Person in whom title to the Nuclear Fuel shall have vested as aforesaid and the Settlement Date shall be such scheduled expiration date. On the Settlement Date (time being of the essence), Lessee shall be obligated to pay or cause to be paid to Lessor as the purchase price for Nuclear Fuel an amount equal to the sum of (i) the Stipulated Loss Value of the Nuclear Fuel as of the Settlement Date plus (ii) the Termination Rent, if any, on the Settlement Date.

(e) Upon receipt of such payment in full, Lessor shall be obligated to deliver a Lessor’s Bill of Sale acknowledging the above-described transfer and vesting of title and ownership of the Nuclear Fuel in




Lessee or in such other Person (including therein the release of any security interest under the Collateral Agreements). Lessee shall pay all reasonable expenses in connection with such transfer, including all escrow fees, search and recording and filing fees, reasonable attorneys’ fees and all Impositions which may be incurred by reason of the transfer and all applicable federal, state and local sales, use and other taxes (except income taxes on any fees payable at such time) which may be incurred or imposed by reason of the transfer then being made by Lessor or by reason of the delivery of said instruments of transfer and release, provided, however, that Lessee’s obligation to make payments shall not be conditioned upon receipt of such Bill of Sale and releases.

(f) If Lessee shall have made the payment required pursuant to Subsection 17(d), then any payments which have been theretofore or may thereafter be received in respect of the Nuclear Fuel as a result of a Taking under Section 16 or damage or loss under Section 15 and which have not been expended as provided herein shall be paid or payable to Lessee, as the case may be.

Section 18. Conditions of Conveyance.

(a) Upon the release of any Nuclear Fuel from this Fuel Lease or upon the conveyance by Lessor of any Nuclear Fuel pursuant to the provisions of this Fuel Lease, (i) Lessor need not transfer any better title thereto or better ownership interest therein than it obtained pursuant to this Fuel Lease, (ii) all such transfers shall be without any representation or warranty of any kind, express or implied, except that Lessor shall warrant that it has not permitted any Lien, exception or restriction to attach to such Nuclear Fuel other than as contemplated by this Fuel Lease and the Basic Documents or as caused by Lessee and except that Lessor shall obtain and deliver a release of all security interests under the Collateral Agreements as to the affected Nuclear Fuel, and (iii) Lessee (or any other Person to whom title is transferred as provided herein) shall accept the same subject to all Liens, exceptions and restrictions attaching thereto, whether before or after such Nuclear Fuel became subject to this Fuel Lease (except as provided in clause (ii) above or for any resulting from any acts of Lessor, the Owner Trustee, or any Assignee, other than such acts taken pursuant to and in accordance with this Fuel Lease and the Basic Documents), and subject to all applicable laws, regulations and ordinances.

(b) Whenever Lessee has the right or obligation to obtain the release of any Nuclear Fuel from this Fuel Lease pursuant to any provision hereof or whenever any Nuclear Fuel is to be conveyed to Lessee pursuant to the provisions hereof, Lessee may cause such Nuclear Fuel to be released to any other Person lawfully entitled to receive the same specified by Lessee in a notice to Lessor given at least 15 days prior to the date of such release; provided, however, that nothing specified in this subsection 18(b) shall in any way impair or affect the obligations of Lessee under this Fuel Lease; and provided further that at the time of any such release Lessee shall deliver to Lessor, the Owner Trustee, and each Assignee the undertaking of Lessee, satisfactory in form and substance to each of them, indemnifying and holding Lessor, the Owner Trustee, and each Assignee harmless from and against any loss or liability incurred by any of them by reason of such release.

(c) Upon any release of any Nuclear Fuel pursuant to any right or obligation of Lessee to obtain the release of Nuclear Fuel from this Fuel Lease under any provision hereof or upon the conveyance by Lessor of any Nuclear Fuel pursuant to the provisions of this Fuel Lease, Lessee shall pay all expenses in connection with such release, including all escrow fees, search and recording and filing fees, reasonable attorneys’ fees and all Impositions and all applicable federal, state and local sales, use and other similar taxes which may be incurred or imposed by reason of the release then being made by Lessor or by reason of the delivery of any instruments of release or conveyance.





Section 19. Lease Events of Default and Remedies.

(a) Any of the following events shall constitute a Lease “Event of Default”:

(i) failure to pay when due any amount payable pursuant to Section 24 hereof and the continuance of such default for ten days after notice to Lessee; or failure to pay when due any portion of any Basic Rent or Special Payment and the continuance of such default for five days thereafter; or

(ii) failure to perform or observe any of the obligations or covenants of Lessee under subsections 14(a) and (b) hereof; or failure to obtain the release of any Nuclear Fuel under subsection 7(c) hereof when required by subsections 15(a) or 15(b) hereof; or

(iii) failure to perform or observe any of the other obligations or covenants of Lessee hereunder and the continuance of such failure for 30 days after notice to Lessee by Lessor or any Assignee; or

(iv) any representation or warranty made by Lessee in connection with this Fuel Lease shall be false in any material respect on the date as of which made; or

(v) default shall be made with respect to any evidence of Indebtedness for Borrowed Money of Lessee having an aggregate principal amount in excess of $10,000,000 if the effect of such default is to accelerate the maturity of such evidence of Indebtedness or to require the prepayment thereof (other than by a regularly scheduled repayment) or to permit the holder or obligee thereof to cause any such Indebtedness for Borrowed Money to become due prior to its stated maturity, or any such Indebtedness for Borrowed Money shall not be paid as and when due and payable after expiration of any applicable grace period; or

(vi) failure by Lessee to pay a judgment or judgments for the payment of money which, individually or in the aggregate, equals or exceeds $5,000,000 and the continuation of any such nonpayment beyond 30 days after said judgment or judgments become final and non-appealable; or

(vii) Lessee or any of its Significant Subsidiaries shall commence any case, proceeding or other action seeking to have an order for relief entered on its behalf as debtor or to adjudicate it as bankrupt or insolvent or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or other similar act or law of any jurisdiction, domestic or foreign, now or hereafter existing; or Lessee or any of its Significant Subsidiaries shall apply for a receiver, custodian or trustee (other than any trustee appointed as a mortgagee or secured party in connection with the issuance of Indebtedness for Borrowed Money) of it or for all or a substantial part of its property; or Lessee or any of its Significant Subsidiaries shall make an assignment for the benefit of creditors; or Lessee or any of its Significant Subsidiaries shall be unable to pay its debts as they become due; or

(viii) any case, proceeding or other action against Lessee or any of its Significant Subsidiaries shall be commenced seeking to have an order for relief entered against it or to adjudicate it as bankrupt or insolvent or seeking reorganization, liquidation, dissolution, winding-up, arrangement, composition or readjustment of its debts or any other relief under any




bankruptcy, insolvency, reorganization, liquidation, dissolution, arrangement, composition, readjustment of debt or other similar act or law of any jurisdiction, domestic or foreign, now or hereafter existing, and such case, proceeding or other action (A) results in the entry of an order for relief or a similar order against it which is not stayed within 30 days thereafter or (B) shall continue for a period of 60 days undismissed, undischarged or unbonded; or a receiver, custodian or trustee (other than any trustee appointed as a mortgagee or secured party in connection with the issuance of Indebtedness for Borrowed Money) of Lessee or any of its Significant Subsidiaries or for all or a substantial part of their respective property shall be appointed; or a warrant of attachment, execution or distraint, or similar process, shall be issued against any substantial part of the property of Lessee or any of its Significant Subsidiaries; or

(ix) (A) any Person shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (B) any “accumulated funding deficiency” (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan, (C) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or institution of proceedings is, in the reasonable opinion of the Required Noteholders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, and, in the case of a Reportable Event, the continuance of such Reportable Event unremedied for thirty days after notice of such Reportable Event pursuant to Section 4043(a), (c) or (d) of ERISA is given or the continuance of such proceedings for thirty days after commencement thereof, as the case may be, (D) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, or (E) any other event or condition relating to a Plan or obligations under ERISA shall occur or exist; and in each case in clauses (A) through (E) above, such event or condition, together with all other such events or conditions, if any, could subject Lessee or any of its Significant Subsidiaries to any tax, penalty or other liabilities in the aggregate material in relation to the business, operations, property or financial or other condition of Lessee and its Significant Subsidiaries taken as a whole.

(b) Upon the occurrence of any Lease Event of Default, Lessor may in its discretion do any one or more of the following:

(i) treat the Lease Event of Default as a Terminating Event effected by Lessee under Section 17(a) hereof, entitling Lessor to the consequent benefits of Section 17(b), (c) and (d) hereof and in general proceed by appropriate judicial proceedings, either at law or in equity, to enforce performance or observance by Lessee of the applicable provisions of this Fuel Lease; or

(ii) by notice of Lessee terminate this Fuel Lease, whereupon Lessee’s interest and all right of Lessee and Persons claiming through or under Lessee to the use of Nuclear Fuel shall forthwith terminate but Lessee shall remain liable with respect to obligations and liabilities, actual or contingent, which arose under this Fuel Lease on or prior to the date of such termination and Lessee’s obligations set forth in Section 20 and this Section 19(b)(ii) and, until the earlier of (1) Lessee’s taking possession of the Nuclear Fuel or (2) final and uncontested payment of the amounts referred to in (A) and (B) below, Sections 8, 9, 11 and 14 hereof; and upon such termination Lessor shall have the immediate right of possession of the Nuclear Fuel (to the extent not prohibited by law) and the right, at Lessor’s election but only in accordance with applicable law, either to enter the Generating Facility or any other premises where the Nuclear Fuel or any portion thereof is located and remove the Nuclear Fuel or such portion thereof there located (to the extent not prohibited by law) or cause the same to be done by any Person entitled by law so to do,




in which case Lessor shall not be responsible for any damage to the Generating Facility or such premises, except for damage resulting from Lessor’s willful misconduct or gross negligence (Lessee hereby agreeing to indemnify and hold Lessor harmless from all losses and liabilities in respect of any such damage to the Generating Facility, such premises or the Nuclear Fuel or injury to Lessor’s, Lessee’s or such other Person’s employees sustained in the course of such removal, except any such damage resulting from Lessor’s willful misconduct or gross negligence, provided that Lessee hereby further agrees that the misconduct or negligence of an Assignee shall not be imputed to Lessor), or to require Lessee, at Lessee’s expense, to deliver the Nuclear Fuel or any portion thereof, properly containerized and insulated for shipping, at the Generating Facility and consigned to a Person specified by Lessor and licensed to receive such Nuclear Fuel, in which case the risk of loss shall be upon Lessee until such delivery is made; and Lessor may thenceforth hold, possess and enjoy the Nuclear Fuel (to the extent not prohibited by law) and may sell Lessor’s interest in the Nuclear Fuel or any portion thereof upon any terms deemed satisfactory to Lessor, free from any rights of the Lessee and any Person claiming through or under Lessee; but Lessor shall, nevertheless, have the right to recover forthwith from Lessee any and all Basic Rent, Special Payments and all other amounts payable by Lessee hereunder which may be due and unpaid immediately prior to such termination or which may then be accrued and unpaid; and as liquidated damages for loss of the bargain and not as a penalty, an amount equal to the excess of (x) the sum of (i) the SLV of the Nuclear Fuel as of the date of such termination of this Lease plus (ii) the Termination Rent, if any, over (y) the amount, if any, realized by Lessor in a sale of the Nuclear Fuel (at which Lessor may be a purchaser), without set‑off, defense or reduction other than a deduction from the sale price of all the costs of such sale, including Lessor’s expenses and attorneys’ fees in connection with asserting its rights hereunder and consummating such sale, and other commissions, sales taxes and other customary charges; it being understood that Lessor shall have no obligation to conduct any such sale, and that Lessor may, in lieu of conducting such sale, transfer and convey title to, and its entire ownership interest in, the Nuclear Fuel to Lessee or any trustee or liquidator therefor upon the terms and conditions set forth in Section 18, but that, if Lessor conducts such sale, the Nuclear Fuel may be sold free and clear of all rights of Lessee.

Lessee hereby waives, to the full extent not prohibited by law, any right it may now or hereafter have to require the sale, in mitigation of damages, of the Nuclear Fuel or any portion thereof consequent to a Lease Event of Default.
(c) Pending Lessor’s exercise of any available remedy to take or deliver to a third party possession of any Nuclear Fuel, Lessee shall be responsible for the storage of the Nuclear Fuel.

(d) The remedies herein provided in favor of Lessor in case of a Lease Event of Default as hereinabove set forth shall not be deemed to be exclusive, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law, in equity or in bankruptcy.

Section 20. Indemnification by Lessee.

Without limitation of any other provision of this Fuel Lease, Lessee shall pay, and shall protect, indemnify and save harmless Lessor, the Owner Trustee, each Assignee and each Credit Party and their respective officers, directors, incorporators, shareholders, direct or indirect controlling Persons or parents, partners, employees, agents and servants (collectively, the “Indemnitees”) from and against all liabilities (other, as to an Indemnitee, than liabilities arising out of the gross negligence or willful misconduct of that Indemnitee), taxes (excluding, however, taxes measured solely by the net income of any Person indemnified or intended to be indemnified pursuant to this Section 20, except as otherwise provided in




subsection 3(d) hereof), losses, obligations, claims, damages, penalties, causes of action, suits, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) and judgments of any nature relating to or arising out of: (i) this Fuel Lease (including schedules hereto), any Assignment Agreement, Assigned Agreement, Nuclear Fuel Contract or Partially Assigned Agreement, (ii) Lessor’s ownership of Nuclear Fuel, (iii) Fuel Management, (iv) the creation with Lessee’s written consent of a security interest in Nuclear Fuel in favor of any Assignee, (v) the assignment with Lessee’s written consent of Lessor’s rights hereunder in favor of any Assignee, (vi) any transfer of Nuclear Fuel or rights therein, or (vii) any action or inaction of any Indemnitee in connection with the Basic Documents. If any action, suit or proceeding arising from any of the foregoing is brought against any Indemnitee, Lessee will, at Lessee’s expense, resist and defend such action, suit or proceeding or cause the same to be resisted and defended by counsel designated by Lessee and acceptable to such Indemnitee, with full power to litigate, compromise or settle the same with the prior consent of such Indemnitee. The foregoing indemnity shall not limit any indemnification to which any Indemnitee may otherwise be entitled. Any payment to any Indemnitee pursuant to this Fuel Lease shall be increased to such amount as will, after taking into account (i) all taxes imposed with respect to the accrual or receipt of such payment by such Indemnitee (as the same may be increased pursuant to this sentence) and (ii) any deductions or credits under any applicable tax law attributable to the accrual or receipt of such payment or taxes for which payment has been made, equal the amount of the payment. The obligations of Lessee under this Section 20 shall survive any termination of this Fuel Lease, in whole or in part.
Section 21. Surrender; Acceptance of Surrender.

No surrender of this Fuel Lease or of the Nuclear Fuel or of any interest therein shall be valid or effective unless agreed to and accepted in writing by Lessor, and no act by Lessor or any representative or agent thereof, other than such written agreement and acceptance by Lessor, shall constitute an acceptance of any such surrender. No surrender of this Fuel Lease or of the Nuclear Fuel or of any interest therein and no acceptance of any such surrender shall reduce or release Lessee’s obligations to make the rental and other payments provided for herein, all of which are absolute, unconditional and independent covenants.
Section 22. Estoppel Certificates; Information; Financial Information.

(a) Lessee will within 95 days after the end of each quarter of each fiscal year deliver to Lessor a statement, executed by a Vice President, Assistant Vice President, Treasurer, Assistant Treasurer, Secretary, Assistant Secretary, Controller or Assistant Controller of Lessee, certifying that this Fuel Lease is unmodified and in full force and effect (or, if there have been modifications, that this Fuel Lease is in full force and effect as modified, and identifying such modifications), and that no Lease Event of Default or Lease Default has occurred and is continuing (or specifying the nature and period of existence of any thereof and what action Lessee is taking or proposes to take with respect thereto) , it being intended that any such statement may be relied upon by Lessor, the Owner Trustee, and each Assignee.

(b) Lessee will deliver to Lessor:

(i) promptly upon their becoming available, copies of all financial statements and reports sent by Lessee to its stockholders, and of all regular and periodic reports and final prospectuses and other official statements required to be filed with the Securities and Exchange Commission by Lessee with respect to its securities outstanding;





(ii) forthwith upon learning of the occurrence of a Lease Event of Default, or Lease Default, or of the institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental. proceeding which is material to Lessee, or any material adverse change since the date hereof in the financial condition, business, operations or properties of Lessee, written notice thereof describing the same and the steps being taken by Lessee with respect thereto; and

(iii) with all reasonable promptness, such other information and data with respect to Lessee, the Nuclear Fuel (including the SLV thereof) or the Generating Facilities as may reasonably be requested by Lessor or any Assignee.

(c) All financial statements referred to in subsection 22(b) hereof shall fairly present the financial position and results of operations of Lessee as of the dates and for the periods specified therein and shall be prepared in accordance with generally accepted accounting principles and policies consistently applied (except as may otherwise be specified therein and except, with respect to interim, unaudited financial statements, for certain footnote disclosure and other details not normally included in such interim, unaudited financial statements) throughout the periods covered thereby.

Section 23. Inspection; Right to Enter Generating Facilities.

Lessor, any Assignee or any authorized representatives of either of them may, but shall not be obligated to, upon not less than 5 days’ notice, (i) enter the Generating Facilities at reasonable times, subject to applicable security regulations governing access thereto, for the purpose of inspecting the Nuclear Fuel and the reactors in which it may be loaded from time to time (subject to their availability for inspection) and (ii) discuss their condition and performance with the responsible officers of Lessee; and Lessee agrees to take such reasonable and customary steps as are appropriate to facilitate such inspection and discussions. Lessor shall not incur any liability or obligation for not making any such inspection or for not conducting any such discussion.
Section 24. Right to Perform Lessee’s Covenants.

If Lessee shall fail to make any payment or perform any act required to be made or performed by it hereunder, Lessor or any Assignee, upon notice to Lessee but without waiving or releasing any obligation or Lease Default, or Lease Event of Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of Lessee. All such payments made by Lessor or any Assignee and all expenses (including, without limitation, reasonable attorneys’ fees and expenses) made or incurred by Lessor or any Assignee in connection with any such payment or performance shall be paid to Lessor, or such Assignee, upon demand therefor, with interest on the amounts so expended or incurred at a rate per annum equal to 1% plus the Prime Rate during the period from and including the date so expended or incurred to the date of repayment.
Section 25. Representations, Warranties and Consents of Lessee.

(a) Lessee (i) acknowledges receipt of an executed copy of the Basic Documents and agrees that such copies constitute adequate notice of all matters contained therein and consents to the execution and delivery of same and the performance of all of the transactions provided for therein and (ii) agrees not to take or omit to take any action if such action or omission would result in a Lease Event of Default under the Fuel Lease or an Event of Default under the Indenture.





(b) Lessee agrees to furnish to each Assignee a copy of each notice, report, schedule, certificate or other document or instrument furnished to Lessor contemporaneously with the furnishing thereof to Lessor.

(c) Without waiver of or prejudice to any rights or remedies otherwise available under law or in equity, Lessee agrees that its obligations to make all rental and other payments payable by it under this Fuel Lease are absolute and unconditional and are independent of its use or enjoyment of any Nuclear Fuel or the performance by Lessor of any of its obligations under the Basic Documents or the realization by Lessee of the benefits sought by the transactions contemplated by the Basic Documents and that it will make all rental and other payments payable by it under this Fuel Lease and all payments regardless of (i) the validity of the organization of Lessor, the termination of the existence of Lessor or the illegality, invalidity or unenforceability of any of the Basic Documents or the Obligations, (ii) any defense, claim, set-off, recoupment, abatement or other right, existing or future, which Lessee may have against Lessor, (iii) whether a lien on or security interest in the Collateral shall have been perfected or shall continue to be perfected or whether the Collateral shall otherwise be impaired in any manner, (iv) whether Lessor shall have amended, extended, supplemented, accelerated, surrendered, released, waived, terminated or otherwise modified any of the terms of provisions of, or any of its rights, powers or remedies under, any of the Basic Documents or the Obligations, (v) the impossibility of performance by Lessor or any inaccuracy of any representation, warranty or statement made by or on behalf of Lessor or any other Person, (vi) the bankruptcy, insolvency, reorganization, liquidation, dissolution, winding-up, arrangement, composition, readjustment of debt or similar event with respect to Lessor, (vii) whether a Taking shall have occurred or whether any damage to, destruction of or malfunction of any or all of the Nuclear Fuel or the Generating Facilities shall have occurred, or (viii) any other circumstance, whether similar or dissimilar, which in any manner would constitute a legal, equitable or other excuse for nonperformance by Lessee.

(d) Lessee agrees to pay all costs and expenses (including, without limitation, reasonable counsel fees and expenses) incurred in connection with enforcing any rights under the Basic Documents.

Section 26. Assignments.

As provided herein, Lessor may grant a security interest in or an assignment of all or part of its right, title and interest in this Fuel Lease to any Assignee or Assignees and grant a security interest in the Nuclear Fuel pursuant to the Collateral Agreements. No Assignee shall have any liability hereunder or be obligated to perform any duty, covenant or condition required to be performed by Lessor under any of the terms hereof, and Lessee by its execution hereof acknowledges and agrees that notwithstanding any such grant or assignment each and all such duties, covenants or conditions required to be performed by Lessor shall survive any such assignment and any such grant of a security interest and shall be and remain the sole liability of Lessor. Upon any such assignment by Lessor, such Assignee or Assignees shall succeed to all of the rights, privileges and powers of Lessor provided in this Fuel Lease as to such right, title, or interest so assigned.
Section 27. No Merger.

There shall be no merger of this Fuel Lease or of the leasehold interest created by this Fuel Lease with the absolute ownership interest in the Nuclear Fuel by reason of the fact that the same entity may at any time or from time to time acquire or own or hold, directly or indirectly, (i) this Fuel Lease or the leasehold interest created by this Fuel Lease or any other interest in this Fuel Lease or in any such leasehold interest, and (ii) the absolute ownership or other interest in the Nuclear Fuel, and no such




merger shall occur unless and until all entities, including each Assignee, having any interest in (y) this Fuel Lease or the leasehold interest created by this Fuel Lease and (z) the absolute ownership or other interest in the Nuclear Fuel shall join in an instrument effecting such merger and shall duly record the same.
Section 28. Notices.

All notices, demands, instructions and other communications required or permitted to be given or to made upon either of the parties hereto or any other Person shall be in writing and (except for financial statements and regulatory filings and orders pertaining to Lessor or Lessee, which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail, postage prepaid, return receipt requested, or by prepaid Telex, TWX or telegram (with messenger delivery specified in the case of a telegram), or by telecopier, and shall be deemed to be given for purposes of this Fuel Lease on the day that such writing is delivered or sent to the intended recipient thereof in accordance with the provisions of this Section 28. Unless otherwise specified in a notice sent or delivered in accordance with the foregoing provisions of this Section 28, notices, demands, instructions and other communications shall be given to or made upon the following parties at their respective addresses (or to their respective Telex, TWX or telecopier numbers indicated below):
If to Lessor:
River Bend Fuel Services, Inc.
c/o Manufacturers Hanover Trust Company
450 West 33rd Street, 15th Floor
New York, NY 10001

Attention: Corporate Trust Department

Telephone:      (212) 791-3347
Telecopier:      (212) 613-7800
If to Lessee:
Gulf States Utilities Company
350 Pine Street
Beaumont, Texas 77701

Attentions Jack Schenck, Treasurer

Telephone No. (409) 838-6631
Telecopier No. (409) 839-3074

All notices, demands, instructions and other communications required or permitted to be given to or made upon Lessor by Lessee hereunder, and all certificates, schedules, reports, financial statements and other documents required or permitted to be furnished or delivered to Lessor by Lessee hereunder, shall be concurrently given, made, furnished or delivered (as the case may be) to the Indenture Trustee at its address specified in the Basic Documents.
Section 29. Amendments.

This Fuel Lease may not be amended or modified, nor may any obligation hereunder be waived, orally, and no amendment, modification or waiver of this Fuel Lease shall be effective for any purpose unless it is in writing, signed by the party against whom enforcement thereof is sought and, if this Fuel Lease has been assigned, consented to in writing by the Indenture Trustee on behalf of the Credit Parties.




Section 30. Severability; Waiver.

Any provision of this Fuel Lease which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, Lessee and Lessor hereby waive any provision of law now or hereafter existing which renders any provision hereof prohibited or unenforceable in any respect.
Section 31. Special Considerations.

(a) Notwithstanding the provisions of Section 6(a), it is recognized that for purposes of Louisiana law, this Fuel Lease may be deemed to constitute a financing lease transaction and title to Nuclear Fuel located in the State of Louisiana may be deemed to vest in Lessee. For tax purposes, both federal and state (including the State of Louisiana), neither Lessor nor Lessee shall file any tax returns or reports or take any similar action which would be inconsistent with that assumption.

(b) To the extent that the Nuclear Fuel is or becomes eligible for the work incentive credit or the investment credit or service credit or other similar credit under the Code as in effect on the Effective Date or as thereafter amended from time to time, Lessor at Lessee’s request shall elect to treat Lessee as having acquired the Nuclear Fuel and shall provide Lessee with an appropriate credit election. Lessee shall provide Lessor with a report or statement with respect to all Nuclear Fuel as to which such credit election is applicable, and such report or statement shall be in such form as may be required for Internal Revenue Service reporting.

Section 32. Assignment of Rights Under Nuclear Fuel Contracts and Assigned Agreements.

(a) Neither any assignment contemplated by this Fuel Lease, nor any action or inaction on the part of Lessor under this Fuel Lease or otherwise, shall (i) release Lessee from any of its obligations and agreements under any Nuclear Fuel Contract, (ii) constitute an assumption of any such obligations or agreements on the part of Lessor or any Assignee or Credit Party or (iii) impose any obligation or liability whatsoever on Lessor or any Assignee or Credit Party. No action or failure to act on the part of Lessee shall adversely affect or limit in any way the rights of Lessor under this Fuel Lease or under any Nuclear Fuel Contract.

(b) Lessee at its expense will perform and comply with all the terms and provisions of each Nuclear Fuel Contract to be performed or complied with by it; will maintain each Nuclear Fuel Contract in full force and effect; and will enforce each of the Nuclear Fuel Contracts in accordance with their respective terms and will take all such action to that end as from time to time may be reasonably requested by Lessor.

(c) Without the prior written consent of Lessor and each Assignee (which consent shall not be unreasonably withheld), Lessee, will not (i) cancel, amend or terminate any Nuclear Fuel Contract or consent to or accept any cancellation or termination thereof, (ii) waive any default under or breach of any Nuclear Fuel Contract, or (iii) take any other action in connection with any Nuclear Fuel Contract which would impair the interests or rights (or value thereof) of Lessee thereunder or of Lessor or any Assignee in connection therewith.





(d) Lessee will promptly deliver to Lessor copies of all notices, requests, agreements and other documents received or delivered by Lessee under or with respect to any Nuclear Fuel Contract which are material to the interests or rights (or value thereof) of Lessee thereunder or of Lessor or any Assignee in connection therewith. Lessee will from time to time, upon request of Lessor, furnish Lessor such information concerning the Nuclear Fuel, any Nuclear Fuel Contract or the Generating Facilities as Lessor may reasonably request. Lessor shall preserve the confidentiality of any information which, under the terms of the relevant Nuclear Fuel Contract, is required to be kept confidential.

(e) Lessee will not change its principal place of business and chief executive office or remove therefrom its records concerning the Nuclear Fuel Contracts unless it gives Lessor at least 30 days’ prior written notice thereof.

(f) Lessee hereby represents and warrants and agrees that: (i) each Nuclear Fuel Contract is in full force and effect and Lessee has delivered to Lessor a true and complete copy of each such Nuclear Fuel Contract as presently in effect; (ii) except as contemplated by the Basic Documents, as of the Effective Date Lessee has not sold, assigned or transferred, or created any security interest in, the Nuclear Fuel, any Nuclear Fuel Contract or any part thereof (except for such portions of Partially Assigned Agreements which are not assigned to Lessor); (iii) Lessee has not agreed to any amendment, modification or supplement which would constitute part of any Nuclear Fuel Contract (other than as disclosed in connection with clause (i) of this subsection 32(f)), or waived performance by any other Person obligated under any Nuclear Fuel Contract of any obligation of such Person thereunder; (iv) neither Lessee nor any other Person is in default in the payment, performance or observance of any term, covenant or agreement on its part to be performed or observed under any Nuclear Fuel Contract; (v) the Nuclear Fuel will be kept at the locations designated by Lessee in Fuel Schedules to be submitted from time to time hereunder; and (vi) no unreleased financing statement (other than (i) any which may have been filed on behalf of an Assignee or Lessor, (ii) any which relate to such portions of Partially Assigned Agreements which are not assigned to Lessor, and (iii) any with respect to Delta Fuel Services Corporation or Security Pacific National Bank, as secured parties, which are to be released contemporaneous with the purchase of Nuclear Fuel from Delta Fuel Services Corporation, covering all or any part of the Nuclear Fuel or any Nuclear Fuel Contract is on file in any public office).

Section 33. General.

(a) Lessor agrees that (i) Lessor will not terminate, amend or modify or consent to any termination, amendment or modification of the Basic Documents or issue any Additional Notes without the prior written consent of Lessee, (ii) Lessor will at all times comply with, observe and perform all of its covenants and agreements under the Basic Documents, (iii) Lessor will exercise its rights to issue the Notes under the Indenture at the times and in the manner directed by Lessee and (iv) Lessor will promptly furnish to Lessee copies of all notices, requests, agreements and other documents received or delivered by Lessor under or with respect to the Basic Documents, to the extent that the same shall not have been delivered to Lessee pursuant thereto.

(b) This Fuel Lease shall be binding upon Lessee and Lessor and their respective successors and assigns, and shall inure to the benefit of Lessee and Lessor and the successors and assigns of Lessor. Notwithstanding the foregoing provisions of this subsection 33(b), (i) no Assignee shall have any liability or obligation whatsoever under or in connection with this Fuel Lease and (ii) Lessee may not assign or otherwise transfer this Fuel Lease or any of its rights or interest hereunder without the prior written consent of Lessor. No assignment, transfer or delegation of duties by Lessee shall relieve it as a primary obligor hereunder.





(c) The terms and provisions of this Fuel Lease supersede all prior negotiations and oral understandings, if any, between Lessor and Lessee with respect to the transactions contemplated heresy.

(d) This Fuel Lease is intended to be only an obligation of River Bend Fuel Services, Inc., as Lessor, and no recourse with respect to this Fuel Lease shall be had by Lessee against the Owner Trustee or any officer, director, employee, agent or shareholder of River Bend Fuel Services, Inc., or of the Owner Trustee. This Fuel Lease is intended to be only a corporate obligation of Lessee and no recourse with respect to this Fuel Lease may be had by Lessor against any officer, director, employee, agent or shareholder of Lessee.

(e) The captions in this Fuel Lease are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

(f) THIS FUEL LEASE SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.

Section 34. Joint Ownership Agreement.

(a) So long as this Fuel Lease remains in effect, Lessee shall not sell, lease, convey, transfer, assign or alienate any portion of its ownership interest or rights to the Nuclear Fuel, the Generating Facilities, or the Joint Facilities (as defined in the Joint Ownership Agreement). Nothing contained in this Section 34 shall prohibit (i) sales of capacity, energy or unit power from the Generating Facilities by Lessee, (ii) grants of any rights or interests in the Joint Facilities (exclusive of the Nuclear Fuel) which do not purport to constitute a grantee as co‑owner under the Joint Ownership Agreement, (iii) mortgages, pledges or other grants of liens or other security interests with respect to Lessee’s ownership interests or rights under the Joint Ownership Agreement or with respect to the Joint Facilities (exclusive of the Nuclear Fuel), or (iv) financing transactions in whatever form, including the financing of the Joint Facilities and Generating Facilities, in whole or in part, and of pollution control facilities, with respect to the Joint Facilities (exclusive of the Nuclear Fuel).

(b) Lessee agrees that it will take all such action as may be required to separately identify Nuclear Fuel subject to the terms of the Joint Ownership Agreement from any other Nuclear Fuel subject to the terms of this Fuel Lease.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed by their respective officers thereunto duly authorized as of the date first above written.
RIVER BEND FUEL SERVICE INC.

By: /s/ James M. Foley     
Its: President             


GULF STATES UTILITIES COMPANY

By: /s/ Joseph L. Donnelly     
Its:  SR EXEC VP         





SCHEDULE A
TO
FUEL LEASE
RIVER BEND FUEL SERVICES, INC. EXPENSE SCHEDULE
for the Basic Rent Period Ended ______________
In accordance with the Fuel Lease dated as of February 7, 1989, between RIVER BEND FUEL SERVICES, INC., as Lessor, and GULF STATES UTILITIES COMPANY, as Lessee, the Daily Financing Charges during, and the Quarterly Financing Charges for, the above Basic Rent Period are as follows:
Interest Expense and Other Fees (item (a)
                of Daily Financing Charge)______
Date
Interest
on Notes
Other
Specify
 
 
$       
$       
 



Other Fees, Costs, Charges and Expenses
(item (b) of Daily Financing Charge,
itemized by each component of such item)
Date
(i)
(ii)
(iii)
(iv)
(v)
(vi)
 
$
$
$
$
$
$
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Date
 
Daily Financing Charge
 
 
$
 
 
 
 
 
Quarterly Financing Charge $______










The information contained herein has been prepared from and is supported by daily expense records and is true and correct in all respects.
RIVER BEND FUEL SERVICES, INC.

By:________________________________
Its: ________________________________

Date Prepared: ______________________











_____________________
Notes:
1.      Any figure used in the computation of Daily Financing Charge shall be stated to ten decimal places.
2.      Quarterly Financing Charge is equal to the sum of Daily Financing Charges for the Basic Rent Period and is to be used in preparing the Basic Rent Schedule for this Basic Rent Period.
3.      All columns are to be completed and totalled by Lessor.





SCHEDULE B
TO
FUEL LEASE
SLV CONFIRMATION SCHEDULE
for the Basic Rent Period Ended _______________________
In accordance with the Fuel Lease dated as of February 7, 1989, between RIVER BEND FUEL SERVICES, INC., as Lessor, and GULF STATES UTILITIES COMPANY, as Lessee, Lessor certifies that the amounts set forth in Items 1, 4 and 5 below are true and correct in all respects, Lessee certifies that the other amounts set forth below are true and correct in all respects, and both Lessor and Lessee certify that this SLV Confirmation Schedule has been prepared in accordance with the provisions of the Fuel Lease.

 
 
Nuclear Fuel
 
 
In Heat Production
Not
In Heat
Production
Total
1.
SLV as indicated in Item 8 of the last previous SLV Confirmation Schedule
$
$
$
2.
Adjustment: Add and subtract the Fuel Cost (as of the end of the prior Basic Rent Period) of Nuclear Fuel (subject to the Fuel Lease at the end of the prior Basic Rent Period) transferred to or from Heat Production during the Basic Rent Period referred to above
 
 
 
3.
Subtotal of Items 1 and 2 above
$
$
$





 
 
Nuclear Fuel
 
 
In Heat Production
Not
In Heat
Production
Total
 
 
 
 
 
4.
Add: Fuel Cost incurred or paid by or on behalf of Lessor during the Basic Rent Period referred to above (exclusive of capitalized Quarterly Financing Charges)
$
$
$
5(a)
Less: SLV of Nuclear Fuel removed from the Fuel Lease pursuant to subsection 7(b) thereof during the Basic Rent Period referred to above
$
$
$
5(b)
Less: SLV reduced pursuant to subsection 3(b) of the Fuel Lease during the Basic Rent Period referred to above
$
$
$
6.
Less: Burn-Up Charge for the Basic Rent Period referred to above
$
_______
$
7.
Add: Capitalized Quarterly Financing Charges (amounts allocated to Fuel Cost of Nuclear Fuel pursuant to subsection 5(b) of the Fuel Lease)
________
$
$
8.
SLV -- End of Basic Rent Period referred to above
$
$
$

Annex I (and Annex II)* (is) (are) a part hereof.
______________________
* Annex II to be delivered if the Basic Rent Period includes December 31 of any year.
















GULF STATES UTILITIES COMPANY

By: ______________________________
Its:   ______________________________

RIVER BEND FUEL SERVICES, INC.

By: ______________________________
Its:   ______________________________

(Acknowledging Acceptance)








______________________
Notes:
Items 1, 4 and 5 are inserted by Lessor. All other Items are to be inserted by Lessee.
Items 6 and 7 are extracted from Items 7 and 9 of the Basic Rent Schedule.
The three entries to be made in Item 1 shall be identical to the corresponding entries made in Item 8 of the last SLV Confirmation Schedule.
Item 2 shows transfers of Nuclear Fuel to and from Heat Production during the Basic Rent Period referred to above.






ANNEX I TO
SLV CONFIRMATION
SCHEDULE
Basic Rent Schedule for Basic Rent Period
Ended __________________
In accordance with the Fuel Lease dated as of February 7, 1989, between RIVER BEND FUEL SERVICES, INC., as Lessor, and GULF STATES UTILITIES COMPANY, as Lessee, Lessee certifies that the following is true and correct in all respects and that the amounts set forth below have been computed in accordance with the provisions of the Fuel Lease.
1.
Sum of (i) aggregate SLV (as of the end of the prior Basic Rent Period) of all Nuclear Fuel (subject to the Fuel Lease both at the beginning and at the end of the Basic Rent Period referred to above) in Heat Production at the end of the Basic Rent Period referred to above plus (ii) aggregate SLV (at the time such Nuclear Fuel becomes subject to the Fuel Lease) of Nuclear Fuel which became subject to the Fuel Lease during the Basic Rent Period referred to above and was in Heat Production at the end of such period
$
 
 
2.
Less: Estimated SLV of Nuclear Fuel included in Item 1 above at the end of the Heat Production stage of the Nuclear Fuel Cycle for such Nuclear Fuel
$
 
 
3.
Item 1 - Item 2
$
 
 
4.
Estimate of number of MWhrs which have been and will be generated by Nuclear Fuel included in Item 1 above during the period beginning with the first day of the Basic Rent Period referred to above and ending with the end of the Heat Production stage of the Nuclear Fuel Cycle for such Nuclear Fuel
$
 
 






5.
Cost per MWhr of output (Item 3 divided by Item 4)
$
 
 
6.
MWhr output of Nuclear Fuel during this Basic Rent Period
 
 
 
7.
Burn-Up Charge (Item 6 X Item 5)
$
 
 
8.
Quarterly Financing Charge from Fuel Company Expense Schedule
$
 
 
9.
Less: Portion of Quarterly Financing Charge capitalized as Fuel Cost in accordance with subsection 5(b) of the Fuel Lease
$
 
 
10.
Portion of Quarterly Financing Charge to be included in Basic Rent (Item 8-Item 9)
$
 
 
11.
Basic Rent for this Basic Rent Period (Item 7 + Item 10)
$
 
 
 
Lessee presently estimates (without in any way binding itself to such estimate), for the information of Lessor only, that the Burn-Up Charge for the next Basic Rent Period will be approximately
$
 
 
GULF STATES UTILITIES COMPANY

By: ______________________________
Its:   ______________________________













Annex I to SLV Confirmation Schedule




ANNEX II TO
SLV CONFIRMATION
SCHEDULE
Nuclear Fuel Not in Heat Production*
In accordance with the Fuel Lease dated as of February 7, 1989, between RIVER BEND FUEL SERVICES, INC., as Lessor, and GULF STATES UTILITIES COMPANY, as Lessee, Lessee certifies that the following are true and correct in all respects.
1.      Description of Nuclear Fuel State:
2.      Physical Location of Nuclear Fuel:
3.      Person in Possession:
4.      Contract for Possession:
5.      SLV at End of Basic Rent Period:
Total SLV for Nuclear Fuel not in Heat Production
GULF STATES UTILITIES COMPANY

By: ______________________________
Its:   ______________________________

Date: ______________________________

______________
* To be prepared only if the Basic Rent Period includes December 31 of any year.






SCHEDULE C
TO
FUEL LEASE
VENDOR’S BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, ________________, a ____________________ corporation (the “Vendor”), whose post office address is _________, for and in consideration of the sum of $1.00 paid to the Vendor by RIVER BEND FUEL SERVICES, INC., a Delaware corporation (the “Purchaser”), whose post office address is 450 West 33rd Street, New York, NY 10001, hereby conveys, transfers, sells and sets over to the Purchaser, its successors and assigns, all right, title, interest and claim of the Vendor in and to the personal property consisting of the assemblies of nuclear fuel or components thereof or other nuclear material described in Annex II to Fuel Schedule No. _______, a copy of which is attached hereto and made a part hereof (the “Nuclear Fuel”), and by this Bill of Sale does hereby grant, bargain, sell, transfer and deliver the Nuclear Fuel unto the Purchaser, to have and to hold the Nuclear Fuel, for itself and its successors and assigns, forever. The Nuclear Feel shall be delivered to the Purchaser, as a necessary incident of this Bill of Sale, at any of the Generating Facilities in which GULF STATES UTILITIES COMPANY, a Texas corporation (the “Utility”), has an interest, or at the facilities of a Manufacturer performing services on the Nuclear Fuel (designated by the Utility), in either case by the Vendor, its agents or a common carrier consigned to the Purchaser.
The Vendor hereby warrants itself to be the true and lawful owner of the Nuclear Fuel, free and clear of liens and encumbrances, and to have full power, good right and lawful authority to dispose of the same in the aforesaid manner; and the Vendor, for itself, its successors and assigns, does hereby covenant and agree with the Purchaser, its successors and assigns, to warrant and defend the true ownership of the Nuclear Fuel by the Purchaser against the claims and demands of all and every person or persons.
The Vendor and the Purchaser hereby acknowledge that, notwithstanding the sale of the Nuclear Fuel by the Vendor to the Purchaser hereunder, the Nuclear Fuel will be in the possession of the Utility, or in the possession of a Manufacturer performing services (including, without limitation, storage and processing) on the Nuclear Fuel for the account of the Utility, pursuant to a Fuel Lease dated as of February 7, 1989, including all amendments or supplements thereto, between the Purchaser, as lessor, and the Utility, as lessee. On the date hereof, the Purchaser is authorized by a general license to receive title to and own, but not to possess, the Nuclear Fuel, and under no circumstances shall a transfer of possession of the Nuclear Fuel to the Purchaser be necessary for the transfer of ownership effected and intended to be effected by this Bill of Sale.





IN WITNESS WHEREOF, the Vendor has caused this Bill of Sale to be executed in its corporate name, by one of its duly authorized Vice Presidents, and its corporate seal to be hereto affixed and attested by its Secretary or Assistant Secretary, and to be dated as of ________, 19__.
(CORPORATE SEAL)

ATTEST:
(Name of Vendor)
By:__________________________
Vice President

__________________________
Secretary/Assistant Secretary





ACCEPTANCE
THIS BILL OF SALE is accepted by the undersigned as of the date last above written.
RIVER BEND FUEL SERVICES, INC.

By:  _______________________________
Its:  ________________________________
ATTEST:

_________________________
Assistant Secretary






SCHEDULE D
TO
FUEL LEASE
FUEL SCHEDULE NO. _______
FUEL SCHEDULE NO. _________, dated as of _____________, 19___, between RIVER BEND FUEL SERVICES, INC., a Delaware corporation (“Lessor”), whose post office address is 450 West 33rd Street, New York, NY 10001, and GULF STATES UTILITIES COMPANY, a Texas corporation (“Lessee”), whose post office address is 350 Pine Street, Beaumont, Texas 77701.
W I T N E S S E T H:
WHEREAS, Lessor and Lessee have heretofore entered into a Fuel Lease, dated as of February 7, 1989 (the “Fuel Lease”), the defined terms therein being used herein with the same meanings as provided in the Fuel Lease; and
WHEREAS, the Fuel Lease provides for Fuel Schedules to be executed and delivered from time to time.
NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration and in compliance with the requirements of the Fuel Lease, Lessor and Lessee agree as follows:
1.      (a) Lessee certifies that Annex II hereto is true and correct in all respects and that the amounts set forth therein have been computed in accordance with the provisions of the Fuel Lease. [Except with respect to the filing of one or more financing statements in the State of Tennessee, all] [All] necessary or advisable recordings, filings and registrations have been duly made in order to protect the validity and effectiveness of the Fuel Lease and the security interest created by the Indenture and the Collateral Agreements with respect to the Nuclear Fuel (except as permitted by subsection 7(e) of the Fuel Lease), with respect to the Fuel Lease and payments thereunder and with respect to any Nuclear Fuel Contract, and all fees, taxes and charges payable in connection with such recordings, filings and registrations have been paid in full by Lessee.
(b) Lessee hereby represents and warrants that (i) no Terminating Event or Lease Event of Default or event which with the giving of notice or the lapse of time or both would constitute a Terminating Event or a Lease Event of Default has occurred and is continuing and (ii) the matters set forth in the form of Exhibit D to the Note Agreement are true and correct on the date hereof except for those matters which expressly relate to an earlier date.
*2.      Lessee requests Lessor to make direct payment to the Manufacturers or other persons named in Annex I hereto of the amounts specified in Annex I and/or to reimburse Lessee in an amount equal to _______________ Dollars ($_________) for Fuel Costs previously incurred by Lessee or paid by Lessee directly to one or more Manufacturers. All of the amounts for which payment or reimbursement is hereby requested are properly included in Fuel Cost as defined in the Fuel Lease and none of said amounts has been previously paid or reimbursed by Lessor.
*3.      (a) There are hereby added to the Fuel Lease those batches or assemblies of Nuclear Fuel or the component parts thereof or the rights thereto described in Annex II hereto or Exhibits thereto as being added to the Fuel Lease (the “Additional Nuclear Fuel”). The Additional Nuclear Fuel complies with all requirements of the Fuel Lease and of law including, without limitation, all Insurance Requirements and all Legal Requirements, and [except with respect to the filing of one or more financing




statements in the State of Tennessee,] all necessary or advisable recordings and filings (including financing statements and continuation statements under any applicable Uniform Commercial Code) have been duly made in the public offices in which such recordings and filings must be made in order to subject, and publish notice of the subjection of, such Additional Nuclear Fuel to the Fuel Lease and to protect the validity and effectiveness of the security interest created by the Indenture and the Collateral Agreements with respect to such Additional Nuclear Fuel, and all fees, taxes and charges payable in connection with such recordings and filings have been paid in full by Lessee. Attached hereto as an exhibit is evidence of compliance with the provisions of Section 14 of the Fuel Lease with respect to such Additional Nuclear Fuel.
(b) Lessee hereby covenants and agrees with Lessor to warrant and defend the true ownership by Lessor of the Additional Nuclear Fuel against the claims and demands of every person. Lessee further warrants that such property is, and is intended to be and remain, personal property and is free and clear of all Liens, except Permitted Liens. Lessee further acknowledges that it has investigated the state of title to and rights of ownership in and possession of the Additional Nuclear Fuel and has made or caused to be made any physical inspection of the Additional Nuclear Fuel that Lessee deems necessary and that it is satisfied with and has approved the same for all purposes of the Fuel Lease.
*4.      Pursuant to subsection 5(a) of the Fuel Lease, the SLV of the items of Nuclear Fuel previously described in Fuel Schedule No. ____, a copy of which is attached hereto, is charged to the amounts set forth in Annex II attached hereto.
*5.      Pursuant to subsection 7(c) of the Fuel Lease, there are hereby removed from the Fuel Lease those items of Nuclear Fuel described in Annex II hereto as being removed from the Fuel Lease.
*6.      Pursuant to [subsection 7(d)] [subsection 7(e)] of the Fuel Lease, the items of Nuclear Fuel previously described in Fuel Schedule No. ____, a copy of which is attached hereto, are to be described as set forth in Annex II hereto. Attached hereto as an exhibit is evidence of compliance with the provisions of Section 14 of the Fuel Lease with respect to such Nuclear Fuel.
*7.      Pursuant to subsection 3(b) of the Fuel Lease, the SLV of the items of Nuclear Fuel previously described in Fuel Schedule No. ___, a copy of which is attached hereto, is reduced to the amounts set forth in Annex II hereto.
8.      Except as hereinbefore expressly modified and amended, the Fuel Lease is ratified and confirmed in all respects, including, without limitation, the obligations of Lessee to pay all Basic Rent, Special Payments and other amounts to be paid by Lessee under the Fuel Lease.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Fuel Schedule to be duly executed as of the date first above written.
RIVER BEND FUEL SERVICES, INC.

By:  ______________________________
Its:  _______________________________

GULF STATES UTILITIES COMPANY

By:  ______________________________
Its:  _______________________________





ANNEX I
TO
SCHEDULE D
FUEL SCHEDULE NO. _____
FUEL COSTS PAYABLE
Date: _________
Material or
Service Supplied
Manufacturer
Allocated
Fuel Cost
Payable
U 3 O 8  Supply
 
 
Conversion
 
 
Enrichment
 
 
Fabrication
 
 
Other (Identify)
 
 
Total
 
$___________

GULF STATES UTILITIES COMPANY

By:  ______________________________
Its:  _______________________________





PART I
TO ANNEX II
TO SCHEDULE D

FUEL SCHEDULE NO.
CONTRACT RIGHTS OF LESSEE TO NUCLEAR FUEL
Date: _______
[The following are hereby [added to] [removed from] the Fuel Lease in accordance with the provisions thereof.] [The following changes in SLV are made pursuant to and in accordance with the Fuel Lease.]
1.      Date of Nuclear Fuel Contract:
2.      Nuclear Fuel Contract Obligor(s):
3.      Nature of Nuclear Fuel Contract:
4.      Description of Nuclear Fuel State:
5.      Physical Location of Nuclear Fuel:
6.      Existing SLV:
7.      Changes in SLV:
8.      Adjusted SLV:
[A true and complete copy of the above referenced Nuclear Fuel Contract, together with the original Assignment Agreement relating thereto, is attached hereto.] [A true and complete copy of the above referenced Nuclear Fuel Contract as previously been provided as part of Fuel Schedule No. ____ and the Utility hereby represents and warrants that the previously provided Nuclear Fuel Contract remains true and complete and has not been modified or amended in any way.]
GULF STATES UTILITIES COMPANY

By:  ______________________________
Its:  _______________________________





PART II
TO ANNEX II
TO SCHEDULE D
FUEL SCHEDULE NO. ______
DESCRIPTION OF NUCLEAR FUEL
Date: __________
[The following are hereby [added to] [removed from] the Fuel Lease in accordance with the provisions thereof.] [The following changes in SLV are made pursuant to and in accordance with the Fuel Lease.]
1.      Most Recent Batch and/or Assembly No.:
2.      Description of Nuclear Fuel State*:
3.      Physical Location of Nuclear Fuel:
4.      Weight or Volume:
5.      Person in Possession:
6.      Contract for Possession:
7.      Existing SLV:
8.      Changes in SLV:
9.      Adjusted SLV:
10.      Ownership Percentage in Nuclear Fuel
GULF STATES UTILITIES COMPANY

By:  ______________________________
Its:  _______________________________




____________________
* Including whether Nuclear Fuel is in Heat Production.






SCHEDULE E
TO
FUEL LEASE
LESSOR’S BILL OF SALE*
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, RIVER BEND FUEL SERVICES, INC., a Delaware corporation (the “Fuel Company”), whose post office address is 450 West 33rd Street, New York, NY 10001, and for and in consideration of the sum of $1.00 paid to the Fuel Trust upon or before the execution and delivery of this Bill of Sale by GULF STATES UTILITIES COMPANY, a Texas corporation (the “Utility”), whose post office address is 350 Pine Street, Beaumont, Texas 77701, hereby conveys, transfers, sells and sets over to the Utility, its successors and assigns, all right, title, interest and claim of the Fuel Company in and to the personal property consisting of the assemblies of nuclear fuel or components thereof or other nuclear material described in Annex II to Fuel Schedule No. ___, a copy of which is attached hereto and made a part hereof (the “Nuclear Fuel”), and by this Bill of Sale does hereby grant, bargain, sell, transfer and deliver the Nuclear Fuel unto the Utility, to have and to hold the Nuclear Fuel unto the Utility, and its successors and assigns, forever. The Nuclear Fuel shall be delivered to the Utility, as a necessary incident of this Bill of Sale, at any of the Generating Facilities of the Utility in the State of Louisiana, or at the facilities of a Manufacturer (designated by the Utility), in either case by the Fuel Company, its agents or a common carrier consigned to the Utility. The Fuel Company hereby represents and warrants that it has not permitted any lien, exception or restriction to attach to the Nuclear Fuel except as follows:
[Insert any liens, exceptions or restrictions permitted by Section 18(a) of the Fuel Lease at time of transfer]



___________________
*This document may be appropriately modified to include all assignees having a security interest in the relevant Nuclear Fuel and/or to substitute another Person for Utility, if Utility has designated such other Person in accordance with the Fuel Lease.





IN WITNESS WHEREOF, the Fuel Company has caused this Bill of Sale to be executed, and to be dated as of _________, 19 ___.
RIVER BEND FUEL SERVICES, INC.

By:  ______________________________
Its:  _______________________________




United States Trust Company of New York, as indenture trustee under the Indenture of Trust, dated as of February 7, 1989, and executed by the Fuel Company in favor of United States Trust Company of New York as indenture trustee, and as Pledgee under that certain Collateral Chattel Mortgage, Collateral Chattel Mortgage Note, and Pledge and Pawn of Collateral Chattel Mortgage Note, dated as of February 7, 1989, and delivered by the Fuel Company and the Utility (the “Louisiana Collateral Documents”), does hereby release the property described in Annex II to Fuel Schedule No. ___ from the lien, pledge and security interest of said Indenture and Louisiana Collateral Documents described above. No warranty, either express or implied, as to title, merchantability, fitness, safety or any other matter whatsoever, is made by, or shall be deemed to be made by, and no recourse may be had for any reason against, the undersigned or any of such secured parties.
UNITED STATES TRUST COMPANY OF
NEW YORK, as Indenture Trustee

By:  ______________________________
Its:  _______________________________








SCHEDULE F-1
TO
FUEL LEASE
ASSIGNMENT AGREEMENT
[DESCRIPTION OF NUCLEAR FUEL CONTRACT]
ASSIGNMENT AGREEMENT dated as of _____________, 19__, between RIVER BEND FUEL SERVICES, INC., a Delaware corporation (the “Fuel Company”), and GULF STATES UTILITIES COMPANY, a Texas corporation (the “Utility”).
WHEREAS, the Utility and [name of Manufacturer], a corporation (the “Manufacturer”), are parties to the following described contract (hereinafter, together with all amendments and supplements thereto prior to or after the date hereof, referred to as the “Nuclear Fuel Contract”) which provides for _________ services to be provided thereunder:
That certain ______________________________ contract dated as of ______________, 19__, between Gulf States Utilities Company and ____________________;
WHEREAS, the Fuel Company and the Utility have entered into a Fuel Lease, dated as of February 7, 1989 (hereinafter, together with all amendments and supplements thereto prior to or after the date hereof, referred to as the “Fuel Lease”);
NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the Fuel Company and the Utility agree as follows:
1. The Utility hereby assigns, transfers and sets over to the Fuel Company (a) all rights of the Utility under the Nuclear Fuel Contract to receive [legal title to product and/or services to be provided under or in connection with the Nuclear Fuel Contract and, in the case of services, (b) all products received or receivable by the Utility under the Nuclear Fuel Contract and (c)] (and (b)] all products and proceeds of any or all of the foregoing. ** To be used if Assignment Agreement relates to a Partially Assigned Agreement. The Utility hereby assigns, transfers and sets over to the Fuel Company (a) the following rights of the Utility under the Nuclear Fuel Contract to receive (legal title to product and/or services to be provided under or in connection with the Nuclear Fuel Contract and, in the case of services, (b) the product received or receivable by the Utility under the Nuclear Fuel Contract and (c)] [and (b)] the products and proceeds of any or all of the foregoing, but only to the extent described below:
(Identification of that portion of Fuel
Nuclear Contract being assigned)
2.      Neither this Assignment Agreement nor any action or inaction hereunder shall (a) release the Utility from any of its obligations and agreements under the Nuclear Fuel Contract, (b) constitute an assumption of any such obligations or agreements on the part of the Fuel Company or (c) impose any obligation or liability whatsoever on the Fuel Company. [The Utility shall retain control of all aspects of the administration of the Nuclear Fuel Contract]. By execution hereof the Fuel Company agrees that it shall not disclose to any person or entity any confidential or proprietary commercial or design information under or in connection with the Nuclear Fuel Contract unless required to do so by court order or applicable law.




3.      No delay or failure by the Fuel Company in the exercise of any right or remedy shall constitute a waiver thereof, and no single or partial exercise by the Fuel Company of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. This Assignment Agreement may not be changed, modified or discharged in whole or in part and no right or remedy of the Fuel Company hereunder may be waived orally, but only by a written agreement signed by the Fuel Company, and no course of dealing between the Utility and the Fuel Company shall be effective to change or modify or to discharge in whole or in part this Assignment Agreement or the interest granted hereby. All remedies hereunder are cumulative and are not exclusive of any other remedies that may be available to the Fuel Company, whether at law, in equity or otherwise.
4.      Notices hereunder shall be governed by Section 28 of the Fuel Lease.
5.      Any provision of this Assignment Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
6.      At the request of the Utility and in order to obtain financing, the Fuel Company may grant a security interest in its rights under this Assignment Agreement to one or more institutions. Each such institution, together with any other person or entity acquiring an interest in the Fuel Company’s rights under this Assignment Agreement through any such institution, is herein called a “Transferee.” Neither the grant of any such security interest by the Fuel Company, nor any other action or inaction on the part of any Transferee shall (a) release the Fuel Company from its obligations and agreements, if any, under this Assignment Agreement, (b) constitute an assumption of any such obligations or agreements on the part of any such Transferee or (c) impose any obligation or liability whatsoever on such Transferee.
7.      The Fuel Company shall have no greater rights against the Manufacturer by virtue of this Assignment Agreement than the Utility would have had if this Assignment Agreement had not been made.
8.      This Assignment Agreement shall be binding upon the Utility, its successors and assigns, and shall inure to the benefit of the Fuel Company, its successors and assigns and any Transferee.
9.      This Assignment Agreement may be executed in two or more counterparts, each of which shall constitute but one instrument. This Assignment Agreement shall be effective when a fully executed counterpart hereof, together with a fully executed Consent hereto, is delivered to the Fuel Company at its address provided for in Section 4 hereof accompanied (unless this Assignment Agreement is accompanied by a Vendor’s Bill of Sale to all of the product to be provided under the Nuclear Fuel Contract assigned hereby, or, if a service is to be provided under such Nuclear Fuel Contract, the service has been performed prior to the date hereof and all product to be received thereunder has been received prior to the date hereof) by an opinion of counsel to the Utility relating to the perfection and priority of the security interest granted by the Fuel Company in its rights under the Nuclear Fuel Contract assigned hereby and this Assignment Agreement, such opinion to contain such assumptions, qualifications and exceptions and to otherwise be in form and substance satisfactory to counsel for the Fuel Company.




10.      This Assignment Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York applicable to contracts made and performed in the State of New York.
RIVER BEND FUEL SERVICES, INC.

By:  ______________________________
Its:  _______________________________

GULF STATES UTILITIES COMPANY

By:  ______________________________
Its:  _______________________________





CONSENT
The undersigned Manufacturer hereby consents to the above ASSIGNMENT AGREEMENT and has caused this CONSENT to be executed and delivered by a duly authorized officer. ** *To be used if Assignment Agreement relates to a Partially Assigned Agreement. [The Manufacturer acknowledges that the above-referred to Nuclear Fuel Contract is not assigned in whole to the Fuel Company and agrees that neither the Fuel Company, its successor or assigns, nor any Transferee shall be subject to any defense related to the fact that the assignment to the Fuel Company was a partial assignment.]
EXECUTED and CONSENTED to this _______ day of __________, 19 ___.
[NAME OF MANUFACTURER]

By:  ______________________________
Its:  _______________________________






SCHEDULE F-2
TO
FUEL LEASE
ASSIGNMENT AGREEMENT
(DESCRIPTION OF NUCLEAR FUEL CONTRACT)
ASSIGNMENT AGREEMENT dated as of ____________________ 19 ___, between RIVER BEND FUEL SERVICES, INC, a Delaware corporation (the “Fuel Company”), and GULF STATES UTILITIES COMPANY, a Texas corporation (the “Utility”).
WHEREAS, the Utility and the United States of America (the “Manufacturer”), are parties to the following described contract (hereinafter, together with all amendments and supplements thereto prior to or after the date hereof, referred to as the “Nuclear Fuel Contract”) which provides for _____________ services to be provided thereunder:
That certain ____________ contract dated as of ___________________, 19 ___ between Gulf States Utilities Company and _________________________;
WHEREAS, the Fuel Company and the Utility have entered into a Fuel Lease, dated as of February 7, 1989 (hereinafter, together with all amendments and supplements thereto prior to or after the date hereof, referred to as the “Fuel Lease”);
NOW, THEREFORE, in consideration of the foregoing, and other good and valuable consideration, the Fuel Company and the Utility agree as follows:
1.      The Utility hereby assigns, transfers and sets over to the Fuel Company (a) the following rights of the Utility under the Nuclear Fuel Contract to receive legal title to product and/or services to be provided under or in connection with the Nuclear Fuel Contract and, in the case of services, (b) the product received or receivable by the Utility under the Nuclear Fuel Contract and (c) the products and proceeds of any or all of the foregoing, but only to the extent described below:
The right to receive those services pursuant to the Nuclear Fuel Contract as may be dedicated to River Bend Unit 1 under and in accordance with the Joint Ownership Participation and Operation Agreement--River Bend Unit 1 Nuclear Plant dated as of July 18, 1979, as amended.
2.      The utility shall retain control of all aspects of the administration of the Nuclear Fuel Contract. By execution hereof, the Fuel Company agrees that it shall not disclose to any person or entity any confidential or proprietary commercial or design information under or in connection with the Nuclear Fuel Contract unless required to do so by court order or applicable law.
3.      In consideration of the Manufacturer’s consent to this Agreement of Partial Assignment, the Utility agrees to indemnify and hold the Manufacturer and persons acting on behalf of the Manufacturer harmless against any and all claims, demands and liabilities of whatsoever nature arising out of this Agreement of Partial Assignment and Consent or arising out of any security interest in the Nuclear Fuel Contract or the Nuclear Fuel. In further consideration of said consent, the Fuel Company agrees with respect to the Manufacturer and persons acting on behalf of the Manufacturer to be bound by all actions taken by the Utility with respect to the Utility’s performance of all terms, conditions and obligations under the Nuclear Fuel Contract including, but not limited to, all actions taken by the Utility with respect to feed materials to be delivered to the Manufacturer in accordance with the provisions of




said Nuclear Fuel Contract; provided, however, that nothing in this Section 3 shall be deemed to modify the respective rights and obligations of the Utility and the Fuel Company under the Fuel Lease.
4.      It is expressly agreed that, anything contained herein to the contrary notwithstanding, (a) the Utility shall at all times remain liable to the Manufacturer to observe and perform all of its duties and obligations under the Nuclear Fuel Contract to the same extent as if this Agreement of Partial Assignment and Consent and the Fuel Lease had not been executed, including without limitation the obligation to make payments under the Nuclear Fuel Contract to the extent not made by the Fuel Company under the Fuel Lease, (b) the exercise by the Fuel Company of any of the rights assigned hereunder or under the Fuel Lease, as the case may be, shall not release the Utility from any of its duties or obligations to the Manufacturer under the Nuclear Fuel Contract and (c) the Fuel Company shall not have any obligation or liability under the Nuclear Fuel Contract by reason of or arising out of this Agreement of Partial Assignment and Consent, or be obligated to perform or fulfill any of the duties or obligations of the Utility under the Nuclear Fuel Contract, or to make any payment thereunder, or to make any inquiry as to the nature or sufficiency of any Nuclear Fuel received by it thereunder, or to present or file any claim, or to take any action to collect or enforce the payment of any amounts or the delivery of any Nuclear Fuel which may have been assigned to it or to which it may be entitled to at any time or times; provided, however, that the Fuel Company agrees, solely for the benefit of the Utility, and subject to the terms and conditions of the Fuel Lease, (i) to purchase the Nuclear Fuel from the Utility or Manufacturer pursuant to the Nuclear Fuel Contract and (ii) to pay to the Manufacturer and/or to the Utility or their order the respective amounts specified in the Fuel Lease with respect to such Nuclear Fuel.
5.      The Utility hereby warrants that the Nuclear Fuel Contract is in full force and effect, and it had all right, title and interest in and to the Nuclear Fuel Contract immediately prior to the assignment thereof as specified under the Joint Ownership Participation and Operation Agreement--River Bend Unit 1 Nuclear Plant, as amended, that it is duly authorized to assign the same, and that no other person has any pending or impending claim, liens, or encumbrances of any kind whatsoever against the Utility with respect to the Nuclear Fuel Contract to the extent that it relates to the Nuclear Fuel (other than the amounts, if any, owing under the Nuclear Fuel Contract and other claims, if any, of the Utility and the Manufacturer which may exist as between themselves), and the Utility further warrants that the Nuclear Fuel Contract, to the extent that it relates to the Nuclear Fuel, is not subject to, and is free from, any security interest or other lien or encumbrance except as above specified, and that the Utility will warrant and defend such title forever against all claims and demands whatsoever. For breach of this warranty the Utility hereby agrees to indemnify and hold the Manufacturer and persons acting on behalf of the Manufacturer, harmless against any and all claims, demands and liabilities of whatever nature against them arising from such breach.
6.      The Utility hereby represents and warrants that, except as set forth herein, it has not entered into or consented to or permitted any cancellation, termination, amendment, supplement or modification or of waiver with respect to the Nuclear Fuel Contract.
7.      The Utility hereby agrees that, except as permitted by Section 32(c) of the Fuel Lease, it will not enter into or consent to or permit any cancellation, termination, amendment, supplement or modification of or waiver with respect to the Nuclear Fuel Contract, nor will the Utility sell, assign, grant any security interest in or otherwise transfer its rights or other interest in the Nuclear Fuel or the Nuclear Fuel Contract or any part of any thereof. It is understood that the Manufacturer shall have no obligation to ascertain whether any modification of the Nuclear Fuel Contract complies with the Fuel Lease.




8.      Any such modification shall be binding between the Utility and the Fuel Company and the Manufacturer, provided that the Fuel Company shall retain its rights against the Utility as provided in the Fuel Lease if such modification does not comply with said Lease.
9.      No delay or failure by the Fuel Company in the exercise of any right or remedy shall constitute a waiver thereof, and no single or partial exercise by the Fuel Company of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. This Assignment Agreement may not be changed, modified or discharged in whole or in part and no right or remedy of the Fuel Company hereunder may be waived orally, but only by a written agreement signed by the Fuel Company, and no course of dealing between the Utility and the Fuel Company shall be effective to change or modify or to discharge in whole or in part this Assignment Agreement or the interest granted hereby. All remedies hereunder are cumulative and are not exclusive of any other remedies that may be available to the Fuel Company, whether at law, in equity or otherwise.
10.      Notices hereunder shall be governed by Section 28 of the Fuel Lease.
11.      Any provision of this Assignment Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
12.      At the request of the Utility and in order to obtain financing, the Fuel Company may grant a security interest in its rights under this Assignment Agreement to one or more institutions. Each such institution acquiring an interest in the Fuel Company’s rights under this Assignment Agreement, together with any other institution acquiring an interest in the Fuel Company’s rights under this Assignment Agreement, is herein called a “Transferee”. Neither the grant of any such security interest by the Fuel Company, nor any other action or inaction on the part of any Transferee shall (a) release the Fuel Company from its obligations or agreements, (b) constitute an assumption of any such obligations or agreements on the part of any such Transferee or (c) impose any obligation or liability whatsoever on such Transferee.
13.      The Fuel Company shall have no greater rights against the Manufacturer by virtue of this Assignment Agreement than the Utility would have had if this Assignment Agreement had not been made; and neither this Assignment nor the Manufacturer’s Consent hereto will in any way add to the obligations of the Manufacturer under the Nuclear Fuel Contract.
14.      This Assignment Agreement shall be binding upon the Utility, its successors and assigns, and shall inure to the benefit of the Fuel Company, its successors and assigns and any Transferee.
15.      This Assignment Agreement may be executed in two or more counterparts, each of which shall constitute but one instrument. This Assignment Agreement shall be effective when a fully executed counterpart hereof, together with a fully executed Consent hereto, is delivered to the Fuel Company at its address provided for in Section 10 hereof accompanied (unless this Assignment Agreement is accompanied by a Vendor’s Bill of Sale to all of the product to be provided under the Nuclear Fuel Contract assigned hereby, or, if a service is to be provided under such Nuclear Fuel Contract, the service has been performed prior to the date hereof and all product to be received thereunder has been received prior to the date hereof) by an opinion of counsel to the Utility relating to the perfection and priority of the security interest granted by the Fuel Company in its rights under the Nuclear Fuel Contract assigned




hereby and this Assignment Agreement, such opinion to contain such assumptions, qualifications and exceptions and to otherwise be in form and substance satisfactory to counsel for the Fuel Company.
RIVER BEND FUEL SERVICES, INC.

By:  ______________________________
Its:  _______________________________


GULF STATES UTILITIES COMPANY

By:  ______________________________
Its:  _______________________________




CONSENT
The undersigned Manufacturer hereby consents to the above ASSIGNMENT AGREEMENT and has caused this CONSENT to be executed and delivered by a duly authorized officer. The Manufacturer acknowledges that the Utility has agreed with the Fuel Company that neither the Fuel Company, its successors or assigns, nor any Transferee shall be subject to any defense related to the fact that the assignment to the Fuel Company was a partial assignment.
EXECUTED and CONSENTED to this _________ day of _______, 19____.
UNITED STATES OF AMERICA

By:  ______________________________
Its:  _______________________________





SCHEDULE G
TO
FUEL LEASE
CERTIFICATE
Gulf States Utilities Company
350 Pine Street
Beaumont, TX 77701

Dear Sirs:

Reference is made to the Fuel Lease, dated as of February 7, 1989, between River Bend Fuel Services, Inc., as Lessor and Gulf States Utilities Company as Lessee (the “Fuel Lease”). The terms defined in the Fuel Lease which are not defined in this certificate shall, when used in this certificate, have the respective meanings defined in the Fuel Lease.
1.      The Fuel Company [is] [will be] obligated to pay at least the amount of $______, which amount is [overdue] [due on [date.]]
2.      You are hereby requested to pay the amount of $__________, [immediately, which amount is overdue and] [on the due date thereof which date is [date] and] for which demand is hereby made.
3.      This certificate is being delivered pursuant to Section 3(b) of the Fuel Lease. To the best knowledge of the undersigned, the Fuel Company will have Available funds in the amount of $ _____________ on the date referred to in paragraph 2 hereof, which funds are insufficient to pay the amount referred to in paragraph 1 hereof because ___________________________________________________________________.]
Dated: _________________
(Certifying Party)

By:  ______________________________
Its:  _______________________________







Exhibit 4(d)12
EXHIBIT A
TO
TRUST INDENTURE
DEFINITIONS
As used in the Basic Documents (as defined below), the following terms shall have the following meanings (such definitions to be applicable to both singular and plural forms of the terms defined):
“Additional Notes” means the Notes issued from time to time under Section 12.2, and as provided in Section 2, of the Trust Indenture.
“Affiliate” of any Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such Person. For purposes of this definition, the term “control”, as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
“Assigned Agreement” means a Nuclear Fuel Contract which has been assigned to Lessor in the manner specified in Section 4 of the Fuel Lease pursuant to a duly executed and delivered Assignment Agreement. The term “Assigned Agreement” shall include a Partially Assigned Agreement.
“Assignee” means each Person to which any part of Lessor’s rights or interest under the Fuel Lease shall at the time be assigned, conditionally or otherwise, by Lessor, as contemplated by Section 26 thereof (including, without limitation, the Indenture Trustee).
“Assignment Agreement” means an assignment agreement substantially in the form of Schedule F-1 or F-2 to the Fuel Lease.
“Atomic Energy Act” means the Atomic Energy Act of 1954, as from time to time amended.
“Available” means at any time collected funds in a bank account which are not provisional or subject in any manner to charge-back and which are not subject to any writ, judgment, warrant of attachment, execution or similar process.
“Bankruptcy Law” means Title 11 of the United States Code or any similar Federal or state law for the relief of debtors.
“Basic Documents” includes the Fuel Lease, the Note Purchase Agreements, Trust Indenture, Series A Notes, the Louisiana Collateral Documents, the Assigned Agreements, the Assignment Agreements, the Trust Agreement, each Bill of Sale, and other agreements related or incidental thereto identified therein as one of the “Basic Documents” and approved by Lessee and Note Purchasers. The Basic Documents shall also include all Additional Notes, if any, issued under and in accordance with the Trust Indenture and Note Purchase Agreements or revolving or other credit agreements relating to the issuance and purchase of Additional Notes.




“Basic Rent” means, for any Basic Rent Period, the sum of (a) that portion of the Quarterly Financing Charge not allocated to Fuel Costs pursuant to the Fuel Lease plus (b) the Burn-Up Charge as shown on the Basic Rent Schedule for such Basic Rent Period.
“Basic Rent Payment Date” means, for any Basic Rent Period, the last Business Day of the calendar month following such Basic Rent Period, except that, if such Basic Rent Period terminates on a Settlement Date, the Basic Rent Payment Date for such Basic Rent Period shall be such Settlement Date.
“Basic Rent Period” means each of the periods (a) commencing on, in the case of the first such period, the Effective Date and, in the case of each succeeding period, the first day following the immediately preceding Basic Rent Period and (b) ending on the earliest of (i) the last day of any Calendar Quarter or (ii) the Settlement Date.
“Basic Rent Schedule” means an instrument substantially in the form of Annex I to Schedule B to the Fuel Lease, which is to be used by Lessee to calculate Basic Rent for each Basic Rent Period.
“Bill of Sale” means a bill of sale substantially in the form of either Schedule C or E to the Fuel Lease, pursuant to which title to all or any portion of the Nuclear Fuel is transferred to Lessor or to Lessee.
“Burn-Up Charge” means, with respect to any Nuclear Fuel, the Fuel Cost of that portion of such Nuclear Fuel consumed during the relevant period, shown as Burn-Up Charge in Item 7 on the Basic Rent Schedule.
“Business Day means any day other than (i) a Saturday or Sunday or (ii) a day on which banking institutions in New York City are authorized by law to close.
“Calendar Quarter” means a three month period ending on the last day of any March, June, September or December.
“Called Principal” means the principal amount of any Note or portion thereof called for redemption pursuant to exercise of an optional right of redemption, if any, provided for in such Note.
“Capitalized Lease” means any and all lease obligations which are or should be capitalized on the balance sheet of the Person in question in accordance with generally accepted accounting principles and Statement No. 13 of the Financial Accounting Standards Board or any successor to such pronouncement regarding lease accounting without regard for the accounting treatment permitted or required under any applicable state or federal public utility regulatory accounting system unless such treatment controls the determination of the generally accepted accounting principles applicable to such Person.
“Charter” means the Restated Articles of Incorporation of Lessee, as amended and as the same may from time to time be amended, modified or supplemented.
“Code” means the Internal Revenue Code of 1986, as from time to time amended.
“Collateral” has the meaning set forth in the granting clauses of the Trust Indenture and includes all property of the Company described in any Collateral Agreement as comprising a part of the Collateral.
“Collateral Account” has the meaning set forth in Section 4.1 of the Trust Indenture.




“Collateral Agreements” means, collectively, the Trust Indenture, all Assignment Agreements, the Louisiana Collateral Documents and any other assignment, security agreement or instrument executed and delivered to the Indenture Trustee hereafter relating to property of the Company which is security for the Secured Obligations.
“Company” means River Bend Fuel Services, Inc., a Delaware corporation.
“Company Expense Schedule” means an instrument substantially in the form of Schedule A to the Fuel Lease, which is used by Lessor to inform Lessee of the Daily Financing Charges for each Basic Rent Period.
“Company Representative” means the persons at the time designated to act on behalf of the Company by written certificate furnished to Lessee and the Indenture Trustee containing the specimen signature of such person and signed on behalf of the Company by the President, or any Vice President, of the Company. Such certificate may designate an alternate or alternates. The Company Representative may be an employee of the Owner Trustee.
“Credit Party” means (a) each Noteholder and Debentureholder, (b) the Indenture Trustee under the Louisiana Collateral Documents and (c) the Indenture Trustee.
“Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.
“Daily Financing Charge” means, for any calendar day (whether or not a Business Day), the sum of:
(a) an accrual for such day of (i) all interest expense with respect to all outstanding Notes and all outstanding indebtedness or liability incurred or owed by Lessor pursuant to the Basic Documents and (ii) all commitment, standby, letter of credit and facility fees (whether or not paid), if any, incurred or owed by Lessor pursuant to the Basic Documents, and

(b) the amounts paid or due and payable by Lessor with respect to the transactions contemplated by the Basic Documents on such day for the following other fees, costs, charges and expenses incurred or owed by Lessor under or in connection with the Fuel Lease or the other Basic Documents: (i) fees and expenses of any Placement Agent for the Notes, (ii) legal, printing, reproduction and closing fees and expenses, (iii) auditors’, accountants’ and attorneys’ fees and expenses, (iv) rating agencies’ fees, (v) franchise taxes and income taxes, and (vi) any other fees and expenses incurred by Lessor under or in respect of the Basic Documents.

Any figure used in the computation of any component of the Daily Financing Charge shall be stated to ten decimal places.
“Debentures” means those debentures designated as 7 1/4% Convertible Debentures due September 1, 1992, which were issued by Lessee pursuant to the Debenture Indenture which are outstanding (as defined in such Debenture Indenture) at the time in question.
“Debenture Indenture” means the indenture between Lessee and Chemical Bank, as Trustee, dated September 1, 1977, pursuant to which the Debentures were issued, as in effect from time to time.




“Debenture Indenture Default” means any of the events specified in Section 8.1 of the Debenture Indenture, whether or not any requirements for notice or lapse of time or other condition has been satisfied.
“Debenture Indenture Obligations” means the principal of, premium, if any, and interest on the Debentures and all other costs, fees and expenses and amounts required to be paid by Lessee on or with respect to the Debentures or under the Debenture Indenture.
“Debenture Trustee” means the person then acting as trustee under the Debenture Indenture, and its permitted successors.
“Debentureholders” means the holders of the then outstanding Debentures.
“Default” means any of the events specified in Section 9.1 of the Trust Indenture, whether or not any requirement for notice or lapse of time or other condition has been satisfied.
“Disclosure Documents” means the following documents, each in the form distributed to the Note Purchasers:
a. The Private Placement Memorandum of Merrill Lynch Capital Markets dated November 1988 (the “Private Placement Memorandum”), including therein the following documents:
(i) the 1987 Annual Report to Shareholders of Lessee and its annual report on Form 10-K for the fiscal year ended 1987;

(ii) Lessee’s quarterly reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1988;

(iii) the periodic reports of Lessee on Form 8-K filed on January 25, 1988, February 19, 1988, April 5, 1988, June 21, 1988, July 1, 1988, November 18, 1988 and December 8, 1988, and any other periodic reports of Lessee filed with the Securities and Exchange Commission which have been delivered to the purchasers of the Series A Notes before their execution and delivery of the Note Purchase Agreements relating to the Series A Notes;

(iv) the 1977-1987 Financial and Statistical Report of Lessee;

(v) the Proxy Statement for the 1988 Annual Meeting of Shareholders of Lessee; and

(vi) the press release disclosing the Lessee’s 1988 earnings, if delivered to the purchasers of the Series A Notes before the closing under the related Note Purchase Agreements; and

b. The Addendum to the Private Placement Memorandum dated November 16, 1988.

“Discounted Value” shall mean, with respect to the Called Principal of any Note which makes reference to the Yield-Maintenance Premium, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Redemption Date with respect to such Called Principal, in accordance with accepted financial practice and




at a discount factor (applied on a semiannual basis) equal to the Reinvestment Yield with respect to such Called Principal.
“Effective Date” means the date upon which the closing conditions specified in the Note Purchase Agreements relating to the Series A Notes are satisfied or waived and the Series A Notes are authenticated and delivered by the Indenture Trustee.
“ERISA” means the Employee Retirement Income Security Act of 1974, as from time to time amended.
“Event of Default” has the meaning specified therefor in Section 9.1 of the Trust Indenture.
“Excepted Payments” means any indemnity, expense, or other payment which by the terms of any of the Basic Documents shall be payable to the Trustor for its own account or to the Owner Trustee for its own account.
“Expiration Date” shall mean the earlier of the following:
a. such time as all of the Notes and all other obligations of the Company shall have been paid or satisfied; or

b. such time as the Settlement Date shall have occurred;

provided, however, that in no event shall the Expiration Date be later than January 31, 2039.
“Federal Energy Regulatory Commission” means the independent regulatory commission of the Department of Energy of the United States Government existing under the authority of the Department of Energy Organization Act, as amended, or any successor organization or organizations performing any identical or substantially identical licensing and related regulatory functions.
“Financing Costs” means (a) interest and premium, if any, on the Notes, (b) fees and other amounts owing to any Credit Party or any purchasers of Notes under the Basic Documents or to the Owner Trustee under the Trust Agreement, (c) legal fees and disbursements and other amounts referred to in Section 7.7 of the Trust Indenture, (d) fees and expenses of any Placement Agent for the Notes, (e) auditing expenses in connection with the financial statements of the Company provided for in the Basic Documents, (f) discounts, premiums, fees, charges or expenses charged by any purchaser of Notes upon issuance thereof, (g) legal, accounting and other fees and expenses incurred by Lessee and/or Company in connection with the preparation, execution and delivery of Basic Documents, issuance of the Series A Notes, or issuance of Additional Notes, (h) commitment fees, standby fees, revolving credit charges, and other fees and charges incurred with respect to the issuance or subsequent borrowing arrangements associated with Additional Notes, and (i) such other reasonable fees and expenses of the Owner Trustee and the Company as they may be entitled to under the Basic Documents.
“First Mortgage Bond Indenture” means the Indenture dated as of September 1, 1926 from the Lessee to Central Hanover Bank and Trust company (now Manufactures Hanover Trust Company), as trustee, as the same has been or may be from time to time amended, modified or supplemented.
“Force Majeure” shall mean any reason or cause reasonably beyond the party’s control and not attributable to its neglect, including but not limited to strike, stoppage in labor, failure of contractors or suppliers of materials, riot, fire, flood, ice, invasion, civil war, insurrection, military or usurped power, order of any court granted in any bona fide adverse legal proceeding or action, order of any civil or




military authority (either de facto or de jure), failure or delay of action by any regulatory or governmental agency or authority, explosion, act of God or public enemies, failure or malfunction of system facilities, unscheduled outage of generating units or transmission facilities and any other reason or cause, whether or not similar or dissimilar to the reasons and causes mentioned which are reasonably beyond the party’s control and not attributable to its neglect; provided, however, that the party suffering any such delay or prevention of performance shall use due and, in its judgment, practicable diligence to remove the cause(s) hereof; and provided, further, that the party shall not be required by the foregoing provisions to settle a strike affecting it except when, according to its own best judgment, such a settlement seems advisable, or to accept conditions or terms with respect to any governmental or regulatory action which are unacceptable to it in its sole discretion; and provided further that lack of funds or delay (other than delay caused by third party intervenors) in obtaining or failure to obtain any necessary regulatory or governmental agency or authority to issue securities to obtain funds shall not be deemed a cause beyond the control of Lessee.
“Fuel Cost” means, for any Nuclear Fuel, the sum of (i) the aggregate amount paid by Lessor for such Nuclear Fuel, including (a) sales, use, property, storage and other similar taxes, (b) any payments with respect thereto made pursuant to Nuclear Fuel Contracts or a portion thereof which are Assigned Agreements for the mining, milling, conversion, enrichment, design, fabrication, installation, delivery, redelivery, containerization, transportation, insuring, storage, processing or other direct costs with respect to acquiring, owning, or preparing such Nuclear Fuel through all stages of its Nuclear Fuel Cycle, including advance or progress payments under such Nuclear Fuel Contracts, and (c) consultant (legal, accounting and engineering), administrative and other costs associated with such Nuclear Fuel (including the financing thereof pursuant to the Basic Documents), plus (ii) amounts allocated to the Fuel Cost of such Nuclear Fuel pursuant to subsection 5(b) of the Fuel Lease.
“Fuel Lease” means the Fuel Lease dated as of February 7, 1989 between Lessor and Lessee, as the same may from time to time be amended, modified or supplemented.
“Fuel Management” means the design of, contracting for, establishing the price and terms of acquisition of, management, movement, removal, disengagement, storage and other activities in connection with the acquisition, utilization, storage and disposal of the Nuclear Fuel.
“Fuel Schedule” means an instrument substantially in the form of Schedule D to the Fuel Lease including, unless otherwise indicated, all Annexes thereto.
“Generating Facilities” shall mean River Bend Unit 1 of Lessee.
“granting clauses” means the portion of the Trust Indenture prior to Section 1, beginning with the statement of consideration.
“Heat Production” means the state of the Nuclear Fuel Cycle commencing with the commercial operation of a Generating Facility and during which the Nuclear Fuel in question is engaged in a reactor core at such Generating Facility.
“Hereof”, “herein”, “hereunder” and words of similar import when used in a Basic Document refer to such Basic Document as a whole and not to any particular section or provision thereof.
“Impositions” means all payments required by public or governmental authority in respect of any property subject to the Fuel Lease or any transaction pursuant to the Fuel Lease or any right or interest held by virtue of the Fuel Lease.




“Indebtedness” means, with respect to the Company, (i) all items (including, without limitation, Capitalized Leases but excluding stockholders’ equity and minority interests) which in accordance with generally accepted accounting principles should be reflected on the liability side of a balance sheet as at the date as of which Indebtedness is to be determined; (ii) all obligations and liabilities (whether or not reflected upon such balance sheet) secured by any Lien existing on the property held subject to such Lien, whether or not the obligation or liability secured thereby shall have been assumed: and (iii) all guarantees (whether or not reflected on such balance sheet); provided , however, that the term “Indebtedness” shall not include deferred taxes.
“Indebtedness for Borrowed Money” means (a) all indebtedness, obligations and liabilities for borrowed money or constituting the deferred purchase price of property or services, (b) all obligations in respect of Capitalized Leases, and (c) any and all guarantees, endorsements (other than for collection in the ordinary course of business) and contingent obligations in respect of any indebtedness, obligations or other liabilities of the type described in clauses (a) and (b) of this definition.
“Indenture Trustee” means the institution designated as such in the Indenture and its permitted successors.
“Insurance Requirements” means all terms of any insurance policy or indemnification agreement covering or applicable to any Nuclear Fuel and all the requirements of the issuer of any such policy or agreement necessary to keep such insurance or agreements in force, and all orders, rules, regulations and other requirements of the Federal Energy Regulatory Commission, the Nuclear Regulatory Commission, or any other regulatory body at any time exercising similar functions with respect to electric utility properties, which are applicable to or affect any of the Generating Facilities, any of the Nuclear Fuel or any operation, use or condition of any thereof.
“Interest Payment Date” means, with respect to the Notes, the dates specified for the payment of interest in the respective Notes.
“Interest Record Date” means the date 15 days prior to the next succeeding Interest Payment Date.
“Investment Company Act” means the Investment Company Act of 1940, as from time to time amended.
“Joint Ownership Agreement” means the Joint Ownership Participation and Operating Agreement, River Bend Unit 1 Nuclear Plant, dated August 28, 1979, among Lessee, Cajun Electric Power Cooperative, Inc. and Sam Rayburn G&T Inc., as the same may from time to time be amended, modified or supplemented.
“Lease Default” means any of the events specified in Section 19 of the Fuel Lease, whether or not any requirement for notice or lapse of time or other condition has been satisfied.
“Lease Event of Default” has the meaning specified therefor in Section 19 of the Fuel Lease.
“Legal Requirements” means all requirements having the force of law applicable at any time to any or all of the Generating Facilities, any of the Nuclear Fuel, any transaction pursuant to the Fuel Lease or any right or interest held by Lessor or Lessee pursuant to the Fuel Lease.
“Lessee” has the meaning specified therefor in the introduction to the Fuel Lease.




“Lessee Representative” means a person at the time designated to act on behalf of Lessee by a written instrument furnished to the Company and the Indenture Trustee containing the specimen signature of such person and signed on behalf of Lessee by any of its officers. The certificate may designate an alternate or alternates. A Lessee Representative may be an employee of Lessee or of the Owner Trustee.
“Lessee’s Letter Agreement” means any letter agreement furnished by Lessee in connection with the issuance of any Notes by the Company, and shall include the “Lessee’s Letter Agreement” referred to in Section 4.2.1 of the Note Purchase Agreements relating to the Series A Notes.
“Lessor” has the meaning specified therefor in the introduction to the Fuel Lease.
“Lessor’s Bill of Sale” means an instrument substantially in the form of Schedule E to the Fuel Lease.
“Lien” means any mortgage, pledge, lien, security interest title retention, charge or other encumbrance of any nature whatsoever (including any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to execute and deliver any financing statement under the Uniform Commercial Code of any jurisdiction).
“Louisiana Collateral Documents” means collectively the Collateral Chattel Mortgage, dated February 6, 1989, delivered by the Company and Lessee, the Collateral Chattel Mortgage Note dated February 6, 1989 delivered by the Company and Lessee, the Notice of Security Interest (Chattel Mortgage Records) dated February 6, 1989 delivered by the Company and Lessee, and the Pledge and Pawn of Collateral Chattel Mortgage Note dated February 6, 1989, delivered by the Company and Lessee to the Indenture Trustee, and any periodic supplements thereto, as the same may from time to time be amended, modified or supplemented.
“Manufacturer” means any supplier of Nuclear Fuel (including but not limited to Delta Fuel Services Corporation and the Lessee) or of any service (including without limitation, enrichment, fabrication, financing, transportation, storage, and processing) in connection therewith, or any agent or licensee of any such supplier.
“Maturity Date” shall mean with respect to each Note the final date specified in the Note for payment of all principal, interest and other amounts owing thereon.
“Maximum Outstanding Notes Limit” has the meaning specified therefor in Section 2.1 of the Trust Indenture.
“Note Purchasers” means the Persons purchasing Notes upon original issuance of such Notes.
“Noteholders” means collectively the holders of the then outstanding Notes and their assigns.
“Notes” means the promissory notes issued by the Company from time to time under and in accordance with the terms, provisions and limitations of the Trust Indenture, and shall include the Series A Notes and the Additional Notes.
“Note Purchase Agreements” means (i) the several but identical (except for the name of the purchaser) Note Agreements, each dated as of February 7, 1989, relating to the issue and sale by the Company of its Intermediate Term Secured Notes, Series A, as from time to time in effect, and (ii) any similar agreements hereafter entered into by the Company relating to the issue and sale of its Notes pursuant to this Trust Indenture.




“Note Purchase Agreement Obligations” means the principal of, premium, if any, and interest on the Notes and all other costs, fees and expenses and amounts required to be paid by the Company on or with respect to the Notes or under the Note Purchase Agreements.
“Nuclear Fuel” means those items which have been purchased by or on behalf of Lessor for which a duly executed Fuel Schedule has been delivered to Lessor and which continue to be subject to the Fuel Lease consisting of (i) the items described in such Fuel Schedules and each of the components thereof in the respective forms in which such items exist during each stage of the Nuclear Fuel Cycle, being substances and materials which, when fabricated and assembled and loaded into a nuclear reactor, are intended to produce heat through the fission process, together with all replacements thereof and additions thereto and (ii) the substances and materials underlying the right, title and interest of Lessee under any Nuclear Fuel Contract assigned to Lessor pursuant to the Fuel Lease.
“Nuclear Fuel Contract” means any contract, as from time to time amended, modified or supplemented, entered into by Lessee with one or more Manufacturers relating to the acquisition of Nuclear Fuel or any service in connection with the Nuclear Fuel and assigned to Lessor pursuant to the Fuel Lease as an Assigned Agreement.
“Nuclear Fuel Cycle” means the various stages in the process, whether physical or chemical, by which the component parts of the Nuclear Fuel are designed, mined, milled, processed, converted, enriched, fabricated into assemblies utilizable for heat production, loaded or installed into a reactor core, utilized, disengaged, stored and disposed, together with all incidental processes with respect to the Nuclear Fuel at any such stage.
“Nuclear Regulatory Commission” means the independent regulatory commission of the United States Government existing under the authority of the Energy Reorganization Act of 1974, as amended, or any successor organization or organizations performing any identical or substantially identical licensing and related regulatory functions.
“Officers Certificate” means, with respect to any corporation, a certificate signed by the President or any Vice President and the Treasurer or any Assistant Treasurer of such corporation, and with respect to any other entity, a certificate signed by two individuals generally authorized to execute and deliver contracts on behalf of such entity.
“Opinion of Counsel” means a written opinion of counsel who is acceptable to the Indenture Trustee, or where it is stated as being an opinion of counsel of a particular party, who is acceptable to such party. The counsel may be counsel to the Owner Trustee, the Company, the Indenture Trustee or Lessee.
“Outstanding” when used with reference to Debentures, or “Debentures Outstanding” shall have the meaning ascribed thereto in the Debenture Indenture.
“Outstanding” when used with reference to Notes, or “Notes Outstanding” means all Notes which have been authenticated and delivered by the Indenture Trustee under the Trust Indenture, except the following:
a. Notes cancelled or purchased by the Company or delivered to the Indenture Trustee for cancellation.





b. Notes that have become due (at maturity or on redemption, acceleration or otherwise) and for the payment, including interest accrued to the due date, of which sufficient moneys are held by the Indenture Trustee.

c. Notes in lieu of which others have been authenticated under Section 2.5 of the Trust Indenture (relating to registration and exchange of Notes) or Section 2.6 of the Trust Indenture (relating to mutilated, lost, stolen, or destroyed Notes).

“Outstanding Debenture Indebtedness” means, at any particular time, the aggregate principal balance remaining unpaid on the Debentures then outstanding under the Debenture Indenture.
“Outstanding Note Indebtedness” means, at any particular time, the aggregate principal balance remaining unpaid on the Notes then issued and outstanding.
“Owner Trust” means the River Bend Fuel Services Trust, a New York Trust created by the Trust Agreement.
“Owner Trust Beneficiary” means Gulf States Utilities Company.
“Owner Trust Estate” means all estate, right, title and interest of the Owner Trustee in and to the outstanding stock of the Company and in and to all monies, securities, investments, instruments, documents, rights, claims, contracts, and other property held by the Owner Trustee under the Trust Agreement; provided , however, that there shall be excluded from the Owner Trust Estate all Excepted Payments.
“Owner Trustee” means Manufacturers Hanover Trust Company, acting as trustee under and pursuant to the Trust Agreement, and its permitted successors.
“Partially Assigned Agreement” means a Nuclear Fuel Contract which has been assigned, in part but not in full, to Lessor in the manner specified in Section 4 of the Fuel Lease, pursuant to a duly executed and delivered Assignment Agreement.
“PBGC” means the Pension Benefit Guaranty Corporation created by Section 4002(a) of ERISA and any successor thereto.
“Permitted Liens” means:
a. the Lien of the Fuel Lease and the Lien of the Trust Indenture and the Collateral Agreements;

b. Liens permitted by Section 12 of the Fuel Lease;

c. Liens for taxes, assessments or other governmental charges not yet delinquent and remaining payable without penalty; and

d. the provisions of the Joint Ownership Agreement.

“Person” means any individual, partnership, joint venture, corporation, trust, unincorporated organization or other business entity or any government or any political subdivision or agency thereof.




“Plan” means, with respect to any Person, any plan of a type described in Section 4021(a) of ERISA in respect of which such Person is an “employer” or a “substantial employer” as defined in Sections 3(5) and 4001(a)(2) of ERISA, respectively.
“Placement Agent” means Merrill Lynch & Co., Inc., as Placement Agent for the Series A Notes and any other person or entity subsequently acting as Placement Agent for any Additional Notes issued as provided in the Indenture.
“Prime Rate” means the rate publicly announced from time to time as the “Reference Rate” of Manufacturers Hanover . Trust Company.
“Principal Payment Date” means such dates, if any, as are specified in a Note as dates prior to maturity upon which principal payments shall be made.
“Principal Record Date” means the date 15 days prior to the next succeeding Principal Payment Date.
“Public Utility Holding Company Act” means the Public Utility Holding Company Act of 1935, as from time to time amended.
“Qualified Institution” means either a commercial bank organized under the laws of, and doing business in, the United States of America or in any State thereof, which has a combined capital, surplus and undivided profits of at least $150,000,000 having trust powers.
“Quarterly Financing Charge” means, for any Basic Rent Period, the sum of Daily Financing Charges for each day (whether or not a Business Day) during such Basic Rent Period.
“Reinvestment Yield” means, with respect to the Called Principal of any Note which makes reference to the Yield-Maintenance Premium, the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the Business Day next preceding the Redemption Date with respect to such Called Principal, on the display designated as “Page 678” on the Telerate Service (or such other display as may replace Page 678 on the Telerate Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Redemption Date, or (ii) if such yields shall not be reported as of such time or the yields reported as of such time shall not be ascertainable, the Treasury Constant Maturity Series yields reported, for the latest day for which such yields shall have been so reported as of the Business Day next preceding the Redemption Date with respect to such Called Principal, in Federal Reserve Statistical Release H. 15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Redemption Date. Such implied yield shall be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between reported yields.
“Related Person” means, with respect to any Person, any trade or business, (whether or not incorporated) which, together with such Person, is under common control as described in Section 414(c) of the Code.
“Remaining Average Life” means, with respect to the Called Principal of any Note which makes reference to the Yield-Maintenance Premium, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) each Remaining Scheduled Payment of such Called Principal (but not of interest thereon) by (b) the number of years (calculated to the nearest one-twelfth year) which will elapse between the




Redemption Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment.
“Remaining Scheduled Payments” means, with respect to the Called Principal of any Note which makes reference to the Yield-Maintenance Premium, all payments of such Called Principal and interest thereon that would be due on or after the Redemption Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date.
“Reportable Event” means any of the events set forth in Section 4043(b) of ERISA and the regulations thereunder.
“Responsible Officer” means a duly elected or appointed, authorized, and acting officer, agent or representative of the Person acting.
“Restoration” means the repair, reconstruction or replacement of all or any portion of the Nuclear Fuel which has been damaged or destroyed, or affected by a Taking, as nearly as possible to the value, condition and character thereof, and in its location immediately prior to such damage, destruction or Taking, or the replacement of any assembly of the Nuclear Fuel so damaged, destroyed or affected, with Nuclear Fuel having an equivalent value and heat production capacity with only such alterations and additions as may be made at Lessee’s election and as will not diminish the usefulness and value of such Nuclear Fuel.
“Secured Obligations” means:
a. all indemnifications, costs, expenses, fees and other compensation of the Indenture Trustee provided for, and all other amounts owed to the Indenture Trustee, under this Trust Indenture,

b. all Debenture Indenture Obligations, and

c. all Note Purchase Agreement Obligations.

“Secured Parties” means the holders from time to time of (i) the Debenture Indenture Obligations and (ii) the Note Purchase Agreement Obligations.
“Securities Act” means the Securities Act of 1933, as from time to time amended.
“Series A Notes” means the Notes issued pursuant to and referred to in Section 2.1 and Section 12.1 of the Trust Indenture.
“Settlement Date” shall have the meaning specified therefor in subsection 17(d) of the Fuel Lease.
“Significant Subsidiary” shall have the meaning specified therefor in Regulation S-X promulgated by the Securities and Exchange Commission under the Securities Act, as said Regulation S-X is in effect on the date hereof.
“Single Employer Plan” means any Plan which is not a multi-employer plan as defined in Section 4001(a)(3) of ERISA.
“SLV” or “Stipulated Loss Value” means, for any date as of which the same is required to be determined with respect to any Nuclear Fuel, the excess of the Fuel Cost of such Nuclear Fuel over the




aggregate amount of the Burn-Up Charges received by or for the account of Lessor (as of the preceding Basic Rent Payment Date) in respect thereof.
“SLV Confirmation Schedule” means an instrument substantially in the form of Schedule B to the Fuel Lease which is to be completed by Lessee for the purpose of calculating and acknowledging the SLV at the end of each Basic Rent Period.
“Special Payment” shall have the meaning specified therefor in Section 3(b) of the Fuel Lease.
“Taking” means a loss of the title to, ownership of or use and/or possession of Nuclear Fuel, or any interest therein or right accruing thereto, as the result of or in lieu or in anticipation of the exercise of the rights of condemnation or eminent domain pursuant to any law, general or special, or by reason of the temporary requisition of the use of Nuclear Fuel by any governmental authority, civil or military.
“Terminating Event” shall have the meaning specified therefor in Section 17(a) of the Fuel Lease.
“Termination Rent” means an amount which, when added to the Stipulated Loss Value then payable by Lessee pursuant to Section 17(d) or Section 19(b) of the Fuel Lease, as the case may be, together with funds available to Lessor from the Collateral Account, will be sufficient to enable Lessor (i) to retire, at their respective maturities, all of Lessor’s then outstanding obligations under (A) all Note Purchase Agreements, including all Notes issued pursuant thereto, and (ii) to pay all charges, premiums and fees owed to all holders of Notes under the Note Purchase Agreements applicable thereto and to any Assignees thereof.
“Transferee” shall have the meaning given such term in Section 13 of the Trust Agreement.
“Trust Agreement” means the Trust Agreement dated as of February 7, 1989 between United States Trust Company of New York as Trustor and Manufacturers Hanover Trust Company as the Owner Trustee thereunder, as the same may be amended, modified or supplemented from time to time.
“Trust Indenture” or “Indenture” means the Trust Indenture dated as of February 7, 1989 between the Company and the Indenture Trustee, as the same may from time to time be amended, modified or supplemented.
“Trustor” means the institution designated as such in the Trust Agreement and its permitted successors.
“Unavoidable Delays” means delays due to Force Majeure.
“Vendor’s Bill of Sale” means an instrument substantially in the form of Schedule C to the Fuel Lease.
“Yield-Maintenance Premium” means, with respect to any Note which makes reference to this defined term, a premium equal to the excess, if any, of the Discounted Value of the Called Principal of such Note over the sum of (i) such Called Principal plus (ii) interest accrued thereon as of (including interest due on) the Redemption Date with respect to such Called Principal. The Yield-Maintenance Premium shall in no event be less than zero.







Exhibit 4(d)15
GULF STATES UTILITIES COMPANY

TO

THE HANOVER BANK,
as Trustee

______________


Eighteenth Supplemental Indenture

Dated August 12, 1959.


_______________


Modifying and Amending Indenture of Mortgage dated
September 1, 1926















THIS EIGHTEENTH SUPPLEMENTAL INDENTURE , dated the 12th day of August, 1959, by and between GULF STATES UTILITIES COMPANY, a corporation duly organized and existing under the laws of the State of Texas (hereinafter sometimes called the Company), party of the first part, and THE HANOVER BANK (formerly, and until change of name effective June 30, 1951, CENTRAL HANOVER BANK AND TRUST COMPANY), a corporation duly organized and existing under the laws of the State of New York and having its principal place of business in the Borough of Manhattan, City and State of New York, as successor Trustee under the Indenture of Mortgage and indentures supplemental thereto hereinafter mentioned (hereinafter sometimes called the Trustee), party of the second part;
WITNESSETH: That
WHEREAS, the Company has heretofore executed and delivered its Indenture of Mortgage, dated September 1, 1926 (hereinafter sometimes called the Original Indenture), to The Chase National Bank of the City of New York, as trustee, in and by which, the Company conveyed and mortgaged to said The Chase National Bank of the City of New York, as trustee, certain property, therein described, to secure the payment of its bonds issued and to be issued under said Original Indenture in one or more series, as therein provided; and
WHEREAS, the Company has heretofore executed and delivered to The Chase National Bank of the City of New York, as trustee, as aforesaid, a First Supplemental Indenture dated as of May 1, 1929, a Second Supplemental Indenture dated as of June 1, 1931, a Third Supplemental Indenture dated as of October 1, 1936, and a Fourth Supplemental Indenture dated as of September 1, 1938, all supplemental to said Original Indenture; and
WHEREAS, on March 21, 1939, said The Chase National Bank of the City of New York resigned as trustee under said Original Indenture and all indentures supplemental thereto as aforesaid, pursuant to Section 4 of Article XIV of said Original Indenture, and by an Indenture dated March 21, 1939 said resignation was accepted and Central Hanover Bank and Trust Company was duly appointed the successor trustee under said Original Indenture and all indentures supplemental thereto as aforesaid, said resignation and appointment both being effective as of said date, and said Central Hanover Bank and Trust Company did by said Indenture dated March 21, 1939 accept the trust under said Original Indenture and all indentures supplemental thereto as aforesaid; and
WHEREAS, the Company has heretofore executed and delivered to Central Hanover Bank and Trust Company, as successor trustee, as aforesaid, a Fifth Supplemental Indenture dated as of May 1, 1939, a Sixth Supplemental Indenture dated as of August 1, 1944, a Seventh Supplemental Indenture dated as of May 1, 1946, an Eighth Supplemental Indenture dated as of April 1, 1948, a Ninth Supplemental Indenture dated as of December 1, 1949, and a Tenth Supplemental Indenture dated as of June 1, 1950, supplementing and modifying said Original Indenture; and
WHEREAS, the name of Central Hanover Bank and Trust Company, successor trustee, as aforesaid, was changed effective June 30, 1951 to “The Hanover Bank”; and
WHEREAS, the Company has heretofore executed and delivered to The Hanover Bank, as successor trustee, as aforesaid, an Eleventh Supplemental Indenture dated as of November 1, 1951, a Twelfth Supplemental Indenture dated as of December 1, 1952, a Thirteenth Supplemental Indenture dated as of December 1, 1953, a Fourteenth Supplemental Indenture dated as of September 1, 1956, a Fifteenth Supplemental Indenture dated as of October 1, 1957, a Sixteenth Supplemental Indenture dated as of May 1, 1958, and a Seventeenth Supplemental Indenture dated as of January 1, 1959, supplementing and modifying said Original Indenture; and




WHEREAS, said Original Indenture, said First Supplemental Indenture, said Second Supplemental Indenture, said Third Supplemental Indenture, said Fourth Supplemental Indenture and said Indenture dated March 21, 1939 appointing Central Hanover Bank and Trust Company successor trustee under said Original Indenture and all indentures supplemental thereto as aforesaid, said Fifth Supplemental Indenture, said Sixth Supplemental Indenture, said Seventh Supplemental Indenture, said Eighth Supplemental Indenture, said Ninth Supplemental Indenture, said Tenth Supplemental Indenture, said Eleventh Supplemental Indenture, said Twelfth Supplemental Indenture, said Thirteenth Supplemental Indenture, said Fourteenth Supplemental Indenture, said Fifteenth Supplemental Indenture, said Sixteenth Supplemental Indenture and said Seventeenth Supplemental Indenture have all been duly recorded and filed in the respective offices of the Recorders of the Parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson Davis, Lafayette, Livingston, Pointe Coupee, St. Landry, St. Martin, Vermilion, West Baton Rouge and West Feliciana, in the State of Louisiana and have been duly recorded as a mortgage of real estate and filed as a chattel mortgage in the respective offices of the County Clerks in the Counties of Brazoria, Brazos, Burleson, Chambers, Falls, Galveston, Grimes, Hardin, Harris, Jasper, Jefferson, Leon, Liberty, Limestone, Madison, Milam, Montgomery, Newton, Orange, Polk, Robertson, San Jacinto, Trinity, Tyler, Walker, Waller and Washington in the State of Texas, with the exception only that said First Supplemental Indenture dated as of May 1, 1929 and said Second Supplemental Indenture dated as of June 1, 1931 are not of record as aforesaid in the County of Galveston, in the State of Texas, nor in the Parishes of Ascension, East Baton Rouge, East Feliciana, Iberville, Livingston, Pointe Coupee, West Baton Rouge and West Feliciana, in the State of Louisiana, said First Supplemental Indenture dated as of May 1, 1929, is not of record as aforesaid in the Counties of Milam and Tyler, and said Eleventh Supplemental Indenture dated as of November 1, 1951, said Twelfth Supplemental Indenture dated as of December 1, 1952, said Thirteenth Supplemental Indenture dated as of December 1, 1953, said Fourteenth Supplemental Indenture dated as of September 1, 1956, said Fifteenth Supplemental Indenture dated as of October 1, 1957, said Sixteenth Supplemental Indenture dated as of May 1, 1958 and said Seventeenth Supplemental Indenture dated as of January 1, 1959 are not of record as aforesaid in the County of Brazoria, and that only the Seventh Supplemental Indenture dated as of May 1, 1946, the Eighth Supplemental Indenture dated as of April 1, 1948, the Ninth Supplemental Indenture dated as of December 1, 1949, the Tenth Supplemental Indenture dated as of June 1, 1950, the Eleventh Supplemental Indenture dated as of November 1, 1951, the Twelfth Supplemental Indenture dated as of December 1, 1952, the Thirteenth Supplemental Indenture dated as of December 1, 1953, the Fourteenth Supplemental Indenture dated as of September 1, 1956, the Fifteenth Supplemental Indenture dated as of October 1, 1957, the Sixteenth Supplemental Indenture dated as of May 1, 1958 and the Seventeenth Supplemental Indenture dated as of January 1, 1959 have been recorded in the County of Harris in the State of Texas and the Parish of Beauregard in the State of Louisiana; and said Seventh Supplemental Indenture, said Eighth Supplemental Indenture, said Ninth Supplemental Indenture, said Tenth Supplemental Indenture, said Eleventh Supplemental Indenture, said Twelfth Supplemental Indenture, said Thirteenth Supplemental Indenture, said Fourteenth Supplemental Indenture, said Fifteenth Supplemental Indenture, said Sixteenth Supplemental Indenture and said Seventeenth Supplemental Indenture have been duly filed in the “chattel mortgage records on realty” of each of the above named counties in the State of Texas, except that said Eleventh Supplemental Indenture, said Twelfth Supplemental Indenture, said Thirteenth Supplemental Indenture, said Fourteenth Supplemental Indenture, said Fifteenth Supplemental Indenture, said Sixteenth Supplemental Indenture and said Seventeenth Supplemental Indenture have not been so filed in the County of Brazoria; and
WHEREAS, under the Original Indenture, as supplemented and modified as aforesaid (the Original Indenture as so supplemented and modified being hereinafter sometimes called “the Indenture”), with the consent of the holders of not less than 75% in principal amount of the Bonds at the time outstanding or their attorneys in fact duly authorized, including the consent of the holders of not less than 60% in principal amount of the Bonds at the time outstanding of each series, the Company, when authorized by a resolution of the




Board of Directors, and the Trustee may enter into an indenture supplemental thereto for the purpose of changing the provisions of the Indenture so as to increase the authorized aggregate principal amount of Bonds which may be authenticated, delivered and issued thereunder and be at any one time outstanding; and
WHEREAS, the Company proposes to, and has obtained the consents of the holders of the necessary percentages of the Bonds outstanding under the Indenture to, so modify and amend the same in the manner effected by this Eighteenth Supplemental Indenture; and
WHEREAS, all acts and proceedings required by law and by the Articles of Incorporation and Bylaws of the Company necessary to authorize a supplemental indenture for the purpose of changing provisions of the Indenture and modifying the rights and obligations of the Company and the rights of the holders of the Bonds in the respects hereinafter provided have been done and taken; and the execution and delivery of this Eighteenth Supplemental Indenture have been in all respects duly authorized;
Now, THEREFORE, THIS EIGHTEENTH SUPPLEMENTAL INDENTURE WITNESSETH:
That, among other things, in order to increase the limit on the aggregate principal amount of Bonds which may be at any one time outstanding under the Indenture, and for and in consideration of the premises, the mutual agreements of the parties hereto, and the sum of $1 duly paid to the Company by the Trustee, on or before the execution hereof, and for other valuable considerations, the receipt whereof is hereby acknowledged, the parties hereto agree to modify and amend the Indenture and the Indenture is hereby modified and amended by
(a) Striking out the words and figures “limited in aggregate principal amount at any one time issued and outstanding to $200,000,000” appearing in the first recital of the Indenture and inserting in lieu thereof the following:
“limited in aggregate principal amount as in Section 3.01 in this Indenture set forth”;
(b) Striking out the first sentence of Section 3.01 of the Indenture and inserting in lieu thereof the following:
“The aggregate principal amount of Bonds which may be authenticated, delivered and issued hereunder is limited in aggregate principal amount at any one time outstanding to $1,000,000,000.”; and
(c) Changing the figure “$200,000,000” appearing in the first paragraph of Section 19.04 of the Indenture to “$1,000,000,000”.
In order to facilitate the recording or filing of this Eighteenth Supplemental Indenture, the same may be simultaneously executed in several counterparts and each shall be deemed to be an original and such counterparts shall together constitute one and the same instrument.




IN TESTIMONY WHEREOF, GULF STATES UTILITIES COMPANY has caused these presents to be executed in its name and behalf by its President or a Vice President, and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary in the presence of me, the undersigned Notary Public, and of the two undersigned competent witnesses, on the day and year first above written.
GULF STATES UTILITIES COMPANY,
[CORPORATE SEAL]
By /s/ W. H. GIESEKE
Vice President.
Attest:

/s/ J. N. CARTER
Assistant Secretary.

Signed, sealed and delivered in
the presence of:

/s/ T. MEAGHER

/s/ T. W. CUTLER

Before me
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961
(NOTARIAL SEAL)





IN TESTIMONY WHEREOF, THE HANOVER BANK, in token of its acceptance hereof, has likewise caused these presents to be executed in its name and behalf by its President or a Vice President and its corporate seal to be hereunto affixed and attested by its Secretary or an Assistant Secretary, in the presence of me, the undersigned Notary Public, and of the two undersigned competent witnesses, on the day and year first above written.
THE HANOVER BANK,

By /s/ J. T. HARRIGAN
Senior Vice President.

[CORPORATE SEAL]
Attest:

/s/ A. W. MAXWELL
Assistant Secretary.

Signed, sealed and delivered in
the presence of:

/s/ T. MEAGHER

/s/ T. W. CUTLER

Before me
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)





STATE OF NEW YORK,
ss.:
COUNTY OF NEW YORK,


Before me, ROBERT E. HORNBY, a Notary Public within and for the State and County aforesaid, on this day personally appeared W. H. GIESEKE, Vice President of Gulf States Utilities Company, and J. N. CARTER, Assistant Secretary, both of whom are known to me to be the persons whose names are subscribed to the foregoing instrument and both of whom are known to me to be Vice President and Assistant Secretary, respectively, of said Gulf States Utilities Company, and separately acknowledged to me that they executed the same in the capacities therein stated for the purposes and consideration therein expressed and as the act and deed of Gulf States Utilities Company.
Given under my hand and seal of office this 12th day of August, 1959.
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)





STATE OF NEW YORK,
ss.:
COUNTY OF NEW YORK,


On this 12th day of August, in the year one thousand nine hundred and fifty-nine (1959), before me personally came W. H. GIESEKE, to me known, who, being by me duly sworn, did depose and say, that he resides at Beaumont, Texas; that he is Vice President of Gulf States Utilities Company, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
Given under my hand and seal of office this 12th day of August, A. D. 1959.
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)






UNITED STATES OF AMERICA,
STATE OF NEW YORK,          ss.:
COUNTY OF NEW YORK,


BE IT REMEMBERED, that on this 12th day of August, A. D. 1959, before me, ROBERT E. HORNBY, a Notary Public, duly commissioned and qualified in and for the State and County aforesaid, and in the presence of T. MEAGHER and T. W. CUTLER, competent witnesses, residing in said State, personally came and appeared W. H. GIESEKE and J. N. CARTER, Vice President, and Assistant Secretary, respectively, of Gulf States Utilities Company, a corporation created by and existing under the laws of the State of Texas, with its Texas domicile in the City of Beaumont, Texas, and said W. H. GIESEKE and J. N. CARTER declared and acknowledged to me, Notary, in the presence of the witnesses aforesaid, they have signed, executed and sealed the foregoing indenture for and on behalf of and in the name of Gulf States Utilities Company and have affixed the corporate seal of said Company to the same, by and with the authority of the Board of Directors of said Company.
IN TESTIMONY WHEREOF, said appearers have severally signed these presents in the presence of and together with the aforesaid witnesses and me, Notary, on the day, month and year first above written.
/s/ W. H. GIESEKE
Vice President.

/s/ J. N. CARTER
Assistant Secretary.

Witnesses:

/s/ T. MEAGHER
/s/ T. W. CUTLER
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)





STATE OF NEW YORK,
ss.:
COUNTY OF NEW YORK,


Before me, ROBERT E. HORNBY, a Notary Public within and for the State and County aforesaid, on this day personally appeared J. T. HARRIGAN, a Senior Vice President of The Hanover Bank, and A. W. MAXWELL, an Assistant Secretary, both of whom are known to me to be the persons whose names are subscribed to the foregoing instrument and both of whom are known to me to be a Senior Vice President and an Assistant Secretary, respectively, of said Bank, and separately acknowledged to me that they executed the same in the capacities therein stated for the purposes and consideration therein expressed, and as the act and deed of The Hanover Bank.
Given under my hand and seal of office this 12th day of August, A. D. 1959.
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)





STATE OF NEW YORK,
ss.:
COUNTY OF NEW YORK,


On this 12th day of August, in the year one thousand nine hundred and fifty-nine (1959) before me personally came J. T. HARRIGAN, to me known, who, being by me duly sworn, did depose and say, that he resides at 23 Park View Court, White Plains, New York; that he is a Senior Vice President of The Hanover Bank, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Trustees of said corporation; and that he signed his name thereto by like order.
Given under my hand and seal of office this 12th day of August, A. D. 1959.
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)





UNITED STATES OF AMERICA,
STATE OF NEW YORK,          ss.:
COUNTY OF NEW YORK,


BE IT REMEMBERED, that on this 12th day of August, A. D. 1959, before me, ROBERT E. HORNBY, a Notary Public, duly commissioned and qualified in and for the State and County aforesaid, and in the presence of T. MEAGHER and T. W. CUTLER, competent witnesses, residing in said State, personally came and appeared J. T. HARRIGAN and A. W. MAXWELL, a Senior Vice President and an Assistant Secretary, respectively, of The Hanover Bank, a corporation created by and existing under the laws of the State of New York with its domicile in the City of New York, New York, and said J. T. HARRIGAN and A. W. MAXWELL declared and acknowledged to me, Notary, in the presence of the witnesses aforesaid, they have signed, executed and sealed the foregoing indenture for and on behalf of and in the name of The Hanover Bank and have affixed the corporate seal of said Bank to the same, by and with the authority of the Board of Trustees of said Bank.
IN TESTIMONY WHEREOF, said appearers have severally signed these presents in the presence of and together with the aforesaid witnesses and me, Notary, on the day, month and year first above written.
/s/ J. T. HARRIGAN
Senior Vice President.

/s/ A. W. MAXWELL
Assistant Secretary.
Witnesses:

/s/ T. MEAGHER
/s/ T. W. CUTLER
            /s/ ROBERT E. HORNBY           
ROBERT E. HORNBY
NOTARY PUBLIC-State of New York
No. 30-1858235
Qualified In Nassau County
Cert. filed in New York County
Term Expires March 30, 1961

(NOTARIAL SEAL)





Certified Copy of Resolution of Board of Directors of Gulf States Utilities Company Adopted at a Meeting Held on August 10, 1959.
I, the undersigned, Assistant Secretary of Gulf States Utilities Company, hereby certify
(1)      That at a Special Meeting of the Board of Directors of said Corporation, duly held August 10, 1959, at which a quorum for the transaction of business was present and acting throughout, the following resolution was unanimously adopted, namely:
RESOLVED, that it is advisable and in the best interest of this Company to, and that this Company do, enter into an Eighteenth Supplemental Indenture modifying and amending the Indenture of Mortgage of the Company, dated September 1, 1926, as heretofore supplemented and modified, for the purposes, among others, of modifying certain provisions of said Indenture of Mortgage, dated September 1, 1926, as heretofore supplemented and modified, so as to increase the authorized aggregate principal amount of Bonds which may be authenticated, delivered and issued thereunder and be at any one time outstanding from $200,000,000 to $1,000,000,000; and this Board of Directors hereby approves the form of draft of said Eighteenth Supplemental Indenture which has been submitted to this meeting and hereby authorizes the President or any Vice President of this Company to execute in the name and on behalf of this Company under its corporate seal, attested by its Secretary or one of its Assistant Secretaries, and to acknowledge and deliver to the Trustee, an Eighteenth Supplemental Indenture in the form of said draft with such changes in any part thereof not inconsistent with this resolution as the signing officers shall approve, such approval to be conclusively evidenced by their signatures thereto.
(2)      That the executed Eighteenth Supplemental Indenture to which this certificate is annexed is the Eighteenth Supplemental Indenture authorized by the foregoing resolution.
WITNESS my hand and the seal of said Corporation this 12th day of August, 1959.
/s/ J. N. CARTER
Assistant Secretary of Gulf States
Utilities Company.
[CORPORATE SEAL]





Exhibit 4(e)1
MISSISSIPPI POWER & LIGHT COMPANY

TO

BANK OF MONTREAL TRUST COMPANY

AND

Z. GEORGE KLODNICKI,

AS TRUSTEES
    
Mortgage and Deed of Trust
    
Dated as of February 1, 1988
    











MISSISSIPPI POWER & LIGHT COMPANY

TO

BANK OF MONTREAL TRUST COMPANY

and

Z. GEORGE KLODNICKI, AS TRUSTEES

Mortgage and Deed of Trust

_________________
TABLE OF CONTENTS 1 /
Page
Parties      1
Recitals      1
Description of bonds
1
General form of coupon bond
2
General form of coupon
4
General form of fully registered bond
4
General form of fully registered bond
(reverse)
6
Form of trustee's authentication
certificate on all bonds
7
Compliance with legal requirements
7
Granting clause      7
Agreement as to after-acquired property      8
Properties excepted from Lien of Indenture      8
Habendum      9
Grant in Trust      9
Defeasance clause      10
Covenant clause      10




______________________________
1
The Table of Contents was not a part of the Mortgage and Deed of Trust as executed.





Table of Contents
Page

ARTICLE I
DEFINITIONS
Sec 1.01
Explanatory statement      10
Construction of accounting terms
10
Evidence of approval of signer
10
Requests and applications to be accompanied by certificates and opinions
10
Sec. 1.02
“Adjusted Net Earnings” defined in Section 1.07 hereof      10
“affiliate”
10
“Board of Directors”
11
“Company”
11
“Cost” defined in Section 1.04 (III) hereof
11
“Co-Trustee”
11
“Daily Newspaper”
11
“Defaults” defined in Section 12.01 hereof
11
“Deferred Grand Gulf I Costs”
11
“Engineer”
11
“Engineer’s Certificate”
11
“Excepted Encumbrances” defined in Section 1.06 hereof
12
“Federal Bankruptcy Act”
12
“Fuel Transportation Facilities”
12
“Funded Cash” defined in Section 1.05 hereof
12
“Funded Property” defined in Section 1.05 hereof
12
“Grand Gulf I”
12
“Grand Gulf I Costs”
12
“Independent”
12
“Independent Engineer’s Certificate”
12
“Investment Securities”
12
“the Lien hereof”, “the Lien of the Indenture” and “the Lien of this Indenture”
13
“Mortgage” or “Indenture”
13
Sec. 1.03
“the Mortgaged and Pledged Property”      13
“Net Earning Certificate” defined in Section 1.07 hereof
13
“1944 Mortgage” defined in the granting clause hereof
13
“Officer’s Certificate”
13
“Opinion of Counsel”
13
“Original Trustee” and “Original Co-Trustee”
14
“Outstanding”
14
“PIK Bonds”
14
“prior lien”
14
“Property Additions” defined in Section 1.04 hereof
14
“Resolution”
14
“Responsible Officers”
14




“Retired Bonds”
15
“SEC”
15
“Space Satellites”
15
“Trustee”
15
“Trustees”
15
“underwriter” defined in Section 16.12 hereof
16
Sec. 1.04
(I) “Property Additions”      16
(II) Provisions for netting Property Additions
17
(III) “Cost”
18
Sec. 1.05
“Funded Property”      19
“Funded Cash”
20
Sec. 1.06
“Excepted Encumbrances”      20
Sec. 1.07
“Net Earning Certificate”      21
Construction of phrases relating to property retirement
24
Interest payment in foreign coin or currency
24
ARTICLE II
FORMS, EXECUTION, REGISTRATION AND EXCHANGE OF BONDS
Sec. 2.01
Series and form of bonds      24
One or more series may be expressed in one or more foreign languages - English text shall prevail
25
Form of each series shall specify the descriptive title, designation, date of bonds, rate or rates of interest, medium of payment, dates of maturity, dates for payment of interest, and place for payment of principal and interest      25
May also contain provisions for:
(a)
Additional places for payment, registration and transfer      25
(b)
Reimbursement of taxes, Sinking fund, put options, and conversion of bonds into stock      25
(c)
Exchanges of bonds      25
(d)
Redemption      26
(e)
Splitting of interest and principal payments      26
(f)
Complying with laws, rules, regulations or usage      26
(g)
Wire or electronic transfer of funds      26
(h)
Other terms and conditions      26
Principal or interest payment in foreign coin or currency
26
Sec. 2.02
Kinds and denominations of bonds      26
Sec. 2.03
Date of and interest on fully registered bonds      26
Dates and designation of coupon bonds
27
Sec. 2.04
Legends on bonds      27
Sec. 2.05
Surrender of bonds upon exchange      27
Authentication and issuance of new bonds
27
Charges for exchanges and transfers of bonds
27
Sec. 2.06
Registration and transfer books      27
Sec. 2.07
Execution of bonds      28
Matured coupons to be detached before authentication of bonds
28
Sec. 2.08
Temporary bonds      28




Sec. 2.09
Replacement of stolen, lost, destroyed or mutilated bonds      29
Indemnity and charges
29
Sec. 2.10
Trustee’s certificate on bonds      29
Sec. 2.11
Bonds may be paid in foreign countries and in foreign currencies      29
ARTICLE III
GENERAL PROVISIONS AS TO ISSUANCE OF BONDS
Sec. 3.01
Aggregate amount of bonds which may be secured by Indenture      29
Sec. 3.02
Company free to determine price, etc., for bonds      29
ARTICLE IV
ISSUANCE OF BONDS UPON THE BASIS OF DEFERRED GRAND GULF I COSTS
Sec. 4.01
Requirements for issuance      30
Sec. 4.02
Provisions of this Article are Exclusive      31
ARTICLE V
ISSUANCE OF BONDS UPON THE BASIS OF PROPERTY ADDITIONS
Sec. 5.01
Additional bonds issuable on basis of Property Additions      31
Sec. 5.02
No bonds issuable under Article V on basis of Funded Property      31
Sec. 5.03
Bonds issuable under Article V to specified percentage of Cost or fair value of Property Additions after making certain deductions and additions      31
Sec. 5.04
Net Earning requirements for issue on Property Additions      31
Sec. 5.05
Bond application papers for issue on Property Additions      31
Determination of Cost, fair value and fair market value
35
ARTICLE VI
ISSUANCE OF BONDS UPON RETIREMENT OF CERTAIN BONDS PREVIOUSLY OUTSTANDING HEREUNDER OR UNDER THE 1944 MORTGAGE
Sec. 6.01
Bond application papers for issues in refunding certain Retired Bonds      35
Net Earning Certificate in certain cases
35
ARTICLE VII
ISSUANCE OF BONDS UPON DEPOSIT OF CASH WITH TRUSTEE
Sec. 7.01
Bond application papers for issues against deposited cash      36
Sec. 7.02
Withdrawal of cash deposited under Section 7.01      37
Sec. 7.03
Company may direct application of cash deposited under Section 7.01 to purchase, pay or redeem bonds      37




ARTICLE VIII
COMPLIANCE WITH THE TRUST INDENTURE ACT OF 1939
Sec. 8.01
Reservation of right to comply with the Trust Indenture Act of 1939      37
ARTICLE IX
PARTICULAR COVENANTS OF THE COMPANY
Sec. 9.01
Possession      38
Maintenance of Lien
38
Right to mortgage
38
Sec. 9.02
Payment of principal and interest      38
Cancellation of paid coupons
38
Sec. 9.03
(a) Appointment of qualified Trustee      38
(b)
Office or agency for presentation of bonds, coupons, notices, etc.      38
Results of failure to maintain such offices.      39
(c)
Duty of paying agent other than Trustee      39
(d)
Duty of Company acting as paying agent      39
(e)
Delivery to Trustee of sums held by other paying agent      39
(f)
All sums to be held subject to Section 19.03      39
Sec. 9.04
Payments of taxes, etc.      39
Sec. 9.05
Insurance on property      40
Application of insurance proceeds
40
Deductible provision
42
Sec. 9.06
Maintenance of Mortgaged and Pledged Property      42
Independent Engineer’s Certificate on maintenance of Mortgaged and Pledged Property
43
Retirement from plant account of property no longer useful in business
45
Sec. 9.07
Maintenance of corporate existence and franchises      45
Sec. 9.08
Recording, filing, etc.      45
Annual Opinion of Counsel
45
Instruments of further assurance
45
Sec. 9.09
(a) Company to furnish Trustee information as to names and
addresses of bondholders      46
(b)
Preservation by Trustee of such information      46
(c)
Trustee shall make such information available or mail communications to bondholders in certain circumstances      46
(d)
Trustee and paying agent not accountable by reason of disclosing or mailing material pursuant to subdivision (c)      47
Sec. 9.10
(1)      Company agrees to file with Trustee copies of annual reports
which the Company may be required to file with the
Securities and Exchange Commission      47
(2)
Company agrees to file with Trustee and Securities and
Exchange Commission certain additional information with
respect to compliance with certain conditions and covenants




of Indenture      47
(3)
Company agrees to transmit to bondholders summaries of such information as may be required by Securities and
Exchange Commission
48
Sec. 9.11
Books of record and account      48
Faithful performance of covenants, conditions, etc.
48
Sec. 9.12
Deposit with Trustee of certain property upon discharge of prior lien      48
Sec. 9.13
Dividend Covenant      49
Sec. 9.14
Annual Certificate of no default      49
Sec. 9.15
Restriction of issuance of bonds under the 1944 Mortgage      49
Sec. 9.16
Compliance with maintenance and replacement fund provisions of the 1944 Mortgage      49
Sec. 9.17
Compliance with applicable laws      49
ARTICLE X
REDEMPTION OR PURCHASE OF BONDS
Sec. 10.01
What bonds redeemable      50
Sec. 10.02
Redemption of a part only of bonds      50
Notice of redemption
50
Mailing notice
50
Sec. 10.03
Bonds due on redemption date if price deposited and notice given      51
Sec. 10.04
Redemption money held in trust until paid to holders on surrender of bonds      51
When bonds cease to bear interest
51
Partial redemption of registered bonds
51
Sec. 10.05
Purchase of bonds with cash held by Trustee      52
Company may designate series
52
Solicitation of offers to sell
52
Sec. 10.06
Bonds paid, purchased or redeemed hereunder to be cancelled      52
Destruction of bonds and coupons
52
ARTICLE XI
POSSESSION, USE AND RELEASE OF MORTGAGED AND PLEDGED PROPERTY
Sec. 11.01
Company’s possession and enjoyment      52
Sec. 11.02
What Company may do without release or consent by Trustee      52
(1)
Replacement of machinery, equipment, tools, etc.      53
(2)
Cancellation of rights of way      53
(3)
Surrender or assent to modification of franchises, etc.      53
Sec. 11.03
Release of property      53
(1)
Officers’ Certificate      53
(2)
Engineer’s Certificate      53
(3)
Cash equal to amount by which fair value of property released exceeds the sum of:
(a)
Purchase money obligations received      54




(b)
Cost or fair value of Property Additions made basis of release      54
(c)
Principal amount of bonds which Company waives right to issue      55
(d)
Principal amount of obligations secured by purchase money mortgage      55
(e)
Taxes and expenses      55
(4)
Opinion of Counsel on Property Additions      56
(5)
Opinion of Counsel on purchase money mortgage, etc.      56
(6)
Opinion of Counsel if franchise to be released      56
(7)
Opinion of Counsel on conditions and covenants      56
Assignment, filing and recordation of purchase money mortgages;
Opinion of Counsel
56
Conditions if release based on Property Additions, etc.
56
When Property Additions made basis for release do not become Funded Property
57
Disposition of consideration received upon release
57
Substituted property to become subject to Lien
58
Sec. 11.04
Release of real estate unimproved for Company’s business      58
Any consideration received by Company to be deposited hereunder
59
Sec. 11.05
Withdrawal or application or moneys received for releases, etc.      59
Such moneys may be:
(1)
Withdrawn on basis of Property Additions      59
(2)
Withdrawn on basis of right to issue bonds      59
(3)
Applied to purchase bonds      60
(4)
Applied to redeem bonds      60
Requirements for withdrawal of moneys
60
When withdrawal does not represent Funded Property
60
Release of purchase money mortgage obligations
61
Principal and interest on purchase money mortgage obligations
62
Disposition of bonds deposited under this Section
62
Sec. 11.06
Release of property taken by eminent domain or purchased by governmental body      62
Application of proceeds
62
Sec. 11.07
If Mortgaged and Pledged Property in hands of receiver or trustee, it may exercise powers conferred on Company      63
Notwithstanding default, Trustee may release Mortgaged and Pledged Property
63
Purchaser in good faith not put on inquiry
63
Sec. 11.08
Alternative method of release of certain Mortgaged and Pledged Property      63
Sec. 11.09
Quitclaim of property not subject to Lien      64
Sec. 11.10
Release of property which is not Funded      64
(1)
Officers’ Certificate      64
(2)
(a) Engineer’s Certificate      64
(b) Independent Engineer’s Certificate      65
(3)
Further Engineer’s Certificate      65
(4)
Opinion of Counsel      65




ARTICLE XII
REMEDIES OF TRUSTEES AND BONDHOLDERS UPON DEFAULT
Sec. 12.01
Definition of “Defaults”      65
Sec. 12.02
Trustees’ issuance of Notice of Default      66
Sec. 12.03
Declaration of principal and accrued interest due upon Default      67
Holders of specified percentage of bonds may annul declaration
67
Sec. 12.04
Trustee or Co-Trustee may take possession of and operate Mortgaged and Pledged Property on Default      68
When Trustees shall surrender possession to Company
68
Sec. 12.05
Power of Trustees to sell all the Mortgaged and Pledged Property      68
Sec. 12.06
Judicial proceedings by Trustees      69
Remedies cumulative
69
Delay, etc., not a waiver of rights
69
Sec. 12.07
Holders of specified percentage of bonds may direct judicial proceedings by Trustees      69
Bonds owned by Company or affiliates not included in determining percentages for certain purposes
70
Sec. 12.08
Appointment of receiver      70
Sec. 12.09
All bonds to become due and payable upon sale of property      70
Sec. 12.10
Purchase by bondholders at sale of property      70
Sec. 12.11
Receipt of Trustees or officer making sale to be a discharge to purchaser      71
Effect of sale on rights of Company
71
Sec. 12.12
Disposition of proceeds of sale      71
Order of application
71
Sec. 12.13
Waiver by Company of advantage of any appraisement, valuation, stay, extension or redemption laws, and of rights to marshal assets      72
Sec. 12.14
Payment of principal and interest to Trustees upon occurrence of certain defaults      72
Judgment may be taken by Trustees
72
Proofs of claim
73
Lien of Indenture not to be affected by judgment or levy of execution by Trustees
73
Application of moneys collected by Trustees
73
Trustee may rely on order, judgment or certificate
74
Sec. 12.15
Possession of bonds unnecessary in action by Trustees      74
Bondholders not necessary part to action
74
Sec. 12.16
Limitation upon right of bondholders to institute certain legal proceedings      75
Right of bondholders to receive and enforce payment not impaired
75
Sec. 12.17
Company may waive period of grace      75
If enforcement proceedings abandoned, status quo is established
75




ARTICLE XIII
EVIDENCE OF RIGHTS OF BONDHOLDERS AND OWNERSHIP OF BONDS
Sec. 13.01
Execution of instruments by bondholders      75
Proof of execution
75
(a)
Acknowledgment      75
(b)
Certificate of trust company, bank, etc.      75
Consent or vote binding on future holder of bond
76
Sec. 13.02
Evidence of ownership of temporary or coupon bonds      76
Evidence of ownership of registered bonds
76
Inspection of bonds
76
ARTICLE XIV
IMMUNITY OF INCORPORATORS, SUBSCRIBERS TO THE
CAPITAL STOCK, STOCKHOLDERS, OFFICERS AND DIRECTORS
Sec. 14.01
Liability of officers, etc., released and waived      76
ARTICLE XV
EFFECT OF MERGER, CONSOLIDATION, ETC.
Sec. 15.01
Company may merge, consolidate etc., upon certain terms      77
Covenant against impairment of Lien thereby
77
Assumption of obligation by successor
77
Sec. 15.02
Right of successor corporation      77
Execution of Indenture
78
Issuance of bonds, etc., on basis of Property Additions by successor corporation
78
Sec. 15.03
Extent of Lien of Indenture upon property of successor corporation      78
ARTICLE XVI
CONCERNING THE TRUSTEES
Sec. 16.01
Qualification of Trustee      79
Acceptance of trust - duties in general
80
Sec. 16.02
Extent of Trustees’ liability - in general      80
Sec. 16.03
Recitals deemed made by Company      81
Sec. 16.04
Trustees not liable for debts incurred in operating property      81
Trustees, etc., may own bonds
81
Sec. 16.05
Trustees may give notices incidental to action by it      81
Sec. 16.06
Notice by Trustees to Company - mailing      81
Sec. 16.07
Trustees protected in relying on Certificates, etc.      81
Trustees may consult counsel
82
Responsibility in selection of experts
82
Sec. 16.08
Moneys deposited with Trustees to be held in trust      82




Interest on moneys with Trustees
82
Sec. 16.09
Compensation of Trustees - lien therefor      82
Sec. 16.10
Trustees may rely on facts established by certificate from Company      83
Sec. 16.11
Action to be taken by Trustees and Co-Trustee who becomes creditor of Company      83
Sec. 16.12
Action to be taken by Trustees and Co-Trustee acquiring conflicting interest      87
Definition of conflicting interest
88
Sec. 16.13
Trustees and Co-Trustee to transmit certain reports to bondholders      91
Copies of reports to be filed with stock exchanges and Securities and Exchange Commission
93
Sec. 16.14
Resignation or removal of Trustees and Co-Trustee      93
Sec. 16.15
Appointment of successor Trustee and successor Co-Trustee      94
Sec. 16.16
Appointment of additional trustees or co-trustees      95
Conditions affecting such appointment
96
Notice by bondholders to Trustee, notice to all trustees
96
Contents, filing, etc. of instrument appointing trustee Incapacity, etc., of separate trustee or co-trustee
96
Sec. 16.17
Acceptance by successor trustee      97
Requirements of predecessor trustee upon retiring
97
Sec 16.18
Merger or consolidation of Trustee      97
Delivery of bonds authenticated by predecessor Trustee
97
Authentication by successor Trustee
97
Sec. 16.19
Appointment of successor Trustee by Company      98
Sec. 16.20
Estates, rights, etc. of Trustee are in joint tenancy      98
Notice, etc. on behalf of Company delivered to Trustee deemed delivered to both Trustee and Co-Trustee
98
Sec. 16.21
Necessity for Co-Trustee      98
ARTICLE XVII
DISCHARGE OF MORTGAGE
Sec. 17.01
Execution of requisite deeds and instruments      98
Bonds for payment of which money or obligations of the United States are deposited are deemed paid - proviso
99
ARTICLE XVIII
MEETINGS AND CONSENTS OF BONDHOLDERS
Sec. 18.01
Modifications of Indenture - in general      99
Sec. 18.02
Call and notice of meeting of bondholders      99
Place when called by Trustee
99
Written notice
100
Publication
100
When notice not required
100
Sec. 18.03
Attendance at meetings      100




Trustee may make regulations as to deposits of bonds
100
Certificate in lieu of production of unregistered bonds
100
Sec. 18.04
Persons entitled to vote at meetings      101
When production of bonds and further proof necessary
101
Proxies - Acknowledgment
101
Sec. 18.05
Temporary Chairman and Secretary      101
Permanent Chairman and Secretary
101
Inspectors of Votes
101
Sec. 18.06
Quorum      101
Notice of adjournment
102
Sec. 18.07
Vote necessary for modification, alteration, etc., of Indenture      103
Limitations on right of modification
103
Bonds owned, held by, or for account of Company not counted
103
Sec. 18.08
Record of meeting      104
Conclusiveness of meeting
104
Copy of resolution to be mailed to bondholders
104
Proof of mailing to be filed with Trustees
104
Effect of failure to mail
104
Approval of resolution by Company
104
Effective date of resolution
104
Sec. 18.09
Notation of action taken may be made on bonds      104
New bonds
104
When supplemental instrument may be executed
105
Sec. 18.10
(A)      Trustee may receive written consent of bondholders in lieu of holding a meeting      105
(B)
Acknowledgment of written consent.      105
(C)
Revocation of consent.      106
ARTICLE XIX
MISCELLANEOUS
Sec. 19.01
Benefits restricted to parties and to holders of bonds and coupons      106
Sec. 19.02
Investment of cash by Trustee in certain securities      106
Such securities held by Trustee as part of Mortgaged and Pledged Property
106
Retirement of bonds with funds in excess of specified amount held by Trustee for specified period
107
Sec. 19.03
Deposits for bonds and coupons not claimed for specified period to be returned to Company on demand      107
Sec. 19.04
Rights may be waived or surrendered by Company      107
Company may enter into further covenants for benefit of one or more series of bonds
107
Trustee may join with Company execution of instruments
108
Sec. 19.05
Formal requirements of certificates and opinions hereunder      108
Sec. 19.06
Concerning court costs and counsel fees in certain suits hereunder      108
Sec. 19.07
Successors and assigns      109




Sec. 19.08
In event of conflict, Trust Indenture Act Provisions herein to control      109
Sec. 19.09
Effect of Indenture under Louisiana law      109
Sec. 19.10
Reference is to Trust Indenture Act in force on the date of execution hereof-exceptions      109
Sec. 19.11
Titles of Articles of Indenture, marginal sectional, marginal Article references and table of contents not part thereof      109
Sec. 19.12
Execution in counterparts      109
Sec. 19.13
Governing law      109
ARTICLE XX
SPECIFIC DESCRIPTION OF PROPERTY
Property Description      110
Testimonium      240
Signatures and seals      240
Acknowledgments      242
Summary of recording data      245













INDENTURE, dated as of the 1st day of February, 1988, made and entered into by and among MISSISSIPPI POWER & LIGHT COMPANY, a corporation of the State of Mississippi, whose post office address is P.O. Box 1640, Jackson, Mississippi 39215-1640 (tel. 601-969-2311) (hereinafter sometimes called the Company), party of the first part, and BANK OF MONTREAL TRUST COMPANY, a corporation of the State of New York, whose principal office is located at Two Wall Street, New York, New York 10005 (tel. 212-964-1100) (hereinafter sometimes called the Trustee), and Z. GEORGE KLODNICKI, whose post office address is 87 Prospect Avenue, Westwood, New Jersey 07675 (tel. 212-964-1100) (hereinafter sometimes called the Co-Trustee), parties of the second part (the Trustee and the Co-Trustee being hereinafter collectively sometimes called the Trustees);
WHEREAS, the Company deems it necessary to borrow money for its corporate purposes and to issue its bonds therefor from time to time in one or more series, and to mortgage and pledge its property hereinafter described or mentioned to secure the payment of the same, such bonds to be at the election of the Company coupon bonds (which may be bearer bonds if at the time permitted by law) and/or fully registered bonds, authenticated by the certificate of the Trustee and issuable as in this Indenture hereinafter provided, such coupon bonds, coupons, fully registered bonds and Trustee’s authentication certificate to be substantially in the forms following, respectively, with such insertions, omissions and variations as the Board of Directors of the Company may determine in accordance with the provisions of this Indenture:




[GENERAL FORM OF COUPON BOND]

MISSISSIPPI POWER & LIGHT COMPANY

___________ Bond

____________ Series due _______

No. _____________      $__________
MISSISSIPPI POWER & LIGHT COMPANY, a corporation of the State of Mississippi (hereinafter called the Company), for value received, hereby promises to pay to the bearer, or, if this bond be registered, to the registered owner hereof, at the office or agency of the Company in ________________, ________________ dollars on ______________, ______________, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay interest thereon from the date hereof at the rate of ____________ per centum per annum in like coin or currency at such office or agency on ____________ and ___________ in each year, until the principal of this bond shall have become due and payable, and to pay interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any defaulted interest at the rate then borne by this bond plus one per centum (1%) per annum. The interest accrued on the principal hereof prior to such principal becoming due and payable shall be paid only upon presentation and surrender of the interest coupons therefor hereto attached as they severally mature.
This bond is one of a series of bonds of the Company issuable in series and is one of a series known as its ______________ Bonds, ______________ Series due ______________, all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of February 1, 1988, executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds and of the Trustees in respect thereof, the duties and immunities of the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms hereinafter used. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds and/or coupons and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided.
This bond is negotiable and shall pass by delivery unless registered as to principal at the office or agency of the Company in ___________, and such registration noted hereon, after which no




valid transfer hereof can be made, except at such office or agency, until after registered transfer to bearer, but after such registered transfer to bearer this bond shall be again transferable by delivery. Such registration, however, shall not affect the negotiability of the coupons, which shall always remain payable to bearer and transferable by delivery. The Company and the Trustees may deem and treat the bearer of this bond if it be not registered as to principal, or, if this bond is registered as herein authorized, the person in whose name the same is registered, as the absolute owner hereof, and the bearer of any coupon hereunto appertaining as the absolute owner hereof, whether or not this bond or such coupon shall be overdue, for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
As provided in the Mortgage, the Company shall not be required to make transfers or exchanges of bonds of any series for a period of fifteen days next preceding any interest payment date for bonds of said series, or next preceding any designation of bonds of said series to be redeemed, and the Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.
No recourse shall be had for the payment of the principal or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
Neither this bond nor the coupons hereto attached shall become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, MISSISSIPPI POWER & LIGHT COMPANY has caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof, and interest coupons bearing the facsimile signature of its Treasurer or an Assistant Treasurer to be attached hereto, as of ______, ____________________.
MISSISSIPPI POWER & LIGHT COMPANY


By     
ATTEST:
___________________________




[GENERAL FORM OF COUPON]
No. _____________      $__________
On ______________, ____, unless the bond hereafter mentioned shall have previously become due and payable, MISSISSIPPI POWER & LIGHT COMPANY will pay to bearer, upon surrender of this coupon, at its office or agency in ______________, ____ dollars in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, being _________ months’ interest then due on its ______________ Bond, ______________ Series due______________, No. ______
    



[GENERAL FORM OF FULLY REGISTERED BOND)

________________ BOND

__________ Series due ____________
No. _____________      $__________
MISSISSIPPI POWER & LIGHT COMPANY, a corporation of the State of Mississippi (hereinafter called the Company), for value received, hereby promises to pay to _________, or registered assigns, at the office or agency of the Company in ______________, ____ dollars on _________, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay to the registered owner hereof interest thereon from __________, _________, if the date of this bond is prior to __________, or, if the date of this bond is on or after __________, from the______________ or ______________ next preceding the date of this bond (unless the date hereof is an interest payment date to which interest has been paid, in which case from the date hereof), at the rate of ______________ per centum per annum in like coin or currency at such office or agency on ______________ and ______________ in each year, until the principal of this bond shall have become due and payable, and to pay interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any defaulted interest at the rate then borne by this bond plus one per centum (1%) per annum. [The following provision may be included here at the Company’s option: provided, however, if the date hereof is after any record date, as hereinafter provided, with respect to any interest payment date and prior to such interest payment date, then interest shall be payable only from such interest payment date unless the Company shall default in the payment of the interest due on such interest payment date, in which case interest shall be payable from the next preceding interest payment date to which interest has been paid, or, if no such interest has been paid on the bonds, from _______________ _____________________.




The interest so payable on any interest payment date will, subject to certain exceptions provided in the Mortgage hereinafter referred to, be paid to the person in whose name this bond is registered at the close of business (whether or not a business day) on the _______________ or _______________ (herein called “record dates”), as the case may be, next preceding such interest payment date.] At the option of the Company, interest may be payable by check mailed on or prior to such interest payment date to the address of the person entitled thereto as such address shall appear on the register of the Company.
[The provisions hereinafter indicated for the reverse of the bond may instead be inserted here. Otherwise, the following statement shall be included here if provisions are continued on the reverse of the bond: ADDITIONAL PROVISIONS OF THIS BOND ARE SET FORTH ON THE REVERSE HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.]
This bond shall not become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, Mississippi Power & Light Company has caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof.
Dated:
MISSISSIPPI POWER & LIGHT COMPANY


By:     

ATTEST:
___________________________




[General Form of Fully Registered Bond]

(Reverse)

MISSISSIPPI POWER & LIGHT COMPANY
This bond is one of a series of bonds of the Company issuable in series and is one of a series known as its ______________ Bonds, ______________ Series due ______________, all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of February 1, 1988, executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds and of the Trustees in respect thereof, the duties and immunities of the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms hereinafter used. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds and/or coupons and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided.
This bond is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in _______________________________________________________, upon surrender of this bond, and upon payment, if the Company shall require it, of the transfer charges provided for in the Mortgage, and, thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange herefor as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
[The following paragraph may be omitted or modified if a record date is established or if such paragraph is otherwise inapplicable.]
As provided in the Mortgage, the Company shall not be required to make transfers or exchanges of bonds of any series for a period of fifteen days next preceding any interest payment date for bonds of said series, or next preceding any designation of bonds of said series to be redeemed, and the Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or




by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
[FORM OF TRUSTEE’S AUTHENTICATION
CERTIFICATE ON ALL BONDS]
TRUSTEE’S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned mortgage.
BANK OF MONTREAL TRUST COMPANY,
as Trustee,


By     
Authorized Officer
; and
WHEREAS, all things necessary to make this Indenture a valid, binding and legal instrument for the security of said bonds, have been performed, and the issue of said bonds, subject to the terms of this Indenture, has been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That MISSISSIPPI POWER & LIGHT COMPANY, in consideration of the premises and of Ten Dollars ($10) to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued hereunder, according to their tenor and effect and the performance of all provisions hereof (including any instruments supplemental hereto and any modification made as in this Indenture provided) and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over and confirmed and granted a security interest in, and by these presents doth grant, bargain, sell, release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set over and confirm and grant a security interest in (subject, however, to Excepted Encumbrances as defined in Section 1.06 hereof), unto Z. George Klodnicki and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, as Trustees, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all properties of the Company specifically described in Article XX hereof and all other properties of the Company real, personal and mixed, of the kind or nature specifically mentioned herein or of any other kind or nature (except any hereinbefore or hereinafter expressly excepted), now owned or, subject to the provisions of Section 15.03 hereof, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same, the scope and intent of the foregoing or of any general description contained in this Indenture) all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same; all power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam,




water and/or other power; all power houses, street lighting systems, standards and other equipment incidental thereto; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, electric, gas and water lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generators and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment, and all other fixtures and personalty; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith and (except as hereinbefore or hereinafter expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 11.01 hereof) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property, rights and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 15.03 hereof, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any hereinbefore or hereinafter expressly excepted, shall be and are as fully granted and conveyed hereby and as fully embraced within the Lien hereof as if such property, rights and franchises were now owned by the Company and were specifically described herein and granted and conveyed hereby.
PROVIDED that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder, nor is a security interest therein hereby granted or intended to be granted, and the same are hereby expressly excepted from the Lien hereof and the operation of this Indenture, viz.: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereinbefore or hereafter specifically pledged, paid, deposited, delivered or held hereunder or covenanted so to be; (2) merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or part) any rolling stock, buses, motor coaches, automobiles or other vehicles or aircraft or boats, ships, or other vessels and any fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; boats, ships and other vessels; all timber, minerals, mineral rights and royalties; (3) bills, notes and other instruments and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged hereunder or hereafter covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the Lien hereof; (5) electric energy, gas, water, steam, ice, and other materials or products generated, manufactured, produced or purchased by




the Company for sale, distribution or use in the ordinary course of its business; (6) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system, and any natural gas distribution system; and (7) the Company’s franchise to be a corporation; provided, however, that the property and rights expressly excepted from the lien and operation of this Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XII hereof by reason of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed or in which a security interest has been granted by the Company as aforesaid, or intended so to be (subject, however, to Excepted Encumbrances as defined in Section 1.06 hereof), unto Z. GEORGE KLODNICKI and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, as Trustees, and their successors and assigns forever.
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the equal pro rata benefit and security of all and each of the bonds and coupons issued and to be issued hereunder, or any of them, in accordance with the terms of this Indenture, without preference, priority or distinction as to the lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject to the provisions hereinafter set forth in reference to extended, transferred or pledged coupons and claims for interest; it being intended that, subject as aforesaid, the lien and security of all of said bonds and coupons of all series issued or to be issued hereunder shall take effect from the date of the initial issuance of bonds hereunder, and that the lien and security of this Indenture shall take effect from said date as though all of the said bonds of all series were actually authenticated and delivered and issued upon such date.
PROVIDED, HOWEVER, these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid, the principal of and interest on said bonds, together with the premium, if any, payable on such of said bonds as may have been called for redemption prior to maturity, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon for principal, interest and premium, if any, and if the Company shall also pay or cause to be paid all other sums payable hereunder by it, then this Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties hereto that all such bonds and coupons are to be authenticated, delivered and issued, and that all property subject or to become subject hereto is to be held subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustees and their successor or successors in such trust, for the benefit of those who shall hold said bonds and interest coupons, or any of them, as follows:




ARTICLE I

DEFINITIONS

Section 1.01    The terms defined in the next succeeding six Sections hereof, numbered from 1.02 to 1.07, both inclusive, shall (except as herein otherwise expressly provided) for all purposes of this Indenture, and of any indenture supplemental hereto, have the respective meanings in such Sections specified. Any term defined in Section 303 of the Trust Indenture Act of 1939, as amended, and not defined in this Indenture shall have the meaning assigned to such term in such Section 303 as in force on the date of the execution of this Indenture.
Except as otherwise specifically provided, the accounting terms used in this Indenture shall be construed in accordance with sound accounting practices.
The acceptance by the Trustee of any document the signer of which is required by some provision hereof to be approved by the Trustee, shall be sufficient evidence of its approval of the signer within the meaning of this Indenture, unless the Trustee shall object in writing within a reasonable time.
Every request or application by the Company for action by the Trustee under any of the provisions of this Indenture shall be accompanied by the Officers’ Certificate and the Opinion of Counsel provided for in Section 19.05 hereof.
Section 1.02.    The term “Adjusted Net Earnings” is defined in Section 1.07 hereof.
The term “affiliate” means a person directly or indirectly controlling, controlled by, or under direct or indirect common control with, another person.
The term “Board of Directors” means either the board of directors of the Company or any duly authorized committee of said board.
The term “Company” shall mean the party of the first part hereto, Mississippi Power & Light Company, and subject to the provisions of Article XV hereof, shall also include its successors and assigns. For the purposes of (i) clause (2) of subdivision (c) of Section 9.03 hereof, (ii) the second paragraph of Section 12.07 hereof, (iii) the second and third paragraphs of Section 12.14 hereof, (iv) Section 16.11 hereof, (v) Section 16.12 hereof and (vi) paragraph (3) of subdivision (a) of Section 16.13 hereof, the word “Company” shall be deemed to mean and refer to the Company and any other obligor on the bonds secured hereby.
The term “Cost” with respect to Property Additions is defined in Section 1.04 (III) hereof.
The term “Co-Trustee” shall mean Z. George Klodnicki and shall also include his successors and assigns.
The term “Daily Newspaper” shall mean a newspaper of general circulation in the relevant area, printed in the English language and customarily published on each business day, whether or not published on Saturdays, Sundays or holidays. In the event that successive weekly publications in a Daily Newspaper are required hereunder they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or in different Daily Newspapers. In case, by reason of the suspension of publication of any Daily Newspaper, or by reason of any other cause, it shall be impractical without extraordinary expense to make publication of any notice in a Daily Newspaper as required by this Indenture, then such method of publication or notification as shall be made with the




approval of the Trustee shall be deemed the equivalent of the required publication of such notice in a Daily Newspaper.
The term “Defaults” is defined in Section 12.01 hereof.
The term “Deferred Grand Gulf I Costs” shall mean the aggregate uncollected balance of the deferrals of Grand Gulf I Costs and any deferred carrying charges thereon recorded as assets on the books of the Company.
The term “Engineer” shall mean an individual who is an engineer or a co-partnership or a corporation engaged in an engineering business, who or which, unless required to be independent, may be employed by the Company.
The term “Engineer’s Certificate” shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and by an Engineer (who may be an employee of the Company) appointed by the Board of Directors of the Company; provided, however, if any property or securities are to be released from the lien of this Indenture, the Engineer’s Certificate as to the fair value of such property or securities and as to matters referred to in clause (f) of subdivision (2) of Section 11.03 hereof shall be made by an Independent Engineer, appraiser, or other expert, if the fair value of such property or securities and of all other property or securities released since the commencement of the then current calendar year, as set forth in the certificates required by this Indenture, is ten per centum (10%) or more of the aggregate principal amount of the bonds at the time Outstanding; but such a certificate of an Independent Engineer, appraiser, or other expert shall not be required in the case of any release of property or securities, if the fair value thereof as set forth in the certificates required by this Indenture is less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds at the time Outstanding, as therein defined, under the 1944 Mortgage. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.
The term “Excepted Encumbrances” is defined in Section 1.06 hereof.
The term “Federal Bankruptcy Act” shall mean the Bankruptcy Reform Act of 1978 and any amendments thereto, or any law substituted therefor.
The term “Fuel Transportation Facilities” shall mean railroad cars, barges and other transportation equipment (other than trucks) used or to be used primarily for the transportation of coal, oil, nuclear fuel or other fuel.
The term “Funded Cash” is defined in Section 1.05 hereof.
The term “Funded Property” is defined in Section 1.05 hereof.
The term “Grand Gulf I” shall mean Unit No. 1 of the Grand Gulf Nuclear Electric Generating Station, a 1,250 megawatt electric generating unit located in Claiborne County, Mississippi.
The term “Grand Gulf I Costs” shall mean the Company’s non-fuel costs associated with the Company’s purchase of capacity and energy from Grand Gulf I.
The term “Independent”, when applied to any accountant, Engineer, appraiser or other expert, shall mean such a person who (a) is in fact independent, (b) does not have any direct material




financial interest in the Company or in any other obligor upon the bonds or in any affiliate of the Company or of such other obligor and (c) is not connected with the Company or such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions, appointed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and who is approved by the Trustee in the exercise of reasonable care.
The term “Independent Engineer’s Certificate” shall mean a certificate signed by an Independent Engineer. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.
The term “Investment Securities” shall mean any of the following obligations or securities on which neither the Company nor any affiliate of the Company is the obligor having a maturity of one (1) year or less: (a) bonds or other obligations of the United States of America; (b) interest bearing deposit accounts (which may be represented by certificates of deposit) in national or state banks (which may include the Trustee) having a combined capital and surplus of not less than Ten Million Dollars ($10,000,000), or savings and loan or homestead or like associations having total assets of not less than Forty Million Dollars ($40,000,000); (c) bankers’ acceptances drawn on and accepted by commercial banks (which may include the Trustee) having a combined capital and surplus of not less than Ten Million Dollars ($10,000,000); (d) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any State of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing, which are rated in any of the three highest rating categories by a nationally recognized rating agency; (e) bonds or other obligations of any agency or instrumentality of the United States of America; (f) commercial or finance company paper which is rated in any of the three highest rating categories by a nationally recognized statistical rating organization; (g) corporate debt securities rated in any of the three highest rating categories by .a nationally recognized statistical rating organization; and (h) any other obligations or securities which may lawfully be purchased by the Trustee and which are rated in any of the three highest rating categories by a nationally recognized statistical rating organization.
The terms “the Lien hereof”, “the Lien of the Indenture” and “the Lien of this Indenture” shall mean the lien created by these presents (including the after-acquired property clauses hereof) and the lien created by any subsequent conveyance or delivery to or pledge with the Trustees hereunder or otherwise (whether made by the Company or any other corporation or any individual or co-partnership) effectively constituting any property a part of the security held by the Trustees or either of them upon the terms and trusts and subject to the covenants, conditions and uses specified in this Indenture.
The terms “Mortgage” (being referred to in the general forms of bonds) or “Indenture” shall mean this instrument and all indentures supplemental hereto.
Section 1.03.    The term “the Mortgaged and Pledged Property” shall mean as of any particular time the property (including securities and other personal property) which at said time is subject or intended to be subject to the Lien of this Indenture whether such Lien be created by these presents (including the after-acquired property clauses hereof) or by subsequent conveyance or delivery to or pledge with the Trustees hereunder or otherwise (whether made by the Company or any other corporation or any individual or co-partnership).
The term “Net Earning Certificate” is defined in Section 1.07 hereof.
The term “1944 Mortgage” shall mean the Company’s Mortgage and Deed of Trust, dated as of September 1, 1944, as heretobefore or hereinafter supplemented, to Irving Trust Company and Frederick G. Herbst (J.A. Vaughan, successor Co-Trustee).




The term “Officers’ Certificate” shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Company. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.
The term “Opinion of Counsel” shall mean an opinion in writing signed by counsel (who may be of counsel to the Company) appointed by the Board of Directors of the Company. If and to the extent required by the provisions of Section 19.05 hereof, each such opinion shall include the statements provided for in such Section.
The term “Original Trustee” shall mean Bank of Montreal Trust Company. The term “Original Co-Trustee” shall mean Z. George Klodnicki.
The term “Outstanding”, subject to the provisions of Sections 12.07 and 18.07 hereof, shall mean as of any particular time with respect to bonds issued or issuable under this Indenture all bonds which theretofore shall have been authenticated and delivered by the Trustee under this Indenture, except (a) bonds theretofore paid, retired, redeemed, discharged or cancelled, or bonds for the purchase, payment or redemption of which money in the necessary amount shall have been deposited with or shall then be held by the Trustee with irrevocable direction so to apply the same, provided that, in the case of redemption, the notice required by Article X hereof shall have been given or have been provided for to the satisfaction of the Trustee, (b) bonds deposited with or held in pledge by the Trustee under any of the provisions of this Indenture, including any so held under any sinking or other fund, and (c) bonds authenticated and delivered hereunder, upon transfer of which or in exchange or substitution for and/or in lieu of which other bonds have been authenticated and delivered under any of the provisions of this Indenture.
The term “PIK Bonds” shall mean bonds issued pursuant to any option the Company may have as a term of any series of bonds to satisfy the obligation of the Company to pay interest on such series of bonds on any or all specified interest payment dates. Any PIK Bonds shall have the same terms, including rate of interest and maturity, as those of the series of bonds in respect of which such PIK Bonds are issued, unless the supplemental indenture providing for the issuance of such PIK Bonds provides otherwise.
The term “prior lien” as used herein shall not include the lien of the 1944 Mortgage.
The term “Property Additions” is defined in Section 1.04 hereof.
The term “Resolution” shall mean a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company and to be in full force and effect on the date certified.
The term “Responsible Officers” of the Trustee shall mean and include the chairman or vice chairman of the board of directors of the Trustee, the chairman or vice chairman of the executive committee of said board, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller, any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge of and familiarity with the particular subject; and the term “Responsible Officer” shall mean and include any of said officers.




The term “Retired Bonds” shall mean: (1) any bonds authenticated and delivered under Article V, VI or VII of this Indenture (and not having been made the basis under any of the provisions of this Indenture of the authentication and delivery of bonds, the withdrawal of cash or the release of property, subject to the provisions of Section 11.03 and Section 11.05 hereof permitting the revocation of the waiver of the right to the authentication and delivery of bonds) that shall have been purchased, paid, retired, redeemed or cancelled or surrendered to the Trustee for cancellation or for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or shall then be held by the Trustee with irrevocable direction so to apply the same (provided that any such purchase, payment, retirement, redemption, cancellation or surrender of bonds shall have been, or is to be, effected otherwise than with cash which, after giving effect to the provisions of Sections 1.05 and 11.05 hereof, is then deemed to be or to have been Funded Cash, and, in the case of redemption, the notice required therefor shall have been given or have been provided for to the satisfaction of the Trustee); and (2) any bonds Outstanding, as therein defined, under the 1944 Mortgage on February 1, 1988 (and not having been made the basis under any of the provisions of this Indenture of the authentication and delivery of bonds, or the withdrawal of cash or the release of property under the 1944 Mortgage, subject to the provisions of Sections 59 and 61 thereof permitting the revocation of the waiver of the right to the authentication and delivery of bonds thereunder), which subsequent thereto shall have been paid, retired, redeemed, discharged or cancelled or surrendered to the Trustee under the 1944 Mortgage for cancellation, or for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or shall then be held by the Corporate Trustee under the 1944 Mortgage with irrevocable direction so to apply the same (provided that any such purchase, payment, retirement, redemption, cancellation or surrender of bonds shall have been, or is to be, effected otherwise than with cash which, after giving effect to the provisions of Sections 5 and 61 of the 1944 Mortgage, is then deemed to be or to have been Funded Cash under subdivision (b), (c) or (d) of the definition of Funded Cash), provided that, in the case of redemption, the notice required by Article X of the 1944 Mortgage shall have been given or have been provided for to the satisfaction of the Corporate Trustee under the 1944 Mortgage as evidenced by an Officers’ Certificate. For purposes of any Officers’ Certificate delivered pursuant to Section 6.01(3) hereof, bonds otherwise conforming to the requirements of this definition, which will, concurrently with the authentication and delivery of the bonds as to which said Officers’ Certificate pertains, be surrendered to the Trustee hereunder or to the Corporate Trustee under the 1944 Mortgage, as the case may be, for cancellation (otherwise than upon exchanges or transfers of bonds), shall be deemed to be “Retired Bonds”.
The term “SEC” shall mean the Securities and Exchange Commission or any successor agency.
The term “Space Satellites” shall mean any form of solar power satellites, space satellites, space stations and other analogous facilities whether or not in the Earth’s atmosphere.
The term “Trustee” shall mean Bank of Montreal Trust Company and shall also include its successors and assigns.
The term “Trustees” shall mean the Trustee and the Co-Trustee.
The term “underwriter” is defined in the last paragraph of Section 16.12 hereof.
Section 1.04    (I) The term “Property Additions” shall mean all property of the following description acquired by the Company after December 31, 1987: all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same; all power sites, flowage rights, water rights, water




locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power, all distribution systems; all service systems; all supply systems; Fuel Transportation Facilities; all power houses, gas plants, Space Satellites, street lighting systems, standards and other equipment incidental thereto; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generator and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, and pipe lines (including, but not limited to, gas pipe lines for supplying fuel to the Company’s plants), gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment and all other fixtures and personalty; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; and other property, real or personal, and improvements, extensions, additions, renewals or replacements, acquired by the Company by purchase, consolidation, merger, donation, construction, erection or in any other way whatsoever, or in the process of construction or erection and used or useful or to be used in or in connection with the business of generating, manufacturing, exploring for and developing, producing, transmitting, transporting, distributing, supplying or managing the use of energy or fuel in any form, including, without limitation, electricity or gas for light, heat, power, refrigeration or other purposes or of generating, manufacturing, producing, transmitting, transporting, distributing or supplying water for drinking, power, heat or other purposes or steam or hot water for power, heat or other purposes. The Term “Property Additions” shall not, however, include (1) any shares of stock, bonds, notes or other obligations or other securities or contracts, leases, or operating agreements, bills, notes and other instruments, accounts receivable, general intangibles or choses in action, or Deferred Grand Gulf I Costs, or (2) except as herein otherwise specifically provided, going value, good will, franchises or governmental permits or licenses granted to or acquired by the Company, as such, separate and distinct from the property operated thereunder or in connection therewith or incident thereto, or (3) any merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any rolling stock, buses, motor coaches, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; or rolling stock, buses, motor coaches, automobiles or other vehicles, or any aircraft (other than Fuel Transportation Facilities and Space Satellites), or (4) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system, or timber, minerals, mineral rights and royalties, or (5) any property, the cost of acquiring, making or constructing which is chargeable to operating expenses.





(II) When any Property Additions are certified to the Trustee in any certificate in any application under any of the provisions of this Indenture as the basis either of the authentication and delivery of bonds or of the release of property or the withdrawal of cash (except in the case of the release of property, or the withdrawal of cash representing the proceeds of insurance on or of the release of property or payment of or on account of obligations secured by purchase money mortgages, in each case on the basis of Property Additions’ acquired or constructed within ninety (90) days prior to the date of the application for such release, or to the receipt by the Trustee of such cash, or subsequent to such application or receipt of cash),

(A) there shall be deducted from the Cost or fair value thereof to the Company, as the case may be (as of the date so certified), an amount equal to the Cost (or as to Property Additions of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to this Section, then such fair value in lieu of Cost) of all Funded Property of the Company retired subsequent to December 31, 1987 (other than the Funded Property, if any, in connection with the application for the release of which such certificate is filed) and not theretofore deducted from the Cost or fair value to the Company of Property Additions theretofore certified to the Trustee, and

(B) there may, at the option of the Company, be added to such Cost or fair value, as the case may be, the sum of

(a) the principal amount of any obligations secured by purchase money mortgages and any cash (other than proceeds of such purchase money obligations), not theretofore so added and which the Company then elects so to add, received by the Trustee or the trustee or other holder of any prior lien, in either case representing the proceeds of insurance on, or of the release or other disposition of, Funded Property retired;

(b) ten-sevenths (10/7ths) of the principal amount of any bond(s) or fraction of a bond, not theretofore so added and which the Company then elects so to add, the right to the authentication and delivery of which under the provisions of Section 5.01 hereof shall have been waived as the basis of the release of Funded Property retired; and

(c) the Cost to the Company of any Property Additions not theretofore so added and which the Company then elects so to add, to the extent that the same shall have been substituted for Funded Property retired;

provided, however, that the aggregate of the amounts added under clause (B) above shall in no event exceed the amounts deducted under clause (A) above and provided further, that neither any reduction in the Cost or book value of property recorded in the plant account of the Company nor the transfer of any amounts appearing in such account to intangible and/or adjustment accounts otherwise than in connection with actual retirements of physical property abandoned, destroyed, released or disposed of, or retired from plant account, shall be deemed to be Funded Property retired for the purposes of this Section.
(III) The term “Cost”, with respect to Property Additions made the basis under any of the provisions of this Indenture of the authentication and delivery of bonds, or the withdrawal of cash or the release of property shall mean the sum of (i) any cash forming a part of such Cost, (ii) an amount equivalent to the fair market value in cash (as of the date of delivery) of any securities delivered in payment therefor or for the acquisition thereof, (iii) the principal amount of any prior lien bonds secured by prior lien upon such Property Additions, outstanding at




the time of their acquisition, and (iv) the principal amount of any other indebtedness incurred or assumed as all or part of the Cost to the Company of such Property Additions; provided, however, that, notwithstanding any other provision of this Indenture, in any case where Property Additions shall have been acquired (otherwise than by construction) by the Company without any consideration consisting of cash, property or securities or the incurring or assumption of indebtedness, no determination of Cost shall be required, and wherever in this Indenture provision is made for Cost or fair value, the Cost, in such case, shall mean an amount equal to the fair value thereof.

In case any Property Additions are shown by the Engineer’s Certificate provided for in subdivision (3) of Section 5.05 hereof to include property which has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company, the Cost thereof may include the amount of cash or the value of any portion of the securities paid or delivered for any rights and intangible property simultaneously acquired for which no separate or distinct consideration shall have been paid or apportioned, and in such case the term Property Additions as defined herein may include such rights and intangible property.
For the purposes of the deductions required by this Section, the Cost and/or the fair value to the Company of Funded Property retired shall be determined as follows: in the case of property which was owned by the Company on December 31, 1987, the Cost thereof shall be the Cost as shown on the books of the Company, or if not so separately shown, the Cost as estimated by the Company; and in the case of Property Additions retired, the Cost or the fair value thereof to the Company shall be the Cost or the fair value thereof to the Company as shown by the Engineer’s Certificate or Independent Engineer’s Certificate furnished to the Trustee at the time such Property Additions became Funded Property, or, if not separately shown in such certificate, shall be such portion of the Cost or the fair value to the Company of Property Additions shown in such certificate as shall be allocated to such Property Additions retired in any Engineer’s Certificate subsequently delivered to the Trustee, and in case such Property Additions shall not have been included in any Engineer’s Certificate or Independent Engineer’s Certificate theretofore furnished to the Trustee, the Cost or the fair value thereof to the Company shall be as shown, as of the time when they become Funded Property, in an Engineer’s Certificate then delivered to the Trustee.

Section 1.05.    The term “Funded Property” shall mean:

(1) all property, except property expressly excepted from the Lien of this Indenture, owned by Mississippi Power & Light Company on December 31, 1987;

(2) all Property Additions to the extent that the same shall have been made the basis of the authentication and delivery of bonds under this Indenture;

(3) all Property Additions to the extent that the same shall have been made the basis of the release of property from the Lien of this Indenture, subject, however, to the provisions of Section 11.03 hereof;

(4) all Property Additions to the extent that the same shall have been substituted (otherwise than under the release or cash withdrawal provisions hereof) for Funded Property retired;





(5) all Property Additions to the extent that the same shall have been made the basis of the withdrawal of any Funded Cash, as hereinafter defined, held by the Trustee hereunder subject, however, to the provisions of Section 9.05 hereof and clause (a) of Section 11.05 hereof, and except to the extent that any such Property Additions shall no longer be deemed to be Funded Property in accordance with the provisions of clause (b) of Section 11.05 hereof; and

(6) all Property Additions to the extent that the same shall have been made the basis of the release, or substituted for cash made the basis of the release, from the lien of the 1944 Mortgage of property that had been made the basis of the authentication and delivery of bonds thereunder, or that had been substituted for such property.

In the event that in any certificate filed with the Trustee in connection with any of the transactions referred to in clauses (2), (3), (5) and (6) of this Section only a part of the Cost or fair value of the Property Additions described in such certificate shall be required for the purposes of such certificate, then such Property Additions shall be deemed to be Funded Property only to the extent so required for the purpose of such certificate.
All Funded Property that shall be retired on the books of the Company from plant account (but not including Funded Property removed from plant account on the books of the Company as a result of or reflecting action of any regulatory authority having jurisdiction over the rates and services of the Company requiring or mandating a direct or indirect disallowance of plant costs for ratemaking purposes under circumstances in which the Trustee shall have been furnished, within 180 days subsequent to such action of such regulatory authority, a certificate signed by an Independent Engineer, appraiser or other expert complying with the requirements of Section 19.05 hereof and stating the signer’s opinion to the effect that (i) such Funded Property is used or useful or to be used in or in connection with the business of generating, manufacturing, exploring for and developing, producing, transmitting, transporting, distributing, supplying or managing the use of energy or fuel in any form, including, without limitation, electricity or gas for light, heat, power, refrigeration or other purposes or of generating, manufacturing, producing, transmitting, transporting, distributing or supplying water for drinking, power, heat or other purposes or steam or hot water for power, heat or other purposes and (ii) the fair value of such Funded Property to the Company immediately following such action of such regulatory authority is at least equal to the fair value thereof to the Company immediately prior to such action) or abandoned, destroyed, released or otherwise disposed of shall for the purpose of Section 1.04 hereof be deemed Funded Property retired and for other purposes of this Indenture shall thereupon cease to be Funded Property but as in this Indenture provided may at any time thereafter again become Funded Property.
The term “Funded Cash” shall mean:
(a) cash, held by the Trustee hereunder, to the extent that it represents the proceeds of insurance on or the release of or the taking by eminent domain of property or the proceeds of the release of obligations secured by purchase money mortgage which obligations have been delivered to the Trustee pursuant to Article XI hereof and used as a credit in any application for the release of property hereunder, or the proceeds of payment to the Trustee on account of the principal of obligations secured by purchase money mortgage which obligations have been delivered to it pursuant to Article XI hereof and used as a credit in any application for the release of property hereunder; and

(b) any cash deposited with the Trustee under Section 7.01 and/or 9.12 hereof.




Section 1.06.    The term “Excepted Encumbrances” shall mean as of any particular time any of the following:

a. liens for taxes, assessments or governmental charges not then delinquent and liens for worker’s compensation awards and similar obligations not then delinquent and undetermined liens or charges incidental to construction or repair work, and liens for taxes, assessments or governmental charges then delinquent but the validity of which is being contested at the time by the Company in good faith as provided in Section 9.04 hereof
;
b. any liens securing indebtedness, neither assumed nor guaranteed by the Company nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Company for substation, transmission line, transportation line, distribution line or right of way purposes;

c. rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to terminate such right, power, franchise, grant, license or permit or to purchase or recapture or to designate a purchaser of any of the property of the Company;

d. rights reserved to or vested in others to take or receive any part of the power, gas, oil or other minerals or timber generated, developed, manufactured or produced by, or grown on, or acquired with, any property of the Company;

e. easements, restrictions, exceptions or reservations in any property and/or rights of way of the Company for the purpose of roads, pipe lines, distribution lines, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment, and defects, irregularities and deficiencies in titles of any property and/or rights of way, which do not materially impair the use of such property and/or rights of way for the purposes for which such property and/or rights of way are held by the Company;

f. rights reserved to or vested in any municipality or public authority to control or regulate any property of the Company, or to use such property in a manner which does not materially impair the use of such property for the purposes for which it is held by the Company;

g. any obligations or duties, affecting the property of the Company, to any municipality or public authority with respect to any franchise, grant, license or permit;

h. any controls, liens, restrictions, regulations, easements, exceptions or reservations of any governmental authority applying to the property or facilities of the Company;

i. any controls, liens, restrictions, regulations, easements, exceptions or reservations of any governmental authority applying particularly to Space Satellites; or

j. the lien of the 1944 Mortgage.





Section 1.07.    The term “Net Earning Certificate” shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and an accountant, who unless required to be independent, may be an officer or employee of the Company, stating:

(A) the Adjusted Net Earnings of the Company for a period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the first day of the month in which the application for the authentication and delivery under this Indenture of bonds then applied for is made, specifying:

(1) its operating revenues, which may include revenues collected by the Company subject to possible refund at a future date, with the principal divisions thereof;

(2) its operating expenses, with the principal divisions thereof, including, without limitation, all expenses and accruals for repairs and maintenance and all appropriations out of income for property retirement in respect of all property owned by the Company;

(3) the amount remaining after deducting the amount required to be stated in such certificate by clause (2) of this Section from the amount required to be stated therein by clause (1) of this Section;

(4) its rental revenues (net) not otherwise included in such certificate;

(5) the sum of the amounts required to be stated in such certificate by clauses (3) and (4) of this Section;

(6) its other income or loss (net);

(7) the amount, if any, by which the amount of other income or loss (net) required to be stated in such certificate by clause (6) of this Section exceeds, without regard to whether such net amount constitutes income or loss, ten per centum (10%) of the amount required to be stated in such certificate by clause (5) of this Section;

(8) the amount remaining after reducing the amount required to be stated in such certificate by clause (6) of this Section by the amount required to be stated therein by clause (7) of this Section; and

(9) the Adjusted Net Earnings of the Company for such period of twelve (12) consecutive calendar months (being the sum of the amounts required to be stated in such certificate by clauses (5) and (8) of this Section);

(B) the Annual Interest Requirements, being the interest requirements, if any, for twelve (12) months upon:

(i)      all bonds Outstanding hereunder at the date of such certificate, except any for the payment of which the bonds applied for are to be issued; provided that, if any such series of Outstanding bonds bears interest at a variable rate, then the interest on such series of bonds shall be computed at the average annual rate in effect for such series during the period of twelve (12) consecutive calendar months (or any portion thereof in which bonds of such series




are Outstanding) being used for the calculation of Adjusted Net Earnings; and if such Outstanding bonds have been issued after the end of such twelve (12) consecutive calendar months, then computed at the initial rate upon issuance;
(ii)      all bonds then applied for in pending applications, including the application in connection with which such certificate is made, computed at the initial rate upon issuance;
(iii)      all bonds Outstanding, as therein defined, under the 1944 Mortgage (other than bonds pledged or delivered as security to the Trustee hereunder) and the principal amount of all other indebtedness (except indebtedness for the payment of which the bonds applied for are to be issued and indebtedness for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or be held by the Trustee or the trustee or other holder of a lien prior to the Lien of this Indenture upon property subject to the Lien of this Indenture with irrevocable direction so to apply the same; provided that, in the case of redemption, the notice required therefor shall have been given or have been provided for to the satisfaction of the Trustee), outstanding in the hands of the public on the date of such certificate and secured by lien prior to the Lien of this Indenture upon property subject to the Lien of this Indenture, if said indebtedness has been assumed by the Company or if the Company customarily pays the interest upon the principal thereof.
In calculating such Adjusted Net Earnings, all the Company’s expenses for taxes (other than income, profits and other taxes measured by, or dependent on, net income), assessments, rentals and insurance shall be included in its operating expenses, or otherwise deducted from its revenues and income; provided, however, that in calculating such Adjusted Net Earnings (x) no expenses or provisions for interest on any of its indebtedness or for the amortization of debt discount, premium and expense, or loss on reacquired debt, amortization of property (other than depreciation or other similar provisions for property retirement), or for other amortization, or for any other extraordinary charge to income of whatever kind or nature, or for refunds of revenues previously collected by the Company subject to possible refund, or for any improvement or sinking fund or other device for the retirement of any indebtedness, shall be required to be included in operating expenses to be deducted from, or shall be otherwise required to be deducted from, its revenues or its other income and (y) no extraordinary items of any kind or nature (determined in accordance with sound accounting practices), no write-off occasioned by and reflecting action of any regulatory authority having jurisdiction over the rates and services of the Company requiring a direct or indirect disallowance of plant costs for rate-making purposes (whether or not the amount thereof would be required, for financial statement reporting purposes, to be recorded as a component of income from continuing operations), and no write-off of previously recorded Deferred Grand Gulf I Costs required as a result of the failure of any rate order or authorization, issued or granted by any regulatory authority having jurisdiction over the rates and services of the Company, to comply with or satisfy the standards of applicable generally accepted accounting principles and practices with respect to the recording of Deferred Grand Gulf I Costs as assets in accordance with such standards (whether or not the amount thereof would be required, for financial statement reporting purposes, to be recorded as a component of income from continuing operations) shall be required to be included in making such calculation.
If any of the property of the Company owned by it at the time of the making of any Net Earning Certificate shall have been acquired during or after any period for which Adjusted Net Earnings of the Company are to be computed, the Adjusted Net Earnings of such property (computed in the manner in this Section provided for the computation of the Adjusted Net Earnings of the Company) during such period or such part of such period as shall have preceded the acquisition thereof, to the extent that the same have not otherwise been included and unless such property shall have been acquired in exchange or




substitution for property the earnings of which have been included, may, at the option of the Company, be included in the Adjusted Net Earnings of the Company for all purposes of this Indenture, and shall be included if such property has been operated as a separate unit or if the earnings therefrom are readily ascertainable.
In any case where a Net Earning Certificate is required as a condition precedent to the authentication and delivery of bonds, such certificate shall also be made and signed by an independent public accountant, if the aggregate principal amount of bonds then applied for plus the aggregate principal amount of bonds authenticated and delivered hereunder since the commencement of the then current calendar year (other than those with respect to which a Net Earning Certificate is not required, or with respect to which a Net Earning Certificate made and signed by an independent public accountant has previously been furnished to the Trustee) is ten per centum (10%) or more of the sum of (a) the aggregate principal amount of the bonds at the time Outstanding hereunder and (b) the aggregate principal amount of the bonds at the time Outstanding, as therein defined, under the 1944 Mortgage; but no Net Earning Certificate need be made and signed by any person other than the Chairman of the Board, Chief Executive Officer, President or a Vice President and an accountant, as to dates or periods not covered by annual reports required to be filed by the Company, in the case of conditions precedent which depend upon a state of facts as of a date or dates or for a period or periods different from that required to be covered by such annual reports.
Each such certificate shall include the statements required by Section 19.05 hereof.
The phrase “appropriations out of income for property retirement”, and other phrases of similar import shall be deemed to include not only charges made upon a retirement accounting theory but also charges made on any depreciation or other accounting theory intended to provide for retirement of property.
Unless otherwise specifically provided with respect to a series of bonds, if interest on any bonds Outstanding hereunder is payable solely in the coin or currency of a foreign nation, then the Annual Interest Requirements for such bonds included in any Net Earning Certificate shall be based upon the Federal noon buying rate (on a date within ten (10) days prior to the date of the application for the authentication and delivery under this Indenture of such bonds) of such foreign coin or currency in The City of New York, New York or if such noon buying rate is not available to the signers of such certificate, then such other rate as may be determined by the signers of such certificate upon a specified commercially reasonable basis.
ARTICLE II

FORMS, EXECUTION, REGISTRATION AND EXCHANGE OF BONDS

Section 2.01.    So long as any of the bonds issued under the 1944 Mortgage are outstanding, bonds issued hereunder shall be known as “General and Refunding Mortgage Bonds” and thereafter upon the discharge of the lien of the 1944 Mortgage may be entitled “First Mortgage Bonds”. Upon such discharge, holders of General and Refunding Mortgage Bonds shall have the right to exchange their bonds for bonds entitled First Mortgage Bonds. At the option of the Company, the bonds issued hereunder may be issued in one or more series, the bonds of each series maturing on such date or dates and bearing interest at such rate or rates as the Board of Directors of the Company prior to the authentication thereof may authorize. The form of each series of bonds issued hereunder and of the coupons to be attached to the coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company. The bonds and coupons of any one or more series may be expressed in one or more foreign languages, if also expressed




in the English language. The English text shall govern the construction thereof and both or all texts shall constitute but a single obligation. The text of the coupon bonds, coupons, fully registered bonds and the Trustee’s authentication certificate shall be respectively of substantially the tenor and purport hereinbefore recited; provided, however, that the form of each series, as established by the Board of Directors, shall specify the descriptive title of the bonds (which may contain the words “General and Refunding Mortgage Bond” or when bonds are no longer Outstanding, as therein defined, under the 1944 Mortgage, may contain the words “First Mortgage Bond”), if any, the designation of the series, the date of the coupon bonds of that series, the rate or rates (or the basis for the determination thereof) of interest, if any, to be borne by the bonds of that series, the coin or currency in which payable (which need not be coin or currency of the United States of America), the date or dates of maturity, the dates for the payment of interest, and a place or places for the payment of principal and interest. Any series of bonds to the extent issued in registered form may have provisions providing for record dates for the payment of interest. Any series of bonds may also have such omissions or modifications or contain such other provisions not prohibited by the provisions of this Indenture as the Board of Directors may, in its discretion, cause to be inserted therein, including, but not limited to, the following:

(a) specifying any additional place or places, either in the United States of America or elsewhere, for the payment of principal and/or interest and/or a place or places for the registration of bonds and/or the transfer of bonds;

(b) expressing any obligation of the Company for the payment of the principal of the bonds of that series or the interest thereon, or both, without deduction for taxes and/or for the reimbursement of taxes in case of payment by the bondholders, it being agreed that such obligation may be limited to taxes imposed by any taxing authorities of a specified class and may exclude from its operation or be limited to any specified tax or taxes or any portion thereof; and/or expressing any obligation of the Company for the creation of a sinking fund or other analogous device for the bonds of that series, and/or expressing an obligation of the Company for the redemption, purchase or other acquisition of the bonds of that series at the election of bondholders upon the occurrence of specified events, and/or expressing any obligation of the Company to permit the conversion of bonds of that series into capital stock of the Company or of any other corporation of any designated class or classes;

(c) permitting the bondholders to make, at a specified place or places, any or all of the following exchanges, viz., exchanges of coupon bonds for fully registered bonds; exchanges of fully registered bonds for coupon bonds; exchanges of coupon bonds for coupon bonds of other authorized denominations; exchanges of fully registered bonds for fully registered bonds of other authorized denominations; exchanges of bonds of one series for bonds of another series; exchanges of bonds containing the words “General and Refunding Mortgage” for bonds containing the words “First Mortgage” when bonds are no longer Outstanding, as therein defined, under the 1944 Mortgage; and exchanges of bonds of one series for bonds of a successor to the Company, whether by merger, consolidation or sale or other disposition of all or substantially all the assets of the Company; and such privilege of exchange may in any case be made subject to such conditions, limitations or restrictions as the Board of Directors may determine and the privilege of exchange may in any case be conferred upon the holders of bonds of one or more denominations and withheld from the holders of bonds of other denominations of the same series and may in any case be conferred on the holders of fully registered bonds and withheld from the holders of coupon bonds or vice versa;





(d) reserving to the Company the right to redeem all or any part of the bonds of that series before maturity at a time or times and at a redemption price or prices to be specified in the form of bond;

(e) reserving to the Company the right to create fully registered bonds that may be registered as to the payment of principal to one holder and to the payment of interest to another holder;

(f) complying with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or conforming to usage;

(g) expressing an obligation of the Company to make payments of principal, premium (if any) and interest on the bonds of that series by wire or other electronic transfer of funds to or for the order of the holder or holders thereof; and/or

(h) in any other respect expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under this Indenture.

For the purposes of calculations under this Indenture (including calculations of principal amount under Articles IV, V, VI, VII and XVIII), the principal amount of any series of bonds Outstanding hereunder payable in a foreign coin or currency payable in a foreign coin or currency shall be based upon the Federal noon buying rate of such foreign coin or currency in The City of New York, New York (or, if such noon buying rate is not available to the signers of the Officers’ Certificate forming a part of the application for the authentication and delivery under this Indenture for the initial authentication and delivery of such bonds, then such other rate as may be determined by the signers of such certificate on a commercially reasonable basis) on a date within ten (10) days prior to the date of such application for authentication and delivery (and set forth in the Officers’ Certificate forming a part of such application) or on such other basis as may be provided in the supplemental indenture creating such series. Such principal amount in coin or currency of the United States of America shall not be changed for subsequent calculations of the principal amount of such bonds after the initial determination, but the determination of interest shall be recalculated as required from time to time by the provisions of Section 1.07 hereof.
Section 2.02.    Any series of bonds may be executed, authenticated and delivered originally as coupon bonds and/or as fully registered bonds, of such denomination or denominations as the Board of Directors of the Company may from time to time authorize.

Section 2.03.    Unless otherwise specifically provided with respect to a series of bonds, fully registered bonds shall be dated as of the date of authentication. Unless other provisions (including, but not limited to, provisions establishing record dates for the payment of interest) are specifically provided with respect to a series of bonds, fully registered bonds shall bear interest from the beginning of the current interest period for that series; provided, however, that if any fully registered bond shall be authenticated and delivered upon a transfer of, or in exchange for or in lieu of, any bond or bonds upon which interest is in default, it shall be dated so that such bond shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such fully registered bond shall have been delivered, unless otherwise specifically provided with respect to a series of bonds. The coupon bonds of each series of bonds issued hereunder shall be dated as of such date as may be determined by the Board of Directors of the Company and designated in the form established for such series.





Section 2.04.    Any bond may have imprinted thereon or included therein any legend or legends required in order to comply with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or to conform to usage, and the Board of Directors of the Company by Resolution may at any time amend the form of any legend to be used on bonds then Outstanding so as to comply with any such law, rule or regulation, or so as to conform to usage.

Section 2.05.    Unless otherwise specifically provided with respect to a series of bonds, in all cases in which the privilege of exchanging bonds exists and is exercised, the bonds to be exchanged shall be surrendered at such place or places as shall be designated by the Board of Directors of the Company for the purpose, with all unmatured coupons appertaining thereto (in the case of coupon bonds) and the Trustee shall authenticate and the Company shall deliver in exchange therefor the bond or bonds which the bondholder making the exchange shall be entitled to receive, having attached thereto, in the case of coupon bonds, all unmatured coupons appertaining thereto. In case at the time of any such exchange, interest on the bonds of such series is in default, all coupon bonds of such series surrendered for exchange and delivered in exchange shall have attached thereto all matured coupons in default unless such coupons have heretofore been previously surrendered. All bonds so surrendered for exchange shall be in bearer form, or if registered, accompanied, by a written instrument or instruments of transfer wherever required by the Company duly executed by the registered owner or his duly authorized attorney. All bonds so surrendered for exchange and the coupons appertaining thereto shall be cancelled by the Trustee. Upon any transfer of bonds as permitted by the next succeeding Section, and upon any exchange of bonds, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge and in addition may charge a sum not exceeding a sum, if any, provided as a term of such series of bonds for each bond authenticated and delivered upon any such transfer or exchange, which sum shall be paid by the party requesting such transfer or exchange as a condition precedent to the exercise of the privilege of making such transfer or exchange. The Company shall not be required to make transfers or exchanges of bonds of any series for a period of fifteen (15) days next preceding any interest payment date of said series (unless such series has a record date for the payment of interest), or next preceding any designation of bonds of said series to be redeemed. The Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.

Section 2.06.    The Company shall keep, at such place or places as shall be designated for the purpose, books for the registration and transfer of bonds issued hereunder, which, at all reasonable times, shall be open for inspection by the Trustee; and upon presentation for such purpose at any such place or places, the Company will register or cause to be registered therein, and permit to be transferred thereon, under such reasonable regulations as it may prescribe, any bonds issued under this Indenture and entitled to registration or transfer at such office. Upon the registration of any coupon bond as to principal, the fact of such registration shall be noted on such bond. Upon the transfer of any registered bond, the Trustee shall authenticate and the Company shall issue in the name of the transferee or transferees a new registered bond or new registered bonds of the same series for a like principal amount. All registered bonds so surrendered for transfer shall be cancelled by the Trustee.

Section 2.07.    All bonds authenticated and delivered hereunder shall, from time to time, be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents, whose signature may be facsimile, and its corporate seal shall be thereon impressed or imprinted and attested by its Secretary or one of its Assistant Secretaries, whose signature may be facsimile. The coupons to be attached to coupon bonds shall bear the facsimile signature of the Treasurer or any Assistant Treasurer of the Company. In case any of the officers who shall have signed any bonds or attested the seal thereon, or whose facsimile signature appears on any coupon, shall cease to be such officer of the Company before the bonds so signed and/or sealed shall have been actually authenticated




and delivered by the Trustee or issued by the Company, such bonds nevertheless may be authenticated, delivered and/or issued with the same force and effect as though the person or persons who signed such bonds and/or attested the seal thereon and/or whose facsimile signature appears on any coupon had not ceased to be such officer or officers of the Company. Before authenticating any coupon bonds, the Trustee shall cut off and cancel all matured coupons thereto attached (except as otherwise provided or permitted in Sections 2.05 and 2.09 hereof).

Section 2.08.    There may be authenticated and delivered and issued from time to time in lieu of (or in exchange for) any definitive bond or bonds issued or issuable under this Indenture one or more temporary bonds substantially of the tenor of the bonds hereinbefore described, with or without one or more coupons, and with or without the privilege of registration as to principal only, or as to both principal and interest, and such temporary bond or bonds may be in such denomination or denominations as the Board of Directors of the Company may determine. Until a definitive bond or bonds secured hereby are delivered in exchange therefor, each such temporary bond or bonds shall be entitled to the Lien and benefit of this Indenture. Upon the exchange by the Company of definitive coupon bonds or definitive fully registered bonds for temporary bonds (which exchange the Company shall make on request of, and without charge to, the holder, when definitive bonds are ready for delivery) such temporary bond or bonds and any unmatured coupons appertaining thereto shall be cancelled by the Trustee. When and as interest is paid upon any unregistered temporary bond without coupons, the fact of such payment shall be noted thereon and interest due on any temporary bond which is represented by a coupon shall be paid only upon presentation and surrender of such coupon for cancellation. Unregistered temporary bonds without coupons of any series shall bear interest from the beginning of the current interest period for bonds of that series in which such unregistered temporary bonds without coupons shall be authenticated. The holder of one or more temporary bonds may exchange the same on the surrender thereof, for cancellation, in bearer form with all unmatured coupons, if any, appertaining thereto, or, if registered, accompanied by a written instrument or instruments of transfer, wherever required by the Company, duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company, and shall be entitled to receive a temporary bond or bonds of the same series of like aggregate principal amount of such other denominations as the Board of Directors of the Company may determine to issue in exchange.

Section 2.09.    Upon receipt by the Company and the Trustee of evidence satisfactory to them of the theft, loss, destruction or mutilation of any bond Outstanding hereunder and/or the coupons appertaining thereto, and of indemnity satisfactory to them, and upon payment, if the Company or the Trustee shall require it, of a reasonable charge and upon reimbursement to the Company and the Trustee of all reasonable expense incident thereto, and upon surrender and cancellation of such bond, if mutilated, and the coupons appertaining thereto, if any, the Company may execute, and the Trustee shall thereupon authenticate and deliver, a new bond of like tenor and of the same series with all unpaid coupons, if any, appertaining thereto in lieu of such stolen, lost, destroyed or mutilated bond and coupons, if any, or if any such bond or any coupon shall have matured or be about to mature, instead of issuing a substituted bond or coupon the Company may pay the same without surrender thereof. Any indemnity bond shall name as obligees the Company, the Trustee, and if requested by the Company, any paying agent.

Section 2.10.    No bond shall be secured hereby unless there shall be endorsed thereon the certificate of the Trustee, substantially in the form hereinbefore recited, that it is one of the bonds (or temporary bonds) of the series therein designated, herein described or provided for; and such certificate on any such bond shall be conclusive evidence that such bond has been duly authenticated and delivered by the Trustee and when delivered by the Company will be secured hereby.





Section 2.11.    The Company may provide for the payment of principal of and/or interest on bonds of any series at one or more places in foreign countries, and/or in the coin or currency of any foreign nation.


ARTICLE III

GENERAL PROVISIONS AS TO ISSUANCE OF BONDS

Section 3.01.    The aggregate principal amount of bonds which may be secured by this Indenture is unlimited except as provided by the terms hereof.

Section 3.02.    Nothing in this Indenture contained shall limit the power of the Board of Directors of the Company (in conformity with applicable law) to fix the price at which the bonds authenticated and delivered under any of the provisions of this Indenture may be issued, exchanged, sold or disposed of, but any or all of said bonds may be issued, exchanged, sold or disposed of upon such terms and for such consideration as the Board of Directors of the Company may deem fit.


ARTICLE IV

ISSUANCE OF BONDS UPON THE BASIS OF
DEFERRED GRAND GULF I COSTS

Section 4.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds of one or more series, registered as to principal, under the provisions of this Section 4.01, upon the basis of Deferred Grand Gulf I Costs, in an aggregate principal amount not exceeding Four Hundred Million Dollars ($400,000,000), but only after the Trustee shall have received the following:

(1) the Resolution provided for in subdivision (1) of Section 5.05 hereof;

(2) the Officers’ Certificate provided for in subdivision (2) of Section 5.05 hereof;

(3) an Officers’ Certificate stating that (a) the bonds for which application is made are to be authenticated and delivered under this Section 4.01, (b) the aggregate principal amount of all Outstanding bonds authenticated and delivered under this Section 4.01, including the bonds for which application is made, will not exceed fifty per centum (50%) of the uncollected balance of the Deferred Grand Gulf I Costs as of the end of the most recent month preceding the authentication and delivery of bonds for which application is made as to which financial statements of the Company are available and in any event as of a date not more than fifty-one (51) days prior to the date of such authentication and delivery, and (c) the uncollected balance of Deferred Grand Gulf I Costs referred to in clause (b) above is either (i) properly recorded as an asset on the books of the Company in accordance with generally accepted accounting principles and practices in use at the time by companies operating like properties, or (ii) if not so recorded in accordance with such generally accepted accounting principles and practices, is nevertheless recorded as an asset on the books of the Company reflecting the terms of a rate order or




authorization then in effect, issued or granted by a regulatory authority having jurisdiction over the retail rates and services of the Company, providing for the recovery of such Deferred Grand Gulf I Costs (in which case, such Officers’ Certificate shall be accompanied by a certificate made and signed by an independent public accountant to such effect);

(4) a Net Earning Certificate showing the Adjusted Net Earnings of the Company to be as required by Section 5.04 hereof;

(5) an Opinion of Counsel as provided for in subdivision (8) of Section 5.05 hereof; and

(6) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in Subdivision (5) of this Section.

Section 4.02.    The bonds of any single series authenticated and delivered in accordance with the provisions of Section 4.01 of this Indenture shall be authenticated and delivered based entirely upon the provisions of said Section 4.01 and shall not be authenticated and delivered in part in accordance with the provisions of Article V, VI or VII of this Indenture.


ARTICLE V

ISSUANCE OF BONDS UPON THE BASIS OF PROPERTY ADDITIONS

Section 5.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds hereunder of one or more series upon the basis of Property Additions, but only in accordance with and subject to the conditions, provisions and limitations set forth in this Article V.

Section 5.02.    No bonds shall be authenticated and delivered at any time under the provisions of this Article V upon the basis of Funded Property.

Section 5.03.    Bonds of any one or more series may be authenticated and delivered under the provisions of this Article V upon the basis of Property Additions for a principal amount not exceeding seventy per centum (70%) of the balance of the Cost or of the fair value thereof to the Company (whichever shall be less) after making any deductions and any additions pursuant to Section 1.04 hereof.

Section 5.04.    No bonds shall be authenticated and delivered upon the basis of Property Additions or pursuant to Section 4.01 hereof, unless, as shown by a Net Earning Certificate, the Adjusted Net Earnings of the Company for the period therein referred to shall have been in the aggregate at least equivalent to twice the Annual Interest Requirements as shall be specified, pursuant to the provisions of subdivision (B) of Section 1.07 hereof, in such Net Earning Certificate. Notwithstanding the foregoing, no Net Earning Certificate is required in connection with the authentication and delivery of PIK Bonds.

Section 5.05.    No bonds shall be authenticated or delivered hereunder by the Trustee upon the basis of Property Additions until the Trustee shall have received the following:




(1) a Resolution requesting the Trustee to authenticate and deliver bonds, (a) specifying the principal amount of bonds called for, the series thereof and any other matters with respect thereto required by this Indenture, and (b) specifying the officer or officers of the Company to whom, or upon whose written order, such bonds shall be delivered;

(2) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and stating that to the knowledge of the signers none of the events which itself or with a lapse of time or the giving of notice or both would constitute a Default hereunder has occurred and is continuing;

(3) an Engineer’s Certificate made and dated not more than ninety (90) days prior to the date of such application:

(a) describing in reasonable detail the Property Additions made the basis of the application;

(b) stating that all the Property Additions made the basis of the application are Property Additions as defined in Section 1.04 hereof;

(c) stating that such Property Additions are desirable for use in the proper conduct of the business of the Company;

(d) stating that such Property Additions, to the extent of the Cost or fair value thereof (whichever is less) to the Company made the basis of the application, do not consist of Funded Property;

(e) stating, except as to Property Additions acquired, made or constructed wholly through the delivery of securities, that the amount of cash forming all or part of the Cost thereof was equal to or more than an amount to be stated therein;

(f) briefly describing, with respect to any Property Additions acquired, made or constructed in whole or in part through the delivery of securities, the securities so delivered and stating the date of such delivery;

(g) stating what part, if any, of such Property Additions includes property which within six months prior to the date of acquisition thereof by the Company has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and showing whether or not the fair value thereof to the Company is less than Twenty-five Thousand Dollars ($25,000) and whether or not the fair value thereof to the Company is less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds Outstanding, as therein defined, under the 1944 Mortgage;

(h) stating, except as to Property Additions in respect to the fair value to the Company of which a statement is to be made in an Independent Engineer’s Certificate as provided for in subdivision (4) of this Section, that the fair value to




the Company as of the date of such certificate of such Property Additions is a specified amount;

(i) stating the amount required to be deducted under the provisions of subdivision (A) of Section 1.04 hereof and the amount elected to be added under the provisions of clauses (a), (b) and (c) of subdivision (B) of Section 1.04 hereof in respect of Funded Property retired of the Company; and

(j) stating that the easements, restrictions, exceptions, reservations or rights, if any, of the character mentioned in clauses (e) and (f) of Section 1.06 hereof, to which any property or rights of way included in such Property Additions are subject, and the defects, irregularities and deficiencies in titles of the character mentioned in said clauses of any property or rights of way included in such Property Additions do not materially impair the use of such property or rights of way for the purposes for which the same are held by the Company;

(4) In case any Property Additions are shown by the Engineer’s Certificate provided for in subdivision (3) above to include property which within six months prior to the date of acquisition thereof by the Company has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and such certificate does not show the fair value thereof to the Company, as of the date of such certificate, to be less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds Outstanding, as therein defined, under the 1944 Mortgage, a further certificate consisting of an Independent Engineer’s Certificate stating as to such Property Additions which have been so used or operated and (at the option of the Company) as to any other Property Additions included in the Engineer’s Certificate provided for in subdivision (3) of this Section that the then aggregate fair value thereof to the Company, as of the date of such Independent Engineer’s Certificate, in the opinion of the signer is a specified amount; and in the case of the authentication and delivery of bonds, the fair value to the Company in the opinion of the signer of any property so used or operated which has been subjected to the Lien of this Indenture since the commencement of the then current calendar year as the basis for the authentication and delivery of bonds, and as to which an Independent Engineer’s Certificate has not previously been furnished to the Trustee;

(5) In case any Property Additions are shown by the Engineer’s Certificate provided for in subdivision (3) above to have been acquired, made or constructed in whole or in part through the delivery of securities, a written appraisal of an engineer, appraiser or other expert person, firm or corporation, stating in the opinion of the signer the fair market value in cash of such securities at the time of delivery thereof in payment for or for the acquisition of such Property Additions;

(6) A Net Earning Certificate showing the Adjusted Net Earnings of the Company to be as required by Section 5.04 hereof;

(7) an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating the signer’s opinion to the effect that:





(a) (except as to paving, grading and other improvements to, under or upon public highways, bridges, parks or other public property of analogous character) this Indenture is, or upon the delivery of, and/or the filing and/or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, will be, a lien on all the Property Additions made the basis of such application, subject to no lien thereon prior or equal to the Lien of this Indenture except Excepted Encumbrances, and that the Company has the right to remove any such Property Additions which are located on any leasehold or which are on property as to which the Company has an easement, prior to or upon the termination of such leasehold or easement, without compensation or other remuneration and free of any lien prior or equal to the Lien of this Indenture, except Excepted Encumbrances; and

(b) the Company has corporate authority to operate the Property Additions in respect to which such application is made; and

(8) an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating the signer’s opinion to the effect that:

(a) the issue of the bonds has been duly authorized by the Company;

(b) the issue of the bonds has been duly authorized by any and all governmental authorities the consent of which is requisite to the legal issue of such bonds, specifying any officially authenticated certificates, or other documents, by which such consent is or may be evidenced, or that no consent of any governmental authorities is requisite;

(c) the Company has sold or contracted to sell or to issue for value such bonds, or contracted to pledge such bonds to secure other indebtedness of a principal amount not less than seventy-five per centum (75%) of the principal amount of such bonds, or issued or pledged such bonds to effectively secure the Company’s payment obligations pursuant to Section 5D of that certain Bond Purchase Agreement, dated as of December 17, 1987, between the Company and the Purchaser named therein; and

(d) the requirements of any tax law applicable to the issuance of the bonds have been complied with;

(9) copies of the instruments of conveyance, assignment and transfer, if any, specified in the Opinion of Counsel provided for in subdivision (7) above; and

(10) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in subdivision (8) above.

If, in order to render the Opinion of Counsel provided for in subdivision (7) or subdivision (8) above, the signer thereof shall deem it necessary that additional facts or matters be stated in the Engineer’s Certificate provided for in subdivision (3) above, then in such event the Engineer’s Certificate may state all such additional facts or matters as the signer of such Opinion of Counsel may request.




The amount of the Cost of any Property Additions and the fair value thereof to the Company and the fair market value in cash of any securities so delivered in payment therefor or for the acquisition thereof and the amount of any deductions and any additions made pursuant to Section 1.04 hereof shall be determined for the purposes of this Article V by the appropriate certificate provided for in this Section.
ARTICLE VI

ISSUANCE OF BONDS UPON RETIREMENT OF CERTAIN
BONDS PREVIOUSLY OUTSTANDING HEREUNDER OR
UNDER THE 1944 MORTGAGE

Section 6.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds hereunder of one or more series of a principal amount equal to and on the basis of the principal amount of any Retired Bonds, but only after the Trustee shall have received the following:

(1) the Resolution provided for in subdivision (1) of Section 5.05 hereof;

(2) the Officers’ Certificate provided for in subdivision (2) of Section 5.05 hereof;

(3) an Officers’ Certificate stating that specific Retired Bonds (in principal amount not less than the principal amount of bonds in respect of which such written order or orders for authentication and delivery is or are made under this Section) have theretofore been sold or issued for value or pledged to secure indebtedness of a principal amount not less than seventy-five per centum (75%) of the principal amount of such Retired Bonds and are the basis for such written order or orders;

(4) the Opinion of Counsel provided for in subdivision (8) of Section 5.05 hereof; and

(5) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in subdivision (4) of this Section.

In case (i) an application for the authentication and delivery of bonds under any of the provisions of this Indenture, which shall have contained a Net Earning Certificate, shall have been made to the Trustee subsequent to the delivery to the Trustee hereunder or the Corporate Trustee under the 1944 Mortgage of an irrevocable direction to apply moneys to any such purchase, payment, retirement and/or redemption of, or subsequent to the cancellation or surrender for cancellation of, any bonds previously authenticated and delivered under this Indenture or the 1944 Mortgage on the basis of which other bonds are to be authenticated and delivered pursuant to the provisions of this Article VI, and in such Net Earning Certificate the annual interest requirements on any such bonds to be authenticated and delivered shall not have been included, or (ii) the Retired Bonds on the basis of which other bonds are to be so authenticated and delivered mature by their terms at a date more than one year after the date of authentication and delivery of the bonds applied for and bear a lower interest rate than the bonds applied for, or (iii) the Retired Bonds on the basis of which other bonds are to be so authenticated and delivered were retired pursuant to the provisions of Section 39 of the 1944 Mortgage or pursuant to any sinking or improvement




fund provision set forth in the 1944 Mortgage, then the Trustee shall in such a case also receive a Net Earning Certificate showing the Adjusted Net Earnings to be as required by Section 5.04 hereof. For purposes of clause (ii) of the immediately preceding sentence, in the event Retired Bonds on the basis of which other bonds are to be authenticated and delivered bear (or, as to such Retired Bonds no longer Outstanding hereunder, bore) interest at a variable rate, then the interest rate on such Retired Bonds shall be deemed to be the annual interest rate thereon in effect immediately prior to the retirement thereof.
Any and all coupon bonds delivered to the Trustee pursuant to this Article shall have attached thereto all unmatured coupons appertaining thereto.
ARTICLE VII

ISSUANCE OF BONDS UPON DEPOSIT OF CASH WITH TRUSTEE

Section 7.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds hereunder of one or more series upon deposit with the Trustee by the Company of cash equal to the aggregate principal amount of the bonds so requested to be authenticated and delivered but only after the Trustee shall have received:

(1) the Resolution provided for in subdivision (1) of Section 5.05 hereof;

(2) the Officers’ Certificate provided for in subdivision (2) of Section 5.05 hereof;

(3) a Net Earning Certificate showing the Adjusted Net Earnings of the Company to be as required by Section 5.04 hereof;

(4) the Opinion of Counsel provided for in subdivision (8) of Section 5.05 hereof; and

(5) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in subdivision (4) of this Section.

Section 7.02.    All cash deposited with the Trustee under the provisions of the next preceding Section hereof shall be held by the Trustee as a part of the Mortgaged and Pledged Property, and may be withdrawn from time to time by the Company, upon application of the Company to the Trustee evidenced by a Resolution, in an amount equal to the principal amount of each bond or fraction of a bond to the authentication and delivery of which the Company shall be entitled under Article V or VI of this Indenture by virtue of compliance with all applicable provisions of this Indenture (except as hereinafter in this Section otherwise provided).

Upon any such application for withdrawal the Company shall comply with all applicable provisions of this Indenture relating to the authentication and delivery of such bond(s) or fraction of a bond except that the Company shall not be required to comply with any earning requirement or to deliver to the Trustee any Resolution, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (6) and (8) of Section 5.05 hereof.




Any withdrawal of cash under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of the bond(s) or fraction of a bond on which it is based and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered hereunder, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of the withdrawal of such cash, and any bonds which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall be deemed to have been made the basis of the withdrawal of such cash.
Section 7.03.    If at any time the Company shall so direct, any sums deposited with the Trustee under the provisions of Section 7.01 hereof may be used or applied to the purchase, payment or redemption of bonds in the manner and subject to the conditions provided in subdivisions (3) and (4) of Section 11.05 hereof; provided, however, that none of such cash shall be applied to the payment of more than the principal amount of any bonds so purchased, paid or redeemed, except to the extent that the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased, paid and/or redeemed with cash deposited under Section 7.01 hereof shall have exceeded the aggregate cost for principal, interest, brokerage and premium, if any, on all bonds theretofore, and on all bonds then to be, purchased, paid and/or redeemed with cash so deposited.


ARTICLE VIII

COMPLIANCE WITH THE TRUST INDENTURE ACT OF 1939

Section 8.01.    The Company reserves the right without any consent or other action by holders of bonds to make such amendments to this Indenture as shall be necessary from time to time in order to qualify this Indenture under the Trust Indenture Act of 1939, as amended, as in force on the date of the making of any such amendment, including, without limitation, the substitution of a separate trustee for any security not applicable to all holders of bonds, provided that no such amendment shall, without the consent of the holder of any bond issued under this Indenture affected thereby, impair or affect the right of such holder to receive payment of the principal of (and premium, if any) and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, or permit the creation of any lien ranking prior to, or on a parity with, the Lien of this Indenture with respect to any of the property mortgaged and pledged thereunder or permit the deprivation of such bondholder of a lien upon the Mortgaged and Pledged Property for the security of his bonds (subject only to the lien of taxes for the then current year, the lien of taxes, assessments or governmental charges not then due and delinquent and to any mortgage or other liens existing upon said property which are prior to this Indenture at the time of such amendment), and holders of any bonds Outstanding under this Indenture by acceptance of such bonds, agree and consent to the making of any such amendments.



ARTICLE IX

PARTICULAR COVENANTS OF THE COMPANY

Section 9.01.    The Company hereby covenants that it is lawfully possessed of all the Mortgaged and Pledged Property; that it will maintain and preserve the Lien of this Indenture so long as any of the bonds issued hereunder are Outstanding; that (subject to the provisions of Section 15.03 hereof) all property of




the Company hereafter acquired, made or constructed and wheresoever situated, except any hereinbefore or hereinafter expressly excepted, shall be subject to the Lien of this Indenture just as though said property was now owned by the Company and described herein; and that it has good right and lawful authority to mortgage and pledge the Mortgaged and Pledged Property, as provided in and by this Indenture.

Section 9.02.    The Company hereby covenants that it will duly and punctually pay the principal of and interest and premium, if any, on all bonds Outstanding hereunder, according to the terms thereof; and that as the coupons appertaining to said bonds are paid they will be cancelled.

Section 9.03.    (a) The Company hereby covenants that, whenever necessary to avoid or fill a vacancy in the office of Trustee, the Company will in the manner provided in Section 16.15 hereof appoint a Trustee so that there shall be at all times a Trustee hereunder which shall at all times be a bank or trust company having its principal office and place of business in the United States of America, if there be such a bank or trust company willing and able to accept the trust upon reasonable or customary terms, and which shall at all times be a corporation organized and doing business under the laws of the United States or of any State or Territory or of the District of Columbia, with (i) in respect of the Original Trustee, a combined capital and surplus of at least Five Million Dollars ($5,000,000) and (ii) in respect of any successor Trustee appointed hereunder, a combined capital and surplus of at least Fifty Million Dollars ($50,000,000) and, in either such case, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority.

(a) The Company hereby covenants that it will keep an office or agency, while any of the bonds issued hereunder are Outstanding, at any and all places at which the principal of or interest on any of said bonds and coupons appurtenant thereto shall be payable, where bonds entitled to be registered, transferred, exchanged, or converted may be presented or surrendered for registration, transfer, exchange or conversion, where notices, presentations and demands to or upon the Company in respect of such bonds or coupons as may be payable at such places or in respect of this Indenture may be given or made, and for the payment of the principal thereof and interest and premium, if any, thereon. The Company will from time to time give the Trustee written notice of the location of such office or offices or agency or agencies, and in case the Company shall fail to maintain such office or offices or agency or agencies or to give the Trustee written notice of the location thereof, then in addition to any other remedy or right arising as a result of the violation of the covenants contained in this Section, the Company agrees that any such notice, presentation or demand in respect of said bonds or coupons or of this Indenture may be given or made, unless other provision is expressly made herein, to or upon the Trustee at its principal office, and the Company hereby authorizes such presentation and demand to be made to and such notice to be served on the Trustee in either of such events and the principal of and interest and premium, if any, on said bonds shall in such event be payable at said office of the Trustee.

(b) The Company hereby covenants that, if it shall appoint a paying agent other than the Trustee, such paying agent shall meet the financial qualifications of Section 9.03(a) and the Company will cause such paying agent to execute and deliver to the Trustee an instrument in which such paying agent shall agree with the Trustee, subject to the provisions of this Section, (1) that such paying agent shall hold in trust for the benefit of the bondholders or the Trustee all sums held by such paying agent for the payment of the principal of or interest on the bonds (and premium, if any); and (2) that such paying agent shall give the Trustee notice of any default by the Company in the making of any deposit with it for the payment of the principal of or interest on the bonds (and premium, if any), and of any default by the Company in the making of any such payment. Such paying agent shall not be obligated to segregate such sums from other funds of such paying agent except to the extent required by law.





(c) The Company hereby covenants that, if the Company acts as its own paying agent, it will, on or before each due date of each installment of principal or interest on the bonds, set aside and segregate and hold in trust for the benefit of the bondholders or the Trustee a sum sufficient to pay such principal or interest so becoming due on the bonds (and premium, if any) and will notify the Trustee of such action, or of any failure to take such action.

(d) Anything in this Section to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a release or satisfaction of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it or any paying agent as required by this Section, such sums to be held by the Trustee upon the trusts in this Indenture contained.

(e) Anything in this Section to the contrary notwithstanding, the holding of sums in trust as provided in this Section is subject to the provisions of Section 19.03 hereof.

Section 9.04.    The Company hereby covenants that it will pay all taxes and assessments and other governmental charges lawfully levied or assessed upon the Mortgaged and Pledged Property, or upon any part thereof or upon any income therefrom or upon the interest of the Trustee in the Mortgaged and Pledged Property, before the same shall become delinquent, and will duly observe and conform to all valid requirements of any governmental authority relative to any of the Mortgaged and Pledged Property, and all covenants, terms and conditions upon or under which any of the Mortgaged and Pledged Property is held; that it will not suffer any lien to be hereafter created upon the Mortgaged and Pledged Property, or any part thereof, or the income therefrom, prior to the Lien hereof, other than Excepted Encumbrances, and other than, in the case of property hereafter acquired, vendors’ liens, purchase money mortgages and any lien thereon at the time of the acquisition thereof and within four (4) months after any lawful claim or demand for labor, materials, supplies or other objects has become delinquent which if unpaid would or might by law be given precedence over the Lien of this Indenture as a lien or charge upon any of the Mortgaged and Pledged Property, or the income therefrom, it will pay or cause to be discharged or make adequate provisions to satisfy or discharge the same; provided, however, that nothing in this Section contained shall require the Company to observe or conform to any requirement of governmental authority or to cause to be paid or discharged, or to make provision for, any such lien or charge, or to pay any such tax, assessment or governmental charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings; and provided that nothing in this Section contained shall require the Company to pay, discharge or make provisions for any tax, assessment or other governmental charge, the validity of which shall not be so contested if adequate security for the payment of such tax, assessment or other governmental charge and for any damages which may reasonably be anticipated from failure to pay the same shall be given to the Trustee; and that, save as aforesaid, it will not suffer any matter or thing whereby the Lien hereof might or could be impaired in contravention of the provisions hereof.

Section 9.05.    The Company hereby covenants that it will keep or cause to be kept all the property subject to the Lien hereof insured against fire, flood, lightning, windstorm, hail, explosion and other risks to the extent that property of similar character is usually so insured by companies similarly situated and operating like properties (all such risks being hereinafter referred to in this Section as the “Specified Hazards”), to a reasonable amount, by reputable insurance companies, any loss, except as to materials and supplies and except as to any particular loss less than Five Million Dollars ($5,000,000), to be made payable, unless otherwise required by applicable provisions promulgated by the Nuclear Regulatory Commission, or any successor regulatory agency, including the requirements of Section 50.54 of the Regulations of such Commission, to the Trustee as the interest of the Trustee may appear and/or to the holder of any other lien prior hereto upon property subject to the Lien hereof, if the terms thereof require losses so to be made payable; or that it will, in lieu of or supplementing such insurance in whole or in part,




adopt some other method or plan of protection against loss by the Specified Hazards at least equal in protection to the method or plan of protection against loss by the Specified Hazards of companies similarly situated and operating properties subject to similar hazards, and that if it shall adopt such other method or plan, it will, except as to materials and supplies and except as to any particular loss less than Five Million Dollars ($5,000,000), pay to the Trustee, unless otherwise required by applicable provisions promulgated by the Nuclear Regulatory Commission, or any successor regulatory agency, including the requirements of Section 50.54 of the Regulations of such Commission, on account of any loss sustained by reason of the destruction or damage of such property by any of the Specified Hazards, an amount of cash equal to such loss less any amounts otherwise paid to the Trustee, or to the trustee or other holder of any mortgage or any other lien prior hereto upon property subject to the Lien hereof, if the terms thereof require losses so to be paid. Any amounts of cash so required to be paid by the Company pursuant to any such method or plan shall for the purposes of this Indenture be deemed to be proceeds of insurance. In case of the adoption of such other method or plan of protection, the Company shall also furnish to the Trustee a certificate of an actuary or other qualified person appointed by the Company with respect to the adequacy of such method or plan. There shall be delivered to the Trustee, on or before October 1 of each year and also whenever the Trustee shall make request therefor, a detailed statement, signed by the President, a Vice President, the Treasurer or an Assistant Treasurer of the Company, of any insurance policies covering the Specified Hazards then outstanding and in force upon the aforesaid property, or any part thereof, including, or by reference to former statements including, the names of the insurance companies which have issued the policies and the amounts and expiration dates thereof, together with a detailed statement, signed by the President, a Vice President, the Treasurer or an Assistant Treasurer of the Company, of such other method or plan, if any.

All moneys paid to the Trustee by the Company in accordance with this Section or received by the Trustee as proceeds of any insurance against loss by any of the Specified Hazards shall, subject to the requirements of any other lien prior hereto upon property subject to the Lien hereof, be held by the Trustee and, subject as aforesaid, shall be paid by it to the Company to reimburse the Company for an equal amount spent in the rebuilding or renewal of the property destroyed or damaged, upon receipt by the Trustee of (1) an Officers’ Certificate requesting such reimbursement, (2) an Engineer’s Certificate stating the amounts so expended and the nature of such rebuilding or renewal and the fair value to the Company of the property rebuilt or renewed and if
(A) within six (6) months prior to the date of acquisition thereof by the Company, such property has been used or operated by a person or persons other than the Company, in a business similar to that in which it has been or is to be used or operated by the Company, and

(B) the fair value to the Company of such property as set forth in such Engineer’s Certificate is not less than Twenty-five Thousand Dollars ($25,000) and not less than one per centum (1%) of the aggregate principal amount of the bonds at the time Outstanding under this Indenture, the Engineer making such certificate shall be an Independent Engineer, and (3) an Opinion of Counsel that the property so rebuilt or renewed is subject to the Lien hereof to the same extent as was the property so destroyed or damaged; provided, however, that to the extent that moneys paid by the Trustee to the Company for reimbursement, as aforesaid, shall represent the proceeds of property that was not Funded Property destroyed or damaged by any of the Specified Hazards, the property so rebuilt or renewed (for which reimbursement is so made), shall not be deemed to be Funded Property.

Any such money not so applied within eighteen (18) months after its receipt by the Trustee, or in respect of which notice in writing of intention to apply the same to the work of rebuilding or renewal




then in progress and uncompleted shall not have been given to the Trustee by the Company within such eighteen (18) months, or which the Company shall at any time notify the Trustee is not to be so applied, shall thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes and subject to the conditions provided in Section 11.05 hereof.
Anything in this Indenture to the contrary notwithstanding, the Company may have insurance policies covering any of the Specified Hazards with a deductible provision in a dollar amount per occurrence not exceeding Five Million Dollars ($5,000,000) or three per centum (3%) of the bonds Outstanding hereunder on the date such policy goes into effect if such three per centum (3%) is in excess of Five Million Dollars ($5,000,000); provided, however, such dollar amount may be exceeded to the extent such dollar amount per occurrence is below the deductible amount in effect as to such insurance on property of similar character insured by companies similarly situated and operating like property.
The Company hereby further covenants that it will procure and maintain insurance against public liability claims for personal injury, death or property damage suffered by others upon or in or about any premises occupied by it or occurring as a result of the operation of its business, and workmen’s compensation or similar insurance as may be required under federal law or the laws of the states of Mississippi or Arkansas, in each case from reputable insurance companies in such amounts and with such terms as are comparable to companies similarly situated and operating like properties.
Section 9.06.    The Company will not, except as herein permitted, do or suffer any act or thing whereby the Mortgaged and Pledged Property might or could be impaired; provided, however, that the Company shall not be deemed, for purposes of this Section, to have suffered the Mortgaged and Pledged Property to be impaired if the plant account on the books of the Company is reduced solely as a result of or to reflect action of any regulatory authority having jurisdiction over the rates and services of the Company mandating or requiring a direct or indirect disallowance of costs for ratemaking purposes. The Company will at all times maintain, preserve and keep the Mortgaged and Pledged Property, as an operating system or systems, in good repair, working order and condition. The Company will from time to time make all needful and proper repairs, replacements, additions, betterments and improvements, so that the operations and business of and pertaining to the Mortgaged and Pledged Property, as an operating system or systems, shall at all times be conducted properly and advantageously; and whenever any portion of the Mortgaged and Pledged Property shall have been worn out or destroyed or shall have become obsolete or otherwise unfit for use, the Company will procure substitutes of at least equal utility and efficiency, so that at all times the efficiency of the Mortgaged and Pledged Property, as an operating system or systems, shall be fully maintained.

Nothing herein contained, however, shall be held to prevent the Company from permanently discontinuing the operation of or reducing the capacity of any of its plants or properties, if, in the judgment of the Company, any such action which affects the Mortgaged and Pledged Property is necessary or desirable in the conduct of the business of the Company, or if the Company is ordered so to do by regulatory authority having jurisdiction in the premises, or if the Company intends to sell or dispose of the same and within a reasonable time shall endeavor to effectuate such sale; nor shall anything herein contained be construed to prevent the Company from taking such action with respect to the use of its plants and properties as is proper under the circumstances, including the cessation or omission to exercise rights, permits, licenses, privileges or franchises which, in the judgment of the Company, can no longer be profitably exercised or availed of; provided, however, the Company covenants that it will, within sixty (60) days after its determination permanently to discontinue the operation of any of its plants or properties subject to the Lien of this Indenture of a Cost, determined as provided in Section 1.04 hereof, in any one




case in excess of Five Million Dollars ($5,000,000) or in the aggregate in any period of twelve (12) consecutive calendar months in excess of Ten Million Dollars ($10,000,000), furnish the Trustee for information purposes with an Officers’ Certificate setting forth the Cost, as so determined, to the Company of the plants, or properties, the operation of which the Company shall have determined so to discontinue.
Whenever (but not more often than once in any period of five (5) years) the holders of at least twenty-five per centum (25%) in principal amount of the bonds Outstanding hereunder shall deliver to the Trustee and to the Company a written statement that they have reasonable grounds to believe that the Mortgaged and Pledged Property has not been adequately maintained, as an operating system or systems, in good repair, working order and condition and request the Company to furnish to the Trustee an Independent Engineer’s Certificate stating whether or not the Mortgaged and Pledged Property, as an operating system or systems, has been maintained in good repair, working order and condition, and whether or not there is any property subject to the Lien of this Indenture which should be retired on the books of the Company as having ceased permanently to be used or useful in the business of the Company and which has not been so retired, the Company shall cause such Independent Engineer’s Certificate to be furnished to the Trustee within a reasonable time after such request. If such Independent Engineer shall report that the Mortgaged and Pledged Property, as an operating system or systems, has not been maintained in good repair, working order and condition, he shall state clearly in his report the character and extent of, and, if longer than one year, the time reasonably necessary to make good such deficiency and, if he shall report that there is property subject to the Lien of this Indenture which should be retired on the books of the Company as having ceased permanently to be used or useful in the business of the Company and which has not been so retired, his report shall briefly describe such property. Said report shall be placed on file by the Trustee and shall be open to inspection by any bondholder at any reasonable time.
If the Company, within thirty (30) days after the filing of the report of such Independent Engineer, objects in writing delivered to the Trustee to the findings of such Independent Engineer as to the character and extent of such maintenance deficiency and/or to the property which should be retired upon the books of the Company, then the character and extent of such maintenance deficiency, if any, and/or the property, if any, so to be retired upon the books of the Company shall be forthwith referred to three arbitrators selected in the following manner: The Trustee, within ten (10) days after the expiration of said period of thirty (30) days, shall name one arbitrator and give notice of such selection to the Company. Within ten (10) days after receipt of such notice, the Company shall name one arbitrator and give notice of such selection to the Trustee, and failure so to do shall entitle the Trustee to name an arbitrator to represent the Company. The two thus selected shall, within ten (10) days after the appointment of the arbitrator representing the Company, select a third arbitrator, but if said arbitrators are unable, within said ten (10) days, to agree upon such third arbitrator, then, upon the election of either the Company or the Trustee, any District Judge of the United States of America for the District in which the Trustee has its principal place of business may appoint such third arbitrator, upon application to said District Judge by either party after five (5) days notice thereof to the other party. The written decision of a majority of such arbitrators shall be filed as soon as practicable with the Trustee and a copy thereof delivered to the Company, and shall be binding upon the Trustee, the Company and the bondholders.
Within one year from the date of the report of such Independent Engineer or the date of such decision of arbitrators, whichever is later, or such longer period as may be reported by such Independent Engineer or the arbitrators, as the case may be, to be reasonably necessary to make good any such deficiency, no statement contained in any report of any Independent Engineer filed with the Trustee,




as hereinbefore in this Section provided, shall be deemed to be in any way evidence or proof of a failure to comply with the provisions of this Section.
The Company shall, with all reasonable speed, do or cause to be done such maintenance work as may be necessary to make good any such maintenance deficiency as shall have been determined to exist as hereinabove provided at the time of the report of such Independent Engineer or at the time of such decision of arbitrators, as the case may be, whereupon such Independent Engineer or such arbitrators, as the case may be (or, in case of his or their refusal or inability to act, some other Independent Engineer), shall report in writing to the Trustee whether such deficiency has been made good.
Unless the Trustee shall be so advised in writing by such Independent Engineer or arbitrators, as the case may be, within one (1) year from the date of the report of such Independent Engineer or the date of such decision of arbitrators, as the case may be, or such longer period as may be reported by such Independent Engineer or the arbitrators, as the case may be, to be reasonably necessary for the purpose, that such deficiency has in all material respects been made good, the Company shall be deemed to have defaulted in the due performance of the covenants of this Section, so far as concerns the maintenance of the Mortgaged and Pledged Property.
All expenses incurred pursuant to this Section shall be borne by the Company.
In the event that any regulatory authority having jurisdiction over the Company shall, by order or regulation, prohibit, in whole or in part, such expenditures for repairs and maintenance, then, upon filing with the Trustee a certified copy of such order or a copy of such regulation, as the case may be, the Company shall, so long as such order or such regulation remains in effect, be relieved from compliance with the covenants contained in this Section, in regard to the maintenance of the Mortgaged and Pledged Property, to the extent that such expenditures for repairs and maintenance shall be prohibited.
The Company covenants that it will promptly retire on its books of account any of the Mortgaged and Pledged Property included in plant account (except real estate held for the purpose of sale or resale) that has, in the opinion of the Company, ceased permanently to be used or useful in its business or which pursuant to the provisions of this Section any Independent Engineer has reported to the Company more than thirty (30) days prior thereto (without written objection thereto having been delivered to the Trustee by the Company), or any arbitrators have determined, should be retired on the books of the Company as having ceased permanently to be used or useful in the business of the Company.
Notwithstanding the foregoing provisions of this Section 9.06, nothing herein contained shall be held to require the Company to retire, other than solely for purposes of this Indenture, any of the Mortgaged and Pledged Property in the event that the Company is ordered not to retire such Mortgaged and Pledged Property by regulatory authority having jurisdiction in the premises.
Section 9.07.    The Company hereby covenants that it will, subject to the provisions of Article XV hereof, at all times maintain its corporate existence and right to carry on business, and duly procure all renewals and extensions thereof, if and when any shall be necessary and, subject to the provisions of this Indenture, will use its best efforts to maintain, preserve and renew all the rights, powers, privileges and franchises owned by it, affecting the Mortgaged and Pledged Property.

Section 9.08.    The Company hereby covenants that it will cause this Indenture and all indentures and instruments supplemental hereto or notices in respect thereof to be promptly recorded and filed and re-recorded and re-filed in such manner and in such places, as may be required by law in order fully to




preserve and protect the security of the bondholders and all rights of the Trustee, and will furnish to the Trustee:

(a) Promptly after the execution and delivery of this Indenture and of each supplemental indenture, an Opinion of Counsel either stating that in the opinion of such counsel this Indenture or such supplemental indenture or notice in respect thereof has been properly recorded and filed, so as to make effective the lien intended to be created thereby, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such lien effective. It shall be a compliance with this subdivision (a) if (1) the Opinion of Counsel herein required to be delivered to the Trustee shall state that this Indenture or such supplemental indenture or notice in respect thereof has been received for record or filing in each jurisdiction in which it is required to be recorded or filed and that, in the opinion of counsel (if such is the case), such receipt for record or filing makes effective the lien intended to be created by this Indenture or such supplemental indenture, and (2) such opinion is delivered to the Trustee within such time, following the date of the execution and delivery of this Indenture or such supplemental indenture, as shall be practicable having due regard to the number and distance of the jurisdictions in which this Indenture or such supplemental indenture is required to be recorded or filed.

(b) On or before February 1 of each year, beginning February 1, 1989, an Opinion of Counsel either stating that in the opinion of such counsel such action has been taken, since the date of the most recent Opinion of Counsel furnished pursuant to this subdivision (b) or the first Opinion of Counsel furnished pursuant to subdivision (a) of this Section, with respect to the recording, filing, re-recording, and re-filing of this instrument and each notice with respect thereto and of each indenture supplemental to this instrument, as is necessary to maintain the Lien hereof, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain such lien.

The Company hereby covenants that it will execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as may be necessary or proper to carry out more effectually the purposes of this Indenture and to make subject to the Lien hereof any property hereafter acquired, made or constructed, intended to be subject to the Lien hereof, and to transfer to any new trustee or co-trustee or co-trustees, the estate, powers, instruments or funds held in trust hereunder.
Section 9.09.    (a) The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee between February 15 and March 1 and between August 15 and September 1 in each year after July 1, 1988, and at such other times as the Trustee may request in writing, a list in such form as the Trustee may reasonably require containing all the information in the possession or control of the Company or of its paying agents, as to the names and addresses of the holders of bonds obtained since the date as of which the next previous list, if any, was furnished. Any such list may be dated as of a date not more than fifteen (15) days prior to the time such information is furnished or caused to be furnished, and need not include information received after such date; and, provided, that the Company need not furnish or cause to be furnished any such list with respect to bonds with respect to which the Trustee maintains the books for the registration and transfer of bonds as provided for in Section 2.06.

(b) The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of bonds (1) contained in the most recent list, if any, furnished to it as provided in subdivision (a) of this Section, (2) received by it in the capacity of paying agent hereunder, and (3) filed with it within two (2) preceding years pursuant to the provisions of paragraph (2) of subdivision (c) of Section 16.13 hereof. The Trustee may (1) destroy any list furnished to it as provided in subdivision (a) of this Section upon receipt of a new list so furnished; (2) destroy any




information received by it as paying agent upon delivery to itself as Trustee, not earlier than forty-five (45) days after an interest payment date of the bonds, of a list containing the names and addresses of the holders of bonds obtained from such information since the delivery of the next previous list, if any; (3) destroy any list delivered to itself as Trustee which was compiled from information received by it as paying agent upon the receipt of a new list so delivered; and (4) destroy any information received by it pursuant to the provisions of paragraph (2) of subdivision (c) of Section 16.13 hereof, but not until two (2) years after such information has been filed with it.

(c) In case three or more holders of bonds (hereinafter referred to as “Applicants”) apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such Applicant has owned a bond for a period of at least six (6) months preceding the date of such application, and such application states that the Applicants desire to communicate with other holders of bonds with respect to their rights under this Indenture or under the bonds, and is accompanied by a copy of the form of proxy or other communication which such Applicants propose to transmit, then the Trustee shall, within five (5) business days after the receipt of such application, at its election either

i. afford to such Applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subdivision (b) of this Section; or

ii. inform such Applicants as to the approximate number of holders of bonds whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subdivision (b) of this Section, and as to the approximate cost of mailing to such bondholders the form of proxy or other communication, if any, specified in such application.

If the Trustee shall elect not to afford to such Applicants access to such information, the Trustee shall, upon the written request of such Applicants, mail to each bondholder whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subdivision (b) of this Section, a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment or provision for the payment of the reasonable expenses of mailing, unless within five (5) days after such tender the Trustee shall mail to such Applicants and file with the Securities and Exchange Commission together with a copy of the material to be mailed a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of bonds, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections, or if said Commission shall find, after notice and opportunity for a hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such bondholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such Applicants respecting their application.
(d) Neither the Trustee nor any paying agent shall be held accountable by reason of the disclosure of information as to names and addresses or the mailing of any material pursuant to any request made under subdivision (c) of this Section.

Section 9.10.    The Company covenants and agrees:





(1) to file with the Trustee within fifteen (15) days after the Company is required to file the same with the Securities and Exchange Commission, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as such Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with such Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents, or reports pursuant to either of such sections, then to file with the Trustee and the Securities and Exchange Commission, in accordance with rules and regulations prescribed from time to time by said Commission, such of the supplementary and periodic information, documents, and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;

(2) to file with the Trustee and the Securities and Exchange Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 19.05 hereof, as to compliance with conditions or covenants, compliance with which is subject to verification by accountants, but no such certificate or opinion shall be required as to (A) dates or periods not covered by annual reports required to be filed by the Company, in the case of conditions precedent which depend upon a state of facts as of a date or dates or for a period or periods different from that required to be covered by such annual reports, or (B) the amount and value of Property Additions, except as provided in Section 5.05 hereof, or (C) the adequacy of depreciation, maintenance, or repairs; and

(3) to transmit to the holders of bonds, in the manner and to the extent provided in subdivision (c) of Section 16.13 hereof with respect to reports pursuant to subdivision (a) of Section 16.13 hereof, such summaries of any information, documents and reports required to be filed by the Company pursuant to subdivisions (1) and (2) of this Section as may be required by the rules and regulations prescribed from time to time by the Securities and Exchange Commission.

Section 9.11.    The Company hereby covenants that it will, in accordance with sound accounting practices, keep books of record and account of all dealings or transactions of, or in relation to, the plants, properties, business and affairs of the Company.

The Company hereby covenants that it will not issue, or permit to be issued, any bonds hereunder in any manner other than in accordance with the provisions of this Indenture and that it will faithfully observe and perform all the conditions, covenants and requirements of this Indenture and of all indentures supplemental hereto and of the bonds issued hereunder.
Section 9.12.    Subject to the rights of the bondholders under the 1944 Mortgage, the Company hereby covenants that, upon the cancellation and discharge of any lien prior hereto (upon property subject to the Lien hereof), securing indebtedness, the Company will cause all cash, purchase money obligations and other property then held by the trustee or other holder of such lien, which




were received by such trustee or other holder by reason of the release of, or the purchase by a governmental authority or its designee of, or which represents the proceeds of the taking by eminent domain of, or insurance on, any of the Mortgaged and Pledged Property (including all proceeds of or substitution for any thereof) to be paid and/or delivered to and/or deposited with the Trustee hereunder, to be held as part of the Mortgaged and Pledged Property, any such cash and/or purchase money obligations constituting a part thereof to be paid over, withdrawn, used or applied in the manner, to the extent, and for the purposes and subject to the conditions provided in Section 11.05 hereof with respect to cash and purchase money obligations deposited under the provisions of Section 11.03 hereof, and any other property constituting a part thereof to be subject to use and release as provided with respect to such property in Article XI hereof. Nothing in this Indenture contained shall be deemed to limit the right of any successor to the Company under the provisions of Article XV hereof which shall not have caused this Indenture or any indenture executed as in Section 15.02 hereof provided to become a lien upon any of the properties or franchises of the successor corporation (except as contemplated by clauses (a), (b) and (c) of Section 15.03 hereof) to increase the indebtedness secured by lien upon any of its properties or franchises not subject to the Lien of this Indenture or of any such indenture executed as in Section 15.02 hereof provided.

Section 9.13.    The Company covenants that, unless otherwise permitted by the SEC in the exercise of its jurisdiction under the Public Utility Holding Company Act of 1935, it will comply with the limitation on dividends to which it is subject under the Statement of Policy regarding First Mortgage Bonds subject to the Public Utility Holding Company Act of 1935, as in effect at the time, in connection with each issuance of bonds under the Indenture and subject to such Act.

Section 9.14.    (a) The Company hereby covenants that it will deliver to the Trustee, on or before February 1, 1989 and each February 1 thereafter, a written statement signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, stating, as to each signer thereof, that, to the best of his knowledge, the Company has fulfilled all its obligations under this Indenture throughout the preceding calendar year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to him and the nature and status thereof.

The Company hereby covenants that within five (5) business days after any of the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company having responsibility for financial or accounting matters becomes aware of the occurrence of any event which itself or with a lapse of time or the giving of notice or both would constitute a Default hereunder (except any such event relating to default by the Company in the performance of its obligations pursuant to clause (1) or clause (2) of Section 9.10 hereof), it will give notice of such event to the Trustee specifying the nature and status thereof.

Section 9.15.    The Company hereby covenants that it will not issue any additional bonds under the 1944 Mortgage, except such bonds, if any, as may be issued at the option of the Company from time to time to the Trustee or Trustees hereunder to provide additional security hereunder, and that upon the payment in full of all indebtedness secured thereby (other than bonds held by the Trustee or Trustees) the Company will promptly take all necessary action to obtain and effect the release and cancellation of the lien of the 1944 Mortgage upon any of the Mortgaged and Pledged Property and the discharge and satisfaction of the 1944 Mortgage. Upon receipt of an Officers’ Certificate to the effect that no bonds are Outstanding under the 1944 Mortgage other than bonds held by the Trustee or Trustees hereunder, the Trustee or Trustees shall surrender all bonds so held to the Corporate Trustee under the 1944 Mortgage for cancellation.




Section 9.16.    The Company hereby covenants that, so long as the 1944 Mortgage has not been discharged or satisfied, it will duly and punctually comply with the provisions of Sections 38 and 39(I) of the 1944 Mortgage.

Section 9.17.    To the extent that lack of compliance could reasonably be expected to have a material adverse effect on its business, prospects, profits, properties or condition (financial or otherwise) (except to the extent that the Company is contesting the same in good faith by timely and appropriate legal action diligently pursued), the Company will comply with applicable statutes, regulations, orders and restrictions of the United States of America, foreign countries, states and municipalities, and agencies and instrumentalities of the foregoing, in respect of the conduct of its business and the ownership of its property.



ARTICLE X

REDEMPTION OR PURCHASE OF BONDS

Section 10.01.    Such of the bonds of any series issued hereunder as are, by their terms, redeemable before maturity, may, at the option of the Company or pursuant to the requirements of this Indenture, be redeemed at such times, in such amounts and at such prices as may be specified therein and in accordance with the provisions of the three next succeeding Sections numbered from 10.02 to 10.04, both inclusive.

Section 10.02.    If less than all the Outstanding bonds of any series are to be redeemed, the particular bonds to be redeemed shall be selected by the Trustee from the Outstanding bonds of such series which have not previously been called for redemption by such method as the Trustee shall deem fair and appropriate. Notwithstanding the foregoing, special provisions for the selection of the particular bonds to be redeemed within a particular series may be provided by a supplemental indenture to this Indenture.

Unless otherwise provided as to a particular series of bonds, notice of intention to redeem to owners and/or holders of any bonds which are not registered as to principal and interest or principal only shall be given, by or on behalf of the Company, by publication in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, once before the date fixed for redemption, the publication to be at least thirty (30) days prior to the date fixed for redemption. If less than all bonds of any particular series are to be redeemed, unless otherwise provided as to a particular series of bonds, the numbers of any bonds to be redeemed which are not so registered shall be included in such notice and may be stated as follows: individually; in groups from one number to another number, both inclusive, except such as shall have been previously called for redemption or otherwise retired; or in any other way satisfactory to the Trustee.
Unless otherwise provided as to a particular series of bonds, notice of intention to redeem to the registered owner of any bond registered as to principal and interest or as to principal only which is to be redeemed in whole or part shall be mailed by or on behalf of the Company, not less than thirty (30) days before the date fixed for redemption, to him at his last address appearing upon the registry books.
Failure duly to give such notice by publication and/or by mailing to the owner or holder of any bond designated for redemption in whole or part shall not affect the validity of the proceedings for the redemption of any other bond.




Unless otherwise provided as to a particular series of bonds, if at the time of publication or mailing of any notice of redemption the Company shall not have deposited with the Trustee and/or irrevocably directed the Trustee to apply, from money held by it available to be used for the redemption of bonds, an amount in cash sufficient to redeem all of the bonds called for redemption, including accrued interest to such date fixed for redemption, such notice shall state that it is subject to the receipt of the redemption moneys by the Trustee before the date fixed for redemption (unless such redemption is mandatory) and such notice shall be of no effect unless such moneys are so received before such date.
The Trustee, upon the request of the Company evidenced by a Resolution delivered to the Trustee at least ten (10) days prior to the date on which notice of redemption must first be published or mailed (unless a shorter notice shall be accepted by the Trustee as sufficient) shall, for and on behalf of and in the name of the Company, call for redemption bonds secured hereby (whether or not the Trustee shall hold at the time of such call cash sufficient for such redemption) provided that, if cash sufficient for such purpose is not so held and such redemption is not mandatory, the notice shall state that it is subject to the receipt of the redemption moneys by the Trustee before the date fixed for redemption and such notice shall be of no effect unless such moneys are so received before such date.
Section 10.03.    Publication of the notice of redemption, if required, having been completed as above provided, or if mailing is required, notice of redemption having been mailed, as in Section 10.02 hereof provided, and the Company having before the redemption date specified in the notice of redemption deposited with the Trustee (and/or having irrevocably directed the Trustee to apply, from money held by it available to be used for the redemption of bonds) an amount in cash sufficient to redeem all of the bonds called for redemption, including accrued interest, the bonds called for redemption shall become due and payable on such redemption date. The foregoing conditions for such bonds so becoming due and payable shall not apply to any redemption of bonds which is mandatory pursuant to other provisions of this Indenture.

Section 10.04.    All moneys held by the Trustee for the redemption of bonds shall, subject to the provisions of Section 19.03 hereof, be held in trust for account of the holders of the bonds so to be redeemed, and shall be paid to them, respectively, upon presentation and surrender of said bonds, with (if required by the Company) all unmatured coupons, if any, appertaining thereto. Coupons maturing on or prior to the date fixed for redemption shall remain payable in accordance with their terms. On and after such date fixed for redemption, if the moneys for the redemption of the bonds to be redeemed shall be held by the Trustee for the purpose, such bonds shall cease to bear interest (except such bonds as shall have been properly presented for payment on, or within one year after, the date fixed for redemption and shall not have been paid) and shall cease to be entitled to the Lien of this Indenture and the coupons for interest, if any, maturing subsequent to the date fixed for redemption shall be void.

If any fully registered bond shall be called for redemption in part only, the notice of redemption shall specify the principal amount thereof to be redeemed, and such fully registered bond shall be presented for cancellation properly endorsed for transfer at or after the date fixed for the redemption of said bonds so called for redemption, and thereupon the payment with respect to said bond shall be made upon surrender of said bond so endorsed, and coupon bonds or fully registered bonds for the unpaid balance of the principal amount of the fully registered bond so presented and surrendered shall be executed by the Company and authenticated and delivered by the Trustee without charge therefor to the holder thereof.
Section 10.05.    Except as may be otherwise provided in any indenture supplemental hereto, at any time, upon the request of the Company, expressed by an Officers’ Certificate, the Trustee shall, to the extent that




such bonds are available for such purchase, apply all or any part of the cash held by it under any provision of this Indenture, subject to the provisions of Sections 7.03, 9.12, and 10.04 hereof, or any cash deposited with it by the Company for the purpose, to the purchase (including a purchase from the Company) of bonds then Outstanding hereunder of such series as the Company may designate. Before making any such purchase the Trustee may, and upon request of the Company shall, by notice published once in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, advertise for written proposals (to be received by it on or before a specified date) to sell to it on or before a subsequent specified date bonds of the series designated by the Company then Outstanding hereunder, and the Trustee, to the extent, as nearly as is possible, of such funds then in its hands and requested by the Company to be so applied, shall purchase the bonds so offered at the price or prices most favorable to the Company, and reasonable notice shall be mailed by the Trustee to the holder or holders of the bonds whose proposals shall have been accepted. The Trustee shall, upon request of the Company, invite offers of bonds for sale to it in any other usual manner. The Trustee in its discretion may reject any or all proposals in whole or in part, and shall reject any or all proposals in whole or in part if on the same day after opening said proposals it has actual knowledge that it can purchase the requisite amount of such bonds or any part thereof at a price more favorable to the Company than it could by accepting said proposals. All offers by holders shall be subject to acceptance of a portion thereof unless otherwise expressed in the offers and all advertisements for written proposals shall so state.

Section 10.06.    All bonds issued hereunder paid, retired or redeemed under any of the provisions of this Indenture or purchased by the Trustee as provided in Section 10.05 hereof and all appurtenant coupons, if any, shall forthwith be cancelled by the Trustee, and the Trustee may periodically destroy any such cancelled coupon bonds and deliver to the Company a certificate of such destruction and deliver any such cancelled fully registered bonds to the Company.



ARTICLE XI

POSSESSION, USE AND RELEASE OF MORTGAGED
AND PLEDGED PROPERTY

Section 11.01.    Unless one or more Defaults shall have occurred and be continuing, the Company shall be suffered and permitted to possess, use and enjoy the Mortgaged and Pledged Property (except: (a) such cash as is expressly required to be deposited with the Trustee; and (b) to the extent not herein otherwise provided, such securities as are expressly required to be deposited with the Trustee), and to receive, use and dispose of the tolls, rents, revenues, issues, earnings, income, products and profits thereof, with power in the ordinary course of business, freely and without let or hindrance on the part of the Trustee or of the bondholders, except as herein otherwise expressly provided to the contrary, to exercise any and all rights under choses in action, contracts, franchises and claims.

Section 11.02.    Unless the Company is in default in the payment of the interest on any of the bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may at any time and from time to time, without any release or consent by, or report to, the Trustee:

(1) sell or otherwise dispose of, free from the Lien of this Indenture, any machinery, apparatus, equipment, frames, towers, poles, wire, pipe, tools, implements, or furniture, or any other fixtures or personalty, then subject to the Lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable or




unnecessary for use in the operations of the Company upon replacing the same by, or substituting for the same, machinery, apparatus, equipment, frames, towers, poles, wire, pipe, tools, implements, or furniture, or any other fixtures or personalty, of at least equal value to that of the property sold or otherwise disposed of and subject to the Lien hereof, subject to no liens prior hereto except liens to which the property sold or otherwise disposed of was subject;

(2) cancel or make changes or alterations in or substitutions of any and all right of way grants; and

(3) surrender or assent to the modification or replacement of any right, power, franchise, license, governmental consent or permit under which it may be operating, provided that, in the opinion of the Board of Directors of the Company (such opinion to be stated in a Resolution to be filed with the Trustee), any such surrender, modification or replacement which affects the Mortgaged and Pledged Property is necessary or desirable in the conduct of the business of the Company and is not materially detrimental to the interest of the bondholders.

Section 11.03.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property (except cash then held by the Trustee) (provided, however, that obligations secured by purchase money mortgage deposited with the Trustee shall not be released except as provided in Section 11.05 hereof), and the Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon the application of the Company and receipt by the Trustee of the following:

(1) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and describing in reasonable detail the property to be released and requesting such release, and stating that the Company is not in default in the payment of the interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing;

(2) an Engineer’s Certificate, made and dated not more than ninety (90) days prior to the date of such application, stating:

(a) that the Company has sold, leased, granted an undivided interest in, exchanged, dedicated or disposed of, or intends or has agreed to sell, lease, grant an undivided interest in, exchange, dedicate or dispose of, or that a governmental body or agency has exercised a right to order the Company to divest itself of, the property to be released;

(b) the fair value, in the opinion of the signers, of the property (or securities) to be released;

(c) the fair value, in the opinion of the signers, of any portion thereof that is Funded Property;

(d) that (except in any case where a governmental body or agency has exercised a right to order the Company to divest itself of such property) such




release is in the opinion of the signers desirable in the conduct of the business of the Company;

(e) the release value of the property to be released, being as to property owned by the Company on December 31, 1987, the depreciated book value thereof on that date, and as to any other property of the Company, the Cost thereof; and

(f) that in the opinion of the signers such release will not impair the security under this Indenture in contravention of the provisions hereof;

(3) an amount in cash (including any amount in cash deposited with the Trustee pursuant to the requirements of Section 9.12 hereof which the Company elects, as evidenced by an Officers’ Certificate, to be also credited against the cash to be held pursuant to this subdivision (3)), to be held by the Trustee as part of the Mortgaged and Pledged Property, equivalent to the amount, if any, by which the release value of the property to be released, as specified in the Engineer’s Certificate provided for in subdivision (2) above, exceeds the aggregate of the following items:

(a) the principal amount, subject to the limitations stated below in this subdivision (3), of any obligations delivered to the Trustee, to be held as part of the Mortgaged and Pledged Property, consisting of obligations secured by purchase money mortgage upon the property released;

(b) the Cost or fair value to the Company (whichever is less) of any Property Additions made the basis of the application which are not then Funded Property (after making any deductions and any additions pursuant to the provisions of Section 1.04 hereof) as shown by a further Engineer’s Certificate (made and dated not more than ninety (90) days prior to the date of such application) delivered to the Trustee; provided, however, that Property Additions acquired, made or constructed within ninety (90) days prior to the date of such application for release, or subsequently thereto, may, at the option of the Company, not have deducted therefrom the deductions nor added thereto the additions pursuant to Section 1.04 hereof;

(c) the principal amount of each bond or fraction of a bond to the authentication and delivery of which the Company shall be entitled under the provisions of Section 6.01 hereof, by virtue of compliance with all applicable provisions of Section 6.01 (except as hereinafter in this Section otherwise provided); provided, however, that (except as hereinafter in this Section otherwise provided) the application for such release shall operate as a waiver by the Company of such right to the authentication and delivery of each such bond or fraction thereof on the basis of which right such property is released and to such extent no such bond or fraction thereof may thereafter be authenticated and delivered hereunder, and any bonds which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall be deemed to have been made the basis of the release of such property;

(d) the principal amount, subject to the limitations stated below in this subdivision (3), of any obligations secured by purchase money mortgage upon the




property to be released and/or any amount in cash, that is evidenced to the Trustee by a certificate of the holder of a lien prior hereto, as the case may be, to have been received by it in accordance with the provisions of such lien prior hereto in consideration for the release of such property or any part thereof from such lien prior hereto; and

(e) any taxes and expenses incidental to such sale, exchange, dedication or disposal;

provided, however, that (i) no obligations secured by purchase money mortgage upon any property being released from the Lien hereof shall be used as a credit in any application for such release unless all obligations secured by such purchase money mortgage shall be delivered to the Trustee or to the trustee or other holder of a lien prior hereto; (ii) in case the total principal amount of obligations secured by purchase money mortgage upon property being released shall exceed seventy-five per centum (75%) of the fair value of such property, as specified in the Engineer’s Certificate provided for in subdivision (2) above, the aggregate credit which may be used pursuant to clause (a) and clause (d) of this subdivision (3) in respect of such obligations shall not exceed seventy-five per centum (75%) of the fair value of the property to be released, as specified in such Engineer’s Certificate; and (iii) no obligations secured by purchase money mortgage shall be used as a credit in any application for the release of property hereunder, if the aggregate credit in respect of such obligations to be used by the Company pursuant to clause (a) and clause (d) of this subdivision (3) plus the aggregate credits used by the Company pursuant to said clause (a) and clause (d) in all applications for the release of property theretofore released from the Lien hereof on the basis of purchase money obligations theretofore delivered to and then held by the Trustee or the trustee or other holder of a lien prior hereto shall, immediately after the release then being applied for, exceed fifteen per centum (15%) of the aggregate of (x) the principal amount of the bonds at such time Outstanding under this Indenture and (y) the principal amount of the bonds Outstanding, as therein defined, under the 1944 Mortgage;
(4) in the case where the release is on the basis of Property Additions, an Opinion of Counsel as required by Section 5.05(7) hereof;

(5) in case any obligations secured by purchase money mortgage upon the property to be released are included in the consideration for such release and are delivered to the Trustee or to the holder of a lien prior hereto in connection with any release of such property, an Opinion of Counsel stating that, in his or their opinion, such obligations are valid obligations enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of mortgagees’ and other creditors’ rights and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law), and that the purchase money mortgage securing the same is sufficient to afford a valid purchase money lien upon the property to be released, subject to no lien prior thereto except Excepted Encumbrances and such liens, if any, as shall have existed thereon just prior to such release as liens prior to the Lien of this Indenture;

(6) in case the Trustee is requested to release any franchise, an Opinion of Counsel stating that in his or their opinion such release will not impair to any material extent the right of the Company to operate any of its remaining properties; and





(7) an Opinion of Counsel complying with the requirements of Section 19.05 hereof.

All purchase money obligations and the mortgages securing the same delivered to the Trustee pursuant to this Section shall be duly assigned to the Trustee. The Company shall cause any such purchase money mortgage and the assignment thereof to be promptly recorded and filed in such place or places as shall be required by law in order fully to preserve and protect the security afforded thereby and shall furnish to the Trustee an Opinion of Counsel stating that in the opinion of such counsel such purchase money mortgage and the assignment thereof have been properly recorded and filed so as to make effective the lien intended to be created thereby. Should any re-recording or re-filing be necessary at any time or from time to time, the Company shall likewise cause the same to be duly effected and shall, in each case, furnish to the Trustee an Opinion of Counsel similar to the foregoing. The Trustee shall deliver to the Company any purchase money mortgage and/or assignment thereof whenever required for the purpose of recording or filing or re-recording or re-filing, as evidenced by an Opinion of Counsel.
In case the release of property is, in whole or in part, based upon Property Additions (as permitted under the provisions of clause (b) of subdivision (3) of this Section), the Company shall, subject to the provisions of said clause (b), comply with all applicable provisions of this Indenture (including but not limited to the furnishing of the Engineer’s Certificate provided for in subdivision (3) of Section 5.05 hereof and, in case the provisions of subdivision (4) of Section 5.05 hereof are applicable, the Independent Engineer’s Certificate provided for in said subdivision (4) of Section 5.05 hereof) as if such Property Additions were made the basis of an application for the authentication and delivery of bonds thereon (equivalent in principal amount to seventy per centum (70%) of the fair value of that portion of the property to be released which is to be released on the basis of such Property Additions, as shown by the Engineer’s Certificate in subdivision (2) of this Section provided for), and in case the release of property is in whole or in part based upon the right to the authentication and delivery of bonds (as permitted under the provisions of clause (c) of subdivision (3) of this Section) the Company shall comply with all applicable provisions of Section 6.01 hereof, as the case may be, relating to such authentication and delivery, except that in no such case shall the Company be required to comply with any earnings requirement or to deliver to the Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel provided for in subdivisions (1), (2), (6) and (8) of Section 5.05 hereof; provided, however, that the Cost of any Property Additions received or to be received by the Company in whole or in part as consideration in exchange for the property to be released shall for all purposes of this Indenture be deemed to be the amount stated in the Engineer’s Certificate provided for in subdivision (2) of this Section to be the fair value of the property to be released (a) plus the amount of any cash and the fair value of any other consideration, further to be stated in such Engineer’s Certificate, paid and/or delivered or to be paid and/or delivered by, and the amount of any obligations assumed or to be assumed by, the Company in connection with such exchange as additional consideration for such Property Additions or (b) less the amount of any cash and the fair value to the Company of any other consideration, which shall also be stated in such Engineer’s Certificate, received or to be received by the Company in connection with such exchange in addition to such Property Additions.
For all purposes of this Article XI, the fair value of property subject to a lien prior to the Lien hereof shall be the fair value thereof less the principal amount of any obligations secured by such lien thereon if it will thereafter cease to be a lien on any property subject to the Lien hereof.
Notwithstanding any of the other provisions of this Indenture,
(A) to the extent that any property to be released is not Funded Property and the Property Additions made the basis of such release shall (as evidenced by a statement to such effect




in an Engineer’s Certificate) have been acquired in exchange or consideration for, or acquired, made or constructed in anticipation of, the release of property (and shall never previously have been used as the basis of the release of property under the provisions of clause (b) of subdivision (3) of this Section or as the basis of the withdrawal of cash under subdivision (1) of Section 11.05) said Property Additions shall not have the status of Funded Property except to the extent of any amount which shall, at the time such Property Additions were made the basis of such release, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04, and

(B) to the extent that any property released shall not have been Funded Property just prior to its release,

(i)      any Property Additions made the basis of such release of property shall not be deemed to be Funded Property except to the extent of any amount which shall, at the time such Property Additions were made the basis of such release, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04, and
(ii)      any waiver of the right to the authentication and delivery of bonds made the basis of such release of property shall be revoked and cease to be effective and shall no longer be deemed to have been made, if the Company shall within two years after the release of such property file with the Trustee such Officers’ Certificates, Engineer’s Certificates, Independent Engineer’s Certificates, Opinions of Counsel and other papers (other than any Resolution, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (6) and (8) of Section 5.05 hereof) as under the provisions of Article V hereof would entitle the Company, on the basis of Property Additions acquired, made or constructed subsequent to the application for the release of such property, to the authentication and delivery of bonds (equal in principal amount to seventy per centum (70%) of the fair value of such property so released), and the inclusion of such subsequently acquired Property Additions in any such Officers’ Certificate, Engineer’s Certificate, Independent Engineer’s Certificate, Opinion of Counsel or other papers shall not make such subsequently acquired Property Additions Funded Property.
Any bonds Outstanding under this Indenture deposited with the Trustee, pursuant to the provisions of this Section, shall forthwith be cancelled by the Trustee, and any moneys and/or obligations secured by purchase money mortgage and/or other property and/or the proceeds of any thereof and/or substitutes therefor received by the Trustee under this Section shall be held as part of the Mortgaged and Pledged Property and such moneys and/or obligations secured by purchase money mortgage shall be paid over, withdrawn, used or applied, in the manner, to the extent, and for the purposes and subject to the conditions provided in Section 11.05 hereof.
Any property acquired by the Company by exchange or purchase to take the place of any property released under any provisions of this Article shall forthwith and without further conveyance become subject to the Lien of and be covered by this Indenture as a part of the Mortgaged and Pledged Property, subject to no lien except Excepted Encumbrances and any liens existing thereon just prior to the acquisition thereof.




Section 11.04.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Trustee shall whenever from time to time requested by the Company (such request to be evidenced by an Officers’ Certificate) and without requiring compliance with any of the provisions of Section 11.03 hereof, release from the Lien hereof all the right, title and interest of the Trustee in and to any real estate unimproved for use in the conduct of the business of the Company, provided the Company has sold, exchanged, dedicated or disposed of such real estate, or has agreed to sell, exchange, dedicate or dispose of such real estate, or, as evidenced by a Resolution, has authorized its officers to endeavor to sell such real estate, and provided the aggregate value of the interest of the Company in such real estate so released without such compliance in any period of twelve (12) consecutive calendar months shall not exceed the greater of One Million Dollars ($1,000,000) or three per centum (3%) of the bonds Outstanding hereunder on the date of such release. Prior to the granting of any such release, there shall be delivered to the Trustee an Engineer’s Certificate stating the fair value of the property to be released and that in the opinion of the signers the release thereof will not impair the security under this Indenture in contravention of the provisions hereof and setting forth any other facts required to be known by it as a condition precedent to any act by it under this Section. The Company covenants that it will deposit with the Trustee, to be dealt with in the manner provided in Section 11.05 hereof, the net consideration, if any, received by it upon the sale or other disposition of any such real estate so released (to the extent that the same shall not have been paid or delivered to the holder of another lien prior to the Lien of this Indenture in accordance with the provisions thereof and an Officers’ Certificate to that effect shall have been furnished to the Trustee), or if no consideration be received therefor or results therefrom to the Mortgaged and Pledged Property the Company will so deposit the fair value thereof.

Section 11.05.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, any Funded Cash received by the Trustee shall be held by the Trustee and, subject to the provisions of Section 9.12 hereof, such cash and any cash which may be applied as in this Section provided,

(1) may be withdrawn from time to time by the Company to the extent of the Cost or the fair value to the Company (whichever is less) of Property Additions not then Funded Property (after making any deductions and additions pursuant to the provisions of Section 1.04 hereof); provided, however, that no such withdrawal of cash representing the proceeds of insurance on or the release of property or securities or payment of or on account of obligations secured by purchase money mortgages may be based in whole or in part upon Property Additions acquired, made or constructed more than five (5) years prior to the last day of the calendar month immediately preceding the receipt by the Trustee of such cash; and provided further, that Property Additions acquired, made or constructed within ninety (90) days prior to the date of the receipt by the Trustee of such cash representing the proceeds of insurance on or the release of property (including securities and other personal property, if any), or payment of or on account of obligations secured by purchase money mortgages, or subsequent to such receipt of cash, may, at the option of the Company, not have deducted therefrom the deductions nor added thereto the additions pursuant to Section 1.04 hereof;

(2) may be withdrawn from time to time by the Company in an amount equal to the principal amount of each bond or fraction of a bond to the authentication and delivery of which the Company shall be entitled under the provisions of Section 6.01 hereof, by virtue of compliance with all applicable provisions of said Section 6.01 (except as




hereinafter in this Section otherwise provided); provided, however, that (except as hereinafter in this Section otherwise provided) the application for such withdrawal of cash shall operate as a waiver by the Company of such right to the authentication and delivery of each such bond or fraction thereof, on the basis of which right such cash is withdrawn, and any bonds which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall be deemed to have been made the basis of the withdrawal of such cash;

(3) may, upon the request of the Company, be used by the Trustee for the purchase of bonds issued hereunder in accordance with the provisions of Section 10.05; or

(4) may, upon the request of the Company, be applied by the Trustee to the payment at maturity of any bonds issued hereunder or to the redemption of any bonds issued hereunder which are, by their terms, redeemable, of such series as may be designated by the Company, such redemption to be in the manner and as provided in Article X hereof.

Such moneys shall, from time to time, be paid out or used or applied by the Trustee, as aforesaid, upon the request of the Company evidenced by a Resolution, and upon receipt by the Trustee of an Officers’ Certificate stating that the Company is not in default in the payment of the interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing. In case the withdrawal of cash is, in whole or in part, based upon Property Additions (as permitted under the provisions of clause (1) of this Section), the Company shall, subject to the provisions of said clause (1), comply with all applicable provisions of this Indenture (including but not limited to the furnishing of the Engineer’s Certificate provided for in subdivision (3) of Section 5.05 hereof and, in case the provisions of subdivision (4) of Section 5.05 hereof are applicable, the Independent Engineer’s Certificate provided for in said subdivision (4) of Section 5.05 hereof) as if such Property Additions were made the basis of an application for the authentication and delivery of bonds thereon equivalent in principal amount to seventy per centum (70%) of the cash to be withdrawn on such basis; or in case the withdrawal of cash is, in whole or in part, based upon the right to the authentication and delivery of bonds (as permitted under the provisions of clause (2) of this Section) the Company shall comply with all applicable provisions of Section 6.01 hereof, as the case may be, relating to such authentication and delivery; except that in no such case shall the Company be required to comply with any earnings requirement or to deliver to the Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 5.05 hereof.
Notwithstanding any of the other provisions of this Indenture,
(a) to the extent that any cash to be withdrawn under the provisions of this Section represents the proceeds of property that was not Funded Property released, taken by eminent domain or damaged or destroyed by fire or represents payment on account of principal of, or consideration for the release of, obligations secured by purchase money mortgage which shall have been deposited with the Trustee as the basis of the release of property that was not Funded Property, and the application for the withdrawal of such cash is based upon Property Additions (which shall never previously have been used as the basis of the withdrawal of cash under subdivision (1) of this Section or as the basis of the release of property under the provisions of clause (b) of subdivision (3) of Section 11.03 hereof) acquired, made or constructed or to be acquired, made or constructed with such cash, or acquired, made or constructed in anticipation of the release of property or the withdrawal of cash (as evidenced by a statement to such effect in an




Engineer’s Certificate), then such Property Additions shall not have the status of Funded Property, except to the extent of any amount which shall, at the time such Property Additions were made the basis of such withdrawal of cash, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04, and

(b) to the extent that any cash withdrawn, used or applied under the provisions of this Section shall have represented the proceeds of property that was not Funded Property released, taken by eminent domain or damaged or destroyed by fire or shall have represented payment on account of principal of, or consideration for the release of, obligations secured by purchase money mortgage which shall have been deposited with the Trustee as the basis of the release of property that was not Funded Property,

i. such cash shall no longer be deemed to be, or to have been at the time of such withdrawal, use or application, Funded Cash;

ii. any Property Additions made the basis of such withdrawal of cash shall not be deemed to be Funded Property except to the extent of any amount which shall, at the time such Property Additions were made the basis of such withdrawal of cash, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04; and

iii. any waiver of the right to the authentication and delivery of bonds, made the basis of such withdrawal of cash, shall be revoked and cease to be effective and shall no longer be deemed to have been made, if the Company shall, within two years after the withdrawal, use or application of such cash, file with the Trustee such Officers’ Certificates, Engineer’s Certificates, Independent Engineer’s Certificates, Opinions of Counsel and other papers (other than any Resolution, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (6) and (8) of Section 5.05 hereof) as, under the provisions of Article V hereof, would entitle the Company, on the basis of Property Additions acquired, made or constructed subsequent to the receipt by the Trustee of such cash, to the authentication and delivery of bonds equal in principal amount to seventy per centum (70%) of such cash so withdrawn, used or applied, and the inclusion of such subsequently acquired Property Additions in any such Officers’ Certificate, Engineer’s Certificate, Independent Engineer’s Certificate, Opinion of Counsel or other papers shall not make such subsequently acquired Property Additions Funded Property.

Any obligation secured by purchase money mortgage received or to be received by the Trustee under any of the provisions of this Indenture in consideration of the release of any property may be released at any time upon payment by the Company to the Trustee of all or the unpaid portion of the principal of such obligation; provided, however, at any time after the Trustee shall have received on account of the principal of any obligations secured by purchase money mortgage on a specified property (from the Company, the obligor or otherwise), an amount in cash equal to the aggregate principal amount of such obligations to the extent made the basis of a credit in the application for the release from the Lien hereof of such property, the Trustee shall deliver to the Company on the written request of the Chairman of the Board, Chief Executive Officer, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Company, the purchase money mortgage on such property and all obligations secured thereby then held by the Trustee including, but not limited to,




any such obligations delivered to the Trustee as required by subdivision (3) of Section 11.03 hereof but not used as a credit thereunder.
The principal of and interest on any such obligations secured by purchase money mortgage held by the Trustee shall be collected by the Trustee as and when the same become payable. Unless the Company is in default in the payment of the interest on any of the bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the interest received by the Trustee on any such obligations shall be paid over to the Company, and any payments received by the Trustee on account of the principal of any such obligations in excess of the amount of credit used by the Company in respect of such obligations upon the release of any property from the Lien hereof shall also be paid over to the Company.
The Trustee shall have and may exercise all the rights and powers of an owner of such obligations and of all substitutions therefor and, without limiting the generality of the foregoing, may collect and receive all insurance moneys payable to it under any of the provisions thereof and apply the same in accordance with the provisions thereof, may consent to extensions thereof at a higher or lower rate of interest, may join in any plan or plans of voluntary or involuntary reorganization or readjustment or rearrangement and may accept and hold hereunder new obligations, stocks or other securities issued in exchange therefor under any such plan. Any discretionary action which the Trustee may be entitled to take in connection with any such obligations or substitutions therefor shall be taken, so long as no Default shall exist, in accordance with the request of the Company, evidenced by a Resolution, and during the existence of a Default in its own discretion.
Any bonds issued under this Indenture received by the Trustee pursuant to the provisions of this Section shall forthwith be cancelled by the Trustee.
Section 11.06.    Should any of the Mortgaged and Pledged Property be taken by exercise of the power of eminent domain or by the exercise by any governmental authority or instrumentality or designee thereof of the right to purchase or otherwise acquire any of the Mortgaged and Pledged Property and should the Company not elect to release such property pursuant to other provisions of this Article XII, the Trustee shall, upon request of the Company, evidenced by an Officers’ Certificate, and upon receipt of the net proceeds referred to below, release from the Lien hereof, all its right, title and interest in and to the property so taken, purchased or otherwise acquired upon being furnished with an Opinion of Counsel to the effect that such property has been taken by exercise of the power of eminent domain or by the exercise by any governmental authority or instrumentality or designee thereof of the right to purchase or otherwise acquire the same. Such Opinion of Counsel shall state the amount of net proceeds received for such property so taken or acquired and the amount so stated shall be deemed to be the fair value of such property for the purpose of subdivision (b) of Section 16.13 hereof. An amount equal to the net proceeds of all property so taken or acquired (which proceeds shall, in either event, be required to be entirely in the form of cash) shall be paid over to the Trustee (except to the extent that such net proceeds shall have been paid or delivered to the holder of a lien prior hereto in accordance with the provisions thereof and a certificate of such trustee or other holder to that effect shall have been furnished to the Trustee), and (if paid over to the Trustee hereunder) may, subject to the provisions of Section 9.12 hereof, thereafter be withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 11.05 hereof.

Section 11.07.    In case the Mortgaged and Pledged Property shall be in the possession of a receiver or trustee, lawfully appointed, the powers hereinbefore conferred upon the Company with respect to the sale or other disposition of the Mortgaged and Pledged Property or the withdrawal of cash may be exercised,




with the approval of the Trustee, by such receiver or trustee, notwithstanding the Company may be in default and any request, certificate, appointment or approval made or signed by such receiver or trustee for such purposes shall be as effective as if made by the Company or its Board of Directors or any of its officers or appointees in the manner herein provided; and if the Trustee shall be in possession of the Mortgaged and Pledged Property under any provision of this Indenture, then such powers may be exercised by the Trustee in its discretion notwithstanding that the Company may be in default.

Notwithstanding the existence of a default in the payment of interest on any bonds Outstanding hereunder or the existence of a Default, the Trustee, in its discretion, may release from the Lien hereof any part of the Mortgaged and Pledged Property or permit the withdrawal of cash, upon compliance with the other conditions specified in this Article in respect thereof.
No purchaser in good faith of property purporting to have been released hereunder shall be bound to ascertain the authority of the Trustee to execute the release, or to inquire as to any facts required by the provisions hereof for the exercise of this authority; nor shall any purchaser or grantee of any property or rights permitted by this Article to be sold, granted, exchanged, dedicated or otherwise disposed of, be under obligation to ascertain or inquire into the authority of the Company to make any such sale, grant, exchange, dedication or other disposition.
Section 11.08.    In addition to the other provisions for the release of Mortgaged and Pledged Property provided in this Indenture, unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may in the alternative also obtain the release of any of the Mortgaged and Pledged Property (except cash or obligations secured by purchase money mortgage or all or substantially all of the Mortgaged and Pledged Property) by delivery to the Trustee of the Officers’ Certificate provided for in subdivision (1) of Section 11.03 hereof, the Engineer’s Certificate provided for in subdivision (2) of Section 11.03 hereof, the Opinion of Counsel provided for in subdivision (7) of Section 11.03 hereof and a copy of a release of such Mortgaged and Pledged Property from the lien of the 1944 Mortgage executed by the Corporate Trustee thereunder.

Section 11.09.    In case the Company has sold, exchanged, dedicated or disposed of, or intends or has agreed to sell, exchange, dedicate or dispose of, or a governmental body or agency has exercised a right to order the Company to divest itself of, any property of a character excepted from the Lien hereof, or the Company desires to disclaim or quitclaim title to property to which the Company does not purport to have title, the Trustee shall, from time to time, execute such instruments of disclaimer or quitclaim as may be appropriate upon receipt by the Trustee of the following:

(1) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and describing in reasonable detail the property to be disclaimed or quitclaimed; and

(2) an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating the signer’s opinion that such property is not subject to the Lien hereof or required to be subject thereto by any of the provisions hereof; and stating that the execution of such disclaimer or quitclaim is appropriate.

Section 11.10.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property which is not Funded Property, except cash then held by the Trustee (provided, however, obligations secured by purchase money mortgage




deposited with the Trustee shall not be released except as provided in Section 11.05 hereof), and the Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon application of the Company and receipt by the Trustee of the following (in lieu of complying with the requirements of Section 11.03 hereof):

(1) An Officers’ Certificate stating that the Company has sold, leased, granted an interest in, exchanged, dedicated or disposed of, or intends to sell, lease, grant an interest in, exchange, dedicate, or dispose of, or that a governmental body or agency has lawfully ordered the Company to divest itself of, certain property, which shall be described in reasonable detail, that is not Funded Property and stating the consideration, if any, received or to be received therefor, and requesting the release thereof from the Lien of this Indenture; and stating that such property has not theretofore been Funded; that such release is in the opinion of the signers desirable in the conduct of the business of the Company; and that the Company is not, to the knowledge of the signers, in default in the performance of any of the terms or covenants of this Indenture; and that in the opinion of the signers all conditions precedent provided for in this Indenture relating to the release of the property in question have been complied with;

(2) (a) An Engineer’s Certificate, made and dated not more than (90) days prior to the date of such application, stating, in the opinion of the signers, the then fair value of the property to be released (which property shall be described in such certificate in reasonable detail) without deduction for any liens on such property; and stating that, in the opinion of the signers, such release will not impair the security under this Indenture in contravention of the provisions of this Indenture;

(b) In the case the fair value of such property to be released and all of other property released from the Lien of this Indenture since the commencement of the then current calendar year as shown by certificates filed pursuant to Article XI hereof, is ten per centum (10%) or more of the aggregate principal amount of bonds Outstanding at the time of the application then being made, an Independent Engineer’s Certificate stating in substance, the then fair value, in the opinion of the signers, of the property to be released, without deduction for any lien on such property; and that such release, in the opinion of the signers, will not impair the security under this Indenture in contravention of the terms of this Indenture; provided, however, that no Independent Engineer’s Certificate need be delivered to the Trustee in the case of any release of property if the fair value thereof, as shown by the certificate filed pursuant to paragraph (a) of this subdivision (2), is less than twenty-five thousand dollars ($25,000) or less than one per centum (1%) of the aggregate principal amount of bonds at the time Outstanding hereunder;

(3) A further Engineer’s Certificate, made and dated not more than ninety (90) days prior to the date of such application, stating, in the opinion of the signers, that the aggregate principal amount of bonds to be Outstanding under this Indenture immediately after such release shall not exceed seventy per centum (70%) of the aggregate fair value of the then Funded Property of the Company; and

(4) An Opinion of Counsel to the effect that all conditions precedent provided for in this Indenture relating to the release of the property in question have been complied with and, in case the Trustee is requested to release any franchise, that such release will not




impair to any material extent the right of the Company to operate any of its remaining properties.


ARTICLE XII

REMEDIES OF TRUSTEES AND BONDHOLDERS UPON DEFAULT

Section 12.01.    The following events are hereby defined for all purposes of this Indenture (except where the term is otherwise defined for specific purposes) as “Defaults”:

(a) Failure to pay the principal of any bond hereby secured when the same shall become due and payable, whether at maturity, as therein expressed, or upon redemption or by declaration or otherwise;

(b) Failure to pay interest upon any bond hereby secured for a period of ten (10) days after such interest shall have become due and payable;

(c) The expiration of a period of sixty (60) days following the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Company under the Federal Bankruptcy Act or any other applicable Federal or State law of a similar nature, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Company or any substantial part of its property, or ordering the winding up or liquidation of its affairs unless during such period such decree, order or appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official shall be vacated or shall be stayed on appeal or otherwise or shall have otherwise ceased to continue in effect;

(d) The commencement by the Company of a voluntary case, or the institution by it of proceedings, to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement or relief under the Federal Bankruptcy Act or any other applicable Federal or State law of a similar nature, or the consent or acquiescence by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action;

(e) The expiration of a period of thirty (30) days after the mailing by the Trustee to the Company of a written demand (citing this provision), or by the holders of fifteen per centum (15%) in principal amount of the bonds at the time Outstanding hereunder (determined as provided in Section 12.07 hereof) to the Company and to the Trustee of a written demand, that the Company perform a specified covenant or agreement contained herein or in any indenture supplemental hereto or in any bond secured hereby, which specified covenant or agreement the




Company shall have failed to perform prior to such mailing, unless the Company during such period shall have performed such specified covenant or agreement or shall have in good faith commenced efforts to perform the same. The Trustee may, and, if requested in writing so to do by the holders of a majority in principal amount of the bonds then Outstanding, shall, make such demand;

(f) The existence of any “Default”, as therein defined, in any indenture supplemental hereto; and

(g) The existence of any “Default”, as therein defined, under the 1944 Mortgage.

Section 12.02    The Trustees shall, within thirty (30) days after the occurrence thereof, give to the bondholders in the manner and to the extent provided in subdivision (c) of Section 16.13 hereof, notice of all defaults known to the Trustees, unless such defaults shall have been cured before the giving of such notice (the term “defaults” for the purposes of this Section being hereby defined to be the events specified in subdivisions (a), (b), (c), (d), (e), (f) and (g) of Section 12.01 hereof, not including any periods of grace provided for in said subdivisions) but in the case of any default as specified in subdivision (e) of Section 12.01 hereof, no such notice shall be given until at least twenty (20) days after the occurrence thereof; provided that, except in the case of default in the payment of the principal of or interest on any of the bonds hereby secured, or in the payment of any installment of any fund required to be applied to the purchase or redemption of any of the bonds hereby secured, the Trustee shall be protected in withholding such notice if and so long as the board of directors, executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determine that the withholding of such notice is in the interests of the bondholders and the Co-Trustee shall be protected in withholding such notice if and so long as the Co-Trustee in good faith determines that the withholding of such notice is in the interests of the bondholders.

Section 12.03.    Upon the occurrence of a Default, the Trustee may, and upon the written request of the holders of twenty-five per centum (25%) in principal amount of the bonds then Outstanding (determined as provided in Section 12.07 hereof) shall, and the holders of twenty-five per centum (25%) in principal amount of the bonds at the time Outstanding hereunder may, (unless the holders of bonds of any series have annulled a declaration of such Default relating to such series of bonds pursuant to the provisions of the supplemental indenture creating such series of bonds), by notice in writing given to the Company (and to the Trustee if such notice be given by bondholders) unless prior to such declaration all covenants with respect to which Default shall have occurred, shall have been fully performed or made good, and all indebtedness secured hereby (including interest on overdue principal and, to the extent that payment of such interest is not prohibited under applicable law, on any overdue interest at the rate specified in Section 12.14 hereof), (other than expenses and charges of the Trustees), except the principal of any bonds not then due by their terms (other than by such declaration) and except interest accrued on such bonds since the last interest payment date, shall be paid, or the amount thereof shall be paid to the Trustee for the benefit of those entitled thereto, declare the principal of all of the bonds hereby secured and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable; subject, however, to the right of the holders of a majority in principal amount of all Outstanding bonds, by written notice to the Company and to the Trustees, thereafter to annul such declaration and destroy its effect at any time before any sale hereunder, if, before any such sale, all covenants with respect to which a Default shall have occurred shall be fully performed or made good, and the reasonable expenses and charges of the Trustees, their agents and attorneys, and all other indebtedness secured hereby (including interest on overdue principal and, to the extent that payment of such interest is




not prohibited under applicable law, on any overdue interest, at the rate specified in Section 12.14 hereof), except the principal of any bonds not then due by their terms (other than by such declaration) and except interest accrued on such bonds since the last interest payment date, shall be paid, or the amount thereof shall be paid to the Trustee for the benefit of those entitled thereto.

Section 12.04.    Upon the occurrence of one or more Defaults, the Company, upon demand of the Trustees, or either of them, shall (if at the time such action shall be lawful) forthwith surrender to the Trustee or to both the Trustee and the Co-Trustee, or to the Co‑Trustee to the extent that the Trustee is not legally qualified to take possession as it or they may demand, the actual possession of, and (if at the time such action shall be lawful) the Trustee, or the Trustee and the Co-Trustee, or the Co-Trustee to the extent that the Trustee is not legally qualified to act in the premises, as shall be specified in such demand, by such officer or agent as it or they may appoint, may take possession of, all the Mortgaged and Pledged Property (with the books, papers and accounts of the Company) and hold, operate and manage the same, and from time to time make all needful repairs and such extensions, additions and improvements as to the Trustee or the Trustee and the Co-Trustee, or the Co‑Trustee to the extent the Trustee is not legally qualified to act in the premises, shall seem wise; and receive the tolls, rents, revenues, issues, earnings, income, products and profits thereof, and out of the same pay all proper costs and expenses of so taking, holding, managing and operating the same, including reasonable compensation to the Trustees, their agents and counsel, and any charges of the Trustees hereunder, and any taxes and assessments and other charges prior to the Lien of this Indenture which the Trustee or trustee in possession may deem it wise to pay, and all expenses of such repairs, extensions, additions and improvements, and apply the remainder of the moneys so received by the Trustee, or the Trustee and the Co-Trustee, or the Co-Trustee to the extent the Trustee is not legally qualified to act in the premises, subject to the provisions of Section 12.12 hereof with respect to extended, transferred or pledged coupons or claims for interest, first to the payment of the installments of interest which are due and unpaid (including, to the extent that payment thereof is not prohibited under applicable law, interest on overdue interest at the rate specified in Section 12.14 hereof), in the order of their maturity, and next, if the principal of any of said bonds is due, to the payment of the principal and accrued interest thereon (including interest on overdue principal and, to the extent that payment thereof is not prohibited under applicable law, interest on overdue interest, at the rate specified in Section 12.14 hereof) pro rata without any preference or priority whatever, except as aforesaid. Whenever all that is due upon such bonds and installments of interest and under any of the terms of this Indenture shall have been paid and all Defaults made good, the Trustees or trustee in possession shall surrender possession to the Company, its successors or assigns; the same right of entry, however, to exist upon any subsequent Default.

Section 12.05.    Upon the occurrence of one or more Defaults, the Trustees, by such officer or agent as they may appoint, with or without entry, may, if at the time such action shall be lawful, sell all the Mortgaged and Pledged Property as an entirety, or in such parcels as the holders of a majority in principal amount of the bonds Outstanding hereunder (determined as provided in Section 12.07 hereof) shall in writing request, or in the absence of such request, as the Trustees may determine, at public auction at some convenient place in such county or judicial district in which the Company owns property subject hereto as the Trustees shall determine, or such other place or places as may be required by law, having first given notice of such sale by publication for three (3) consecutive weeks preceding the sale in at least one Daily Newspaper of general circulation in each county or parish in Mississippi, Arkansas and any other state in which the Company owns property (if there be such Daily Newspaper), the first publication to be made not less than twenty-one (21) days prior to the date of such sale, and by like publication one (1) time in at least one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, and by posting notice of such sale for the same period of time at the courthouse of each county in Mississippi, Arkansas and any other state in which the Company owns property, and any other notice




which may be required by law, and such notice or advertisement shall disclose the name of the Company as the original grantor of this Mortgage and Deed of Trust. From time to time the Trustees may (to the extent permitted by law) adjourn such sale in their discretion by announcement at the time and place fixed for such sale without further notice, and upon such sale may make and deliver to the purchaser or purchasers a good and sufficient instrument or instruments of conveyance, assignment or transfer for the same, which sale shall to the extent then permitted by law, be a perpetual bar, both at law and in equity, against the Company and all persons, firms and corporations lawfully claiming or who may claim by, through or under it.

The Company waives the provisions of Section 89-1-55 of the Mississippi Code of 1972, as amended, as far as such section restricts the right of the Trustees to offer at sale more than 160 acres at a time, and the Trustees may offer the property herein conveyed as a whole, regardless of how it is described.
Section 12.06.    In case of the breach of any of the covenants or conditions of this Indenture, the Trustees shall have the right and power to take appropriate judicial proceedings for the enforcement of their rights and the rights of the bondholders hereunder. In case of a Default the Trustees may either after entry, or without entry, proceed by suit or suits at law or in equity to enforce payment of the bonds then Outstanding hereunder and to foreclose this Indenture and to sell the Mortgaged and Pledged Property under the judgment or decree of a court or courts of competent jurisdiction.

No remedy by the terms of this Indenture conferred upon or reserved to the Trustees, or either of them (or to the bondholders), is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any Default shall impair any such right or power or shall be construed to be a waiver of any such Default or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient.
No waiver of any Default, whether by the Trustee or by the bondholders, shall extend to or shall affect any subsequent Default or shall impair any rights or remedies consequent thereon.
Section 12.07.    The holders of not less than a majority in principal amount of the bonds at the time Outstanding hereunder may direct the time, method, and place of conducting, any proceeding for any remedy available to the Trustees, or either of them, exercising any trust or power conferred upon the Trustees, or either of them, provided, however, that such direction shall not be otherwise than in accordance with the provisions of law and this Indenture and that, subject to the provisions of Sections 16.01 and 16.02 hereof, the Trustees shall have the right to decline to follow any such direction if the Trustee in good faith shall by Responsible Officers determine that the action or proceeding so directed would involve the Trustees, or either of them, in personal liability or be unjustifiably prejudicial to nonassenting bondholders or that it will not be sufficiently indemnified for any expenditures in any action or proceeding so directed.

For the purposes of this Section and of Sections 9.06, 12.01, 12.03, 12.05, 16.02, 16.14, 16.15, 18.02, 18.06, 18.10 and 19.06 hereof, and for the purpose of waiving, in accordance with any of the provisions of Section 18.07 hereof, any past Default of the Company and the consequences thereof, in determining whether the holders of the required percentage of the principal amount of bonds have concurred or participated in any direction or consent, (a) bonds for the purchase of which money in the




necessary amount shall have been deposited with or shall then be held by the Trustee with irrevocable direction to apply the same to the purchase thereof shall be deemed Outstanding and (b) bonds owned by the Company or by any affiliate of the Company (unless all bonds at the time Outstanding hereunder are then so owned) shall be disregarded, except that for the purpose of determining whether the Trustees, or either of them, shall be protected in relying on any such direction or consent, only bonds which the Trustees, or either of them, know are so owned, shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this paragraph, if the pledgee shall establish to the satisfaction of the Trustees or the Trustee the pledgee’s right to vote such bonds and that the pledgee is not an affiliate of the Company. In case of a dispute as to such right, any decision by the Trustees, or either of them, taken upon the advice of counsel shall be full protection to the Trustees.
Section 12.08.    In case of a Default and upon the filing of a bill in equity or other commencement of judicial proceedings to enforce the rights of the Trustees and of the bondholders under this Indenture, the Trustees shall be entitled, as a matter of right (to the extent that such right is enforceable under applicable law), to the appointment of a receiver or receivers of the Mortgaged and Pledged Property, and of the tolls, rents, revenues, issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer, whether or not the Mortgaged and Pledged Property shall be adequate to satisfy the bonds then Outstanding.

Section12.09.    Upon any sale being made either under the power of sale hereby given or under judgment or decree in any judicial proceedings, for the foreclosure or otherwise for the enforcement of this Indenture, the principal of all bonds then secured hereby, if not previously due, shall become and be immediately due and payable.

Section 12.10.    Upon any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for foreclosure or otherwise for the enforcement of this Indenture, any bondholder or bondholders may bid for and purchase the Mortgaged and Pledged Property or any part thereof and upon compliance with the terms of sale may hold, retain and possess and dispose of such property in his, their or its own absolute right without further accountability, and any purchasers at any such sale may, in paying the purchase money, turn in any of the bonds Outstanding hereunder and coupons or claims for interest outstanding hereunder in lieu of cash to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon, subject, however, to the provisions of Section 12.12 hereof with respect to extended, transferred, or pledged coupons or claims for interest. Said bonds and coupons, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the holders thereof after being appropriately stamped to show partial payment.

Section 12.11.    Upon any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for the foreclosure or otherwise for the enforcement of this Indenture, the receipt of the Trustees, or either of them, or of the officer making such sale shall be a sufficient discharge to the purchaser or purchasers at any sale for his or their purchase money and such purchaser or purchasers, his or their assigns or personal representatives shall not, after paying such purchase money and receiving such receipt of the Trustees, or either of them, or of such officer therefor, be obliged to see to the application of such purchase money, or be in anywise answerable for any loss, misapplication or non-application thereof.

Any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for the foreclosure or otherwise for the enforcement of this Indenture shall, if and to the extent then permitted by law, operate to divest all right, title, interest, claim and demand




whatsoever, either at law or in equity, of the Company of, in and to the property so sold, and be a perpetual bar both at law and in equity against the Company, its successors and assigns and against any and all persons, firms or corporations claiming or who may claim the property sold, or any part thereof, from, through or under the Company, its successors or assigns.
Section 12.12.    The proceeds of any sale made either under the power of sale hereby given, or under judgment or decree in any judicial proceedings for the foreclosure or otherwise for the enforcement of this Indenture, together with any other amounts of cash which may then be held by the Trustees, or either of them, as part of the Mortgaged and Pledged Property, shall be applied, as follows:

First .--To the payment of all taxes, assessments, governmental charges and liens prior to the Lien of this Indenture, except those subject to which such sale shall have been made, and of all the costs and expenses of such sale, including reasonable compensation to the Trustees, their agents and (to the extent permitted by law) their attorneys, and of all other sums payable to the Trustees hereunder by reason of any expenses or liability incurred (in good faith and without negligence by the Trustees) or advances made in connection with the management or administration of the trusts hereby created;
Second .--To the payment in full of the amounts then due and unpaid for principal, premium and interest upon the bonds then secured hereby; and in case such proceeds shall be insufficient to pay in full the amounts so due and unpaid, then to the payment thereof ratably, without preference or priority as to principal, premium or interest, or of any amount of interest over any other amount of interest; provided, however, that if the time for the payment of any coupon or claim for interest upon any of the bonds secured hereby shall have been extended (except pursuant to action taken under Article XVIII hereof) by or with the consent of the Company, or if any thereof at or after maturity shall have been transferred or pledged separate from the bond to which they relate, such coupons or claims for interest shall not be entitled in case of Default hereunder to the benefit or security of this Indenture except after the prior payment in full of the principal and premium, if any, of all bonds issued hereunder and then secured hereby and of all coupons and claims for interest on such bonds the payment of which has not been so extended, or not so transferred or pledged; but the foregoing provisions of this paragraph Second shall not be applicable to any coupon or claim for interest the time for the payment of which shall have been extended, if such extension be pursuant to a plan proposed by the Company to all holders of any one or more series of bonds then Outstanding and accepted by and binding upon the holder of such coupon or claim for interest; and
Third .--Any surplus thereof remaining to the Company, its successors or assigns or to it, him or them whosoever may be lawfully entitled to receive the same.
Section 12.13.    In case of a Default, to the extent that such rights may then lawfully be waived, neither the Company nor anyone claiming through or under it shall or will set up, claim, or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force in any locality where any of the Mortgaged and Pledged Property may be situated, in order to prevent or hinder the enforcement or foreclosure of this Indenture, or the absolute sale of the Mortgaged and Pledged Property, or the final and absolute putting into possession thereof, immediately after such sale, of the purchaser or purchasers thereat, but the Company, for itself and all who may claim through or under it, hereby waives, to the extent that it lawfully may so do, the benefit of all such laws and all right of appraisement and redemption to which it may be entitled under the laws of any State where any of the Mortgaged and Pledged




Property may be situated. The Company, for itself and all who may claim through or under it, waives, to the extent that it lawfully may do so, any and all right to have the estates comprised in the security intended to be created hereby marshalled upon any foreclosure of the Lien hereof, and agrees that any court having jurisdiction to foreclose such Lien may sell the Mortgaged and Pledged Property as an entirety.

Section 12.14.    The Company covenants that if default shall be made in the payment of the principal of any bond hereby secured when the same shall become due and payable, whether by the maturity of said bond or otherwise, or in the case of a default in the payment of the interest on any bond for a period of ten (10) days after such interest shall have become due and payable, then upon demand of the Trustee, the Company will pay to the Trustees, for the benefit of the holders of the bonds and coupons then secured hereby, the whole amount due and payable on all such bonds and coupons for principal, premium, if any, and interest, with interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.

In the case of a default in payment of the principal of any bond when the same shall become due and payable, or in the case of a default in the payment of the interest on any bond for a period of ten (10) days after such interest shall have become due and payable, the Trustees, or either of them, may recover judgment, in their own names and as trustees of an express trust, against the Company for the whole amount of such principal, interest and any premium remaining unpaid together with interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.
The Trustees, or either of them, may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustees, or either of them, and of the bondholders allowed in any judicial proceedings relative to the Company or its creditors, or its property. In case of any receivership, insolvency, bankruptcy, reorganization or other similar proceedings affecting the Company or its property, the Trustee, irrespective of whether the principal of the bonds shall then be due and payable and irrespective of whether the Trustee shall have made any demand for such payment, shall be entitled and empowered either in its own name or as trustee of an express trust or as attorney in fact for the holders of the bonds and coupons, or in any one or more of such capacities, to file a proof of claim for the whole amount of principal and interest (with interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum) which may be or become owing and unpaid in respect of the bonds and for any additional amount which may be or become payable by the Company hereunder, without regard to or deduction for any amount which may have been or which may thereafter be received, collected or realized by the Trustees from or out of the Mortgaged and Pledged Property or any part thereof or from or out of the proceeds thereof or any part thereof; but nothing in this Indenture contained shall authorize the Trustees to accept or consent to any composition or plan of reorganization on behalf of any bondholder.
The Trustees, to the extent permitted by law, shall be entitled to sue and recover judgment and/or to file and prove such claim as aforesaid either before or after or during the pendency of any proceedings for the enforcement of the Lien of this Indenture upon the Mortgaged and Pledged Property, and in case of a sale of any of the Mortgaged and Pledged Property and of the application of the proceeds of sale to the payment of the debt hereby secured, the Trustees, in their own name and as trustees of an express trust, shall be entitled to enforce payment of and to receive all amounts then remaining due and




unpaid upon any and all the bonds and coupons then Outstanding hereunder, for the benefit of the holders thereof, and the Trustees shall be entitled to recover judgment for any portion of the debt remaining unpaid, with interest. No recovery on any such judgment by the Trustees and no levy of any execution upon any such judgment upon any of the Mortgaged and Pledged Property or upon any other property shall in any manner or to any extent affect the Lien of this Indenture upon the Mortgaged and Pledged Property or any part thereof, or any rights, powers or remedies of the Trustees hereunder, or any lien, rights, powers or remedies of the holders of the said bonds, but such lien, rights, powers and remedies of the Trustees and of the bondholders shall continue unimpaired as before.
Any moneys thus collected or received by the Trustees under this Section shall be applied by them first, to the payment of their expenses, disbursements and compensation and the expenses, disbursements and compensation of their agents and attorneys, and, second, toward payment of the amounts then due and unpaid upon such bonds and coupons in respect of which such moneys shall have been collected, ratably and without preference or priority of any kind (subject to the provisions of Section 12.12 hereof with respect to extended, transferred or pledged coupons and claims for interest), according to the amounts due and payable upon such bonds and coupons, respectively, at the date fixed by the Trustees for the distribution of such moneys, with interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum, upon presentation of the several bonds and coupons and upon stamping such payment thereon, if partly paid, and upon surrender thereof, if fully paid.
Upon any payment or distribution of assets of the Company pursuant to this Article XII, the Trustees shall be entitled to rely upon a court order or judgment or certificate of a receiver trustee in bankruptcy, or liquidating trustee, for the purpose of ascertaining persons entitled to participate in such payment, and the amount or amounts to be paid or distributed therein, including facts pertinent to whether interest on overdue interest shall be paid or payable in accordance with any provision of this Article XII and to whom it shall be payable.
Section 12.15.    All rights of action (including the right to file proofs of claim) under this Indenture or under any of the bonds or coupons may be enforced by the Trustees, or either of them, without the possession of any of the bonds or coupons or the production thereof in any trial or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustees, or either of them, shall be brought in their names as Trustees, or in its or his name as Trustee or Co-Trustee, and any recovery of judgment shall be for the equal benefit of the holders of the Outstanding bonds and coupons, subject to the provisions of Section 12.12 hereof with respect to extended, transferred or pledged coupons and claims for interest.

In any proceeding brought by the Trustees, or either of them (including also any proceeding involving the interpretation of any provision of this Indenture to which the Trustees, or either of them, shall be a party), the Trustee or Trustees shall be held to represent all the holders of the bonds and coupons secured by this Indenture and it shall not be necessary to make such holders of the bonds and coupons parties to any such proceedings.
Section 12.16.    No holder of any bond or coupon shall have any right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder unless such holder shall have previously given to the Trustees written notice of a Default, nor unless also the holders of twenty-five per centum (25%) in principal amount of the bonds then Outstanding hereunder shall have made written request to the Trustees and shall have offered them reasonable opportunity either to proceed to exercise




the powers hereinbefore granted or to institute such suit, action or proceeding in their own name and shall have offered to the Trustees security and indemnity satisfactory to the Trustees against the costs, expenses and liabilities to be incurred thereby without negligence or bad faith, and the Trustees shall have declined to take such action or shall have failed so to do within sixty (60) days thereafter; it being understood and intended that no one or more holders of the bonds or coupons shall have any right in any manner whatsoever to affect, disturb or prejudice the Lien of this Indenture by his or their action to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all holders of Outstanding bonds and coupons. Such notification, request and offer of indemnity are hereby declared, at the option of the Trustees, but subject to the provisions of Sections 16.01 and 16.02 hereof, to be conditions precedent to the execution by them of the powers and trusts of this Indenture and to the exercise by them of any action or cause of action or remedy hereunder.

Notwithstanding any other provision of this Indenture, the right of any holder of any bond to receive payment of the principal of and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such holder.
Section 12.17.    The Company may waive any period of grace provided for in this Article.
In case the Trustees shall have proceeded to enforce any right under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustees, then and in every such case the Company and the Trustees shall be restored to their former positions and rights hereunder with respect to the Mortgaged and Pledged Property, and all rights, remedies and powers of the Trustees shall continue as if no such proceedings had been taken.


ARTICLE XIII

EVIDENCE OF RIGHTS OF BONDHOLDERS AND OWNERSHIP OF BONDS

Section 13.01.    Any request, declaration or other instrument, which this Indenture may require or permit to be signed and executed by the bondholders, may be in any number of concurrent instruments of similar tenor, and shall be signed or executed by such bondholders in person or by attorney appointed in writing. Proof of the execution of any such request or other instrument, or of a writing appointing any such attorney, or of the holding by any person of the bonds or coupons appertaining thereto, shall be sufficient (subject, insofar as the Trustees are concerned, to the provisions of Section 16.01 and Section 16.02 hereof) for any purpose of this Indenture (except as otherwise herein expressly provided) if made in the following manner:

(a) The fact and date of the execution by any person of such request or other instrument or writing may be proved by a witness or by a certificate acknowledged before a Notary Public or other officer authorized to take acknowledgments;

(b) The amount of bonds transferable by delivery held by any person executing such request or other instrument as a bondholder, and the series and serial numbers thereof, held by such person, and the date of his holding the same, may be proved by a certificate executed by any trust company, bank, banker or other depositary wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such person had on deposit with such depositary the bonds




described in such certificate. The Trustees, or either of them, may nevertheless in their discretion require further proof in cases where they deem further proof desirable. The ownership of registered bonds shall be proved by the registry books.

Any request, consent or vote of the owner of any bond shall bind all future holders and owners of said bond issued in exchange or substitution for said bond in respect of anything done or suffered by the Company or the Trustees in pursuance thereof.
Section 13.02.    The Company and the Trustees may deem and treat the bearer of any temporary or coupon bond Outstanding hereunder, which shall not at the time be registered as to principal as hereinbefore authorized, and the bearer of any coupon for interest on any such bond, whether such bond shall be registered or not, as the absolute owner of such bond or coupon, as the case may be, whether or not such bond or coupon shall be overdue, for the purpose of receiving payment thereof or on account thereof and for all other purposes, and neither the Company nor the Trustees shall be affected by any notice to the contrary.

The Company and the Trustees may, subject to the provisions of this Indenture providing for the use of a record date in certain cases, deem and treat the person in whose name any fully registered bond Outstanding hereunder shall be registered upon the books of the Company, as herein authorized, as the absolute owner of such bond for the purpose of receiving payment of or on account of the principal of and interest on such bond and for all other purposes, and they may deem and treat the person in whose name any coupon bond shall be so registered as to principal as the absolute owner thereof for the purpose of receiving payment of or on account of the principal thereof and for all other purposes, except to receive payment of interest represented by outstanding coupons; and all such payments so made to any such registered owner, or upon his order, shall be valid and effectual to satisfy and discharge the liability upon such bond to the extent of the sum or sums so paid, and neither the Company nor the Trustees shall be affected by any notice to the contrary.
Neither the Company nor the Trustees shall be bound to recognize any person as the holder of a bond Outstanding under this Indenture unless and until his bond is submitted for inspection, if required, except as may otherwise be provided by regulations made under Section 18.03 hereof, and his title thereto satisfactorily established, if disputed.


ARTICLE XIV
    
IMMUNITY OF INCORPORATORS, SUBSCRIBERS TO THE
CAPITAL STOCK, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 14.01.    No recourse under or upon any obligation, covenant or agreement contained in this Indenture (including any indenture supplemental hereto) or in any bond or coupon hereby secured, or because of the creation of any indebtedness hereby secured, shall be had against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise; it being expressly agreed and understood that this Indenture and the obligations hereby secured are solely corporate obligations, and that no such personal liability shall attach to, or be incurred by, such incorporators, subscribers to the capital stock, stockholders, officers or directors of the Company or of any predecessor or successor corporation,




or any of them, as such, because of the incurring of the indebtedness hereby authorized, or under or by reason of any of the obligations, covenants or agreements contained in this Indenture or in any of the bonds or coupons hereby secured, or implied therefrom, and that any and all such personal liability of every name and nature, and any and all such rights and claims against every such incorporator, subscriber to the capital stock, stockholder, officer or director, as such, whether arising at common law or in equity, or created by rule of law, statute, constitution or otherwise, are expressly released and waived as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of the bonds and interest obligations secured hereby.


ARTICLE XV

EFFECT OF MERGER, CONSOLIDATION, ETC.

Section 15.01.    The Company may consolidate with, or merge into, any corporation having corporate authority to carry on any of the businesses mentioned in the first sentence of Section 1.04 of this Indenture, or may convey, transfer or lease, subject to the Lien of this Indenture, all or substantially all of the Mortgaged and Pledged Property as an entirety to any corporation lawfully entitled to acquire or lease or operate the same; provided, however, and the Company covenants and agrees, that such consolidation, merger, conveyance, transfer or lease shall be upon such terms as fully to preserve and in no respect to impair the Lien or security of this Indenture, or any of the rights or powers of the Trustees or the bondholders hereunder; and provided, further, that immediately after giving effect to such transaction, no Default shall have occurred and be continuing hereunder; and provided, further, that any such lease shall be made expressly subject to immediate termination by the Company or by the Trustees, or either of them, at any time during the continuance of a Default hereunder, and also by the purchaser of the property so leased at any sale thereof hereunder, whether such sale be made under the power of sale hereby conferred or under judicial proceedings; and provided, further, that, upon any such consolidation, merger, conveyance or transfer, or upon any such lease the term of which extends beyond the date of maturity of any of the bonds secured hereby, the due and punctual payment of the principal and interest of all bonds secured hereby according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company shall be expressly assumed by an instrument in writing executed and delivered to the Trustees by the corporation formed by such consolidation or into which such merger shall have been made, or acquiring all or substantially all the Mortgaged and Pledged Property as an entirety, as aforesaid, or by the lessee under any such lease the term of which extends beyond the date of maturity of any of the bonds secured hereby. No such conveyance, transfer or lease of all or substantially all of the Mortgaged and Pledged Property as an entirety shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section from its liability as obligor and maker on any of the bonds secured hereby.

Section 15.02.    In case the Company, as permitted by Section 15.01 hereof, shall be consolidated with or merged into any other corporation or shall convey or transfer, subject to the Lien of this Indenture, all or substantially all the Mortgaged and Pledged Property as an entirety, the successor corporation formed by such consolidation, or into which the Company shall have been merged, or which shall have received a conveyance or transfer as aforesaid, upon executing with the Trustees and causing to be recorded an indenture whereby such successor corporation shall expressly assume and agree to pay, duly and punctually, the principal of, interest and premium, if any, on the bonds issued hereunder in accordance with the provisions of said bonds and coupons and this Indenture, and shall agree to perform and fulfill all the covenants and conditions of this Indenture to be kept or performed by the Company, shall succeed to




and be substituted for the Company with the same effect as if it had been named herein, and shall have and may exercise under this Indenture the same powers and rights as the Company, and (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing general powers and rights) such successor corporation thereafter may cause to be executed, authenticated and delivered, either in its own name or in the name of Mississippi Power & Light Company, as its name is now or shall then exist, in respect of property of the character defined in Section 1.04 hereof as Property Additions, such bonds as could or might have been executed, issued and delivered by the Company had it acquired such property of such character by purchase on or after the date of such consolidation, merger, conveyance or transfer, and had such consolidation, merger, conveyance or transfer not occurred, and upon the order of such successor corporation in lieu of the Company, and subject to all the terms, conditions and restrictions in this Indenture prescribed concerning the authentication and delivery of bonds, the Trustee shall authenticate and deliver any bonds delivered to it for authentication which shall have been previously signed by the proper officers of the Company, and such bonds as the successor corporation shall thereafter, in accordance with the provisions of this Indenture, cause to be executed and delivered to the Trustee for such purpose, and such successor corporation shall also have and may exercise in respect of the property of such character, and subject to all the terms, conditions and restrictions in this Indenture prescribed applicable thereto, whether as to withdrawal of cash, release of property, or otherwise, the same powers and rights which the Company might or could exercise had it acquired the property of such character by purchase on or after the date of such consolidation, merger, conveyance or transfer, and had such consolidation, merger, conveyance or transfer not occurred. All the bonds so issued or delivered by the Company shall in all respects have the same legal right and security as the bonds theretofore issued or delivered in accordance with the terms of this Indenture as though all of said bonds had been authenticated and delivered at the date of the execution hereof. As a condition precedent to the execution by such successor corporation and the authentication and delivery by the Trustee of any such additional bonds or the withdrawal of cash or release of property, under any of the provisions of this Indenture, on the basis of property of the character defined in this Indenture as Property Additions acquired, made or constructed by the successor corporation or by any corporation with which the Company or any successor corporation may be so consolidated or into which the Company or any successor corporation may be so merged or to which the Company or any successor corporation may make any such conveyance, the indenture with the Trustees to be executed and caused to be recorded by the successor corporation as in this Section provided, or a subsequent indenture, shall contain a conveyance or transfer and mortgage in terms sufficient to subject such property to the Lien hereof; and provided, further, that the lien created thereby and the lien thereon shall have similar force, effect and standing as the Lien of this Indenture would have if the Company should not be consolidated with or merged into such other corporation or should not convey or transfer, subject to this Indenture, all or substantially all the Mortgaged and Pledged Property as an entirety, as aforesaid, to such successor corporation, and should itself on or after the date of such consolidation, merger, conveyance or transfer, acquire or construct such property, and in respect thereof should request the authentication and delivery of bonds or the withdrawal of cash or the release of property under the provisions of this Indenture.

Section 15.03.    In case the Company, as permitted by Section 15.01 of this Indenture, shall be consolidated with or merged into any other corporation, or shall convey or transfer, subject to the Lien of this Indenture, all or substantially all the Mortgaged and Pledged Property as an entirety as aforesaid, neither this Indenture nor the indenture with the Trustees to be executed and caused to be recorded by the successor corporation as in Section 15.02 hereof provided, shall, unless such indenture shall otherwise provide, become or be or be required to become or be a lien upon any of the properties, rights or franchises then owned or thereafter acquired by the successor corporation (by purchase, consolidation, merger, donation, construction, erection or in any other way) except (a) those acquired by it from the Company, and improvements, extensions and additions thereto and renewals and replacements thereof,




(b) the property made and used by the successor corporation as the basis under any of the provisions of this Indenture for the authentication and delivery of additional bonds or the withdrawal of cash or the release of property, and (c) such franchises, repairs and additional property as may be acquired, made or constructed by the successor corporation (1) to maintain, renew and preserve the franchises covered by this Indenture, or (2) to maintain the property mortgaged and intended to be mortgaged hereunder as an operating system or systems in good repair, working order and condition, or (3) in rebuilding or renewal of property, subject to the Lien hereof, damaged or destroyed, or (4) in replacement of or substitution for machinery, apparatus, equipment, frames, towers, poles, wire, pipe, rails, ties, switches, tools, implements and furniture, subject to the Lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable, undesirable or unnecessary for use in the operation of the property mortgaged and intended to be mortgaged hereunder.


ARTICLE XVI

CONCERNING THE TRUSTEES

Section 16.01.    The Trustee shall at all times be a bank or trust company eligible under Section 9.03 hereof and have (i) in respect of the Original Trustee, a combined capital and surplus of not less than Five Million Dollars ($5,000,000) and (ii) in respect of any successor Trustee appointed hereunder, a combined capital and surplus of at least Fifty Million Dollars ($50,000,000). If the Trustee publishes reports of condition at least annually, pursuant to law or to the requirement of any supervising or examining authority referred to in Section 9.03 hereof, then for the purposes of this Section the combined capital and surplus of the Trustee shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.

Any Co-Trustee appointed in succession to the Original Co-Trustee shall always be an individual who shall be a citizen of the United States of America, or a bank or trust company having combined capital and surplus of not less than One Hundred and Fifty Thousand Dollars ($150,000), organized and doing business under the laws of the United States or of one of the States thereof or the District of Columbia which is authorized under such laws to exercise corporate trust powers, unless otherwise required by law.
The Trustees hereby accept the trust hereby created. The Trustees undertake, prior to Default, and after the curing of all such Defaults which may have occurred, to perform such duties and only such duties as are specifically set forth in this Indenture, and in case of such Default (which has not been cured) to exercise such of the rights and powers vested in them by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. For the purposes of this Section 16.01 and of Section 16.02 hereof a Default shall be deemed cured when the act or omission or other event giving rise to such Default shall have been cured, remedied or terminated.
The Trustee, upon receipt of evidence furnished to it by or on behalf of the Company pursuant to any provision of this Indenture, will examine the same to determine whether or not such evidence conforms to the requirements of this Indenture.
Section 16.02.    No provision of this Indenture shall be construed to relieve the Trustees, or either of them, from liability for their, its or his own negligent action, negligent failure to act, or willful misconduct, except that




(a) prior to Default, and after the curing of all such Defaults which may have occurred, the Trustees, or either of them, shall not be liable except for the performance of such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustees, or either of them, but the duties and obligations of the Trustees, or either of them, prior to Default, and after the curing of all such Defaults which may have occurred, shall be determined solely by the express provisions of this Indenture; and

(b) prior to Default, and after the curing of all such Defaults which may have occurred, and in the absence of bad faith on the part of the Trustee, the Trustees, or either of them, may conclusively rely as to the truth of the statements and the correctness of opinions expressed therein, upon certificates or opinions conforming to the requirements of this Indenture; and

(c) no Trustee which is a corporation shall be personally liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of such Trustee unless it shall be proved that such Trustee was negligent in ascertaining the pertinent facts and no Co-Trustee who is an individual shall be personally liable for any error of judgment made in good faith by him unless it shall be proved that he was negligent in ascertaining the pertinent facts; and

(d) the Trustees, or either of them, shall not be personally liable with respect to any action taken or omitted to be taken by them, or either of them, in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the bonds at the time Outstanding (determined as provided in Section 12.07 hereof) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustees, or either of them . , or exercising any trust or power conferred upon the Trustees, or either of them, under this Indenture; and

(e) the Trustees may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustees shall not be responsible for any misconduct or negligence on the part of any agent or attorney who is not, in either case, an employee of the Trustees, appointed with due care by them or either of them hereunder.

Section 16.03.    The recitals contained herein and in the bonds shall be taken as the statements of the Company and the Trustees, or either of them, assume no responsibility for the correctness of the same. The Trustees, or either of them, make no representations as to the conditions, genuineness, validity or value of the Mortgaged and Pledged Property or any part thereof, or as to the title of the Company thereto, or as to the validity or adequacy of the security afforded thereby and hereby, or as to the validity of this Indenture or of the bonds or coupons issued hereunder. The Trustees, or either of them shall be under no responsibility or duty with respect to the disposition of any bonds authenticated and delivered hereunder or the application of the proceeds thereof or the application of any moneys paid to the Company under any of the provisions hereof.

Section 16.04.    The Trustees, or either of them, shall not be personally liable in case of entry by them, or either of them, upon the Mortgaged and Pledged Property for debts contracted or liability or damages incurred in the management or operation of said property.

The Trustee, Co-Trustee, any paying agent, bond registrar, or authenticating agent, in its individual or any other capacity, may become the holder, owner or pledgee of bonds or coupons secured hereby and, subject to Sections 19.11 and 16.12 hereof, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Co‑Trustee, paying agent, bond registrar or authenticating agent.




Section 16.05.    Whenever it is provided in this Indenture that the Trustees, or either of them, shall take any action upon the happening of a specified event or upon the fulfillment of any condition or upon the request of the Company or of bondholders, the Trustees, or either of them, taking such action shall have full power to give any and all notices and, to do any and all acts and things incidental to such action.

Section 16.06.    Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustees, or either of them, on the Company shall be deemed to have been sufficiently given or served, for all purposes, by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Company with the Trustee for the purpose of this Section) to the Company at the address given in the first paragraph of this Indenture.

Section 16.07.    To the extent permitted by Sections 16.01 and 16.02 hereof:

(1) The Trustees, or either of them, may rely and shall be protected in acting upon any Resolution, Officers’ Certificate, Engineer’s Certificate, Independent Engineer’s Certificate, Net Earning Certificate, Opinion of Counsel, resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond or other paper or document believed by them, it or him to be genuine and to have been signed or presented by the proper party or parties; and any request or direction of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate, Resolution or written order; and

(2) The Trustees, or either of them, may consult with counsel, who may be of counsel to the Company, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by them, it or him hereunder in good faith and in accordance with the opinion of such counsel.

The Trustees, or either of them, shall not be under any responsibility for the selection, appointment or approval of any expert for any of the purposes expressed in this Indenture, except that nothing in this Section contained shall relieve the Trustees, or either of them, of their, its or his obligation to exercise reasonable care with respect to such selection, appointment or approval of independent experts who may furnish opinions or certificates to the Trustees, or either of them, pursuant to any provision of this Indenture.
Nothing contained in this Section shall be deemed to modify the obligation of the Trustees, or either of them, to exercise during the continuance of a Default the rights and powers vested in them, it or him by this Indenture with the degree of care and skill specified in Section 16.01 hereof.
Section 16.08.    Subject to the provisions of Section 19.03 hereof, all moneys received by the Trustees, or either of them, whether as Trustee, Co-Trustee, or paying agent shall, until used or applied as herein provided, be held in trust for the purposes for which they were paid, but need not be segregated from other funds except to the extent required by law. The Trustee may allow and credit to the Company interest on any moneys received by it hereunder at such rate, if any, and upon such terms as may be agreed upon with the Company from time to time and as may be permitted by law.

None of the provisions contained in this Indenture shall require the Trustees, or either of them, to expend or risk their, its or his own funds or otherwise incur personal financial liability in the performance of any of their, its or his duties or in the exercise of any of their, its or his rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to them, it, or him.




Section 16.09.    The Company covenants and agrees to pay to the Trustees from time to time, and the Trustees shall be entitled to, reasonable compensation for all services rendered by them in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustees, which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust, and the Company will reimburse the Trustees for all appropriate advances made by the Trustees, or either of them, pursuant to this Indenture and in performance of its or their duties, and will pay to the Trustees from time to time their expenses and disbursements (including the reasonable compensation and the expenses and disbursements of all persons not regularly in its employ and, to the extent permitted by law, of its counsel) incurred without negligence or bad faith. The Company also covenants to indemnify the Trustees and each of them for, and to hold them and each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustees or such Trustee, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending against any claim of liability in the premises. To secure the performance of the obligations of the Company under this Section, the Trustees and each of them shall have (in addition to any other rights under this Indenture) a lien prior to that of the bonds upon the :rust estate, including all property and funds held or collected by the Trustees.

If, and to the extent that, the Trustees, and either of them, and their counsel and other persons not regularly in their, its or his employ do not receive compensation for services rendered, reimbursement of its, their or his advances, expenses and disbursements, or indemnity, as herein provided, as the result of allowances made in any reorganization, bankruptcy, receivership, liquidation or other proceeding or by any plan of reorganization or readjustment of obligations of the Company, the Trustees, or either of them, shall be entitled, in priority to the holders of the bonds, to receive any distribution of any securities, dividends or other disbursements which would otherwise be made to the holders of bonds in any such proceeding or proceedings and the Trustees, or either of them, are hereby constituted and appointed, irrevocably, the attorneys-in-fact for the holders of the bonds and each of them to collect and receive, in their name, place and stead, such distributions, dividends or other disbursements, to deduct therefrom the amounts due to the Trustees, or either of them, their, its or his counsel and other persons not regularly in their, its or his employ on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the holders of the bonds. The Trustees shall have a lien upon any securities or other considerations to which the holders of bonds may become entitled pursuant to any such plan of reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the terms and conditions under which any such lien shall exist and be enforced.
Section 16.10.     Whenever in the administration of the trusts of this Indenture, prior to a Default and after the curing of any such Default, the Trustees, or either of them, shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may to the extent permitted by Sections 16.01 and 16.02 hereof be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Company and delivered to the Trustees, or either of them, and such certificate shall be full warrant to the Trustees, or either of them, for any action taken or suffered by them, it or him under the provisions of this Indenture upon the faith thereof.




Section 16.11.    [This Section shall not be operative as a part of this Indenture until this Indenture is qualified under the Trust Indenture Act, and, until such qualification, this Indenture shall be construed as if this Section were not contained herein.]

(a) Subject to the provisions of subdivision (b) of this Section, if the Trustee or

(b) Co-Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within four months prior to a default (as defined in the last paragraph of this subdivision), or subsequent to such a default, then, unless and until such default shall be cured, the Trustee or Co-Trustee shall set apart and hold in a special account for the benefit of the Trustee or Co-Trustee individually, the holders of the bonds, and the holders of other indenture securities (as defined in the last paragraph of this subdivision (a))

(1) an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest effected after the beginning of such four months’ period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subdivision (a) or from the exercise of any right of set-off which the Trustee or Co-Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and

(2) all property received in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four (4) months’ period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds.

Nothing herein contained, however, shall affect the right of the Trustee or Co‑Trustee
(A) to retain for its or his own account (i) payments made on account of any such claim by any person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee or Co-Trustee to a third person, and (iii) distributions made in cash, securities, or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law;

(B) to realize for its or his own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such four (4) months’ period;

(C) to realize, for its or his own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such four (4) months’ period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee or Co-Trustee shall sustain the burden of proving that at the time such property was so received the Trustee or Co-Trustee had no reasonable cause to believe that a default as defined in the last paragraph of this subdivision (a) would occur within four months; or





(D) to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in paragraph (B) or (C), as the case may be, to the extent of the fair value of such property.

For the purposes of paragraphs (B), (C), and (D), property substituted after the beginning of such four (4) months’ period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee or Co-Trustee as such creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee or Co-Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee . or Co-Trustee, the bondholders, and the holders of other indenture securities in such manner that the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee or Co-Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term “dividends” shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities, with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula.
Any Trustee or Co-Trustee who has resigned or been removed after the beginning of such four (4) months’ period shall be subject to the provisions of this subdivision (a) as though such resignation or removal had not occurred. If any Trustee or Co-Trustee has resigned or been removed prior to the beginning of such four (4) months’ period, it shall be subject to the provisions of this subdivision (a) if and only if the following conditions exist--
(i) the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee or Co-Trustee had continued as Trustee or Co-Trustee, occurred after the beginning of such four (4) months’ period; and





(ii) such receipt of property or reduction of claim occurred within four (4) months after such resignation or removal.

As used in this Section, the term “default” means any failure to make payment in full of the principal of or interest upon the bonds or upon the other indenture securities when and as such principal or interest becomes due and payable; and the term “other indenture securities” means securities upon which the Company is an obligor (as defined in the Trust Indenture Act of 1939, as amended) outstanding under any other indenture (a) under which such Trustee or Co-Trustee is also trustee, (b) which contains provisions substantially similar to the provisions of this subdivision (a), and (c) under which a default exists at the time of the apportionment of the funds and property held in said special account.
(b) There shall be excluded from the operation of subdivision (a) of this Section a creditor relationship arising from--

(1) the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one (1) year or more at the time of acquisition by such Trustee or Co-Trustee;

(2) advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving the property subject to the Lien of this Indenture or of discharging tax liens or other prior liens or encumbrances on the trust estate, if notice of such advance and of the circumstances surrounding the making thereof is given to the bondholders as provided in subdivisions (a), (b) and (c) of Section 16.13 hereof with respect to advances by the Trustee or Co-Trustee as such;

(3) disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity;

(4) an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in the last paragraph of this subdivision (b);

(5) the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or

(6) the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in the last paragraph of this subdivision (b).

As used in this Section, the term “security” shall have the meaning assigned to such term in the Securities Act of 1933, as amended and in force on the date of the execution of this Indenture; the term “cash transaction” shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; the term “self-liquidating paper” shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods,




wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee or Co-Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and the term “Trustee” shall include the Trustee or Co-Trustee, and any separate trustee or co-trustee appointed pursuant to Section 16.16 hereof.
Section 16.12    [This Section shall not be operative as a part of this Indenture until this Indenture is qualified under the Trust Indenture Act, and then only to the extent required by such Act, and, until such qualification, this Indenture shall be construed as if this Section were not contained herein.]

(a) If the Trustee or Co-Trustee has or acquires any conflicting interest, as defined by subdivision of this Section, the Trustee or Co-Trustee shall within ninety (90) days after ascertaining that it or he has such conflicting interest, either eliminate such conflicting interest or resign by giving written notice to the Company, but such resignation shall not become effective until the appointment of a successor trustee or co-trustee and such successor’s acceptance of such appointment. The Company covenants to take prompt steps to have a successor appointed in the manner hereinafter provided in Section 16.15 hereof. Upon giving such notice of resignation, the resigning Trustee or Co-Trustee shall publish notice thereof in a Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, once, provided, however, that if all bonds then Outstanding shall be registered as to principal, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. If the resigning Trustee or Co-Trustee fails to publish such notice within ten (10) days after giving written notice of resignation to the Company, the Company shall publish such notice.

(b) In the event that the Trustee or Co-Trustee shall fail to comply with the provisions of the preceding subdivision (a) of this Section, the Trustee or Co-Trustee shall within ten (10) days after the expiration of such ninety (90) day period transmit notice of such failure to the bondholders in the manner and to the extent provided in subdivision (c) of Section 16.13 hereof with respect to reports pursuant to subdivision (a) of Section 16.13 hereof.

(c) Subject to the provisions of Section 19.06 hereof, any bondholder who has been a bona fide holder of a bond or bonds for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee or Co-Trustee and the appointment of a successor if the Trustee or Co-Trustee fails, after written request therefor by such holder, to comply with the provisions of subdivision (a) of this Section.

(d) The Trustee or Co-Trustee shall be deemed to have a conflicting interest if--

(1) the Trustee or Co-Trustee is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company, are outstanding unless such other indenture is a collateral trust indenture under which the only collateral consists of bonds issued under this Indenture; provided that there shall be excluded from the operation of this paragraph (1) another indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the Company shall have sustained the burden of proving, on application to the Securities and Exchange Commission and after opportunity for hearing thereon, that trusteeship under this Indenture and such other indenture is not so




likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee or

(2) Co-Trustee from acting as such under one of such indentures;

(3) the Trustee or Co-Trustee or any of its directors or executive officers is an obligor upon the bonds or an underwriter for the Company;

(4) the Trustee or Co-Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company;

(5) the Trustee or Co-Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of the Company, or of an underwriter (other than the Trustee or Co-Trustee itself or himself) for the Company who is currently engaged in the business of underwriting, except that (A) one individual may be a director and/or an executive officer of the Trustee or Co-Trustee and a director and/or an executive officer of the Company, but may not be at the same time an executive officer of both the Trustee or Co-Trustee and the Company; (B) if and so long as the number of directors of the Trustee or Co-Trustee in office is more than nine, one additional individual may be a director and/or an executive officer of the Trustee or

(6) Co-Trustee and a director of the Company; and (C) the Trustee or Co-Trustee may be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent or depositary or in any other similar capacity or, subject to the provisions of paragraph (1) of this subdivision (d), to act as trustee, whether under an indenture or otherwise;

(7) ten per centum (10%) or more of the voting securities of the Trustee or Co-Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or twenty per centum (20%) or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or ten per centum (10%) or more of the voting securities of the Trustee or Co-Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons;

(8) the Trustee or Co-Trustee is the beneficial owner of or holds as collateral security for an obligation which is in default, (A) five per centum (5%) or more of the voting securities or ten per centum (10%) or more of any other class of security of the Company, not including the bonds issued under this Indenture and securities issued under any other indenture under which the Trustee or Co-Trustee is also trustee, or (B) ten per centum (10%) or more of any class of security of an underwriter for the Company;

(9) the Trustee or Co-Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, five per centum (5%) or more of the voting securities of any person who, to the knowledge of the Trustee or Co-Trustee, owns ten per centum (10%) or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company; the Trustee or Co-Trustee is




the beneficial owner of or holds as collateral security for an obligation which is in default, ten per centum (10%) or more of any class of security of any person who, to the knowledge of the Trustee or Co-Trustee, owns fifty per centum (50%) or more of the voting securities of the Company; or the Trustee or Co-Trustee owns on February 15 in any calendar year in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of twenty-five per centum (25%) or more of the voting securities or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7), or (8) of this subdivision (d). As to any such securities of which such Trustee or Co-Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed twenty-five per centum (25%) of such voting securities or twenty-five per centum (25%) of any such class of security. Promptly after January 15 in each calendar year, the Trustee or Co-Trustee shall make a check of its or his holdings of such securities in any of the above-mentioned capacities as of February 15. If the Company fails to make payment in full of principal or interest upon the bonds when and as the same becomes due and payable, and such failure continues for thirty (30) days thereafter, the Trustee or Co-Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such thirty (30) day period and after such date, notwithstanding the foregoing provisions of this paragraph, all such securities so held by the Trustee or Co-Trustee with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee or Co-Trustee for the purposes of paragraphs (6), (7), and (8) of this subdivision (d).

The specifications of percentages in paragraphs (5) to (9), inclusive, of this subdivision (d) shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (3) or (7) of this subdivision (d).
For the purposes of paragraphs (6), (7), (8) and (9) of this subdivision (d) only, (A) the terms “security” and “securities” shall include only such securities as are generally known as corporate securities, but shall not include any note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for thirty (30) days or more and shall not have been cured; and (C) the Trustee or Co-Trustee shall not be deemed to be the owner or holder of (i) any security which it or he holds as collateral security (as trustee or otherwise) for an obligation which is not in default as above defined, or (ii) any security which it or he holds as collateral security under this Indenture, irrespective of any default hereunder, or (iii) any security which it or he holds as agent for collection, or as custodian, escrow agent or depositary, or in any similarly representative capacity.
The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions:




(aa)      A specified percentage of the voting securities of the Trustee or Co-Trustee, the Company or any other person referred to in this Section (each of whom is referred to as a “person” in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person.
(bb)      A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding.
(cc)      The term “amount”, when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security.
(dd)      The term “outstanding” means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition:
(1) Securities of an issuer held in a sinking fund relating to securities of the issuer of the same class;

(2) Securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise;

(3) Securities pledged by the issuer thereof as security for any obligation of the issuer not in default as to principal or interest or otherwise;

(4) Securities held in escrow if placed in escrow by the issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof.
(ee)      A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges, provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes, and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture.
The provisions of this Section which have been made specifically applicable to the Trustee shall apply to the Trustee, the Co-Trustee and, if a separate or co-trustee is appointed pursuant to Section 16.16 hereof, to any separate or co-trustee, except that in case of the resignation of the Co-Trustee or a separate or co-trustee, such resignation and the appointment of a successor shall (subject to the provisions of subdivision (c) of this Section) be governed by the provisions of Section 16.15 and paragraph (3) of Section 16.16 hereof.
The term “underwriter” when used with reference to the Company means every person, who, within three (3) years prior to the time as of which the determination is made, has purchased from




the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors’ or sellers’ commission.
Section 16.13.    (a) The Trustee and Co-Trustee shall transmit, either jointly or severally as they may determine, within sixty (60) days after the last day of February in each year, beginning with the year 1989, to the bondholders as hereinafter in this Section provided, a brief report dated as of such date with respect to

(1) its or his eligibility and its or his qualifications under Sections 9.03, 16.01 and 16.12 hereof, or in lieu thereof, if to the best of its or his knowledge the Trustee or Co-Trustee has continued to be eligible and qualified under such Sections, a written statement to such effect;

(2) the character and amount of any advances (and if such Trustee or Co-Trustee elects so to state, the circumstances surrounding the making thereof) made by such Trustee or Co-Trustee as such which remain unpaid on the date of such report, and for the reimbursement of which such Trustee or Co-Trustee claims or may claim a lien or charge prior to that of the bonds on the trust estate or on property or funds held or collected by it or him as Trustee or Co-Trustee, provided that such Trustee or Co-Trustee shall not be required (but may elect) to state such advances, if such advances so remaining unpaid aggregate not more than one-half of one per centum (1/2 of 1%) of the principal amount of the bonds Outstanding on the date of such report;

(3) the amount, interest rate, and maturity date of all other indebtedness owing by the Company to such Trustee or Co-Trustee in its or his individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in paragraphs (2), (3), (4) or (6) of subdivision (b) of Section 16.11 hereof;

(4) the property and funds physically in the possession of such Trustee or Co-Trustee on the date of such report;

(5) any release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) which has not been previously reported, provided, however, that to the extent that the aggregate value as shown by the release papers of any or all of such released properties does not exceed an amount equal to one per centum (1%) of the principal amount of bonds then Outstanding, the report need only indicate the number of such releases, the total value of property released as shown by the release papers, the aggregate amount of cash received and the aggregate value of property received in substitution therefor as shown by the release papers;

(6) any additional issue of bonds which has not been previously reported; and

(7) any action taken by the Trustee or Co-Trustee in the performance of its or his duties under this Indenture which it or he has not previously reported and which in its




or his opinion materially affects the bonds or the trust estate, except in respect of a Default, notice of which has been or is to be withheld by the Trustee in accordance with the provisions of Section 12.02 hereof.

(b) The Trustee and Co-Trustee shall transmit to the bondholders as hereinafter provided a brief report with respect to--

(1) the release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) unless the fair value of such property, as set forth in the certificate or opinion required by Section 9.05, 11.03, 11.04, 11.05 or 11.06 hereof, is less than ten per centum (10%) of the principal amount of bonds Outstanding at the time of such release, or such release and substitution, such report to be so transmitted within ninety (90) days after such time, provided that, if any such report is transmitted by the Trustee, no report covering the same transaction need be made by the Co-Trustee; and

(2) the character and amount of any advances (and if the Trustee or Co-Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee or Co-Trustee as such since the date of the last report transmitted pursuant to the provisions of subdivision (a) of this Section (or if no such report has yet been so transmitted, since the date of execution of this Indenture), for the reimbursement of which it or he claims or may claim a lien or charge prior to that of the bonds on the trust estate or on property or funds held or collected by it or him as Trustee or Co-Trustee, and which it or he has not previously reported pursuant to this paragraph, provided that the Trustee or

(3) Co-Trustee shall not be required (but may elect) to state such advances, if such advances remaining unpaid at any time aggregate not more than ten per centum (10%) of the principal amount of bonds Outstanding at such time, such report to be transmitted within ninety (90) days after such time.

(c) Reports pursuant to this Section shall be transmitted by mail--

(1) to all registered holders of bonds, as the names and addresses of such holders appear upon the registration books of the Company;

(2) to such holders of bonds as have, within two years preceding such transmission, filed their names and addresses with the Trustee for that purpose; and

(3) except in the case of reports pursuant to subdivision (b) of this Section, to each bondholder whose name and address is preserved at the time by the Trustee, as provided in subdivision (b) of Section 9.09 hereof.

(d) A copy of each such report shall, at the time of such transmission to bondholders, be filed by the Trustee and Co-Trustee with each stock exchange upon which the bonds are listed and also with the Securities and Exchange Commission. The Company will notify the Trustee of the name and address of each stock exchange on which the bonds are listed.

(e) Notwithstanding any of the provisions of this Section which require the Co-Trustee to transmit reports to the bondholders and to file such reports with each stock exchange upon which the bonds are listed and also with the Securities and Exchange Commission, such Co-Trustee may,




if it or he so elects, furnish to the Trustee all information concerning such Co-Trustee which such Co-Trustee is required to report, and the Trustee shall transmit and file such information, in accordance with the provisions of this Section, on behalf of such Co-Trustee.

Section 16.14.    The Trustee or Co-Trustee may at any time resign and be discharged of the trusts hereby created by giving written notice to the Company specifying the day upon which such resignation shall take effect and thereafter publishing notice thereof, in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, once and such resignation shall take effect upon the day specified in such notice unless previously a successor trustee shall have been appointed by the bondholders or the Company in the manner hereinafter provided in Section 16.15 and in such event such resignation shall take effect immediately on the appointment of such successor trustee, provided, however, that if all bonds then Outstanding shall be registered, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. This Section shall not be applicable to resignations pursuant to Section 16.12 hereof.

Any Trustee or Co-Trustee may be removed at any time by an instrument or concurrent instruments in writing filed with such Trustee or Co-Trustee and signed and acknowledged by the holders of a majority in principal amount of the bonds then Outstanding hereunder (determined as provided in Section 12.07 hereof) or by their attorneys in fact duly authorized.
In case at any time the Trustee or Co-Trustee shall cease to be eligible in accordance with the provisions of Section 9.03 or Section 16.01 hereof, then the Trustee or Co‑Trustee so ceasing to be eligible shall resign immediately in the manner and with the effect in this Section provided; and, in the event that it or he does not resign immediately in such case, then it or he may be removed forthwith by an instrument or concurrent instruments in writing filed with the Trustee or Co-Trustee so ceasing to be eligible and either (a) signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company with its corporate seal attested by the Secretary or an Assistant Secretary of the Company or (b) signed and acknowledged by the holders of a majority in principal amount of the bonds then Outstanding hereunder (determined as provided in Section 12.07 hereof) or by their attorneys in fact duly authorized.
Section 16.15.    In case at any time the Trustee or Co-Trustee shall resign or shall be removed (unless such Trustee or Co-Trustee shall be removed as provided in subdivision (c) of Section 16.12 hereof in which event the vacancy shall be filled as provided in said subdivision) or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or Co-Trustee or of its or his property shall be appointed, or if any public officer shall take charge or control of the Trustee or Co-Trustee, or of its or his property or affairs for the purpose of rehabilitation, conservation or liquidation, a vacancy shall be deemed to exist in the office of the Trustee or Co-Trustee, and a successor or successors may be appointed by the holders of a majority in principal amount of the bonds then Outstanding hereunder (determined as provided in Section 12.07 hereof) by an instrument or concurrent instruments in writing signed and acknowledged by such bondholders or by their attorneys in fact duly authorized, and delivered to such new Trustee or Co-Trustee, notification thereof being given to the Company and the retiring Trustee or Co-Trustee; provided, nevertheless, that until a new Trustee or Co-Trustee shall be appointed by the bondholders as aforesaid, the Company, by instrument executed by order of its Board of Directors and duly acknowledged by its Chairman of the Board, Chief Executive Officer, President or a Vice President, may appoint a Trustee or Co-Trustee to fill such vacancy until a new Trustee or Co-Trustee shall be appointed by the bondholders as herein authorized. The Company shall publish notice of any such appointment made by it in the manner provided in Section 16.14




hereof. Any new Trustee or Co-Trustee appointed by the Company shall, immediately and without further act, be superseded by a Trustee or Co-Trustee appointed by the bondholders as above provided, if such appointment by the bondholders be made prior to the expiration of one year after the first publication of notice of the appointment of the new Trustee or Co-Trustee by the Company.

If in a proper case no appointment of a successor Trustee or Co-Trustee shall be made pursuant to the foregoing provisions of this Section within six months after a vacancy shall have occurred in the office of Trustee or Co-Trustee, the holder of any bond Outstanding hereunder or any retiring Trustee or Co-Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee or Co-Trustee. Said court may thereupon after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee or successor Co-Trustee.
If any Trustee or Co-Trustee resigns because of a conflict of interest as provided in subdivision (a) of Section 16.12 hereof and a successor has not been appointed by the Company or the bondholders, or, if appointed, has not accepted the appointment, within thirty (30) days after the date of such resignation, the resigning Trustee or Co-Trustee may apply to any court of competent jurisdiction for the appointment of a successor Trustee or successor Co-Trustee.
Any Trustee appointed under the provisions of this Section in succession to the Original Trustee shall be a bank or trust company eligible under Sections 9.03 and 16.01 hereof and qualified under Section 16.12 hereof.
Any Trustee or Co-Trustee which or who has resigned or been removed shall nevertheless retain the lien afforded to it or him by Section 16.09 hereof upon the trust estate, including all property or funds held or collected by such Trustee or Co-Trustee, as such, to secure the amounts due to such Trustee or Co-Trustee as compensation, reimbursement, expenses and indemnity, and shall retain the rights afforded to it or him by said Section 16.09 hereof.
Section 16.16.    At any time or times, for the purpose of conforming to any legal requirements, restrictions or conditions in any State or jurisdiction in which any part of the Mortgaged and Pledged Property then or to become subject to the Lien of this Indenture may be located, the Company and the Trustees or the Trustee shall have the power to appoint, and, upon the request of the Trustees or the Trustee the Company shall for such purpose join with the Trustees or the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, another corporation or one or more persons approved by the Trustees or the Trustee, either to act as separate trustee or trustees, or co-trustee or co-trustees jointly with the Trustee or Co Trustee, of all or any of the property subject to the Lien hereof. In the event that the Company shall not have joined in such appointment within fifteen (15) days after the receipt by it of a request so to do, the Trustees or Trustee alone shall have power to make such appointment.

Every separate trustee, every co-trustee and every successor trustee, other than any trustee which may be appointed as successor to the Original Trustee or the Original Co‑Trustee, shall, to the extent permitted by law, but to such extent only, be appointed subject to the following provisions and conditions, namely:
(1) The rights, powers, duties and obligations conferred or imposed upon trustees hereunder or any of them shall be conferred or imposed upon and exercised or performed by the Trustee or Trustees and such separate trustee or separate trustees or co-trustee or co-trustees jointly, as shall be provided in the instruments and agreements




appointing such separate trustee or separate trustees or co-trustee or co-trustees, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations shall be exercised and performed by the Co-Trustee or by such separate trustee or separate trustees or co-trustee or co-trustees;

(2) The bonds secured hereby shall be authenticated and delivered, and all powers, duties, obligations and rights, conferred upon the Trustees or Trustee in respect of the custody of all bonds and other securities and of all cash pledged or deposited hereunder, shall be exercised solely by the Original Trustee or its successors in the trust hereunder; and

(3) The Company and the Trustee and the Co-Trustee, at any time by an instrument in writing executed by them jointly, may accept the resignation of or remove any separate trustee or co-trustee appointed under this Section or otherwise, and, upon the request of the Trustee, the Company shall, for such purpose, join with the Trustee and the Co-Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to make effective such resignation or removal. In the event that the Company shall not have joined in such action within fifteen (15) days after the receipt by it of a request so to do, the Trustee and the Co-Trustee alone shall have power to accept such resignation or to remove any such separate trustee or co-trustee. A successor to a separate trustee or co-trustee so resigned or removed may be appointed in the manner provided in this Section.

No trustee or co-trustee hereunder shall be personally liable by reason of any act or omission of any other trustee or co-trustee hereunder.
Any notice, request or other writing, by or on behalf of the holders of the bonds delivered to the Original Trustee, or its successor in the trust hereunder, shall be deemed to have been delivered to all of the then trustees or co-trustees as effectually as if delivered to each of them. Every instrument appointing any trustee or trustees other than a successor to the Original Trustee shall refer to this Indenture and the conditions in this Article expressed, and upon the acceptance in writing by such trustee or trustees or co-trustee or co-trustees, he, they or it shall be vested with the estates or property specified in such instrument, either jointly with the Original Trustee, or its successor, or separately, as may be provided therein, subject to all the trusts, conditions, and provisions of this Indenture; and every such instrument shall be filed with the Original Trustee or its successor in the trust hereunder. Any separate trustee or trustees, or any co-trustee or co-trustees, may at any time by an instrument in writing constitute the Original Trustee or its successor in the trust hereunder his, their or its agent or attorney in fact, with full power and authority, to the extent which may be permitted by law, to do any and all acts and things and exercise any and all discretion authorized or permitted by him, them or it, for and in behalf of him, them or it, and in his, their or its name. In case any separate trustee or trustees or co-trustee or co-trustees, or a successor to any of them, shall die, become incapable of acting, resign or be removed, all the estates, property, rights, powers, trusts, duties and obligations of said separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Original Trustee or its successor in the trust hereunder, without the appointment of a new trustee as successor to such separate trustee or co-trustee.
Section 16.17.    Any successor trustee appointed hereunder shall execute, acknowledge and deliver to his or its predecessor trustee, and also to the Company, an instrument accepting such




appointment hereunder, and thereupon such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of his or its predecessor in trust hereunder, with like effect as if originally named as trustee herein; but the trustee ceasing to act shall nevertheless, on the written request of the Company, or of the successor trustee, or of the holders of ten per centum (10%) in principal amount of the bonds then Outstanding hereunder, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be required for more fully and certainly vesting and confirming in such successor trustee all the right, title and interest of the trustee to which he or it succeeds, in and to the Mortgaged and Pledged Property and such rights, powers, trusts, duties and obligations, and the trustee ceasing to act shall also, upon like request pay over, assign and deliver to the successor trustee any money or other property subject to the Lien of this Indenture, including any pledged securities which may then be in his or its possession. Should any deed, conveyance or instrument in writing from the Company be required by the new trustee for more fully and certainly vesting in and confirming to such new trustee such estates, properties, rights, powers, trusts and duties, any and all such deeds, conveyances and instruments in writing shall, on request be executed, acknowledged and delivered by the Company.

Section 16.18.    Any corporation into which the Trustee may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation in which the Trustee shall be a party or any corporation to which substantially all the business and assets of the Trustee may be transferred, provided such corporation shall be eligible under the provisions of Section 9.03 and 16.01 hereof and qualified under Section 16.12 hereof, shall be the successor trustee under this Indenture, without the execution or filing of any paper or the performance of any further act on the part of any other parties hereto, anything herein to the contrary notwithstanding. In case any of the bonds contemplated to be issued hereunder shall have been authenticated but not delivered, any such successor to the Trustee may, subject to the same terms and conditions as though such successor had itself authenticated such bonds, adopt the certificate of authentication of the Original Trustee or of any successor to it, as trustee hereunder, and deliver the said bonds so authenticated; and in case any of said bonds shall not have been authenticated, any successor to the Trustee may authenticate such bonds either in the name of any predecessor hereunder or in the name of the successor trustee, and in all such cases such certificate shall have the full force which it is anywhere in said bonds or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to authenticate bonds in the name of the Original Trustee shall apply only to its successor or successors by merger or consolidation or sale as aforesaid.

Section 16.19.    Notwithstanding any other provisions hereof, the Company, by instrument executed by order of its Board of Directors and duly acknowledged by its proper officers, may, within the period beginning January 1, 1993, and ending December 31, 1993, and the comparable period in each succeeding decade, appoint any corporation eligible under the provisions of Section 16.15 hereof, and doing business in the United States of America, as Trustee in succession to the Trustee in office as of the date of such appointment and the corporation so appointed Trustee shall thereupon become successor Trustee hereunder until a new Trustee shall be appointed by the bondholders as authorized herein.

Section 16.20.    All the estates, rights, titles and interest by this Indenture conveyed or assigned or transferred to the Trustee and the Co-Trustee are conveyed, assigned and transferred to them as joint tenants and not as tenants in common.





Except as herein expressly provided to the contrary, any notice, request, or other writing by or on behalf of the Company delivered solely to the Trustee shall be deemed to have been delivered to both the Trustee and the Co-Trustee hereunder as effectually as if delivered to each of them.
Section 16.21.    The Co-Trustee has been joined as trustee in order to comply with any legal requirements respecting trustees under mortgages or deeds of trust of property in the states, or some of them, in which the mortgaged premises or part thereof are or may be situate, and shall as such trustee possess such powers, and such powers only, as may be necessary to comply with such requirements. If by reason of the repeal of such requirements, or for any other reason, it shall not be necessary, in the opinion of counsel, that there shall be a Co-Trustee and the Company shall file with the Trustee, and also with the Co-Trustee, an Opinion of Counsel to that effect and a written request for the resignation or removal of the Co-Trustee, the Original Co-Trustee, or any successor, will thereupon resign or shall forthwith cease to be a Trustee hereunder, and all powers of the Co-Trustee shall forthwith terminate, as shall his right, title or interest in and to the trust estate; and, unless and until there shall be appointed a new Trustee or successor to the Co-Trustee, all the right, title and powers of the Trustees shall devolve upon the Trustee and its successors alone.


ARTICLE XVII

DISCHARGE OF MORTGAGE

Section 17.01.    The Trustees (and any trustee or trustees or co-trustee or co-trustees appointed pursuant to the provisions of this Indenture) may, and upon request of the Company shall, cancel and discharge the Lien hereof and execute and deliver to the Company such deeds and instruments as shall be requisite to satisfy the Lien hereof and reconvey and transfer to the Company the Mortgaged and Pledged Property, whenever all indebtedness secured hereby shall have been paid, including all proper charges of the Trustees hereunder.

Notwithstanding the satisfaction and discharge of this Indenture, the Trustees shall have an unsecured right to charge and be reimbursed for any expenditures and liabilities (incurred in good faith and without negligence by the Trustees) which they or either of them may thereafter incur.
Bonds and interest obligations for the payment of which and bonds for the redemption of which either
(i)
moneys in the necessary amount or

(ii)
obligations of the United States of America which shall not contain provisions permitting the redemption thereof at the option of the issuer, the principal of and the interest on which when due, and without any regard to reinvestment thereof, will, in the opinion of an Independent accountant, provide moneys which, together with the moneys, if any, deposited with or held by the Trustee, shall be sufficient to pay when due and to become due on said bonds or portions thereof on the redemption date or maturity date thereof, as the case may be,

shall have been set apart by or deposited with the Trustee, with irrevocable direction so to apply the same, subject to the provisions of Section 19.03 hereof (with or without any additional right given to the holders to surrender their bonds or obtain therefrom payment therefor prior to the redemption date) shall for all




purposes under this Indenture, including satisfying the Lien of this Indenture, be deemed to have been paid; provided that in case of redemption the notice requisite to the validity of such redemption shall have been given or arrangements shall have been made assuring to the satisfaction of the Trustee that the same will be given, and provided further that the Trustee shall receive an Opinion of Counsel to the effect that such setting apart by, or deposit with, the Trustee does not require registration on behalf of any such obligations of the United States of America by the Company or by the Trustee under the Investment Company Act of 1940, does not violate any applicable laws, and does not result in a taxable event with respect to the holders of the bonds prior to the time of their right to receive payment.


ARTICLE XVIII

MEETINGS AND CONSENTS OF BONDHOLDERS

Section 18.01    Modifications and alterations of this Indenture and/or of any indenture supplemental hereto and/or of the rights and obligations of the Company and/or of the rights of the holders of bonds and coupons issued hereunder may be made as provided in this Article XVIII.

Section 18.02    The Trustee may at any time call a meeting of the bondholders and it shall call such a meeting on written request of the holders of not less than a majority in principal amount of the bonds Outstanding hereunder at the time of such request. The Company, pursuant to a Resolution of its Board of Directors, may also call a meeting of the bondholders at any time. In each such case the purpose or purposes of such meeting shall be set forth in reasonable detail in the notice of the meeting provided for herein. In the event of the Trustee’s failing for ten (10) days to call a meeting after being thereunto requested by the bondholders as above set forth, holders of Outstanding bonds in the amount above specified in this Section or the Company, pursuant to Resolution of its Board of Directors, may call such meeting. Every such meeting called by and at the instance of the Trustee shall be held in Jackson, Mississippi, or the Borough of Manhattan, The City of New York, New York, or with the written approval of the Company, at any other place in the United States of America, and notice thereof, stating the place and time thereof and in reasonable detail the business to be submitted, shall be mailed by the Trustee not less than thirty (30) days before such meeting (a) to all holders of bonds the names and addresses of whom are then preserved as required by Section 9.09 hereof, and (b) to the Company addressed to it at the address given in the first paragraph of this Indenture (or at such other address as may be designated by the Company from time to time), and, unless all bonds Outstanding hereunder are at the time registered as to principal, shall be published by the Trustee once preceding the meeting, in a Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, the publication to be not less than twenty (20) days prior to the date of such meeting; provided, however, that the mailing of such notice to any bondholders shall in no case be a condition precedent to the validity of any action taken at such meeting, and provided further, however, that if all bonds then Outstanding shall be registered, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. If such meeting is called by or at the instance either of the Company or of the bondholders, it shall be held at such place in the United States of America as may be specified in the notice calling such meeting and notice thereof shall be sufficient for all purposes hereof if given by newspaper publication as aforesaid stating the place and time of the meeting and in reasonable detail the business to be submitted. Any meeting of bondholders shall be valid without notice if the holders of all bonds then Outstanding hereunder are present in person or by proxy and if the Company and the Trustee are present by duly authorized representatives, or if notice is waived in writing before or after the meeting by the Company, the holders




of all bonds Outstanding hereunder and by the Trustee, or by such of them as are not present in person or by proxy.

Section 18.03.    Officers and nominees of the Trustee, of the Co-Trustee and of the Company or their or its nominees may attend such meeting, but shall not as such be entitled to vote thereat. Attendance by bondholders may be in person or by proxy and, unless specifically prohibited by law, any such proxy shall remain in effect unless specifically revoked and shall be binding on any subsequent holder of the bonds represented by such proxy, unless specifically revoked by any such subsequent holder before being voted. In order that the holder of any bond payable to bearer and his proxy may attend and vote without producing his bond, the Trustee, with respect to any such meeting, may make and from time to time vary such regulations as it shall think fit for deposit of bonds with, or the stamping of bonds by, (i) any banks, bankers or trust or insurance companies having a capital of not less than Five Hundred Thousand Dollars ($500,000) or (ii) any trustee of any pension, welfare, hospitalization or similar fund or funds having an aggregate corpus in excess of Five Million Dollars ($5,000,000), or (iii) the United States of America, any Territory thereof, the District of Columbia, any State of the United States, any municipality in any State of the United States or any public instrumentality of the United States, any State or Territory, or (iv) by any other person or corporation satisfactory to the Trustee, and for the issue to the persons depositing the same of certificates by such depositaries entitling the holders thereof to be present and vote at any such meeting and to appoint proxies to represent them and vote for them at any such meeting as if the persons so present and voting, either personally or by proxy, were the actual bearers of the bonds in respect of which such certificates shall have been issued and any regulations so made shall be binding and effective. A bondholder in any of the foregoing categories may sign such certificate in his own behalf. In lieu of or in addition to providing for such deposit, the Trustee may, in its discretion, permit such institutions to issue certificates stating that bonds were exhibited to them, which certificates shall entitle the holders thereof to vote at any meeting only if the bonds with respect to which they are issued are not produced at the meeting by any other person and are not at the time of the meeting registered in the name of any other person. Each such certificate shall state the date on which the bond or bonds in respect of which such certificate shall have been issued were deposited with or submitted to such institution and the series, maturities and serial numbers of such bonds. In the event that two or more such certificates shall be issued with respect to any bond or bonds, the certificate bearing the latest date shall be recognized and be deemed to supersede any certificate or certificates previously issued with respect to such bond or bonds. If any such meeting shall have been called under the provisions of Section 18.02 hereof, by bondholders or by the Company, and the Trustee shall fail to make regulations as above authorized, then regulations to like effect for such deposit, stamping or exhibition of bonds and the issue of certificates by (i) any bank, banker or trust or insurance company organized under the laws of the United States of America or of any State thereof, having a capital of not less than Five Hundred Thousand Dollars ($500,000), or (ii) any trustee or any pension, welfare, hospitalization, or similar fund or funds having an aggregate corpus in excess of Five Million Dollars ($5,000,000), or (iii) by the United States of America, any Territory thereof, the District of Columbia, any State of the United States, any municipality in any State of the United States or any public instrumentality of the United States, any State or Territory shall be similarly binding and effective for all purposes hereof if adopted or approved by the bondholders calling such meeting or by the Board of Directors of the Company, if such meeting shall have been called by the Company, provided that in either such case copies of such regulations shall be filed with the Trustee. A bondholder in any of the foregoing categories may sign such a certificate in his own behalf.

Section 18.04.    Subject to the restrictions specified in Sections 18.03 and 18.07 hereof, any registered holder of bonds Outstanding hereunder and any holder of a certificate (not superseded) provided for in Section 18.03 hereof, shall be entitled in person or by proxy to attend and vote at such meeting as holder of the bonds registered or certified in the name of such holder without producing such bonds. All others




seeking to attend or vote at such meeting in person or by proxy must, if required by an authorized representative of the Trustee or the Company or by any other bondholder, produce the bonds claimed to be owned or represented at such meeting, and everyone seeking to attend or vote shall, if required as aforesaid, produce such further proof of bond ownership or personal identity as shall be satisfactory to the authorized representative of the Trustee, or if none be present then to the Inspectors of Votes hereinafter provided for. Proxies shall be witnessed or in the alternative may (a) have the signature guaranteed by a bank or trust company or a registered dealer in securities, (b) be acknowledged before a Notary Public or other officer authorized to take acknowledgments, or (c) have their genuineness otherwise established to the satisfaction of the Inspectors of Votes. All proxies and certificates presented at any meeting shall be delivered to said Inspectors of Votes and filed with the Trustee.

Section 18.05.    Persons named by the Trustee, if it is represented at the meeting, shall act as temporary Chairman and Secretary of the meeting, but if the Trustee shall not be represented or shall fail to nominate such persons or if any person so nominated shall not be present, the bondholders represented shall by a majority vote, irrespective of the amount of their holdings, elect another person or other persons from those present to act as temporary Chairman and/or Secretary. A permanent Chairman and a permanent Secretary of such meeting shall be elected from those present by the bondholders represented by a majority vote of bonds represented. The Trustee, if represented at the meeting, shall appoint two Inspectors of Votes who shall decide as to the right of anyone to vote and shall count all votes cast at such meeting, except votes on the election of a Chairman and Secretary, both temporary and permanent, as aforesaid and who shall make and file with the permanent Secretary of the meeting their verified written report in duplicate of all such votes so cast at said meeting. If the Trustee shall not be represented at the meeting or shall fail to nominate such Inspectors of Votes or if either Inspector of Votes fails to attend the meeting, the vacancy shall be filled by appointment by the permanent Chairman of the meeting.

Section 18.06.    The holders of:

(a) not less than a majority in principal amount of the bonds Outstanding hereunder when such meeting is held; or

(b) if the action proposed at said meeting adversely affects solely the rights of the holders of one or more, but less than all, series of bonds then Outstanding, then at least a majority in principal amount of those bonds then Outstanding so to be adversely affected; or

(c) if the action proposed at said meeting relates to the express provisions of Section 1.07 or 4.01 hereof, then at least a majority in principal amount of all series of bonds authenticated and delivered under Article IV hereof then Outstanding hereunder, considered as a single class, and of the holders of a majority in principal amount of the bonds then Outstanding hereunder

(excluding in any case bonds disqualified from voting by reason of the Company’s interest therein) must be present at such meeting in person or by proxy in order to constitute a quorum for the transaction of business, less than a quorum, however, having power to adjourn; provided, however, that if such meeting is adjourned by less than a quorum for more than thirty (30) days, notice thereof shall be mailed as soon as practicable by the Trustee if such meeting shall have been called by the Trustee (a) to the Company addressed to it at the address given in the first paragraph of this Indenture (or at such other address as may be designated by the Company in writing from time to time), and (b) to all holders of bonds then Outstanding hereunder, the names and addresses of whom are then preserved by the Trustee as required by the provisions of Section 9.09 hereof, and, unless all bonds Outstanding hereunder are at the time of such mailing registered as to principal, shall be published at least once in each thirty (30) day period of such




adjournment in a Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, provided, however, that if all bonds then Outstanding shall be registered, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. Notwithstanding the foregoing, if a meeting is first adjourned by less than a quorum for less than thirty (30) days and is again adjourned, no such notice need be mailed or published during the period of the first adjournment but such notice shall be mailed as soon as practicable by the Trustee after the second adjournment and, unless all bonds Outstanding hereunder are at the time of such mailing registered as to principal, shall be published as aforesaid at least once in each thirty (30) day period of the second adjournment and of any subsequent adjournments. The failure to mail such notice to any such bondholder as aforesaid shall in no case affect the validity of any action taken at any meeting held pursuant to such adjournment. If such meeting shall have been called, under the provisions of Section 18.02 hereof, by bondholders or by the Company, notice of such adjournment shall be given by the permanent Chairman and permanent Secretary of the meeting in the newspaper and for the number of times above specified in this Section and shall be sufficient if so given.
Section 18.07.    Subject to the provisions of Section 12.16 hereof, any modification or alteration of this Indenture (including any indenture supplemental hereto) and/or of the rights and obligations of the Company and/or the rights of the holders of bonds and/or coupons issued hereunder in any particular and/or the waiver of any Default under the Indenture may be made or given at a meeting of bondholders duly convened and held in accordance with the provisions of this Article, but only by resolution duly adopted by the affirmative vote of at least a majority in principal amount of the bonds Outstanding hereunder, or, if the rights of one or more, but less than all, series of bonds then Outstanding are to be adversely affected by action taken at such meeting, then by affirmative vote of the holders of at least a majority in principal amount of those bonds so to be adversely affected and Outstanding hereunder, when such meeting is held, or, if any such amendment or alteration is in respect of the express provisions of Section 1.07 or 4.01 hereof, then by the affirmative vote of the holders of at least a majority in principal amount of all series of bonds authenticated and delivered under Article IV hereof Outstanding hereunder, voting together as a single class, and of the holders of at least a majority in principal amount of the bonds Outstanding hereunder, and in every case approved by Resolution of the Board of Directors of the Company as hereinafter specified; provided that, no such modification or alteration shall, without the consent of the holder of any bond issued hereunder affected thereby, (1) impair or affect the right of such holder to receive payment of the principal of (and premium, if any) and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, or (2) permit the creation of any lien ranking prior to, or on a parity with, the Lien of this Indenture with respect to any of the Mortgaged and Pledged Property, or (3) permit the deprivation of any nonassenting bondholder of the benefit of a lien upon the Mortgaged and Pledged Property for the security of his bonds (subject only to the lien of taxes, assessments or governmental charges not then delinquent and to any mortgage or other liens existing upon such property which are prior hereto at the date of the calling of any such bondholders’ meeting) or (4) permit the reduction of the percentage required by the provisions of this Section for the taking of any action under this Section with respect to any bond Outstanding hereunder.

Except for the purpose of waiving any past Default of the Company and the consequences thereof, in which event the provisions of Section 12.07 hereof shall be applied, bonds owned and/or held by and/or for the account of and/or for the benefit or interest of the Company or any affiliate of the Company shall not be deemed Outstanding for the purpose of any vote or of any calculation of bonds Outstanding in this Article XVIII provided for, except that, subject to the provisions of Sections 16.01 and




16.02 hereof, for the purpose of determining whether the Trustees, or either of them, shall be protected in relying on any such vote or calculation, only bonds which the Trustees, or either of them, know are so owned and/or held, shall be so excluded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this paragraph, if the pledgee shall establish to the satisfaction of the Trustees, or either of them, the pledgee’s right to vote such bonds and that the pledgee is not an affiliate of the Company. In case of a dispute as to such right, any decision by the Trustees, or either of them, taken upon the advice of counsel shall be full protection to the Trustees.
Section 18.08.    A record in duplicate of the proceedings of each meeting of bondholders shall be prepared by the permanent Secretary of the meeting and shall have attached thereto the original reports of the Inspectors of Votes, and affidavits by one or more persons having knowledge of the facts showing a copy of the notice of the meeting and a copy of the notice of adjournment thereof, if required under the provisions of Section 18.06 hereof, and showing that said notices were mailed and published as provided in Section 18.02 hereof and, in a proper case, as provided in Section 18.06 hereof. Such record shall be signed and verified by the affidavits of the permanent Chairman and the permanent Secretary of the meeting, and one duplicate thereof shall be delivered to the Company and the other to the Trustee for preservation by the Trustee. Any record so signed and verified shall be proof of the matters therein stated, and if such record shall also be signed and verified by the affidavit of a duly authorized representative of the Trustee, such meeting shall be deemed conclusively to have been duly convened and held and such record shall be conclusive, and any resolution or proceeding stated in such record to have been adopted or taken, shall be deemed conclusively to have been duly adopted or taken by such meeting. A true copy of any resolution adopted by such meeting shall be mailed by the Trustee to all holders of bonds Outstanding hereunder, the names and addresses of whom are then preserved by the Trustee pursuant to the provisions of Section 9.09 hereof, and proof of such mailing by the affidavit of some person having knowledge of the fact shall be filed with the Trustee, but failure to mail copies of such resolution as aforesaid shall not affect the validity thereof. No such resolution shall be binding until and unless such resolution is approved by Resolution. It shall be the duty of the Company to file a copy of any such Resolution of approval with the Trustee, but if such Resolution is adopted and a certified copy thereof is filed with the Trustee, the resolution so adopted by such meeting shall (to the extent permitted by law) be deemed conclusively to be binding upon the Company, the Trustees and the holders of all bonds and coupons issued hereunder, at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such resolution, or annulling the action taken thereby in a legal action or equitable proceeding for such purposes commenced within such sixty (60) day period; provided, however, that no such resolution of the bondholders or Resolution shall in any manner change or modify or be so construed as to change or modify any of the rights, immunities, or obligations of the Trustees without their written assent thereto.

Section 18.09    Bonds authenticated and delivered after the date of any bondholders’ meeting may bear a notation in form approved by the Trustee as to the action taken at meetings of bondholders theretofore held, and upon demand of the holder of any bond Outstanding at the date of any such meeting and presentation of his bond for the purpose at the principal office of the Trustee, the Company shall cause suitable notation to be made on such bond by endorsement or otherwise as to any action taken at any meeting of bondholders theretofore held. If the Company or the Trustee shall so determine, new bonds so modified as, in the opinion of the Trustee and the Board of Directors of the Company, to conform to such bondholders’ resolution shall be prepared, authenticated and delivered, and upon demand of the holder of any bond then Outstanding and affected thereby shall be exchanged without cost to such bondholder for bonds then Outstanding hereunder upon surrender of such bonds with all unmatured coupons, if any,




appertaining thereto. The Company or the Trustee may require bonds Outstanding to be presented for notation or exchange as aforesaid if either shall see fit to do so. Instruments supplemental to this Indenture embodying any modification or alteration of this Indenture (including any indenture supplemental hereto) made at any bondholders’ meeting and approved, by Resolution of the Board of Directors of the Company, as aforesaid, may be executed by the Trustees and the Company and upon demand of the Trustee, or if so specified in any resolution adopted by any such bondholders’ meeting, shall be executed by the Company and the Trustees.

Any instrument supplemental to this Indenture executed pursuant to the provisions of this Section shall comply with all applicable provisions of the Trust Indenture Act of 1939, as amended and in force on the date of the execution of such supplemental indenture.
Section 18.10.    (A) Anything in this Article contained to the contrary notwithstanding, the Trustee shall receive the written consent (in any number of instruments of similar tenor executed by bondholders or by their attorneys appointed in writing) of the holders of bonds Outstanding hereunder, the affirmative vote or votes of which would otherwise be required by Section 18.07 hereof (in all cases, at the time the last such needed consent is delivered to the Trustee), in lieu of the holding of a meeting pursuant to this Article and in lieu of all action at such a meeting and with the same force and effect as a resolution duly adopted in accordance with the provisions of Section 18.07 hereof.

(B) Instruments of consent shall be witnessed or in the alternative may (a) have the signature guaranteed by a bank or trust company or a registered dealer in securities, (b) be acknowledged before a notary public or other officer authorized to take acknowledgments, or (c) have their genuineness otherwise established to the satisfaction of the Trustee.

The amount of bonds payable to bearer, and the series and serial numbers thereof, held by a person executing an instrument of consent (or whose attorney has executed an instrument of consent in his behalf), and the date of his holding the same, may be proved either by exhibiting the bonds themselves to the Trustee or by a certificate executed (i) by any bank, banker or trust or insurance company organized under the laws of the United States of America or of any State thereof, having a capital of not less than Five Hundred Thousand Dollars ($500,000), (ii) by any trustee of any pension, welfare, hospitalization or similar fund having an aggregate corpus in excess of Five Million Dollars ($5,000,000), (iii) by the United States of America, any Territory thereof, the District of Columbia, any State of the United States, any municipality in any State of the United States or any public instrumentality of the United States, any State or Territory, or (iv) by any other person or corporation satisfactory to the Trustee. A bondholder in any of the foregoing categories may sign a certificate in his or its own behalf.
Each such certificate shall be dated and shall state in effect that, as of the date thereof, a coupon bond or bonds bearing a specified serial number or numbers was deposited with or exhibited to the signer of such certificate. The holding by the person named in any such certificate of any bond specified therein shall be presumed to continue unless (1) any certificate bearing a later date issued in respect of the same bond shall be produced, (2) the bond specified in such certificate (or any bond or bonds issued in exchange or substitution for such bond) shall be produced by another holder, or (3) the bond specified in such certificate shall be registered as to principal in the name of another holder or shall have been surrendered in exchange for a fully registered bond registered in the name of another holder. The Trustee may, in its discretion, require further proof in cases where it deems further proof desirable. The ownership of registered bonds shall be proved by the registry books.




(C) Until such time as the Trustee shall receive the written consent of the necessary per centum in principal amount of the bonds required by the provisions of subsection (A) above for action contemplated by such consent, any holder of a bond, the serial number of which is shown by the evidence to be included in the bonds the holders of which have consented to such action, may, by filing written notice with the Trustee at its principal office and upon proof of holding as provided in subsection (B) above, revoke such consent so far as it concerns such bond. Except as aforesaid, any such consent shall be conclusive and binding upon such holder and upon all future holders of such bond (and any bond issued in lieu thereof or exchanged therefor), irrespective of whether or not any notation of such consent is made upon such bond, and in any event any action taken by the holders of the percentage in aggregate principal amount of the bonds specified in subsection (A) above in connection with such action shall, subject to the provisions of the last sentence of Section 18.08 hereof, be conclusively binding upon the Company, the Trustees and holders of all the bonds.



ARTICLE XIX

MISCELLANEOUS

Section 19.01.    Nothing in this Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding hereunder, any right, remedy, or claim under or by reason of this Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Indenture contained by and on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding hereunder.

Section 19.02.    Any money which is held by the Trustee (other than money which is held by it for the purpose of effecting the purchase, payment or redemption of any bonds issued hereunder or the payment of any coupons or interest claims appertaining to bonds issued hereunder or which it has been directed to apply to any such purchase, payment or redemption which may only be invested in any bonds or other obligations of the United States of America designated by the Company) shall, at the request of the Company evidenced by an Officers’ Certificate, be invested or reinvested by the Trustee in any Investment Securities designated by the Company, and, unless the Company is in default in the payment of interest on any of the bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, any interest on such bonds or other obligations which may be received by the Trustee shall be forthwith paid to the Company. Such bonds or other obligations (other than those held for the purpose of effecting the purchase, payment or redemption of any bonds issued hereunder or the payment of any coupons or interest claims appertaining to bonds issued hereunder) shall be held by the Trustee as a part of the Mortgaged and Pledged Property and subject to the same provisions hereof as the cash used to purchase the same, but upon a like request of the Company, the Trustee shall sell all or any designated part of the same and the proceeds of such sale shall be held by the Trustee subject to the same provisions hereof as the cash used by it to purchase the bonds or other obligations so sold. If such sale shall produce a net sum less than the cost of the bonds or other obligations so sold, the Company covenants that it will pay promptly to the Trustee such amount of cash as with the net proceeds from such sale will equal the costs of the bonds or other obligations so sold, and if such sale shall produce a net sum greater than the costs of the bonds or other obligations so sold, the Trustee shall promptly pay to the Company an amount in cash equal to such excess.




Unless the Company is in Default, any money in excess of the sum of Fifty Thousand Dollars ($50,000) which shall have been held by the Trustee for a period of five (5) years, invested or uninvested (other than money which is held by it for the purpose of effecting the purchase, payment or redemption of any bonds issued hereunder or the payment of any coupons or interest claims appertaining to bonds issued hereunder or which it has been directed to apply to any such purchase, payment or redemption), shall be applied by the Trustee to the redemption of bonds to the extent any bonds then Outstanding are, by their terms, redeemable, selected as provided in Section 10.02 hereof from the bonds of all series then redeemable. Any moneys not so applied to redemption of bonds shall be held, applied or withdrawn in accordance with the other provisions of this Indenture. In the case of any such redemption, the Trustee shall have power to give any and all redemption notices for or on behalf of the Company.
Section 19.03.    In the event that any bond issued hereunder shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for the redemption thereof, or in the event that any coupon shall not be presented for payment at the due date thereof and the Company shall have deposited with the Trustee or any paying agent for the purpose or left with either of them if previously so deposited, money sufficient to pay the principal of such bond (and premium, if any), together with all interest due thereon to the date of the maturity of such bond or to the date fixed for the redemption thereof, or to pay such coupon, as the case may be, for the use and benefit of the holder thereof, the Trustee or such paying agent shall, in case the holder of any such bond or coupon shall not, within two (2) years after the maturity of any such bond or coupon or the date fixed for the redemption of any such bond, claim the amount deposited as above stated for the payment thereof, pay over to the Company such amount so deposited, if the Company is not at the time in default hereunder; and the Trustee or such paying agent shall thereupon be relieved from all responsibility to the holder thereof, and in the event of such payment to the Company the holder of any such bond or coupon shall (subject to any applicable statute of limitations) be deemed to be an unsecured creditor of the Company for an amount equivalent to the amount deposited as above stated for the payment thereof and so paid over to the Company.

Section 19.04.    Any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of this Indenture, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations, restrictions or provisions for the benefit of any one or more series of bonds issued hereunder and provide that a breach thereof shall be equivalent to a Default under this Indenture, or the Company may cure any ambiguity contained herein, or in any supplemental indenture, or may (in lieu of establishment by Resolution as provided in Section 2.01 hereof) establish the terms and provisions of any series of bonds by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to be recorded in all of the states in which any property at the time subject to the Lien hereof shall be situated. Alternative provisions relating to redemption of a particular series may be provided for in the relevant supplemental indenture to this Indenture, as approved by the Trustee, in lieu of the provisions of Section 10.04. Any supplemental indenture to this Indenture subjecting any bonds issued under the 1944 Mortgage or any other securities to the Lien hereof shall provide the terms and conditions under which such bonds or securities shall be held, including provisions regarding the voting of such bonds or securities. The Trustee is hereby authorized to join with the Company in the execution of any such instrument or instruments or any other instruments of pledge or delivery of securities. Such instrument, executed and acknowledged as aforesaid, shall be delivered to the Trustee and thereupon any modification of the provisions of these presents therein set forth, authorized by this Section, shall be binding upon the




parties hereto, their successors and assigns, and the holders of the bonds and coupons hereby secured. Anything herein contained to the contrary notwithstanding, this Section shall not be construed to permit any act, waiver, surrender or restriction adversely affecting any bonds then Outstanding hereunder.

Section 19.05.    Each certificate or opinion which is specifically required by the provisions of this Indenture to be delivered to the Trustee with respect to compliance with a condition or covenant herein contained shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person such condition or covenant has been complied with.

Every request or application by the Company for action by the Trustee shall be accompanied by an Officers’ Certificate and an Opinion of Counsel stating in each case that in the opinion of the person making such certificate or opinion the conditions precedent, if any, to such action, provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent), have been complied with.
The same officer or officers of the Company, or the same engineer or counsel or other person, as the case may be, need not certify to all the matters required to be certified under the provisions of any Article, Section, subsection, subdivision, paragraph or clause hereof, but different officers, engineers, counsel or other persons may certify to different facts respectively.
Section 19.06.    All parties to this Indenture agree, and each holder or owner of any bond by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorney’s fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this section shall not apply to any suit instituted by the Trustee, to any suit instituted by any bondholder, or group of bondholders, holding in the aggregate more than ten per centum (10%) in principal amount of the bonds Outstanding (determined as provided in Section 12.07 hereof), or to any suit instituted by any bondholder for the enforcement of the payment of the principal of or interest on any bond, on or after the respective due dates expressed in such bond.

Section 19.07.    Subject to the provisions of Article XV and Article XVI hereof, whenever in this Indenture any of the parties hereto is named or referred to (except in subdivision (1) of Section 1.05 hereof), this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not.

Section 19.08.    If any provision of this Indenture limits, qualifies, or conflicts with another provision of this Indenture which has been required to be included pursuant to any requirements of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, as amended, such required provision shall control.





Section 19.09.    It is the intention and it is hereby agreed that so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana the general language of conveyance contained in this Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that so far as the said Louisiana property is concerned, this Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued hereunder, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued hereunder and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 19.10.    Wherever reference is made in this Indenture to the Trust Indenture Act of 1939, as amended (except in Section 18.09 hereof), reference is made to such Act as it was in force on the date of the execution of this Indenture.

Section 19.11.    The titles of the several Articles of this Indenture, the marginal sectional and marginal Article references and the table of contents shall not be deemed to be any part of this Indenture.

Section 19.12.    This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 19.13.    The laws of the State of New York shall govern this Indenture and the bonds issued hereunder, except to the extent that the validity or perfection of the Lien of the Indenture, or remedies thereunder, are governed by the laws of a jurisdiction other than the State of New York.


ARTICLE XX

SPECIFIC DESCRIPTION OF PROPERTY

PARAGRAPH ONE
THE ELECTRIC GENERATING PLANTS, PLANT SITES AND STATIONS OF THE COMPANY, including all electric works, power houses, buildings, pipe lines and structures owned by the Company and all lands of the Company on which the same are situated and all of the Company’s lands and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, equipment and appurtenances, forming a part of said plants, sites, or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property, including all the Company’s right, title and interest in and to the following property situated in the State of Mississippi:
(1) The Steam Electric Generating Station situated in the County of Adams, State of Mississippi, including the power houses, buildings and other structures and all of the Company’s




right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain parcel of land in said County and State, described as follows:

A parcel of land fronting 1883.7 feet on the North ROW line of the Y&MV Railroad and being a portion of Greenwood Plantation in Sections 13 and 18, Township 7 North, Range 2 West, in Adams County, Mississippi, and containing 82.7 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book “5-Z” at Page 195; LESS AND EXCEPT right-of-way through Parcel 29, Block 1, Tax Map 181, Adams County, Mississippi, as more particularly described as follows:
From centerline Station Number 67+20, as surveyed for State Aid Project No. SAP 1(45), and shown on the plans for said project on file in the City-County Engineer’s Office in Natchez, Mississippi, go South 20 degrees 20 minutes West for 30.0 feet to the point of beginning, being a point on the present right-of-way of Steam Plant Road. From said point of beginning go South 20 degrees 20 minutes West for 20.0 feet, thence go North 69 degrees 40 minutes West for 50.0 feet, thence go South 20 degrees 20 minutes West for 130.0 feet, thence go North 69 degrees 40 minutes West for 96.2 feet, more or less, to a point in the center of Foster’s Bayou; thence go North 64 degrees 40 minutes East along the center of said bayou for 45.3 feet more or less, thence go North 16 degrees 00 minutes East along the center of said bayou for 117.9 feet more or less, thence go South 69 degrees 40 minutes East for 123.5 feet, more or less, back to the point of beginning. The herein described property contains 0.27 acres, more or less.
(2) The Steam Electric Generating Station situated in the County of Bolivar, State of Mississippi, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain tract of land in said County and State described as follows:
PARCEL 1 :
East Half, Northeast Quarter, Section 3, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-43 at Page 204; West Half, Northeast Quarter and Northwest Quarter, Section 3, Township 22 North, Range 5 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M‑43 at Pages 149 and 154, and Book M-50 at Page 255, containing 339.95 acres, more or less, in the Second Judicial District of Bolivar County, being the entire North Half of Section 3, Township 22 North, Range 5 West.
PARCEL 2 :
The South Half of Section 34, Township 23 North, Range 5 West; the West Half of the Northeast Quarter, and the East Half of the Northwest Quarter, and the East Half of the Northwest Quarter of the Northwest Quarter, and the Southwest Quarter of the Northwest Quarter of Section 3, all being in Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-43 at Page 154.




PARCEL 3 :
151.91 acres, more or less, situated as follows: All that portion of the Southeast Quarter of Section 33, Township 23 North, Range 5 West, situated East of U.S. Highway No. 61, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-43 at Pages 144, 146 and 154, LESS AND EXCEPT 4.14 acre easement sold to State Highway Commission, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M‑101 at Page 219; LESS AND EXCEPT easement for railroad spur track: A strip of land 100 feet wide across that part of Northeast Quarter of Southwest Quarter and East Half of West Half of Southwest Quarter lying east of ICRR and that part of West Half of West Half of Southeast Quarter lying West of U.S. Highway No. 61, all in Section 33, Township 23 North, Range 5 West; ALSO 60 feet by 1116 feet across Northeast Quarter of Southwest Quarter and that part of East Half of Northwest Quarter of Southwest Quarter lying East of ICRR, all in Section 33, Township 23 North, Range 5 West, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-44 at Page 231.
PARCEL 4 :
A parcel or tract of land containing 3.9 acres more or less and located in Section 35, Township 23 North, Range 5 West, in Bolivar County, Mississippi, being more particularly described as follows, to-wit:
Commence at the southwest corner of Section 35, Township 23 North, Range 5 West, run thence north 1,325 feet to a point; thence run east 2,158 feet to a point which is the point of beginning and the southwest corner of the parcel or tract of land hereinabove mentioned; from this point of beginning run north 10 degrees and 54 minutes west a distance of 407.34 feet to a point; thence run east 400 feet more or less to a point in the thread of the stream of the Sunflower River; thence run in a southeasterly direction along the said thread of the stream a distance of 407 feet more or less to a point; thence run west 400 feet more or less to the point of beginning, all being located in the South Half of Section 35, Township 23 North, Range 5 West, Bolivar County, Mississippi; as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-43 at Page 441.
(3) The Steam Electric Generating Station situated in the County of DeSoto, State of Mississippi, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, and that certain tract of land in said county and state, described as follows:
PARCELS 1, 2 AND 3 :
Description of the Koehler Plantation, being parts of Sections 27, 28, 29, 31, 32, 33, and 34, including accretions to Sections 29, 31, and 32 in Township 2 South, Range 10 West, in DeSoto County, Mississippi, and parts of Sections 4 and 5 in Township 3 South, Range 10 West, in Tunica County, Mississippi, more particularly described as follows:




PARCEL 1 :
Parts of Sections 27, 28, 32, 33, and 34 of Township 2 South, Range 10 West, in DeSoto County, Mississippi, and parts of Sections 4 and 5 of Township 3 South, Range 10 West, in Tunica County, Mississippi, lying west of U.S. Highway No. 61 and east of Y&MV Rail Road; BEGINNING at an iron pin in the northwest right of way of U.S. Highway No. 61, 150 feet wide, and the south line of Section 34, Township 2 South, Range 10 West; thence South 84 ° 30’ west with the south line of Sections 34 and 33, and along the DeSoto and Tunica County line a distance of 4930.80 feet to an iron pin, the northwest corner of the Northeast Quarter of Section 4, Township 3 South, Range 10 West; thence South 5 ° 35’ 52” east a distance of 2598 feet to an iron pin, the southeast corner of the Northwest Quarter of said Section 4; thence South 84 ° 24’ 50” west 2661 feet to an iron pin, the southwest corner of the Northwest Quarter of said Section 4; thence North 5 ° 35’ 52” west along the line dividing Sections 4 and 5 a distance of 778 feet to an iron pin, said point being 1824 feet south of the north corner of Sections 4 and 5, Township 3 South, Range 10 West; thence South 84 ° 40’ 11” west a distance of 2640 feet to an iron pin; thence North 5 ° 35’52” west with the west line of the Northeast Quarter of said Section 5 a distance of 1824 feet to an iron pin, the northwest corner of the Northeast Quarter of said Section 5 and the southwest corner of the Southeast Quarter of Section 32, Township 2 South, Range 10 West, said point also being in the DeSoto County and Tunica County line; thence South 84 ° 40’ 11” west along the south line of said Section 32 and said County line a distance of 435.63 feet to an iron pin in the southeast right-of-way of the Y&MV Railroad, 100 feet wide; thence with said Railroad right of way North 26 ° 25’ 45” east 1141.47 feet to an iron pin, the corner of said Railroad Depot lot; thence with said Depot lot South 63 ° 34’ 15” east 100 feet to an iron pin; thence North 26 ° 25’ 45” east with the Depot lot 870 feet to an iron pin; thence North 63 ° 34’ 15” west a distance of 100 feet to an iron pin, said point being 50 feet southeast of the centerline of said Railroad, as measured along a right angle to said centerline; thence with said Railroad right of way North 26 ° 25’ 45” east a distance of 248.05 feet to a point of curve; thence continuing eastwardly along said Railroad right of way along a curve to the right with a radius of 5680 feet a distance of 2662.57 feet to a point of tangency; thence continuing along said right of way North 53 ° 17’ 14” east a distance of 8157.29 feet to an iron pin, said point being 1659.9 feet east of the west line of Section 27, Township 2 South, Range 10 West; thence South 5 ° 24’ 47” east and parallel to the West line of said Section 27 a distance of 2502.43 feet to an iron pin in the line dividing Sections 27 and 34; thence with the line dividing said Sections North 84 ° 55’ 59” east a distance of 980.10 feet to an iron pin, the northeast corner of the Northwest Quarter of Section 34, Township 2 South, Range 10 West; thence South 5 ° 36’ 04” east along said quarter section line a distance of 2674.77 feet to an iron pin in the center of Section 34; thence North 84 ° 53’ 40” east with the north line of the Southeast Quarter of Section 34 a distance of 2483.04 feet to an iron pin in the northwest right of way of U.S. Highway No. 61, 170 feet wide; thence with said Highway right of way South 40 ° 02’ 20” west a distance of 2706.52 feet to a point; thence with said right of way South 49 ° 57’ 40” east a distance of 25 feet to a point, said point being 60 feet from the centerline of said Highway; thence with said right of way South 40 ° 02’ 20” west 950 feet to a point; thence North 49” 57’ 40” west 25 feet to a point; thence South 40 ° 02’ 20” west with said right of way 104.5 feet to an iron pin; thence leaving said Highway North 49 ° 57’ 40” west 210 feet to an iron pin; thence South 40 ° 02’ 20” west 230 feet to an iron pin; thence South 49 ° 57’ 40” east 220 feet to an iron pin in the northwest right of way of said Highway, 150 feet wide; thence with said Highway right of way South 40 ° 02’ 20” west a distance of 5.20 feet to the beginning, and containing 1558.310 acres of land.




PARCEL 2 :
Parts of Sections 27, 28, 29, 32, and 33 of Township 2 South, Range 10 West, in DeSoto County, Mississippi, lying west of the Y & MV Railroad and east of the New Yazoo-Mississippi Delta Levee right of way:
Beginning at an iron pin in the south line of Section 32, Township 2 South, Range 10 West, said line being the line dividing DeSoto County and Tunica County, said point being also in the west right of way of the Y&MV Railroad, 100 feet wide, and 553.24 feet west of the southeast corner of the Southwest Quarter of said Section 32; thence South 84 ° 40’ 11” west with the south line of said Section 32 a distance of 743.89 feet to an iron pin in the east right of way of the New Yazoo-Mississippi Delta Levee; thence with the east right of way of said levee as follows: North 23 ° 38’ 08” east 2548.62 feet; north 66 ° 21’ 38” west 40 feet; North 23 ° 37’ 54” east 1966.99 feet; North 41 ° 44’ 54” east 702 feet; North 41 ° 50’ 54” east 5300 feet; North 41 ° 47’ 54” east 468.09 feet to an iron pin in a public road; thence North 84 ° 55’ 59” east and parallel to and 2824.8 feet north of the south line of Sections 28 and 27, Township 2 South, Range 10 West, a distance of 3989.70 feet to an iron pin in said Road, said point being 1659.9 feet east of the west line of said Section 27; thence South 5 ° 24’ 47” east and parallel to the west line of Section 27 a distance of 205.33 feet to an iron pin in the north right of way of the Y&MV Railroad, 100 feet wide; thence with said right of way South 53 ° 17’ 14” west 8218.09 feet to a point of curve; thence continuing southwardly along a curve to the left with a radius of 5780 feet a distance of 2709.45 feet to a point of tangency; thence with said right of way South 26 ° 25’ 45” west a distance of 98.05 feet to an iron pin the corner of a Depot Lot; thence with said Depot Lot North 63 ° 34’ 15” west 25 feet to an iron pin; thence South 26 ° 25’ 45” west with said Depot 150 feet to an iron pin; thence South 63 ° 34’ 15” east a distance of 25 feet to an iron pin in the northwest right of way of said Railroad; thence with said right of way South 26 ° 25’ 45” west a distance of 2073.38 feet to the beginning, containing 406.346 acres of land, including 12.111 acres in Old Highway 61, 40 feet wide by usage - no deed.
PARCEL 3 :
Parts of Sections 28, 29, 31, and 32, including accretions to Sections 29, 33, and 32, lying west of the New Yazoo-Mississippi Delta Levee and east of the top of the revetment bank of the Mississippi River in DeSoto County, Mississippi:
Beginning at an iron pin in the northwest right of way of the New Yazoo-Mississippi Delta Levee, said point being 3970.23 feet west of the east line of Section 28, Township 2 South, Range 10 West, as measured along a line 2824.8 feet north of the south line of said Section 28; thence with said levee right of way as follows: South 41 ° 50’ 22” west 475.04 feet; South 48 ° 09’ 38” east 11 feet; South 39 ° 55’ 29” west 97 feet; South 34 ° 35’ 26” west 257 feet; South 49 ° 36’ 33” east 52 feet; South 39 ° 48’ 27” west 444 feet; South 47 ° 44’ 27” west 393 feet; South 40 ° 17’ 27” west 558 feet; South 42 ° 55’ 27” west 509 feet; South 53 ° 22’ 27” west 191 feet; South 41 ° 02’ 27” west 1071.27 feet; North 48 ° 10’ 38” west 54 feet; South 41 ° 49’ 22” west 168 feet; South 41 ° 47’ 35” west 622.74 feet; South 48 ° 13’ 38” east 170 feet; South 46 ° 08’ 17” west 344 feet; South 32 ° 59’ 17” west 94 feet; South 24 ° 13’ 17” west 39 feet; South 41 ° 46’ 52” west 170.83 feet; South 23 ° 50’ 13” west 572.10 feet; South 21 ° 04’ 21” west 206.79 feet; South 72 ° 10’ 29” west 64 feet; South 23 ° 50’ 29” west 251 feet; North 66 ° 17’ 38” west 131 feet; South 23 ° 40’ 44” west 800.99 feet; South 24” 56’ 29” west 1100.28 feet; South 23 ° 38’ 22” west 1100 feet; South 66 ° 21’ 38” east 255 feet; South 23 ° 12’ 29” east 438.63 feet; South 61 ° 29’ 50” west 203.59 feet; South 89 ° 18’ 42” west 219.32 feet; North 66 ° 27’ 38” west 225 feet; South 23 ° 32’ 22” west 56 feet; North 66 ° 27’




38” west 250 feet; South 23 ° 32’ 22” west 770.48 feet to an iron pin in the south line of Section 31, Township 2 South, Range 10 West, said point being 267.1 feet west of the southeast corner of said Section 31, said point also being in the east line of the old levee; thence along the east line of the old levee as follows: North 6 ° 40’ 32” east 69.33 feet; North 7 ° 13’ 46” east 428.01 feet; North 5 ° 16’ 19” west 503.75 feet; North 9 ° 01’ 15” east 620.95 feet; North 80 ° 28’ 57” west 100 feet; North 8 ° 04’ 10” east 709.55 feet to a point, the southeast corner of a parcel deeded to Koehler by the Levee Board; thence with said parcel North 58 ° 55’ 09” west 736.51 feet, call 735 feet, to a point in the west line of the old levee, the southwest corner of said parcel; thence with the west line of the old levee as follows: South 6 ° 14’ 13” west 1011.67 feet; south 1 ° 07’ 33” east 627.57 feet; south 7 ° 36’ 1” west 805.05 feet; South 83 ° 48’ 57” east 163 feet; South 2 ° 45’ 02” west 100.18 feet; south 1 ° 14’ 10” west 212 feet to an iron pin in the south line of Section 31 extended and in the DeSoto, Tunica County line, said point being 837.9 feet west of the southeast corner of Section 31, Township 2 South, Range 10 West; thence with said County line South 84 ° 40’ 11” west 3428.52 feet to an old railroal rail in the Buck Island Slough; thence with an old fence in the Buck Island Slough as follows: North 58 ° 36’ 48” west 395 feet to an old iron pin; North 49 ° 34’ 43” west 206.28 feet to an old post with braces; North 64 ° 00’ 06” west 212.07 feet to an old post with braces; North 79 ° 01’ 20” west 537.24 feet to an old cross tie post; North 80 ° 39’ 07” west 190.78 feet to an old iron pin; North 80 ° 57’ 14” west 339.81 feet to an old iron pin in concrete; North 38’ 25’ 33” west 206.88 feet to an old iron pin; North 37 ° .37’ 44” west 399.36 feet to an iron pin on the top . of the east bank of the Mississippi River, as reveted; thence with the top of said River bank as follows: North 69 ° 02’ 53” east 275.66 feet; North 65 ° 49’ 46” east 533.13 feet; North 62 ° 14’ 59” east 118.17 feet; North 71 ° 07’ 03” east 359.56 feet; North 65 ° 27’ 29” east 1180.78 feet; North 70 ° 59’ 55” east 200 feet; North 73 ° 03’ 04” east 1095.78 feet; North 42 ° 14’ 59” east 735.81 feet; North 43 ° 22’ 27” east 1189.78 feet; North 45 ° 21’ 48” east 321.48 feet; North 33 ° 47’ 22” east 1676.48 feet; North 45 ° 05’ 39” east 1273.14 feet; North 49 ° 35’ 57” east 822.03 feet; North 53 ° 03’ 28” east 550.66 feet to a point, the intersection of the east bank of said River with the west right of way of the old levee; thence with the west right of way of the old levee as follows: South 39 ° 30’ 48” west 152.4 feet; South 28 ° 10’ 39” west 333.19 feet; South 44 ° 25’ 19” west 385.13 feet; South 27 ° 20’ 29” west 223.22 feet; South 29 ° 46’ 56” west 372.62 feet; South 29 ° 35’ 22” west 711.49 feet; South 27 ° 22’ 27” west 1408.36 feet to a point, the northwest corner of a parcel of levee conveyed to Koehler; thence South 61 ° 37’ 52” east 634.72, call 632, feet to a point in the east right of way of the old levee, the northeast corner of a parcel conveyed to Koehler; thence with the east line of the old levee as follows: North 36 ° 05’ 54” east 89.37 feet; North 20 ° 47’ 01” east 661.53 feet; North 25 ° 31’ 52” east 1710.49 feet; North 26 ° 44’ 00” east 123.53 feet; North 42 ° 56’ 03” east 700 feet; North 33 ° 40’ 12” east 733.39 feet; North 23 ° 32’ 24” east 721.53 feet to a point on the present east bank of the Mississippi River; thence with said River bank as follows: North 53 ° 03’ 28” east 502.29 feet; North 40 ° 29’ 47” west 78.28 feet; North 57 ° 18’ 19” east 397.11 feet; North 60 ° 53’ 37” east 544.16 feet to a point where said River bank again intersected the east line of the old levee; thence with the east line of the old levee as follows: North 76 ° 57’ 16” east 408.56 feet; North 47 ° 39’ 24” east 356.78 feet; North 47 ° 23’ 49” east 129.5 feet to a point where said levee right of way again intersects the east bank of the River; thence with said River bank as follows: North 61 ° 03’ 59” east 609.32 feet; North 41 ° 23’ 21” east 272.21 feet; North 54 ° 49’ 15” east 277.47 feet to an iron pin; thence leaving said River South 6 ° 15’ 00” east 601.39 feet to an iron pin; thence North 84 ° 55’ 59” east 287.87 feet to the beginning, containing 621.548 acres of land.




LESS AND EXCEPT:
Two parcels of land located in the North one-half of the Southwest Quarter of Section 27, the Southeast Quarter and the Southeast Quarter of the Southwest Quarter of Section 28, the Northwest Quarter of the Northeast Quarter and the Northwest Quarter of Section 33, the South one-half of the Northeast Quarter, the Southeast Quarter and the Southeast Quarter of the Southwest Quarter of Section 32, all Township 2 South, Range 10 West of the Chickasaw Meridian, DeSoto County, Mississippi, more particularly described as follows:
PARCEL 1 :
Beginning at the intersection of the North line of the North one-half of the Southwest Quarter of said Section 27 and a line that lies parallel to and/or concentric with and 50 feet normally distant southeasterly from the centerline of the Illinois Central Gulf Railroad Company’s Clarksdale District main track; thence southwesterly along said parallel and/or concentric line, being Grantor’s southeasterly right-of-way line 11,100 feet, more or less, to Grantor’s Mile Post M-25 (Valuation Station 1288+70), being the northwesterly corner of Grantor’s Penton station grounds property; thence southeasterly at a right angle, 100 feet to a line that lies parallel to and 150 feet normally distant southeasterly from the centerline of said main track; thence southwesterly along the last said parallel line, 870 feet; thence northwesterly at a right angle, 100 feet to said line that lies parallel to and/or concentric with and 50 feet normally distant southeasterly from the centerline of said main track, being the southwesterly corner of Grantor’s station grounds property; thence southwesterly along the last said parallel and/or concentric line, 1,360 feet, more or less, to the South line of the Southeast Quarter of the Southwest Quarter of said Section 32; thence West along said South line, 29 feet, more or less, to a line that lies parallel to and/or concentric with and 25 feet normally distant southeasterly from the centerline of said main track; thence northeasterly along the last said parallel and/or concentric line, 13,310 feet, more or less, to said North line of the North one-half of the Southwest Quarter of Section 27; thence East along said North line, 47 feet; more or less, to the point of beginning; all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 151 at Page 511.
PARCEL 2 :
Beginning at the intersection of the North line of the North one-half of the Southwest Quarter of said Section 27 and a line that lies parallel to and/or concentric with and 50 feet normally distant northwesterly from the centerline of the Illinois Central Gulf Railroad Company’s Clarksdale district main track; thence southwesterly along said parallel and/or concentric line, being Grantor’s northwesterly right-of-way line, 10,800 feet, more or less, to the northeasterly corner of Grantor’s old depot property; thence northwesterly at a right angle, 25 feet to a line that lies parallel to and 75 feet normally distant northwesterly from the centerline of said main track; thence southwesterly along the last said parallel line, 150 feet; thence southeasterly at a right angle, 25 feet to said line that lies parallel to and/or concentric with and 50 feet normally distant northwesterly from the centerline of said main track; thence southwesterly along the last said parallel and/or concentric line, 2,300 feet, more or less, to the South line of the Southeast Quarter of the Southwest Quarter of said Section 32; thence East along said South line, 29 feet, more or less, to a line that lies parallel to and/or concentric with and 25 feet normally distant northwesterly from the centerline of said main track; thence northeasterly along the last said parallel and/or concentric line, 13,270 feet, more or less, to said North line of the North one-half of the Southwest Quarter of Section 27; thence West along said North line, 47 feet, more or less, to the point of beginning; all as more




particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 151 at Page 511.
Subject to the rights of the public in roadways on, over, along and across Parcels 1 and 2.
LESS AND EXCEPT FURTHER:
A parcel of land in the Southeast Quarter of Section 33, Township 2 South, Range 10 West, in DeSoto County, Mississippi, and being more particularly described as follows:
Commencing at the Southeast Corner of Section 33, Township 2 South, Range 10 West, DeSoto County, Mississippi, said point being in the center of a County Gravel Road and also being 2,170 feet West of the centerline of U.S. Highway No. 61; thence South 89 degrees 05 minutes West along the center of said County Road, 2,446 feet to a point; thence North 00 degrees 55 minutes West 20 feet to the Point of Beginning on the North right-of-way of said County Road; thence North 43 degrees 45 minutes East 265.6 feet to a point; thence North 46 degrees 15 minutes West 100 feet to a point; thence South 43 degrees 45 minutes West 364.4 feet to a point on the North right-of-way of said County Road; thence North 89 degrees 05 minutes East along said road right-of-way 140.6 feet to the Point of Beginning, containing 0.72 acre and all being in the Southeast Quarter of Section 33, Township 2 South, Range 10 West, DeSoto County, Mississippi.
LESS AND EXCEPT FURTHER:
A parcel of land in the South Half of South Half of Section 34, Township 2 South, Range 10 West, in DeSoto County, Mississippi, more particularly described as follows:
Begin at a point on the present Northerly right-of-way line of U.S. Highway No. 61 that is 85 feet Northerly of and perpendicular to the centerline of survey of State Project No. 79-0009-06-008-10 at Station. 2 + 60; from said point of beginning run thence North 35 ° 02’ East, a distance of 142.2 feet; thence North 56 ° 28’ East, a distance of 255.0 feet to said present Northerly right-of-way; thence run South 45 ° 09’ West along said right-of-way line, a distance of 390.0 feet; thence North 44 ° 51’ West, a distance of 25.0 feet to the point of beginning, containing 0.26 acres, more or less, and being situated in the South 1/2 of South 1/2 of Section 34, Township 2 South, Range 10 West, DeSoto County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 174 at Pages 279-280.
(4) The Steam Electric Generating Station situated in the City of Jackson, County of Hinds, State of Mississippi, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain tract of land in said City, County and State, described as follows:
PARCEL 1 :
A tract of land in the shape of a triangle in the South end of Lot 5, Garland Community Farms, containing 40.0 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Hinds County, Mississippi, in Deed Book 544 at Page 114; ALSO all rights and title in and to the water, pumping equipment and other properties owned or leased in or near Hico Lake, all in Sections 16 and 17, Township 6 North, Range 1 East.




PARCEL 2 :
Lot 6 of Garland Community Farm, containing 40.0 acres, more or less, as shown by map or plat thereof, recorded in Surveyor’s Record Book “B”, Page 67, containing 40.0 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Hinds County, Mississippi, in Deed Book 357 at Page 242.
PARCEL 3 :
Lot 7 of Garland Community Farm Subdivision, according to a map or plat of said subdivision, on file and of record in Surveyor’s Record Book “B” at Page 67, in the office of the Chancery Clerk of Hinds County at Jackson, Mississippi, said lot being a part of the SW 1 / 4 of SE 1 / 4 of Section 17, Township 6, Range 1 East, Hinds County, Mississippi, except so much and such part of said Lot 7 as was granted by the Company by Warranty Deed, which deed is recorded in the office of the Chancery Clerk of Hinds County, at Jackson, Mississippi, in Deed Book 357 at Page 489.
ALSO, a strip of land four hundred (400) feet wide from east to west across and off of the east side of Lot 12 of Garland Community Farm Subdivision, according to the map or plat of said subdivision, on file and of record in the office of the Chancery Clerk of Hinds County, at Jackson, Mississippi, in Surveyor’s Record Book “B”, at Page 67 thereof, particularly described as follows:
Begin at the northeast corner of said Lot 12 and run thence west along the north line of said lot a distance of 400 feet; run thence south parallel to the east line of said lot, a distance of 1336 feet to the south line of said lot; run thence east along the south line of said lot a distance of 400 feet to the southeast corner of said lot; and run thence north along the east line of said lot a distance of 1336 feet to the point of beginning, except, however, so much and such part of said land that may be embraced in the public road on the south side thereof, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Hinds County, Mississippi, in Book 676 at Page 445.
PARCEL 4 :
A parcel of land located in the Northeast Quarter of the Northeast Quarter and Northwest Quarter of the Northeast Quarter of Section 20, Township 6 North, Range 1 East, of Hinds County, Mississippi, being more particularly described as follows:
Commencing at an iron pin in Northside Drive, said pin locating a section corner common to Sections 16, 17, 20 and 21, all in Township 6 North, Range 1 East; thence South 30 feet along the east line of Section 20 to the point of beginning which is an iron pin located at the northeast corner of a certain Brickyard Subdivision, Part 1, a plat of said subdivision being a matter of record in Plat Book 7 at Page 43 thereof in the Office of the Hinds County Chancery Clerk in Jackson, Mississippi; thence North 89 ° 30’ West 285 feet along the north line of said Brickyard Subdivision, Part 1, to an iron pin located at the northeast corner of Lot 4 of said subdivision; thence South along the east line of said Lot 4 - 200 feet to an iron pin located at the southeast corner of said Lot 4; thence North 89 ° 30’ west along the south line of said Lot 4 - 100 feet to an iron pin located at the southwest corner of said Lot 4; thence North along the west side of said Lot 4 - 200 feet to an iron pin located at the northwest corner of said Lot 4; thence North 89 ° -30’ west along the north line of said Brickyard Subdivision, and the extension of said north line extended west, 2279.4 feet to an iron pin located on a line between the East Half and the West Half of said Section 20, said point also being located 8.2 feet north of a concrete monument located at the northeast corner of




Lot 7, Block B, Milo Park, a subdivision, a plat of which is a matter of record in Plat Book 8, at Page 16 thereof, in the Office of the Hinds County Chancery Clerk at Jackson, Mississippi; thence turning through a deflection angle to the left of 90 ° -24’ - 400 feet in a southerly direction along the east side of said Milo Park Subdivision to an iron pin located at a point 3.4 feet south of the southeast corner of Lot 10, Block D, Milo Park; thence turning through a deflection angle to the left of 89 ° -36’ 2661.6 feet to an iron pin located on a line which is the southerly extension of the east line of said Brickyard Subdivision; thence North along said line extension and the east line of said Brickyard Subdivision 400 feet to the point of beginning, consisting of 23.99 acres, more or less, all lying in the City of Jackson in Northeast Quarter Northeast Quarter and Northwest Quarter Northeast Quarter, Section 20, Township 6 North, Range 1 East, Hinds County, Mississippi.
LESS AND EXCEPT:
PARCEL 1 :
A parcel of land along the South side of Northside Drive located in the North Half of the Northeast Quarter of Section 20, Township 6 North, Range 1 East, said parcel of land being described by metes and bounds as follows:
Beginning at a point on the South side of Northside Drive, said point being the Northeast corner of Lot 1 of Brickyard Subdivision, Part I, being a subdivision in Section 20, Township 6 North, Range 1 East, recorded in Plat Book 7, Page 43 of the Records of Maps and Plats of Land of the First Judicial District of Hinds County, Mississippi; from said point of beginning run Westerly along the South line of Northside Drive a distance of 2,664.3 feet to a point; thence angle left 90 degrees 22 minutes 40 seconds and run Southerly along an extension of the East boundary of Milo Park Subdivision, Block “B”, a distance of 8.2 feet to a concrete monument at the Northeast corner of said subdivision; thence continue Southerly along the East boundary of said subdivision a distance of 1.1 feet to a point; thence angle left 89 degrees 31 minutes 29 seconds and run Easterly and parallel to centerline of construction of Northside Drive a distance of 2,526.7 feet to a point of curve; thence continue Easterly and parallel to centerline of said construction on a curve to left with a radius of 2,897.79 feet a distance of 133.18 feet to a point of reverse curve; thence continue Easterly and parallel to centerline of said construction on a curve to the right with a radius of 2,831.79 feet a distance of 4.44 feet to a point on the East line of said Brickyard Subdivision, Part I; run thence Northerly along the East boundary line of said subdivision a distance of 2.6 feet to the point of beginning, containing 0.46 acre (20,101 square feet) more or less, all as shown on a plat attached as Exhibit “A” to that certain document recorded among the land records in the office of the Chancery Clerk of Hinds County at Jackson, Mississippi, in Book 2278 at Pages 652-656; and also
PARCEL 2 :
A parcel of land off the South end of Lots 6, 7 and 12 of the Garland Community Farm, a subdivision of the Southwest Quarter of Section 8, the whole of Section 17, and the Northeast Quarter of Section 18, all in Township 6 North, Range 1 East, said parcel of land being described by metes and bounds as follows:
Commencing at the intersection of the section line between Sections 16 and 17, Township 6 North, Range 1 East, and the North line of Northside Drive, run thence Westerly along said North line of Northside Drive a distance of 1,243 feet to the point of beginning of the parcel of land herein described; thence continue Westerly along the North line of Northside Drive a distance of 1,795




feet to the Southwest corner of Grantor’s property; thence angle right 90 degrees 00 minutes and run Northerly along the West line of Grantor’s property a distance of 3.4 feet to a point; thence angle right 90 degrees 06 minutes 30 seconds and run thence Easterly parallel to centerline of construction of Northside Drive a distance of 1,795 feet to the point of beginning, containing 0.070 acre (3,052 square feet) more or less, all as shown on a plat attached, marked Exhibit “B”, and made a part of that certain document recorded among the land records in the office of the Chancery Clerk of Hinds County at Jackson, Mississippi, in Book 2278 at Pages 652-656.
(5) The Steam Electric Generating Station situated inside and outside the City of Vicksburg, in the County of Warren, State of Mississippi, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain tract of land in said City, County and State described as follows:
PARCEL 1 :
A certain tract of land being a part of Section 18, Township 15 North, Range 3 East, and together with accretions lying West and South of and being adjacent thereto, more particularly described by metes and bounds as follows, to-wit:
Begin at a point on Stouts, or Big Bayou as said Bayou was in existence in 1963, 61.28 chains North 84 ° 08’ West from the Northwest corner of Section 30, Township 15 North, Range 3 East, and run thence up said Bayou, with the meanderings thereof, as follows:
N4 ° 29’30”W, 295.1 feet; Nl ° 38’E, 878.4 feet; N33 ° 41’30”E, 180.3 feet; S76 ° 09’E, 221.4 feet; N77 ° 35’30”E, 153.6 feet; N36 ° 14’E, 231.8 feet; N8 ° 56’30”E, 180.2 feet; N12 ° 05’W, 477.6 feet; N18 ° 12’30”E, 218.8 feet; N7 ° 29’30”W, 225.0 feet; N50 ° 36’W, 144.9 feet; N80 ° 9’30”W, 175.6 feet; N30 ° 58’W, 110.8 feet; N17 ° 51’E, 186.0 feet; N30 ° 44’30”E, 1271.7 feet; N45 ° 00’E, 353.6 feet; N30 ° 12’30”E, 1047.2 feet; N21 ° 48’W, 242.3 feet; N51 ° 11’30”W, 295.2 feet; N21 ° 39’30”W, 303.4 feet; N34 ° 50’30”E, 192.5 feet; N67 ° 34’30”E, 372.3 feet; N83 ° 28’30”E, 439.9 feet; 582 ° 13’30”E, 406.7 feet; 566 ° 16’30”E, 415.1 feet; N79 ° 15’30”E, 198.6 feet; N49 ° 34’E, 932.8 feet; N75 ° 20’30”E, 335.9 feet; 556 ° 18’30”E, 72.1 feet; N33 ° 25’30”E, 299.5 feet; N6 ° 51’30”E, 792.4 feet to a point on the South line of the William Foster 25 acre tract of land; run thence N 58 ° 00’W along the South line of said William Foster 25 acre tract for a distance of 2405 feet to a point on West line of the property of Amanda Wilkins and the West line of the property of Howard Divers, Jr., extended South, as said West line of the property of Wilkins and Divers are shown on a plat of a survey made by W. L. Polk in January 1900, and recorded in the office of the Chancery Clerk of Warren County at Vicksburg, Mississippi, in Deed Book 69, Page 73; run thence North for a distance of 1120.2 feet to a point measured along the said west line of the property of Wilkins and Divers and along said line extended Southerly, said point being S32 ° 00’W, 2226.3 feet and N58 ° 00’W, 446.2 feet measured from an iron stake at the SW corner of Lot No. 5 of the H.C. McCabe Subdivision according to a map or plat recorded in said office of the Warren County Chancery Clerk in Deed Book 116, Page 192, said point also being on the South line of the A. Clark 10 acre tract of land extended Westerly; run thence N58 ° 00’W and along a line parallel with the said South line of the William Foster 25 acre tract for a distance of 350.2 feet to a point on the East bank of the Mississippi River, as said river bank existed in July, 1963; run thence Southwesterly along the said East bank of the Mississippi River as follows:
S53 ° 37’W, 689.4 feet; S51 ° 09’W, 924.6 feet; S57 ° 30’30”W, 225.3 feet; 547 ° 23’W, 867.0 feet; 556 ° 37’30”W, 203.6 feet; S4 ° 20’30”W, 237.7 feet; 530 ° 33’W, 141.7 feet; S46 ° 01’W, 358.6 feet;




S33 ° 57’30”E, 59.1 feet; S8 ° 24’30”W, 410.4 feet; S50 ° 30’W, 213.8 feet; S19 ° 55’W, 231.9 feet; S33 ° 34’30”W, 139.2 feet; S22 ° 22’W, 378.5 feet; S30 ° 52’ 30”W, 643.1 feet; S17 ° 39’W, 138.5 feet; S49 ° 47’W, 161.1 feet; S34 ° 56’W, 448.9 feet; S39 ° 30’W, 413.4 feet; S28 ° 32’30”W, 194.7 feet; S33 ° 02’30”W, 146 7 feet; S6 ° 57’E, 82.6 feet; S18 ° 53’30”W, 157.5 feet; S48 ° 22’W, 84.3 feet; S24 ° 37’W, 487.3 feet; S30 ° 28’W, 374.7 feet; S13 ° 14’30”W, 104.8 feet; S33 ° 32’W, 199.2 feet; S16 ° 33’30”W, 512.2 feet; S22 ° 20’30”W, 431.4 feet; S31 ° 54’W, 452.3 feet; S24 ° 51’W, 387.9 feet; S18 ° 32’30”W, 173.0 feet; 523 ° 27’30”W, 115.6 feet; S30 ° 31’W, 330.8 feet; 515 ° 21’W, 317.3 feet; S10 ° 04’30”W, 154.4 feet; S15 ° 13’40”W, 886.3 feet to the South line of the property conveyed by Ella Reese Morgan to W.J. Hatcher (now deceased) on December 21, 1927, by deed recorded in Book 172, at page 72 of the record of deeds of Warren County, Mississippi; then leaving said East bank of the Mississippi River and run thence S89 ° 11’30”E measured along a hacked and blazed line for a distance of 4107.3 feet to the point of beginning, and containing an area of 824 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 382 at Page 513.
PARCEL 2 :
Begin at a railroad iron marking the southeast corner of the Northeast Quarter of the Southwest Quarter of Section 8, Township 15 North, Range 3 East, and run thence North 2 degrees, 14 minutes East, 161.0 feet to the junction of two fences; run thence along one of said fence lines, marking the east boundary line of the W.B. Ross, Jr., property North 0 degrees, 35 minutes West, 1294.4 feet; thence North 1 degree, 10 minutes West, 982.0 feet; thence North 1 degree, 53 minutes East, 159.0 feet; thence North 2 degrees, 12 minutes West, 234.7 feet to an old iron pipe; continuing with said fence run North 0 degrees, 23 minutes West, 485.0 feet; thence North 0 degrees, 16 minutes East, 367.0 feet; run thence North 0 degrees, 36 minutes West, 92 feet to a point located 15 feet East of and at right angles to the top bank of the Mississippi River, as it existed in 1964, which point is described as Point “B” for the purpose of this description; thence following the top bank of the Mississippi River, as it existed in 1964, but running 15 feet distant therefrom run South 36 degrees, 46 minutes West, 107.9 feet; thence South 25 degrees, 15 minutes East, 90.0 feet; thence South 50 degrees, 35 minutes West, 1090.0 feet; thence South 42 degrees, 44 minutes West, 510.0 feet; thence South 38 degrees, 27 minutes West, 310.0 feet; thence South 45 degrees, 04 minutes West, 390.0 feet; thence South 47 degrees, 12 minutes West, 570.0 feet; thence South 48 degrees, 57 minutes West, 470.0 feet; thence South 52 degrees, 24 minutes West, 440.0 feet; thence South 49 degrees, 43 minutes West, 485 feet; thence South 46 degrees, 19 minutes West, 255.0 feet; thence South 34 degrees, 25 minutes West, 260.0 feet; thence South 27 degrees, 03 minutes West, 260.0 feet; thence South 45 degrees, 24 minutes West, 26.9 feet to a fence line which point for the purpose of this description is called Point “A”; thence following said fence south 59 degrees, 04 minutes East, 450.7 feet; thence South 29 degrees 57 minutes West, 927 feet to an old iron pipe, the junction with an east-west fence; thence following said east-west fence South 58 degrees, 15 minutes East, 1520.7 feet to an old iron pipe close to the bank of Four Mile or Hennessey’s Bayou; thence continuing South 58 degrees, 15 minutes East, 45 feet to the center line of Four Mile or Hennessey’s Bayou; thence running up said Bayou North 63 degrees, 00 minutes East, 110 feet; North 73 degrees, 00 minutes East, 90 feet; North 51 degrees, 00 minutes East, 120 feet; thence North 36 degrees, 30 minutes East, 120 feet; thence North 27 degrees, 30 minutes East, 100 feet; thence North 34 degrees, 00 minutes East, 50 feet; thence North 4 degrees, 55 minutes East, 83.2 feet; thence leaving said Bayou and run South 88 degrees, 10 minutes East, 690 feet; thence North 1 degree, 07 minutes East, 380.4 feet to a point on the north bank of said Bayou; thence run East 23.4 feet to a fence; thence with said fence run North 0




degrees, 18 minutes West, 935 feet; thence North 89 degrees, 58 minutes East, 1276.4 feet to the point of beginning of this parcel.
PARCEL 3 :
To get to the point of beginning commence at a point on the top bank of the Mississippi River (as of 1964), at Point “B” in Parcel Two next above, and run thence North 36 degrees, 46 minutes East, 134.8 feet to the point of beginning of Parcel Three, which for the purposes of this description is called Point “C”; run thence East 1097.1 feet to an old iron pipe; thence run North 4 degrees 03 minutes West, 979.1 feet to an old iron pipe; run thence North 58 degrees, 00 minutes West, 167.2 feet to a point 15 feet east of the top bank of the Mississippi River as of 1964, which for the purpose of this description is called Point “D”; thence with a line 15 feet east of and at right angles to said top bank run South 25 degrees, 19 minutes West, 43.8 feet; thence South 11 degrees, 16 minutes West, 60 feet; thence South 64 degrees, 47 minutes West, 135 feet; thence South 3 degrees, 57 minutes West, 60 feet; thence South 43 degrees, 13 minutes West, 110 feet; thence South 26 degrees, 58 minutes West, 120 feet; thence South 78 degrees, 48 minutes West, 60 feet; thence South 44 degrees, 10 minutes West, 335 feet; thence South 28 degrees, 12 minutes West, 115 feet; thence South 13 degrees, 13 minutes West, 105 feet; thence South 53 degrees, 45 minutes West, 205 feet; thence South 36 degrees, 46 minutes West, 107.3 feet; to the point of beginning of this Parcel.
PARCEL 4 :
That certain strip of land lying between the west line of Parcels Two and Three next above and the Mississippi Louisiana State line described as beginning at Point “A” of Parcel Two next above, and run North 59 degrees, 04 minutes West to the Mississippi-Louisiana State line; thence upstream with said State line to its intersection with a line which runs from Point “D” of Parcel Three next above North 58 degrees, 00 minutes West; thence South 58 degrees 00 minutes East to Point “D” aforesaid; thence southerly with the west line of Parcel Three next above to Point “C”; thence South 36 degrees, 46 minutes West 134.8 feet to Point “B”; thence southerly with the west line of Parcel Two next above to Point “A”, the point of beginning, LESS AND EXCEPT, HOWEVER, that certain strip of land lying west of the line running from Point “B” North 36 degrees, 46 minutes East 134.8 feet to Point “C” above and the accretions, alluvium and riparian rights appurtenant to said strip.
It is intended to grant in trust hereby and there is granted in trust hereby all lands in Sections 6, 7, 8, 17 and 18, Township 15 North, Range 3 East, aforesaid owned or claimed by the said William B. Ross, Jr., together with all accretions, alluvium and riparian rights which are appurtenant to the above described land, except that there is specifically excepted from this grant that certain tract of land conveyed by Joseph V. Lavecchia, et al, by deed dated June 17, 1933, of record in Deed Book 190 at Page 62, of the land deed records of Warren County, Mississippi.
Parcels Two, Three and Four are all more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 313, and the descriptions therein are hereby incorporated herein by reference.
PARCEL 5 :
That certain tract or parcel of land, lying and being in Section 18, Township 15 North, Range 3 East, in the County of Warren, State of Mississippi, described as follows, to‑wit:




To get to the point of beginning commence at the corner common to Sections 7, 8, 17 and 18, Township 15 North, Range 3 East, and run thence North 88 degrees, 20 minutes West, 619.8 feet; thence North 58 degrees, 19 minutes, 45 seconds West, 613.9 feet to an iron pipe marking the Southwest corner of Lot 7 of the H.C. McCabe tract, a plat of which is of record in Book 116 at Page 192 of the Land Deed records of Warren County, Mississippi; thence South 32 degrees, 00 minutes West, 3,255.6 feet to a point in the South line of the May Peers Ross tract, as surveyed by G.E. Strickland, a plat of which is of record in Book 350 at page 464 of the Land Deed records of Warren County, Mississippi, which point is the point of beginning of the parcel herein described; from said point of beginning run North 57 degrees, 29 minutes, 40 seconds West, 1903 feet to a point which lies South 57 degrees, 29 minutes, 40 seconds East, twenty-five (25) feet from the existing top bank of the Mississippi River as of March, 1964, which point is called Point “A” in this description; thence with said top bank and 25 feet distant therefrom run South 52 degrees, 12 minutes, 20 seconds West, 225.5 feet to a concrete monument, which point is called Point “B” in this description; thence run South 58 degrees, 00 minutes East 325.2 feet to a concrete monument; run thence South 1120.2 feet to a concrete monument; run thence South 58 degrees, 00 minutes East 2355 feet to a concrete monument; thence continue South 58 degrees, 00 minutes East 50 feet to a point in the center line of Four Mile or Hennessey Bayou (sometimes called Stout’s Bayou); thence up said Bayou with the center line thereof with the following courses and distances: North 4 degrees, 00 minutes West 95 feet; North 19 degrees, 30 minutes West 150 feet; North 4 degrees, 00 minutes East 210 feet; North 17 degrees, 36 minutes West 222.7 feet; North 7 degrees, 30 minutes East 60 feet; North 13 degrees, 15 minutes East 140 feet; North 21 degrees, 00 minutes East 160 feet; North 9 degrees, 30 minutes East 265 feet; North 25 degrees, 22 minutes East 50 feet to the Southeast corner of the May Peers Ross tract; thence with the South line of the May Peers Ross tract run North 57 degrees, 29 minutes, 40 seconds West, 694 feet to the point of beginning of the parcel herein described, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 300.
PARCEL 6 :
Commence at Point “A” as described and located in Parcel Five next above, and run thence with the West line of said Parcel One South 52 degrees, 12 minutes, 20 seconds West 225.5 feet to a concrete monument; run thence North 58 degrees, 00 minutes West to the Mississippi-Louisiana State line; thence Northerly up the Mississippi-Louisiana State line to the South line of the May Peers Ross tract aforesaid projected Westward; thence with the South line of the May Peers Ross tract projected westward and the North line of the tract herein described run South 57 degrees, 29 minutes, 40 seconds, East to Point A, the point of beginning of Parcel Two hereof, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 300.
PARCEL 7 :
Begin at a point common to Sections 7, 8, 17, and 18, Township 15 North, Range 3 East, Warren County, Mississippi, and run thence North 88 degrees 20 minutes West 619.8 feet to a point; run thence North 58 degrees 19 minutes 45 seconds West a distance of 613.6 feet to a point being the Southwest corner of Lot 7 of the H.C. McCabe Subdivision, a plat of which is of record in Book 116 at Page 192 of the Land Records of Warren County, Mississippi; thence run South 32 degrees, 0 minutes West a distance of 2,689.2 feet to the point of beginning of the tract or parcel of land hereinafter described; thence from said point of beginning run North 58 degrees 0 minutes West a distance of 1,749.8 feet to a point located 15 feet East of and at right angles to the top bank of the




Mississippi River as of 1964, which point is described as Point A for the purpose of this description; thence following the top bank of the Mississippi River as of 1964, but running 15 feet distance therefrom run South 47 degrees, 36 minutes West a distance of 570.8 feet to a point for the purpose of this description called Point B; run thence South 57 degrees 29 minutes 40 seconds East a distance of 2,597 feet to the center of Four Mile or Hennessey’s Bayou; run thence and meandering along the center of said Bayou run North 38 degrees 5 minutes East a distance of 28.6 feet; run thence North 7 degrees 0 minutes East 185 feet; run thence North 16 degrees 30 minutes East 170 feet; run thence North 29 degrees 0 minutes East 140 feet; run thence North 46 degrees 0 minutes East a distance of 75 feet; run thence North 58 degrees 0 minutes West a distance of 584.2 feet to the point of beginning, together with all of the lands immediately contiguous to said lands which are now and have been under fence and claimed by the Grantor described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 362, the legal description in such document being hereby incorporated herein as a more particular description of this Parcel 7.
PARCEL 8 :
That certain strip of land lying West of the West boundary of Parcel Seven next above described as follows: Begin at Point A in Parcel Seven next above, run thence North 58 degrees 0 minutes West to the Mississippi-Louisiana State Line, thence downstream with said State line to its intersection with a line which runs North 57 degrees 29 minutes 40 seconds West from Point B in Parcel Seven next above; run thence South 57 degrees 29 minutes 40 seconds East to Point B in Parcel Seven next above; run thence North 47 degrees 36 minutes East a distance of 570.8 feet to Point A in Parcel Seven next above, being the point of beginning, together with the accretions and alluvium and riparian rights appurtenant to said strip, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 362.
PARCELS 9 AND 10 :
All of Lot One (1) of the H.C. McCabe Subdivision, a plat of which is of record in Book 116 at Page 192 of the Land Records of Warren County, Mississippi, all being located in Sections Seven (7) and Eighteen (18), Township 15 North, Range 3 East, Warren County, Mississippi, together with all other land immediately contiguous to said lands which are now and have been under fence and claimed by the Grantor of that certain property described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 302 at Page 160 and Book 390 at Page 377, for many years, said lands being further described by metes and bounds as follows:
PARCEL 9 :
Begin at a point common to Sections Seven (7), Eight (8), Eighteen (18) and Seventeen (17), Township 15 North, Range 3, Warren County, Mississippi; run thence North 88 degrees 20 minutes West a distance of 619.8 feet to a point; run thence North 58 degrees 19 minutes 45 seconds West a distance of 613.6 feet to a point begin the Southwest corner of Lot 7 of the H.C. McCabe Subdivision as aforesaid; run thence South 32 degrees 00 minutes West a distance of 2,144.2 feet to the point of beginning of the tract or parcel of land hereinafter described; from said point of beginning run thence North 58 degrees, 00 minutes West a distance of 1,607.5 feet to a point located 15 feet East of and at right angles to the top bank of the Mississippi River as of 1964, which point is described as Point “A” for the purpose of this description; thence following the top




bank of the Mississippi River as of 1964, but running 15 feet distant therefrom, run South 37 degrees 11 minutes West the distance of 34.9 feet to a point; run thence South 46 degrees 50 minutes West a distance of 250 feet to a point; run thence South 47 degrees 36 minutes West a distance of 279 feet to a point for the purpose of this description called Point “B”; run thence South 58 degrees 00 minutes East a distance of 2,334 feet to the center of Four Mile or Hennessey’s Bayou; run thence North 46 degrees, 00 minutes East a distance of 50 feet; run thence North 34 degrees 30 minutes East a distance of 100 feet; run thence North 10 degrees 15 minutes East a distance of 140 feet; run thence North 01 degree 00 minutes West a distance of 110 feet; run thence North 8 degrees 00 minutes East a distance of 100 feet; run thence North 19 degrees 16 minutes East a distance of 85 feet to a point; run thence North 58 degrees 00 minutes West a distance of 429.5 feet to the point of beginning.
PARCEL 10 :
That certain strip of land lying West of the West boundary of Parcel Nine next above described as follows: Begin at Point “A” in Parcel Nine next above; run thence North 58 degrees 00 minutes West to the Mississippi-Louisiana State Line; then downstream with said state line to its intersection with a line which runs North 58 degrees 00 minutes West from Point “B” in Parcel Nine next above; run thence South 58 degrees 00 minutes East to Point “B” in Parcel Nine next above; run thence North 47 degrees 36 minutes East a distance of 279 feet; run thence North 46 degrees 50 minutes East a distance of 250 feet to a point; run thence North 37 degrees 11 minutes East a distance of 34.9 feet to Point “A” in Parcel Nine next above, being the point of beginning, together with the accretions and alluvium and riparian rights appurtenant to said strip.
It is intended to grant in trust, and it is hereby granted in trust, all lands in Sections 7 and 18, Township 15 North, Range 3 East, aforesaid owned or claimed by the Grantor of the property described in the documents referenced below the description of this Parcel Ten, together with all accretions and alluvium and riparian rights which are appurtenant to this Parcel Ten and Parcel Nine next above, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 302 at Page 160, and Book 390 at Page 377.
PARCELS 11 AND 12 :
All of Lot Two (2) of H.C. McCabe Subdivision, a plat of which is of record in Book 116 at Page 192 of the land records of Warren County, Mississippi, all being located in Section 18, Township 15 North, Range 3 East, Warren County, Mississippi, together with all other lands immediately contiguous to said lands which are now and have been under fence and claimed by the Grantor referred to in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 222, for many years, said lands being further described by metes and bounds as follows:
PARCEL 11 :
Begin at a point common to Section 7, 8, 18 and 17, Township 15 North, Range 3 East, Warren County, Mississippi; run thence North 88 degrees 20 minutes West a distance of 619.8 feet to a point; run thence North 58 degrees 19 minutes 45 seconds West 613.6 feet to a point being the Southwest corner of Lot 7 of the H.C. McCabe Subdivision as aforesaid; run thence South 32 degrees 00 minutes West a distance of 1604.2 feet to the point of beginning of the tract or parcel hereinafter described; from said point of beginning run thence North 58 degrees 00 minutes West




1209.7 feet to a point; run thence South 32 degrees 01 minute 30 seconds West 220 feet to a point; run thence North 58 degrees 00 minutes West 364.4 feet to a point located 15 feet East of and at right angles to the top bank of the Mississippi River as of 1964, which point is described as Point “A” for the purpose of this description; thence following the top bank of the Mississippi River as of 1964, but running 15 feet distance therefrom run South 43 degrees, 30 minutes West 36.9 feet; run South 37 degrees 11 minutes West 285.1 feet to a point for the purpose of this description called Point “B”; run thence South 58 degrees 00 minutes East a distance of 2037 feet to the center of Four Mile or Hennessey’s Bayou; thence meandering along the center of said Bayou; run North 14 degrees, 30 minutes East 50 feet; run North 7 degrees 00 minutes East a distance of 160 feet; thence North 42 degrees 30 minutes East 105 feet; thence North 78 degrees 00 minutes East 115 feet; thence North 88 degrees 00 minutes East 80 feet; thence North 63 degrees 10 minutes East 139.6 feet; thence North 58 degrees 00 minutes West 587.3 feet to the point of beginning.
PARCEL 12 :
That certain strip of land lying West of the West boundary of Parcel Eleven next above described as follows: Begin at Point “A” in Parcel Eleven next above, run thence North 58 degrees 00 minutes West to the Mississippi-Louisiana State line; thence downstream with said State line to its intersection with a line which runs North 58 degrees 00 minutes West from Point “B” in Parcel Eleven next above; run thence South 58 degrees 00 minutes East to Point “B” in Parcel Eleven next above; run thence North 37 degrees 11 minutes East a distance of 285.1 feet; run thence North 43 degrees 30 minutes East 36.9 feet to Point “A” in ‘Parcel Eleven next above being the point of beginning, together with the accretions and alluvium and riparian rights appurtenant to said strip.
It is intended to grant in trust and there is hereby granted in trust all lands in Sections 7 and 18, Township 15 North, Range 3 East aforesaid, owned or claimed by the Grantor referred to in the document referred to below in this description of Parcel Twelve, together with all accretions and alluvium and riparian rights which are appurtenant to this Parcel Twelve and Parcel Eleven next above, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 222.
PARCELS 13 AND 14 :
All of Lot Three (3) of H.C. McCabe Subdivision, a plat of which is of record in Book 116, at page 192, of the land records of Warren County, Mississippi, all being located in Section Eighteen (18), Township 15 North, Range 3 East, Warren County, Mississippi, together with all other land immediately contiguous to said lands which are now and have been under fence and claimed by the Grantor referred to in that certain documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Pages 290, 292, 295 and 311, for many years, said lands being further described by metes and bounds as follows:
PARCEL 13 :
Begin at a point common to Sections Seven (7), Eight (8), Eighteen (18) and Seventeen (17), Township 15 North, Range 3 East, Warren County, Mississippi; run thence North 88 degrees 20 minutes West a distance of 619.8 feet to a point; run thence North 58 degrees 19 minutes 45 seconds West a distance of 613.6 feet to a point being the Southwest corner of Lot 7 of the H.C. McCabe Subdivision as aforesaid; run thence South 32 degrees 0 minutes West a distance of 1224.2 feet to the point of beginning of the tract or parcel of land hereinafter described; from said




point of beginning, run thence North 58 degrees 0 minutes West a distance of 1,209.6 feet to a point; thence continuing North 58 degrees 0 minutes West run a distance of 97.7 feet to a point located 15 feet West of and at right angles to the top bank of the Mississippi River as of 1964, which point is described as Point “A” for the purpose of this description; thence following the top bank of the Mississippi River as of 1964, but running 15 feet distance therefrom, run thence South 54 degrees 14 minutes West a distance of 48 feet; run thence South 63 degrees 44 minutes West a distance of 385 feet; run thence South 43 degrees 30 minutes West a distance of 233.1 feet to a point for the purpose of this description called Point “B”; run thence South 58 degrees 0 minutes East a distance of 364.4 feet to a point; run thence North 32 degrees 1 minute 30 seconds East a distance of 220 feet to a point; run thence South 58 degrees 0 minutes East a distance of 1797 feet to the center of Four Mile or Hennessey’s Bayou; run thence and meandering along the center of said Bayou North 62 degrees 15 minutes East a distance of 275 feet to a point; run thence North 51 degrees 12 minutes East a distance of 150.8 feet to a point; run thence North 58 degrees 0 minutes West a distance of 775.4 feet to the point of beginning.
PARCEL 14 :
That certain strip of land lying West of the West boundary of Parcel Thrteen next above described as follows: Begin at Point “A” in Parcel Thirteen next above, run thence North 58 degrees 0 minutes West to the Mississippi-Louisiana State line; thence downstream with said State line to its intersection with a line which runs North 58 degrees 0 minutes West from Point “B” in Parcel Thirteen next above; run thence South 58 degrees 0 minutes East to Point “B” in Parcel Thirteen next above; run thence North 43 degrees 30 minutes East a distance of 233.1 feet; run thence North 63 degrees 44 minutes East a distance of 385 feet; run thence North 54 degrees 14 minutes East a distance of 48 feet to Point “A” in Parcel Thirteen next above, being the point of beginning, together with the accretions and alluvium and riparian rights appurtenant to said strip.
It is intended to grant in trust, and there is hereby granted in trust all lands in Sections 7 and 18, Township 15 North, Range 3 East, aforesaid owned or claimed by the Grantor referred to in the documents hereinafter referred to in this description of Parcel Fourteen, together with all accretions and alluvium and riparian rights which are appurtenant to this Parcel Fourteen and Parcel Thirteen next above, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Pages 290, 292, 295, and 311.
PARCEL 15 :
Begin at a point common to Sections 7, 8, 17 and 18, Township 15 North, Range 3 East, Warren County, Mississippi; run thence North 88 degrees 20 minutes West a distance of 619.8 feet to a point being the point of beginning of the tract or parcel hereinafter described; from said point of beginning, run thence North 58 degrees 19 minutes 45 seconds West a distance of 613.6 feet to a point being the Southwest corner of Lot 7 of the H.C. McCabe Subdivision aforesaid; thence continuing along said line run North 58 degrees 19 minutes 45 seconds West a distance of 905.4 feet to a point located 15 feet East of and at right angles to the top bank of the Mississippi River as of 1964, which point is described as Point “A” for the purpose of this description; thence following the top bank of the Mississippi River as of 1964, but running 15 feet distant therefrom run south 46 degrees 1 minute West a distance of 18.5 feet; run thence South 37 degrees 17 minutes West a distance of 285 feet to a point; run thence South 50 degrees 47 minutes West a distance of 140 feet to a point; run thence South 47 degrees 43 minutes West a distance of 175 feet; run thence South 59 degrees 23 minutes West a distance of 275 feet; run thence South 54




degrees 14 minutes West a distance of 143.1 feet to a point for the purpose of this description called Point “B”; run thence South 32 degrees 4 minutes West a distance of 239.7 feet; run thence South 58 degrees 0 minutes East a distance of 1985 feet to the center of Four Mile or Hennessey’s Bayou; run thence and meandering along the center line of said Bayou run North 50 degrees 0 minutes East a distance of 210 feet; run thence North 68 degrees 0 minutes East a distance of 220 feet; run thence North 79 degrees 30 minutes East a distance of 130 feet; run thence South 87 degrees 30 minutes East a distance of 190 feet; run thence North 78 degrees 0 minutes East a distance of 140 feet; run thence North 61 degrees 30 minutes East a distance of 105 feet to a point; run thence North 50 degrees 30 minutes East a distance of 315 feet; run thence North 55 degres 35 minutes East a distance of 203.8 feet; run thence North 58 degrees 19 minutes 45 seconds West a distance of 45 feet; thence continuing run North 58 degrees 19 minutes 45 seconds West a distance of 906.4 feet to the point of beginning.
PARCEL 16 :
That certain strip of land lying West of the West boundary of Parcel Fifteen next above described as follows: Begin at Point “A” in Parcel Fifteen next above, run thence North 58 degrees 19 minutes 45 seconds West to the Mississippi-Louisiana State line; thence downstream with said State line to its intersection with a line which runs North 32 degrees 4 minutes East from Point “B” in Parcel Fifteen next above; run thence South 32 degrees 4 minutes West to Point “B” in Parcel Fifteen next above; run thence North 54 degrees 14 minutes East a distance of 143.1 feet; run thence North 59 degrees 23 minutes East a distance of 275 feet; run thence North 47 degrees 43 minutes East a distance of 175 feet to a point; run thence North 50 degrees 47 minutes East a distance of 140 feet to a point; run thence North 37 degrees 17 minutes East a distance of 285 feet to a point; run thence North 46 degrees 1 minute East a distance of 18.5 feet to Point “A” in Parcel Fifteen next above being the point of beginning, together with the accretions and alluvium and riparian rights appurtenant to said strip.
It is intended to grant in trust and is hereby granted in trust all of the lands in Sections 7, 17, 18, Township 15 North, Range 3 East, Warren County, Mississippi, owned or claimed by the Grantor referred to in the documents referred to below in this description of Parcel Sixteen, together with all accretions and alluvium and riparian rights which are appurtenant to this Parcel Sixteen and Parcel Fifteen next above, all as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Deed Book ZZ at Page 446, and Book 390 at Page 164.
PARCEL 17 :
All those certain parts of Lots One (1) and Two (2) of the Magnolia Plantation Survey in Sections Seventeen (17) and Eighteen (18), Township Fifteen (15) North, Range Three (3) East, a plat of which said survey appears of record in Deed Book 69 at Pages 92 and 93 of the Land Records of Warren County, Mississippi, and lying South of the Wigwam Road and being more particularly described as follows, to-wit:
Beginning at the southeast corner of said Lot One (1) in said survey, and running thence northward along the east line of said Lot One (1) 10.75 chains to a stake; thence westward 48.10 chains to the center of the old line of the Y&MV Railroad; run thence North 74 degrees West 37.15 chains to the center of Big Bayou; run thence with the meanderings of said bayou in a southwesterly direction to the southwest corner of said Lot Two (2); run thence South 74 degrees East 47.85 chains along the south line of Lots Two (2) and One (1) to the center of the present track of the




Y&MV Railroad; run thence eastward along the south boundary line of said Lot One (1) 49.75 chains to the place of beginning and containing approximately 99 acres, more or less, and being the same property conveyed to W.O. Sylvester by Correction Warranty Deed dated October 16, 1916, as same appears of record in Book 137 at page 7 of the Land Records of Warren County, Mississippi, hereby intending to describe all of the land owned, claimed, occupied and possessed by the Grantors referred to in the document referred to below in this description of Parcel Seventeen, situate in Fractional Sections Seventeen (17) and Eighteen (18), Township Fifteen (15) North, Range Three (3) East, Warren County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 388 at Page 362.
PARCELS 18 AND 19 :
All of Lot Four (4) of H.C. McCabe Subdivision, a plat of which is of record in Book 116, at Page 192, of the land records of Warren County, Mississippi, all being located in Sections 7 and 18, Township 15 North, Range 3 East, Warren County, Mississippi, together with all other lands immediately contiguous to said lands which are now and have been under fence and claimed by the Grantor referred to in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 158, for many years, said lands being further described by metes and bounds as follows:
PARCEL 18:
Begin at a point common to Sections Seven (7), Eight (8), Seventeen (17) and Eighteen (18), Township 15 North, Range 3 East, Warren County, Mississippi; run thence North 88 degrees 20 minute West a distance of 619.8 feet to a point; run thence North 58 degrees 19 minutes 45 seconds West a distance of 613.6 feet to a point being the Southwest corner of Lot 7 of the H.C. McCabe Subdivision as aforesaid; run thence South 32 degrees 0 minutes West a distance of 1,224.2 feet; run thence North 58 degrees 0 minutes West a distance of 1,209.6 feet to the point of beginning of the tract or parcel of land hereinafter described, said point also being the Southwest corner of Lot 5 of the H.C. McCabe Subdivision aforesaid; from said point of beginning run thence North 32 degrees 4 minutes East a distance of 239.7 feet to a point located 15 feet East of and at right angles to the top bank of the Mississippi River as of 1964, which point is described as Point “A” for the purpose of this description; thence following the top bank of the Mississippi River as of 1964, but running 15 feet distant therefrom, run thence South 54 degrees 14 minutes West a distance of 258.9 feet to a point for the purpose of this description called Point “B”; run thence South 58 degrees 0 minutes East a distance of 97.7 feet to the point of beginning.
PARCEL 19 :
That certain strip of land lying West of the West boundary of Parcel Eighteen next above described as follows: Begin at Point “A” in Parcel Eighteen next above, run thence North 32 degrees 4 minutes East to the Mississippi-Louisiana State line; run thence downstream with said State line to its intersection with a line which runs North 58 degrees 0 minutes West from Point “B” in Parcel Eighteen next above; run thence South 58 degrees 0 minutes East to Point “B” in Parcel Eighteen next above; run thence North 54 degrees 14 minutes East a distance of 258.9 feet to Point “A” in Parcel Eighteen next above, being the point of beginning, together with the accretions and alluvium and riparian rights appurtenant to said strip, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 158.




PARCELS 20 AND 21 :
All of Lot Six (6) of the H.C. McCabe Subdivision, a plat of which is of record in Plat Book 116 at Page 192 of the Land Records of Warren County, Mississippi, all being located in Section 7, Township 15 North, Range 3 East, Warren County, Mississippi, together with all other lands immediately contiguous to said lands which are now and have been under fence and claimed by the Grantor referred to in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at page 159, for many years, said lands being further described by metes and bounds as follows, to-wit:
PARCEL 20 :
Begin at a point common to Sections Seven (7), Eight (8), Seventeen (17) and Eighteen (18), Township 15 North, Range 3 East, Warren County, Mississippi; run thence North 88 degrees 20 minutes West a distance of 619.8 feet to a point; run thence North 58 degrees 19 minutes 45 seconds West a distance of 613.6 feet to a point being the Southwest corner of Lot 7 of the H.C. McCabe Subdivision as aforesaid, said point being the point of beginning of the tract or parcel hereinafter described; from said point of beginning run thence North 29 degrees 55 minutes East a distance of 925.4 feet to a point; run thence North 59 degrees 6 minutes West a distance of 451.3 feet to a point located 15 feet East of and at right angles to the top bank of the Mississippi River as of 1964, which point is described as Point “A” for the purpose of this description; thence following the top bank of the Mississippi River as of 1964, but running 15 feet distant therefrom, run South 45 degrees 23 minutes West a distance of 148.1 feet; run thence South 70 degrees 33 minutes West a distance of 175 feet; run thence South 87 degrees 54 minutes West a distance of 170 feet; run thence South 46 degrees 1 minute West a distance of 561.5 feet to a point for the purpose of this description called point “B”; run thence South 58 degrees 19 minutes 45 seconds East a distance of 905.4 feet to the point of beginning.
PARCEL 21 :
That certain strip of land lying West of the West Boundary of Parcel Twenty next above described as follows: Begin at point “A” in Parcel Twenty next above; run thence North 59 degrees 6 minutes West to the Mississippi-Louisiana line; thence downstream with said State line to its intersection with a line which runs North 58 degrees 19 minutes 45 seconds West from Point “B” in Parcel Twenty next above; run thence South 58 degrees 19 minutes 45 seconds East to Point “B” in Parcel Twenty next above; run thence North 46 degrees 1 minute East a distance of 561.5 feet to a point; run thence North 87 degrees 54 minutes East a distance of 170 feet to a point; run thence North 70 degrees 33 minutes East 175 feet to a point; run thence North 45 degrees 23 minutes East 148.1 feet to Point “A” in Parcel Twenty next above, being the point of beginning, together with accretions, alluvium and riparian rights appurtenant to said strip, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 390 at Page 159.
PARCEL 22 :
Beginning at an iron pipe which marks the intersection of the north line of Section Seventeen (17) in Township Fifteen (15) North of Range Three (3) East with the west line of U.S. Highway 61, and run thence in a southeasterly direction along the west line of said U.S. Highway 61 a distance of Nine Hundred Sixty (960) feet, more or less, to an iron pipe at the intersection of the west line of said U.S. Highway 61 with the west line of the Illinois Central Railroad right-of-way; run




thence in a southerly direction along the west line of said Illinois Central Railroad right-of-way a distance of 530.4 feet to an iron pipe; run thence West a distance of Four Hundred Fifty-eight and one-half (458.5) feet to an iron pipe; thence North Seventy-four (74) degrees and no (00) minutes West a distance of Twenty-one Hundred Seventy-two (2,172) feet to an iron pipe on the bank of Hennessey Bayou; thence continue North Seventy-four (74) degrees and no (00) minutes West to the center line of said Hennessey Bayou; run thence in a northeasterly and northerly direction along the center line of said Hennessey bayou a distance of Eleven Hundred Fifty (1,150) feet, more or less, to the intersection of the center line of said Bayou with the north line of Section Seventeen (17) of Township Fifteen (15) North of Range Three (3) East; run thence East along the north line of said Section Seventeen (17) a distance of Fifteen Hundred Seventeen and one-half (1,517.5) feet to the point of beginning, together with all the hereditaments, rights, privileges and appurtenances thereunto appertaining and belonging. Being the same tract or parcel of land conveyed by Vernon C. Farrior, Carlton V. Farrior, Edward V. Farrior, James W. Farrior and Francis L. Farrior to Robert M. Koestler by warranty deed dated February 17, 1964, and duly recorded in Deed Book 386 at Page 531 of the Land Records of Warren County, Mississippi, and as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 392 at Page 350.
PARCEL 23 :
A parcel of land situated in the Eastern part of Section 18, Township 15 North, Range 3 East, Warren County, Mississippi, and being a part of Lot 3 of the Mattingly or Magnolia Plantation, a plat of said plantation being recorded in Book 69 at Page 93 of the Land Records of Warren County, Mississippi, said parcel of land being more particularly described as follows, to-wit:
Commencing at a point on the Valley or Public road at a point 49.20 chains in a Northwesterly direction from the crossing of the said road with the South boundary of the Mattingly or Magnolia Plantation, said point being the Southeast corner of the property owned by the Grantor in that certain instrument recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 448 at Page 284, and being located North 74 ° West a distance of 1,128.6 feet from the West boundary line of the old Yazoo and Mississippi Valley Railroad, run thence North 74 ° West along the South boundary of Lot Three (3) a distance of 2,246.35 feet to the point of beginning of the parcel of land herein described; thence continue North 74 ° West along the South boundary of Lot Three (3) a distance of 406.65 feet to a point on the centerline of Big Bayou (Hatcher, four mile or Hennessey’s Bayou); run thence with the meanderings of the center line of said bayou in a Northeasterly direction to the North boundary of Lot Three (3) or an extension thereof; run thence South 74 ° East along the North boundary of Lot Three (3) a distance of 627.44 feet to a point; run thence South 55 ° 15’ West a distance of 1,182.85 feet to the point of beginning, containing 13.50 acres, more or less, all as shown on plat attached, marked as Exhibit “A” and made a part of that certain instrument recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 448 at Page 284, the description of this Parcel Twenty-Three being more particularly described therein.
PARCEL 24 :
A parcel of land situated in the eastern part of Section 18, Township 15 North, Range 3 East, Warren County, Mississippi, and being a part of Lot 10 of the Mattingly or Magnolia Plantation, a plat of said Plantation is recorded in Book 69 at Page 93 of the Land Records of Warren County, Mississippi, and said parcel of land being more particularly described as follows, to-wit:




Commencing at the intersection of the North line of Lot 9 of the Mattingly or Magnolia Plantation with the West boundary of the old Yazoo and Mississippi Valley Railroad (as it existed in 1901); run thence North 74 ° West along and on the North line of Lots 9 and 10 of said Plantation a distance of 3,374.95 feet to the point of beginning of the parcel of land herein described; run thence South 55 ° 15’ West a distance of 455.25 feet to a point of curve; run thence Southwesterly on a 7 ° 00’ curve to the left with a radius of 818.51 feet a distance of 552.38 feet to a point on the center line of Big Bayou (Hatcher, four mile or Hennessey’s Bayou); run thence with the meanderings of the center line of said Bayou in a Northwesterly direction a distance of 940 feet, more or less, to the North line of Lot 10 or an extension thereof; run thence South 74 ° East a distance of 406.65 feet to the point of beginning, containing 2.6 acres, more or less, all as shown on plat attached, marked as Exhibit “A” and made a part of that certain instrument recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 448 at Page 409, the description of this Parcel Twenty-Four being more particularly described therein.
(6) The Steam Electric Generating Station situated in the County of Washington, State of Mississippi, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain parcel of land in said County and State, described as follows:
PARCEL 1 :
Commence at the Northeast corner of Unit 8 of the subdivision of the Glenmary Plantation as recorded in Map Book 3, at page 54, of the land records of Washington County, Mississippi; said point being the point of beginning of the tract herein described; thence South 89 degrees 22 minutes 38 seconds West 4264.46 feet along the North line of the Glenmary Plantation to the land side right of way of the Mississippi River Levee; thence North 56 degrees 15 minutes East 3564.31 feet along said levee right of way; thence North 56 degrees 22 minutes East 1525.81 feet along said levee right of way to an iron pipe; thence, leaving said levee right of way South 0 degrees 37 minutes 22 seconds East 2779.14 feet to the point of beginning, containing 136.164 acres, more or less, in Section 2, Township 17 North, Range 9 West, Washington County, Mississippi. A plat of said lands prepared by F.E. Hall & Associates, Engineers and Architects, dated December 18, 1965, is attached as Exhibit “A”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1050 at Pages 50-57, which document more particularly described this Parcel One.
PARCEL 2 :
Commence at the Northeast corner of Unit 8 of the subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54, of the land records of Washington County, Mississippi; thence South 89 degrees 22 minutes 38 seconds West 1815 feet to the Northwest corner of said Unit 8 and the point of beginning of the tract herein described; thence South 0 degrees 37 minutes 22 seconds East 1320.0 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 560.05 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 265.54 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 164.05 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 265.63 feet; thence South 89 degrees 14 minutes 18 seconds West 2362.61 feet to the Mississippi River Levee right of way; thence North 15 degrees 09 seconds East 35.37 feet along the land side of said levee right of way; thence South 81 degrees 04 minutes East 162.00 feet along said levee right of way; thence North 5 degrees 13 minutes East




519.26 feet along said levee right of way; thence North 56 degrees 15 seconds East 495.61 feet along said land side of said levee right of way to the North line of the Glenmary Plantation; thence, along the North line of said Plantation North 89 degrees 22 minutes 38 seconds East 2449.46 feet to the point of beginning, containing 58.937 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being all of Unit 12 of the subdivision of the Glenmary Plantation except a one-acre tract retained by M.C. Mitchell and a tract deeded to Levee Board for levee right of way by M.C. Mitchell in 1942 and recorded in Book 310, page 452 of the land records of Washington County, Mississippi. A plat of this Parcel Two prepared by F.E. Hall & Associates, Engineers and Architects, Greenville, Mississippi, dated December 18, 1965, is attached as Exhibit “B”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1050 at Pages 50-57, which document more particularly described this Parcel Two.
PARCEL 3:
Commence at the Northeast corner of Unit 8 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi; thence South 89 degrees 22 minutes 38 seconds West 1815 feet to the Northwest corner of said Unit 8; thence South 0 degrees 37 minutes 22 seconds East 1320.0 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 724.10 feet to an iron pipe marking the point of beginning of the tract herein described; thence South 89 degrees 22 minutes 38 seconds West 237.51 feet; thence South 0 degrees 37 minutes 22 seconds East 784.89 feet along an old fence to an old iron pipe; thence South 88 degrees 42 minutes 16 seconds West 531.62 feet, along an old fence to an iron pipe; thence, continuing along said fence, South 88 degrees 44 minutes 51 seconds West 2058.14 feet to the landside right of way of the Mississippi River Levee; thence North 27 degrees 44 minutes East 25.92 feet along said right of way; thence North 60 degrees 00 minutes West 28.00 feet along said right of way; thence North 25 degrees 26 minutes East 463.00 feet along said right of way; thence North 19 degrees 00 minutes East 235.00 feet along said right of way; thence North 17 degrees 05 minutes East 177.00 feet along said right of way to a levee Engineers monument mark B.M. 66-A; thence North 15 degrees 09 minutes East 515.63 feet along said right of way; thence, leaving said Levee right of way, North 89 degrees 14 minutes 18 seconds East 2362.61 feet; thence South 0 degrees 37 minutes 22 seconds East 531.17 feet to the point of beginning, containing 74.105 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. The lands herein described being all of Unit 13 of the aforementioned Glenmary Plantation and being all of the property owned by the Grantors referred to in the document referred to below in this description of Parcel Three, in Section 3, Township 17 North, Range 9 West, on the landside right of way of the Mississippi Board of Levee Commissioners, whether herein correctly described or not. A plat of said lands herein referred to as Unit 13 of the Glenmary Plantation prepared by F.E. Hall & Associates, Architects and Civil Engineers, is attached as Exhibit “A”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1026 at Pages 276-279, reference to which document is hereby made for a more particular description of this Parcel Three.
PARCEL 4 :
Commence at the Southwest corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi; said corner being marked by a capped iron pipe; thence North 3 degrees 29 minutes 23 second West 631.2 feet along the line common to Sections 4 and 17 of said Township




and Range to the Southeast corner of Section 3; thence South 89 degrees, 19 minutes 34 seconds West 5355.85 feet along the south line of Section 3 of the point of beginning of the tract herein described; thence, leaving the south line of said Section 3, North 0 degrees 42 minutes 06 seconds West 1151.57 feet along an old fence to an iron pipe; thence South 88 degrees 42 minutes 16 seconds West 531.62 feet to an iron pipe; thence South 0 degrees 40 minutes 51 seconds East 534.45 feet to an iron pipe; thence South 84 degrees 04 minutes 38 seconds West 470.16 feet to an iron pipe; thence South 6 degrees 12 minutes 32 seconds East 571.00 feet to the south line of Section 3; thence North 89 degrees 19 minutes 34 seconds East 945.19 feet along the south line of Section 3 to the point of beginning, containing 20.004 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi, said tract being a portion of Unit 14 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi; a plat of said lands prepared by F.E. Hall & Associates, Engineers and Architects, dated September 4, 1965, being attached as Exhibit “A”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1030 at Pages 551-553, reference to which document is hereby made for a more particular description of this Parcel Four is expressly understood and agreed that all oil, gas and mineral rights in said lands are included in this conveyance, and being the same property acquired by W.H. Harbison from Mose Mason and Maggie Mason, by deed recorded in Book 1002 at page 56 of said land records.
PARCEL 5 :
Commence at the Southwest corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi, said corner being marked by a capped iron pipe; thence North 3 degrees 29 minutes 23 seconds West 631.2 feet along the line common to Sections 4 and 17 of said Township and Range to the Southeast corner of Section 3; thence South 89 degrees 19 minutes 34 seconds West 4230.09 feet along the South line of Section 3 to the point of beginning of the tract herein described; thence, leaving the South line of Section 3, North 0 degrees 37 minutes 22 seconds West 1935.45 feet; thence South 89 degrees 22 minutes 38 seconds West 1127.34 feet; thence South 0 degrees 37 minutes 22 seconds East 784.89 feet along an old fence line to an iron pipe; thence, continue along said fence, South 0 degrees 42 minutes 06 seconds East 1151.57 feet to the South line of Section 3 of said Township and Range; thence North 89 degrees 19 minutes 34 seconds East 1125.76 feet along the South line of Section 3 to the point of beginning, containing 50.082 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being Unit 11 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi, a plat of said lands prepared by F.E. Hall & Associates, Engineers and Architects, dated September 4, 1965, being attached as Exhibit “A”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1030 at Pages 298-300, reference to which document is hereby made for a more particular description of this Parcel Five.
PARCEL 6 :
Commence at the Southwest corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi; said corner being marked by a capped iron pipe; thence North 3 degrees 29 minutes 23 seconds West 631.2 feet along the line common to Sections 4 and 17 of said Township and Range to the Southeast corner of Section 3; thence South 89 degrees 19 minutes 34 seconds West 5355.85 feet along the South line of Section 3 to an iron pipe at the Southeast corner of Unit 14 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3 on page 54 of the




land records of Washington County; thence, continue South 89 degrees 19 minutes 34 seconds West 945.19 feet along the South line of said Unit 14 to the point of beginning of the tract herein described; thence, continue South 89 degrees 19 minutes 34 seconds West 945.19 feet along the South line of said Unit 14 to the point of beginning of the tract herein described; thence, continue South 89 degrees 19 minutes 34 seconds West 1862.11 feet along the South line of Unit 14 and also the South line of Section 3 to an iron pipe on the East right of way line of the Mississippi River levee; thence, along said levee right of way, North 3 degrees 07 minutes 44 seconds West 433.11 feet; thence North 2 degrees 45 minutes East 289.0 feet, along said levee right of way; thence North 27 degrees 44 minutes East 459.08 feet along said levee right of way to an iron pipe at the Northwest corner of said Unit 14; thence North 88 degrees 44 minutes 51 seconds East 2058.14 feet along the North line of Unit 14 to an iron pipe; thence South 0 degrees 40 minutes 51 seconds East 534.45 feet to an iron pipe; thence South 84 degrees 04 minutes 38 seconds West 470.16 feet to an iron pipe; thence South 6 degrees 12 minutes 32 seconds East 571.00 feet to the point of beginning, containing 52.429 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi, said tract being a portion of Unit 14 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi. A plat of the lands herein described prepared by F.E. Hall & Associates, Engineers and Architects, dated May 19, 1966, is attached Exhibit “A”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1086 at Pages 177-179, reference to which document is hereby made for a more particular description of this Parcel Six.
PARCEL 7 :
Commence at the Southwest Corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi; said corner being marked by a capped iron pipe; thence North 30 degrees 29 minutes 23 seconds West 631.2 feet along the line common to Sections 4 and 17 of said Township and Range to the Southeast Corner of Section 3; thence South 89 degrees 19 minutes 34 seconds West 1759.66 feet along the South line of Section 3 to the point of beginning of the tract herein described; thence, leaving the South line of Section 3, North 0 degrees 37 minutes 22 seconds West, 1933.24 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 938.25 feet to an iron pipe; thence South 0 degrees 37 minutes 22 seconds East 301.35 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 144.55 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 301.35 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 1387.64 feet; thence South 0 degrees 37 minutes 22 seconds East 1935.45 feet to a point on the South line of Section 3; thence North 89 degrees 19 minutes 34 seconds East 2470.43 feet along the South line of Section 3 to the point of beginning, containing 108.704 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being all of Units 9 and 10 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3 on page 54 of the Land Records of Washington County, Mississippi, except a one acre tract in the Northwest Quarter of Unit 9 which was conveyed to James A. Easter, Jr. and Isabella T. Easter said being recorded in Deed Book 720 on page 550 of the Land Records of Washington County, Mississippi, said tract being subject to a county road right of way along the north side of said tract and a Mississippi Power and Light Company Transmission line Easement across the Southeast Corner of said tract, a plat of said land prepared by F.E. Hall & Associates, Engineers and Architects, dated May 7, 1968, being attached as Exhibit “A”, in aid of the description of the property hereby described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1176 at Pages




505-509, reference to which document is hereby made for a more particular description of the property described in this Parcel Seven.
PARCEL 8 :
One acre, more or less, lying and being situate in Unit 9 of the subdivision of Glenmary Plantation in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi, and being more particularly described as follows, to-wit:
Commence at the Southwest corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi; said corner being marked by a capped iron pipe; thence North 3 degrees, 29 minutes, 23 seconds West 631.2 feet along the line common to Sections 4 and 17 of said Township and Range to the Southeast corner of Section 3; thence South 89 degrees, 19 minutes, 34 seconds West 1,759.66 feet along the South line of Section 3 to a point; thence, leaving the South line of Section 3, North 0 degrees, 37 minutes 22 seconds West 1,933.24 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 938.25 feet to an iron pipe and being the point of beginning of the tract herein described; thence South 0 degrees 37 minutes 22 seconds East 301.35 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 144.55 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 301.35 feet to an iron pipe; thence North 89 degrees 22 minutes 38 seconds East to the point of beginning, containing 1.00 acre, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi; said tract being a part of Unit 9 of the subdivision of the Glenmary Plantation, all as shown on plat attached, marked Exhibit “A” and made a part of the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1215 at Pages 387-389, reference to which document is hereby made for a more particular description of this Parcel Eight, subject to a county road right of way along the Northerly edge thereof and being that said real property described in Deed Book 720 at page 550 of the land records of Washington County, Mississippi.
PARCEL 9 :
Commence at the Southwest Corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi; said corner being marked by a capped iron pipe; thence N 3°-29’-23” W 631.2 feet along the line common to Sections 4 and 17 of said Township and Range to the Southeast corner of Section 3; thence S 89°-19’34” W 1759.66 feet along the south line of Section 3; thence, leaving the south line of Section 3, N 0 ° -37’22” W 1933.24 feet to an iron pipe; thence S 89 ° -22’38” W 1646.17 feet to an iron pipe marking the point of beginning of the tract herein described; thence N 0 ° ‑37’‑22” W 1320.0 feet to an iron pipe on the North line of Section 3; thence S 89‑22’38” W 990.0 feet along the North line of Section 3 to an iron pipe; thence S 0 ° ‑37’-22” E 1320.0 feet to an iron pipe; thence N 89 ° -22’-38” E 990.0 feet to the point of beginning, containing 30.0 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being the West 990 feet of Unit 8 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3 on page 54 of the Land Records of Washington County, Mississippi, said tract being subject to a county road right of way, a telephone and power line easement and a drainage canal easement, all as shown by survey of William L. Burle, Registered Professional Engineer, dated August 12, 1969, and being attached as Exhibit “A”, in aid of the description of the property herein described, to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1208 at Pages 93-95, reference to which document is hereby made for a more particular description of this Parcel Nine.




PARCEL 10 :
Commence at the Northeast corner of Unit 8 of the subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi; thence South 89 degrees 22 minutes 38 seconds West 1815 feet to the Northwest corner of said Unit 8; thence South 0 degrees 37 minutes 22 seconds East 1320.0 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 560.05 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 265.54 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 164.05 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 265.63 feet; thence South 89 degrees 14 minutes 18 seconds West 2362.61 feet to the Mississippi River levee right of way and the point of beginning of the tract herein described; thence North 15 degrees 09 minutes East 35.37 feet along the land side of the said levee right of way; thence South 81 degrees 04 minutes East 162.00 feet along said levee right of way; thence North 5 degrees 13 minutes East 519.26 feet along said levee right of way; thence North 56 degrees 15 minutes East 439.92 feet along said land side of said levee right of way; thence South 89 degrees 22 minutes West 418.87 feet; thence South 39 degrees 22 minutes 38 seconds West 177.6 feet; thence South 4 degrees 36 minutes 57 seconds West 630.64 feet to the point of beginning; containing 3.740 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi; subject to easement for levee purposes held by the Board of Mississippi Levee Commissioners.
PARCEL 11 :
Commence at the Northeast corner of Unit 8 of the subdivision of Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi; thence South 89 degrees 22 minutes 38 seconds West 1815 feet to the Northwest corner of said Unit 8; thence South 0 degrees 37 minutes 22 seconds East 1320.0 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 560.05 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 265.54 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 164.05 feet to an iron pipe; thence North 0 degrees 37 minutes 22 seconds West 265.63 feet; thence South 89 degrees 14 minutes 18 seconds West 2362.61 feet to the Mississippi River Levee right of way and the point of beginning of the tract herein described; thence North 4 degrees 36 minutes 57 seconds East 630.64 feet; thence North 39 degrees 22 minutes 38 seconds East 177.6 feet; thence South 89 degrees 22 minutes West across the Mississippi River Levee to the Mississippi-Arkansas State Line; thence Southerly along said Mississippi-Arkansas State Line; thence North 89 degrees 14 minutes 18 seconds East to the point of beginning, containing 5.0 acres, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. All of said tract being subject to Mississippi Levee Board Levee right of way. Parcel Ten and Eleven hereof being more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1050 at Pages 50-56.
PARCEL 12 :
Commence at the Northeast corner of Unit 8 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County, Mississippi; thence South 89 degrees 22 minutes 38 seconds West 1815 feet to the Northwest corner of said Unit 8; thence South 0 degrees 37 minute 22 seconds East 1320.0 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 724.10 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 237.51 feet; thence South 0 degrees 37 minutes 22 seconds East




784.89 feet along an old fence to an old iron pipe; thence South 88 degrees 42 minutes 16 seconds West 531.62 feet, along an old fence, to an iron pipe; thence, continuing along said fence, South 88 degrees 44 minutes 51 seconds West 2058.14 feet to the landside right of way of the Mississippi River Levee and the point of beginning of the tract herein described; thence, continue on a projection of the south line of Unit 13 of the Subdivision of Glenmary Plantation, South 88 degrees 44 minutes 51 seconds West across said levee right of way to Arkansas-Mississippi State line; thence Northerly along said state line to an intersection with a projection of the North line of said Unit 13 of said Subdivision of the Glenmary Plantation; thence, leaving said state line on a projection of said North line of said Unit 13, North 89 degrees 14 minutes 18 seconds East across said levee right of way to the east right of way line of said levee at the Northwest corner of said Unit 13; thence South 15 degrees 09 minutes West 535.63 feet along said levee right of way to a levee Engineers Monument marked B.M. 66-A; thence South 17 degrees 05 minutes West 177.0 feet along said levee right of way; thence South 19 degrees 00 minutes West 235.0 feet along said levee right of way; thence South 25 degrees 26 minutes West 463.0 feet along said levee right of way; thence South 60 degrees 00 minutes East 28.0 feet along said levee right of way; thence South 27 degrees 44 minutes West 25.92 feet to the point of beginning, said tract being in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being subject to the right of way of the Mississippi Levee Board, it being the intent to describe herein all of the right, title and interest in any and all lands owned or claimed by the Grantors referred to in the instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1026 at pages 276-279, in that portion of Section 3, Township 17 North, Range 9 West, lying between the landside edge of the levee right of way as presently constituted westerly to the Arkansas-Mississippi state line, including all rights and interests to accretions and all other riparian rights, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1026 at Pages 276-279.
PARCEL 13 :
Commence at the Southwest corner of Section 17, Township 17 North, Range 9 West, Washington County, Mississippi; said corner being marked by a capped iron pipe; thence North 3 degrees 29 minutes 23 seconds West 631.2 feet along the line common to Sections 4 and 17 of said Township and Range to the Southeast corner of Section 3; thence South 89 degrees 19 minutes 34 seconds West 5355.85 feet along the South line of Section 3 to an iron pipe at the Southeast corner of Unit 14 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54 of the land records of Washington County; thence, continue South 89 degrees 19 minutes 34 seconds West 945.19 feet along the South line of said Unit 14 to an iron pipe; thence, continue South 89 degrees 19 minutes 34 seconds West 1862.11 feet along the South line of Unit 14 and also the South line of Section 3 to an iron pipe on the East right of way line of the Mississippi River Levee, said point being the point of beginning of the tract herein described; thence, continue on the South line of Section 3, South 89 degrees 19 minutes 34 seconds West across said levee right of way to the Mississippi-Arkansas state line; thence Northerly along said state line to an intersection with a projection of the North line of said Unit 14 of said subdivision; thence, leaving said state line, North 88 degrees 44 minutes 51 seconds East along a projection of the North line of said Unit 14 across said levee right of way to the Northwest corner of said Unit 14 on the East right of way line of said levee; thence along said levee right of way South 27 degrees 44 minutes West 459.08 feet; thence South 2 degrees 45 minutes West 289.00 feet; thence South 3 degrees 07 minutes 44 seconds East 433.11 feet to the point of beginning, said tract being in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being subject to the right of way




of the Mississippi Levee Board; it being the intent to describe herein all of the right, title and interest of the Grantors referred to in that certain instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1086 at pages 177-179, in any and all lands owned or claimed by them in that portion of Section 3, Township 17 North, Range 9 West, lying between the landside edge of the levee right of way as presently constituted westerly to the Arkansas-Mississippi state line, including all rights and interests to accretions and other riparian rights, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1086 at Pages 177-179.
PARCEL 14 :
One acre, more or less, lying and being situate in Unit 12 of the Subdivision of Glenmary Plantation in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi, and being more particularly described as follows, to-wit:
Commence at the Northeast corner of Unit 8 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, on page 54, of the land records of Washington County, Mississippi; thence South 89 degrees 22 minutes 38 seconds West 1815 feet to the Northwest corner of said Unit 8; thence South 0 degrees 37 minutes 22 seconds East 1320.0 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 560.05 feet to an iron pipe and the point of beginning of the tract herein described; thence North 0 degrees 37 minutes 22 seconds West 265.54 feet to an iron pipe; thence South 89 degrees 22 minutes 38 seconds West 164.05 feet to an iron pipe; thence South 0 degrees 37 minutes 22 seconds East 265.54 feet to a point on the South line of Unit 12 of the subdivision of the Glenmary Plantation; thence North 89 degrees 22 minutes 38 seconds East 164.05 feet to the point of beginning, containing 1.00 acre, more or less, in Section 3, Township 17 North, Range 9 West, Washington County, Mississippi. Said tract being a part of Unit 12 of the subdivision of the Glenmary Plantation, all as shown on plat attached, marked Exhibit “A” and made a part of the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1215 at Pages 315-318, reference to which document is hereby made for a more particular description of this Parcel Fourteen; subject to a county road right of way along the southerly boundary thereof.
PARCEL 15 :
Commence at the Levee Board Bench Mark No. 65-A; thence South 33 degrees 00 minutes East 285.00 feet to the Point of Beginning of the tract herein described, said point being on the landside right of way of the Mississippi River Main Levee; thence North 56 degrees 22 minutes East 2678.00 feet along said levee right of way; thence North 66 degrees 04 minutes 12 seconds East 2220.76 feet along said levee right of way to a point on the line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; thence North 9 degrees 31 minutes West 135.57 feet along said Section line; thence North 17 degrees 29 minutes East 452.20 feet along said Section line to a point on the center line of the Mississippi River Main Levee; thence, continue North 17 degrees 29 minutes East 173.22 feet along said Section line to a point on the riverside toe of said levee; thence South 66 degrees 07 minutes West 396.71 feet, along said riverside toe of said levee, said toe line being 130 feet Northwest of and parallel to the centerline of said levee, to a point opposite levee station 4200; thence, continue along said toe line, South 65 degrees 52 minutes 30 seconds West 1000.31 feet to a point opposite levee station 4210; thence, continue along said toe line, South 66 degrees 01 minutes West 1007.67 feet to a point opposite levee station 4220; thence, continue along said toe line, South 59 degrees 23 minutes West




1012.65 feet to a point opposite levee station 4230; thence, continue along said toe line South 56 degrees 22 minutes 30 seconds West 1003.77 feet to a point opposite levee station 4240; thence, continue along said toe line, South 56 degrees 25 minutes West 1000.37 feet to a point opposite levee station 4250; thence, continue along said toe line, South 56 degrees 08 minutes West 998.75 feet to a point opposite levee station 4260; thence, continue along said toe line, South 56 degrees 27 minutes 30 seconds West 999.54 feet to a point opposite levee station 4270; thence, continue along said toe line, South 56 degrees 16 minutes 30 seconds West 1000.44 feet to a point opposite levee station 4280; thence, continue along said toe line, South 56 degrees 15 minutes West 1003.39 feet to a point opposite levee station 4290; thence, meandering along a curve in the toe of said levee the following chords: South 53 degrees 49 minutes West 162.44 feet; thence South 49 degrees 41 minutes 38 seconds West 107.90 feet; thence South 35 degrees 35 minutes 39 seconds West 65.39 feet; thence South 31 degrees 26 minutes 40 seconds West 67.41 feet; thence South 17 degrees 43 minutes 13 seconds West 35.26 feet to the point of intersection of the riverside main levee toe with the Second line common to Sections 2 and 3; thence North 89 degrees 22 minutes East 928.25 feet along the line between Sections 2 and 3 to the landside right of way of said levee; thence North 56 degrees 15 minutes East 3620.00 feet along said right of way to the point of beginning, containing 125.747 acres, more or less in Sections 1 and 2, Township 17 North, Range 9 West, Washington County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1266 at Page 335.
PARCEL 16 :
A tract of land containing 31.368 acres, more or less, located in Section 16, Township 17 North, Range 9 West, Washington County, Mississippi, as shown and designated on the plat or map prepared by F.E. Hall and Associates, Engineers-Architects, of Greenville, Mississippi, dated July 12, 1973, a copy of which plat is attached as Exhibit “A” to and made a part of that certain instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1296 at Pages 159-160, such plat being incorporated herein by reference as if fully set out herein, said tract being more particularly described as follows, to-wit:
Commence at the Mississippi River Levee Board Bench Mark No. 64-A; thence S. 2 ° 55’ W. 195.00 feet to the Landside Right of Way of the Mississippi River Main Levee; thence S. 66 ° -04’-12” W. 353.3 feet along said levee Right of Way to the East line of Section 16, Township 17 North, Range 9 West, Washington County, Mississippi and the Point of Beginning of the tract herein described; thence S. 66 ° -04’-12” W. 1216.29 feet along said levee Right of Way to the West line of said Section 16; thence N. 9 ° -31’ W. 135.57 feet along the West line of Section 16; thence N. 17 ° -29’ E. 462.20 feet along the West line of Section 16 to the centerline of the levee; thence N. 17 ° -29’ E. 173.22 feet along the West line of Section 16 to an iron pipe at the Riverside Toe of the levee; thence N. 17 ° -29’ E. 1004.81 feet along the West line of Section 16 to the Riverside Levee Right of Way; thence N. 17 ° -29’ E. 308.86 feet along the West line of Section 16; thence N. 30 ° -29’ E. 290.84 feet along the West line of Section 16 to an iron pipe; thence S. 23 ° -47’ E. 400.12 feet to the Riverside Right of Way of the Main Levee; thence S. 23 ° -47’ E. 583.90 feet to the East line of Section 16; thence S. 0 ° -29’-36” E. 187.47 feet along the East line of Section 16 to the Riverside Toe of the Main Levee; thence S. 0 ° -29’-36” E. 141.53 feet along the East line of Section 16 to the centerline of the main levee; thence S. 0 ° -29’-36” E. 511.06 feet along the East line of Section 16 to the Point of Beginning, containing 31.368 acres, more or less, in Section 16, Township 17 North, Range 9 West, Washington County, Mississippi. Said acreage consisting of 15.901 acres between Landside Levee Right of Way line and the riverside toe of the main levee, 13.217 acres




between the riverside toe of the main levee and the riverside levee Right of Way line; 2.250 acres North of the Riverside Levee Right of Way line which is free of Right of Way, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1296 at Pages 159-160.
PARCEL 17 :
Tract containing 2.675 acres, more or less, as shown and designated on the plat or map prepared by F.E. Hall & Associates, Engineers-Architects, of Greenville, Mississippi, dated July 12, 1973, a copy of which plat is attached as Exhibit “A” to and made a part of that certain instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1296 at Page 236, such plat being incorporated herein by reference as if fully set out herein, said Tract being more particularly described as follows, to-wit:
Commence at the Mississippi River Levee Board Bench Mark No. 64-A; thence S. 66 ° ‑09’ W. 108.76 feet along a line between said Bench Mark No. 64-A and 64-B; thence N. 23 ° ‑47’ W. 294.42 feet to a 2” iron pipe in the center of the main levee; thence N. 23 ° -47’ W. 130.0 feet to a 2” iron pipe at the riverside toe of the main levee; thence S. 66 ° -13’ W. 499.25 feet along the riverside toe of the levee; thence S. 66 ° -07’ W. 150.75 feet along the riverside toe of the main levee to an iron pipe marking the Point of Beginning of the tract herein described; thence S. 66 ° -07’ W. 452.53 feet along the riverside toe of the main levee to an iron pipe on the West line of Section 16, Township 17 North, Range 9 West, Washington County, Mississippi; thence N. 17 ° -29’ E. 686.10 feet along the West line of Section 16 to an iron pipe; thence S. 23 ° -47’ E. 514.92 feet to the Point of Beginning, containing 2.675 acres, more or less, in Section 16, Township 17 North, Range 9 West, Washington County, Mississippi, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1296 at Page 237.
PARCEL 18 :
A parcel of land in Washington County, Mississippi, in Sections 1 and 2, Township 18 North, Range 9 West, and Section 13, Township 18 North, Range 9 West, all as more particularly described as follows:
Commence at the Levee Board Bench Mark No. 66-B; thence N. 81 ° -22’-35” W. 413.63 feet to an iron pipe on the Mississippi-Arkansas State Line; thence N. 0 ° -55’-44” E. 7.56 feet to the Point of Beginning of the tract herein described, said point being on the line common to Sections 2 and 3, Township 17 North, Range 9 West, Washington County, Mississippi; thence N. 0 ° -55’-44” E. 403.73 feet along said State line to an iron pipe on an old fence line; thence N. 0 ° -55’-44” E. 613.27 feet along said state line to an iron pipe on the top bank of the Mississippi River; thence N. 46 ° -33’-43” E. 601.52 feet along the top bank of said river to the U.S. Corp. of Engineers Bench Mark I.S.-6; thence N. 43 ° ‑49’‑34” E. 432.99 feet along the top bank of said river to the Corps Bench Mark I.S.-5; thence N. 45 ° -53’-07” E. 553.88 feet along the top bank of said river to the Corps Bench Mark I.S.-4; thence N. 33 ° -12’-41” E. 575.38 feet along the top bank of said river to the Corps Bench Mark I.S.-3; thence N. 36 ° -59’-47” E. 488.06 feet along the top bank of said river to the Corps Bench Mark 1.S.-2; thence N. 36 ° -57’-55” E. 520.54 feet along the top bank of said river to the Corps Bench Mark I.S.-1; thence N. 40 ° -16’-47” E. 1152.40 feet along the top bank of said river; thence N. 33 ° -17’-09” E. 872.54 feet along the top bank of said river to the center line of an old levee; thence N. 33 ° -17’-09” E. 212.16 feet along the top bank of said river to a point 50 feet north of the riverside toe of said old levee; thence, leaving the top bank of said river, N.




62 ° -56’-57” E. 3284.52 feet along a line parallel to and 50 feet North of the riverside toe of said old levee; thence, continue N. 62 ° -56’-57” E. 1484.00 feet to a point; thence S. 67 ° -59’-47” E. 1492.67 feet; thence S. 23 ° -47’ E. 184.79 feet to a point on the line common to Sections 1 and 16, Township 17 North, Range 9 West; thence S. 30 ° -29’ W. 290.84 feet along said section line; thence S. 17 ° -29’ W. 1313.67 feet along said section line to a point on the riverside toe of the Mississippi River Main Levee; thence S. 66 ° -07’ W. 396.71 feet, along said riverside toe of said levee, said toe line being 130 feet Northwest of and parallel to the center line of said levee, to a point opposite levee station 4200; thence, continue along said toe line, S 65 ° -52’-30” W. 1000.31 feet to a point opposite Levee Station 4210; thence, continue along said toe line, S. 66 ° -01’ W. 1007.67 feet to a point opposite Levee Station 4220; thence, continue along said toe line, S. 59 ° -23’ W. 1012.65 feet to a point opposite Levee Station 4230; thence, continue along said toe line, S. 56 ° -22’-30” W. 1003.77 feet to a point opposite Levee Station 4240; thence, continue along said toe line, S. 56 ° -25’ W. 1000.37 feet to a point opposite Levee Station 4250; thence, continue along said toe line, S. 56 ° -08’ W. 998.75 feet to a point opposite Levee Station 4260; thence, continue along said toe line, S. 56 ° -27’-30” W. 999.54 feet to a point opposite Levee Station 4270; thence, continue along said toe line, S. 56 ° -16’-30” W. 1000.44 feet to a point opposite Levee Station 4280; thence, continue along said toe line, S. 56 ° -15’ W. 1003.39 feet to a point opposite Levee Station 4290; thence, meandering along a curve in the toe of said levee the following chords, S. 53 ° -49’ W. 162.44 feet; thence S. 49 ° -41’-38” W. 107.90 feet; thence S. 35 ° -35’-39” W. 65.39 feet; thence S. 31 ° -26-’40” 67.41 feet; thence S. 17 ° ‑43’-13” W. 35.26 feet to the Point of Intersection of the riverside main levee toe with the aforesaid line common to Sections 2 and 3; thence, along said section line, S. 89 ° -22’ W. 213.04 feet to the Point of Beginning, containing 465.465 acres, more or less, in Sections 1 and 2, Township 17 North, Range 9 West, and Section 13, Township 18 North, Range 9 West, Washington County, Mississippi, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1266 at Pages 333-334.
PARCEL 19 :
A parcel of land in Washington County, Mississippi, in Sections 1 and 2, Township 17 North, Range 9 West, and more particularly described as follows:
Commence at the Mississippi River Levee Board Bench Mark No. 64-A; thence S 2 ° - 55’ W 195.0 feet to the Landside Right of Way of the Mississippi River Main Levee; thence S 66 ° - 04’-12” W 1569.59 feet along said Levee Right of Way to the west line of Section 16, Township 17 North, Range 9 West, Washington County, Mississippi; thence N 9 ° - 31’ W 135.57 feet along the west line of said Section 16; thence N 17 ° - 29’ E 452.20 feet along the west line of Section 16, to the centerline of the Mississippi River Main Levee; thence, continue, N 17 ° - 29’ E 173.22 feet along the west line of Section 16 to the riverside toe of the Main Levee and the point of beginning of the tract herein described; thence S 66 ° - 07’ W 396.71 feet along the riverside toe of said levee to a point opposite Levee Station 4200; thence S 65 ° - 52’ - 30” W 1000.31 feet along the riverside toe of said levee to a point opposite Levee Station 4210; thence S 66 ° - 01’ W 1007.67 feet along the riverside toe of said levee to a point opposite Levee Station 4220; thence S 59 ° - 23’ W 1012.65 feet along the riverside toe of said levee to a point opposite Levee Station 4230; thence S 56 ° - 22’ - 30” W 538.06 feet along the riverside toe of said levee to the west right-of-way line of the new county road to Warfield Point; thence N 23 ° - 47’ W 966.51 feet along the west right of way of said county road to a point on the present riverside right of way of the Mississippi River Main Levee; thence N 56 ° - 02’ E 557.53 feet along said riverside Levee Right of Way; thence N 57 ° - 14’ E 614.0 feet along said riverside Levee Right of Way; thence N 66 ° - 02’ E 1896.0 feet along said




riverside Levee Right of Way; thence N 23 ° - 52’ W 205.0 feet, along said riverside Levee Right of Way; thence N 21 ° - 23’ E 421.0 feet along said riverside Levee Right of Way; thence N 65 ° - 55’ E 302.0 feet along said riverside Levee Right of Way; thence S 23 ° 52’ E 698.0 feet along said riverside Levee Right of Way; thence N 65 ° - 53’ - 12” E 950.55 feet along said riverside Levee Right of Way to the west line of Section 16, Township 17 North, Range 9 West; thence S 17 ° -29’ W 1004.81 feet along the west line of Section 16 to the point of beginning, containing 97.040 acres, more or less, in Sections 1 and 2, Township 17 North, Range 9 West, Washington County, Mississippi, and as more particularly described in that certain instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1274 at Pages 176-180.
PARCEL 20 :
A parcel of land in Washington County, Mississippi, in Section 1, Township 17 North, Range 9 West, and as more particularly described as follows:
Commence at the Mississippi River Levee Bench Mark No. 65-A in Section 2, Township 17 North, Range 9 West, Washington County, Mississippi; thence N 25 ° - 31’ W 1682.0 feet to the riverside right of way of the Mississippi River Main Line Levee; thence N 20 ° - 03’ E 250.0 feet along said levee right of way; thence N 34 ° 15’ W 450.0 feet along said levee right of way; thence N 55 ° - 50’ E 321.80 feet along said levee right of way to the point of beginning of the tract herein described; thence, continue, N 55 ° - 50’ E 78.20 feet along said levee right of way; thence N 33 ° - 45’ W 193.0 feet along said levee right of way; thence S 53 ° 21’ W 239.77 feet along said levee right of way; thence leaving said levee right of way, N 75 ° - 22’ 56” W 86.08 feet to the top bank of the Mississippi River; thence N 33 ° - 17’ 09” E 527.77 feet along the top bank of said river; thence, leaving said top bank, S 75 ° - 22’ - 56” E 326.55 feet to a point on the south right of way of the old Mississippi River levee; thence S 63 ° - 04’ W 15.17 feet along said levee right of way; thence S 34 ° - 52’ E 215.0 feet along the levee right of way; thence S 15 ° - 47’ W 350.34 feet along said levee right of way; thence, leaving said levee right of way line, N 75 ° - 22’ - 56” W 311.62 feet to the point of beginning, containing 5.442 acres, more or less, in Section 1, Township 17 North, Range 9 West, Washington County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1274 at Pages 176-180.
LESS AND EXCEPT:
PARCEL 1 :
A tract of land situated in Section 1, Township 17 North, Range 9 West, Washington County, Mississippi, and being more particularly described as follows:
Beginning at a point on Mississippi Power & Light Company’s property line, at an intersection of the West boundary of a 100 foot road easement reserved by Washington County in a deed of conveyance to Mississippi Power & Light Company and recorded in the office of Chancery Clerk of Washington County, Mississippi, in deed book 1266 at page 333, said point being 3283.57 feet north of and 92.69 feet east of the Levee Board concrete monument 65-A; thence run North 62 degrees 56 minutes 57 seconds East 1147.69 feet along said Mississippi Power & Light Company property line to a point; run thence South 37 degrees 09 minutes 17 seconds West a distance of 448.13 feet to a point; run thence South 62 degrees 56 minutes 57 seconds West 452.80 feet to a point on a curve to the left, the radius of which is 200.0 feet; thence along said curve 309.77 feet to




a point; run thence South 25 degrees 47 minutes 40 seconds East 6.51 feet to a point; thence South 64 degrees 12 minutes 20 seconds West a distance of 100 feet to a point on the West boundary of the above mentioned 100 foot road easement and being approximately 50 feet Westerly of the centerline of an existing County road; run thence North 25 degrees 47 minutes 40 seconds West along the West boundary of said road easement a distance of 395.0 feet to the point of beginning and containing 4.90 acres, more or less, as shown on plat attached to and marked as Exhibit “A” to that certain instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1350 at Page 3, such plat and description being hereby incorporated herein by reference.
PARCEL 2 :
A tract of land situated in Section 1, Township 17 North, Range 9 West, Washington County, Mississippi, and being more particularly described as follows:
Commencing at a point on Mississippi Power & Light Company’s property line, at an intersection of the West boundary of a 100 foot road easement reserved by Washington County in a deed of conveyance to Mississippi Power & Light Company and recorded in the office of Chancery Clerk of Washington County, Mississippi in deed book 1266 at page 333, said point being 3283.57 feet North of and 92.69 feet East of the Levee Board concrete monument 65-A; thence run North 62 degrees 56 minutes 57 seconds East along said property line 1470 feet to a point of beginning; thence continuing along said property line North 62 degrees 56 minutes 57 seconds East 120 feet to a point; thence South 27 degrees 03 minutes 03 seconds East for a distance of 65 feet to a point; run thence South 62 degrees 56 minutes 57 seconds West 120 feet to a point; run thence North 27 degrees 03 minutes 03 seconds West 65 feet to the point of beginning and containing 0.18 acre, more or less, as shown on plat attached to and marked as Exhibit “A” to that certain instrument recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1350 at Page 3, such plat and description being hereby incorporated herein by reference.
PARCEL 3 :
A tract of land situated in Sections 2 and 3, Township 17 North, Range 9 West, Washington County, Mississippi, and being more particularly described as follows:
Commence at the Northeast corner of Unit 8 of the Subdivision of the Glenmary Plantation as recorded in Map Book 3, page 54 of the land records of Washington County, Mississippi; thence S. 89 degrees 22 minutes 38 seconds W. 2025.0 feet along the North line of Glenmary Plantation to the POINT OF BEGINNING of the tract herein described; thence S. 0 degrees 37 minutes 22 seconds E. 1320.0 feet to the South line of Unit 12 of said subdivision of the Glenmary Plantation; thence S. 89 degrees 22 minutes 38 seconds W. 1300.0 feet along the South line of Unit 12 and then through Unit 13 of said subdivision; thence N. 0 degrees 37 minutes 22 seconds W. 1320.0 feet through Unit 13 and 12 to the North line of Unit 12; thence N. 0 degrees 37 minutes 22 seconds W. 374.24 feet; thence N. 56 degrees 15 minutes E. 1552.32 feet along a line 200.0 feet from and parallel to the land side of right of way of the Mississippi River Levee; thence S. 0 degrees 37 minutes 22 seconds E. 1222.58 feet to the POINT OF BEGINNING, containing 63.222 acres, more or less, in Sections 2 and 3, Township 17 North, Range 9 West, Washington County, Mississippi: LESS AND EXCEPT, all cotton allotments thereon, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1302 at Page 222.




PARCEL 4 :
Commencing at the Levee Board concrete monument No. 64-A; thence run South 66 ° 09’ West 1067.3 feet to Levee Board concrete monument No. 64-B; run thence North 3 ° 10’ West 313.6 feet to a point on the Mississippi River Main Levee; run thence North 66 ° 07’ East 96.09 feet to the point of beginning of the parcel of land herein described; run thence North 23 ° 47’ West 530 feet to a point on the section line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; run thence along said section line North 17 ° 29’ East 781.86 feet to a point; run thence North 30 ° 29’ East 290.84 feet to a point; thence leaving said section line run South 23 ° 47’ East 984.02 feet to a point on the section line common to Sections 15 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; run thence along said section line South 0 ° 29’ 36” East 329.0 feet to a point on the center line of the Mississippi River Main Levee; run thence South 66 ° 13’ West along the center line of the Mississippi River Main Levee 369.06 feet to a point; run thence South 65 ° 55’ West 252.64 feet to the point of beginning, containing 15.80 acres more or less, all as shown as Parcel No. 1 on the plat attached to and marked as Exhibit “A” to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1386 at Page 403, reference to which is hereby made for a more particular description of this Parcel Four.
PARCEL 5 :
Commencing at the Levee Board concrete monument No 64-A; thence run South 66 ° 09’ West 1067.3 feet to Levee Board concrete monument No. 64-B; run thence North 3 ° 10’ West 313.6 feet to a point on the Mississippi River Main Levee; thence North 24 ° 03’ west parallel and 18 feet East of the center line of Mississippi Power & Light Company east most oil storage retention dike and run 418.45 feet to a point on the section line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; run thence along said section line North 17 ° 29’ East 148.63 feet to the point of beginning of the parcel of land herein described; run thence North 23 ° 47’ West 217.0 feet to a point; run thence North 74 ° 28’ West 129.18 feet to a point; run thence North 24 ° 03’ West 1.94 feet to a point; run thence North 65 ° 03’ East to a point; run thence North 17 ° 40’ East to a point; run thence North 22 ° 19’ 59” feet to a point; run thence North 66 ° 13’ feet to a point; run thence North 23 ° 47’ feet to a point; run thence North 66 ° 13’ feet to a point; run thence South 67 ° 59’ 47” East 299.93 feet to a point; run thence South 23 ° 47’ East 184.79 feet to a point on the section line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; run thence South 30 ° 29’ West 290.84 feet to a point; run thence South 17 ° 29’ West 781.86 feet to the point of beginning, containing 5.56 acres more or less, all as shown as Parcel No. 2 on the plat attached to and marked as Exhibit “A” to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1386 at Page 403, reference to which is hereby made for a more particular description of this Parcel Five.
PARCEL 6 :
Commencing at the Levee Board concrete monument No. 64-A; run thence South 66 ° 09’ West 1067.3 feet to Levee Board concrete monument No. 64-B; run thence North 3 ° 10’ West 313.6 feet to the point of beginning of the land herein described; run thence North 24 ° 3’ West 418.45 feet to a point on the section line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; run thence North 17 ° 29’ East along said section line 148.63 feet to a point; thence leaving the section line run South 23 ° 47’ East 530.0 feet to a point on the Mississippi River levee; run thence South 66 ° 07’ West 96.09 feet to the point of beginning,




containing 1.06 acres more or less, all as shown as Parcel No. 3 on the plat attached to and marked as Exhibit “A” to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1386 at Page 403, reference to which is hereby made for a more particular description of the property described in this Parcel Six.
PARCEL 7 :
Commencing at the Levee Board concrete monument No. 64-A; run thence South 66 ° 09’ West 1067.3 feet to Levee Board concrete monument No. 64-B; run thence North 3 ° 10’ West 313.6 feet to a point on the Mississippi River Main Levee; run thence North 24 ° 03’ West 418.45 feet to a point on the section line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi, which is the point of beginning; run thence North 24 ° 03’ West 410.57 feet to a point; run thence South 74 ° 28’ East 129.18 feet to a point; run thence South 23 ° 47’ East 217.0 feet to a point on the second line common to Sections 1 and 16, Township 17 North, Range 9 West, Washington County, Mississippi; run thence South 17 ° 29’ West along said section line 148.63 feet to the point of beginning, containing 0.71 acres more or less, all as shown as Parcel No. 4 on the plat attached to and marked as Exhibit “A” to the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1386 at Page 403, reference to which is hereby made for a more particular description of this Parcel Seven.
(7) The real property purchased and held for the possible future site of an Electric Generating Station, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, and that certain parcel of land in the County of Washington, described as follows:
PARCEL 1 :
All of the North Half of Section 36 East of gravel road, adjacent to and parallel with Old Yazoo & Mississippi Railroad, less 18.0 acres in the southeast corner, being 15 chains North and South and 12 chains East and West; also, the South Half of Section 36 East of the East Boundary of the Mississippi River Levee, less a strip of land 7.0 chains wide off the North end of that part lying between the East Boundary of the Mississippi River Levee and the West Boundary of the Old Yazoo & Mississippi Railroad, less railroad and road right of way, all being in Township 16 North, Range 8 West. Also, the North Half of Section 6 East of the East Boundary of the Mississippi River Levee, less a strip 2.5 chains wide off the South side, and less railroad and road right of way; also, a strip of land 10.25 chains wide off the West side of the Northwest Quarter of Section 5, all in Township 15 North, Range 8 West; and containing in the aggregate 554 acres, more or less, and being Share No. 3 according to a map showing the division of that part of Glenora Plantation lying East of the Mississippi River Levee, made by M.H. James, C.E., in October, 1943. Less and except, however, the approximately two acres of land heretofore conveyed by Mrs. Ann C. Unkel to F.M. Wigley, et ux, by quitclaim deed dated May 31, 1963, and recorded in Deed Book 904, page 290, of the land records of Washington County, Mississippi, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1298 at Page 521.




PARCEL 2 :
Commencing at a concrete monument marking the Northwest corner of Section 36, Township 16 North, Range 8 West; thence South 00 ° 00’ West 6,500.58 feet to the point of beginning of the tract herein described; thence due East 747.43 feet to the center line of the Mississippi River Levee (Levee station 5232+31); thence continue due East 501.2 feet to the Levee Board Landside right-of-way; thence along the said Levee Board Landside right-of-way the following 9 courses and distances: thence South 00 ° 40’ West 44.21 feet; thence South 84 ° 42’ East 170.0 feet; thence South 1 ° 53’ West 388.0 feet; thence North 89 ° 43’ East 93.0 feet; thence South 5 ° 41’ East 465.0 feet; thence North 83 ° 00’ East 327.0 feet; thence South 2 ° 58’ East 817.0 feet; thence South 4 ° 00’ East 320.0 feet; thence South 17 ° 49’ East 944.13 feet; thence leaving the said Levee Board Landside right-of-way South 89 ° 36’ West 1,291.02 feet to the center line of the Mississippi River Levee (Levee station 5261+96); thence continue South 89 ° 36’ West 601.52 feet; thence South 00 ° 24’ East 1,210.96 feet; thence due West 2,305.51 feet to an iron pipe on the East bank of the Mississippi River; thence along the East bank of said Mississippi River the following 7 courses and distances: thence North 10 ° 13’ East 586.7 feet; thence North 31 ° 09’ West 238.0 feet; thence North 7 ° 44’ East 526.0 feet; thence North 2 ° 28’ East 740.0 feet; thence North 27 ° 45’ West 400.0 feet; thence North 1 ° 10’ West 1,400.0 feet; thence North 5 ° 00’ West 333.96 feet to an iron pipe; thence leaving the East bank of said Mississippi River due East 2,120.11 feet to the point of beginning, being located in Section 1, Township 15 North, Range 9 West, and Section 6, Township 15 North, Range 8 West, Washington County, Mississippi; together with all accretions and batture lands thereto and rights of reversion, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1298 at Page 521.
(8) The real property purchased and held for the possible future site of an Electric Generating Station, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain parcel of land in Wilkinson County, Mississippi, described as follows:
PARCEL 1 :
In Wilkinson County, Mississippi, all of Section 24, all of Section 22, all of Section 26, all of Section 25, Lots 1, 2, 5 and 7 of Section 27, and all of Section 50, and all of the Lot allotted to Susan Harris by the Commissioners of the Chancery Court of Wilkinson County in the case of Anthony Haynes vs. Susan Harris, et al, and being Cause Number 1612 on the docket of the said Court, said Lot being Lot 6, Section 36, containing 48.81 acres, all shown by Decree confirming the Commissioners Report in said Cause, said Decree with Plat attached being of record in Book 3-A, Pages 548 and 549, all being in Township 1 North, Range 4 West; and
All of Section 1, less the South 95 acres owned by Mrs. G.E. and C.S. Pitcher in Township 1 North, Range 5 West; also the North 72 acres of Section 4, Township 1 North, Range 5 West, said land being known as the Berry and Williamson land in said Sections, Township and Ranges; also the North 13.78 acres of Section 3, Township 1 North, Range 5 West;
and containing in the aggregate 2,320 acres, more or less.
There is excepted from this description and the lands hereinabove described a tract of land 1500 feet square in the Northwest corner of Section 24, Township 1 North, Range 4 West, said parcel to




be between parallel lines, the North and West lines to be the section lines and the South and East lines to be parallel with the North and West lines.
The lands hereby described containing in the aggregate 2,260 acres, more or less.
Also, a right-of-way 36 feet in width along the presently existing roadway across Sections 11, 12 and 23, Township 1 North, Range 4 West, for the purpose of ingress and egress to and from the above described land.
Together with all accretions, batture lands, riparian rights and made lands contiguous to all the hereinabove described lands, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Wilkinson County, Mississippi, in Book 6-0 at Page 348.
(9) A twenty-five percent (25%) undivided interest in and to the Steam Electric Generating Station situated in the County of Independence, State of Arkansas, including the power houses, buildings and other structures and all of the Company’s right, title and interest in and to lands, rights-of-way, easement rights, water rights, franchises, consents, privileges and immunities of every kind and character, owned, used or enjoyed in connection therewith, being that certain parcel of land in said County and State, described as follows:
All that part of the SW 1 / 4 , SW 1 / 4 , Section 3, lying South of the South Right-of-Way of the Missouri Pacific Railroad; all tht part of the SE 1 / 4 , SE 1 / 4 , Section 4, lying South of the said railroad Right-of-Way; the E½, NE 1 / 4 , Section 9; all that part of the SE 1 / 4 , Section 9, lying East of the Right-of-Way of Arkansas State Highway 69 along the West side thereof and lying East of the Right-of-Way of a gravel road, running North and South, located in the NW 1 / 4 of said SE 1 / 4 , Section 9; all that part of Section 10, lying South of the said railroad Right-of-Way; the SW 1 / 4 , Section 11; the W½, SE 1 / 4 , Section 11; all that part of the NW 1 / 4 , Section 11, lying South of said railroad Right-of-Way; all that part of the SW 1 / 4 , NE 1 / 4 , Section 11, lying South of said railroad Right-of-Way; the NW 1 / 4 , Section 14; the W½, NE 1 / 4 , Section 14; the NW 1 / 4 , SE 1 / 4 , Section 14; the N½, SW 1 / 4 , Section 14; the N½, SE 1 / 4 , Section 15; the NE 1 / 4 , Section 15 and the NW 1 / 4 , Section 15, all located in T-12-N, R-4-W, Independence County, Arkansas, being more particularly described as follows:
From a found stone at the S.W. corner of Section 15, T-12-N, R-4-W, run N 05 ° 05’42”W 2781.49 feet to the point of beginning, being the S.W. corner of the NW 1 / 4 , said Section 15; thence continue N 05 ° 05’42”W 2663.62 feet; thence S 85 ° 35’38”W 2530.30 feet to a point on the East Right-of-Way of Arkansas State Highway 69; thence N 06 ° 01 1 01”E 771.54 feet along said Highway Right-of-Way; thence N 04 ° 50’27”E 158.40 feet along said highway Right-of-Way; thence N 04 ° 31’42”W 347.39 feet along said highway Right-of-Way; thence N 10 ° 51’53”W 503.85 feet along said highway Right-of-Way; thence N 12 ° 33’19”W 502.59 feet to a point on the East Right-of-Way of a gravel road; thence N 09 ° 52’31”W 358.17 feet along said road Right-of-Way; thence N 85 ° 39’45”E 1225.04 feet; thence N 04 ° 28’26”W 2645.44 feet; thence N 03 ° 53’03”W 625.44 feet (along the West line of the SE 1 / 4 , SE 1 / 4 , Section 4) to a point on the South Right-of-Way of the Missouri Pacific Railroad; thence S 76 ° 48’31”E 11,268.35 feet along said railroad Right-of-Way (to a point on the East line of the SW 1 / 4 , NE¼, Section 11); thence S 04°47’16”E 2700.68 feet; thence S 04 ° 59’47”E 4021.24 feet to the S.E. corner of the NW¼, SE¼, Section 14; thence S 85 ° 59’33”W 4081.85 feet; thence S 87 ° 17’20”W 2687.87 feet; thence N 05 ° 10’09”W 1358.94 feet; thence S 87 ° 58’38”W 2683.76 feet to the point of beginning, containing 1921.76 acres more or less. Subject to easements of record.




Less and except a switchyard substation tract approximately 1200 feet northerly and southerly and approximately 1000 feet easterly and westerly and containing approximately 27.5 acres lying near the center of the west half of Section 10, T 12 N, R 4 W, and more precisely described as follows:
From the southwest corner of said Section 10, run N 13 ° 9’25.5”E 2107.05 feet to a point which is the southwest corner of the switchyard. The boundaries of said switchyard, proceeding from said southwest switchyard corner, are as follows: Run N 13 ° 11’29”E 1200 feet to the northwest corner of said switchyard; thence S 76 ° 48’31”E 1,000 feet to the northeast corner; then S 13 ° 11’29”W 1,200 feet to the southeast corner; then N 76 ° 48’31” west 1,000 feet, returning to the southwest corner.
PARAGRAPH TWO
THE ELECTRIC SUBSTATIONS AND SUBSTATIONS SITES OF THE COMPANY, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, transmitting and distributing electric energy, and the land of the Company on which the same are situated, and all of the Company’s land and easements, rights-of-way, rights, machinery, equipment, appliances, devices, and appurtenances forming a part of said substations or any of them, or used or enjoyed or capable of being used or enjoyed in conjunction with any thereof, including all of the Company’s right, title and interest in and to the following, situated in the State of Mississippi:

ADAMS COUNTY :
(1) 4.60 acres, Natchez 115 KV substation site, in Section 17, Township 7 North, Range 3 West, being part of Anchorage Plantation, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 4W at Page 377.

(2) 1.38 acre easement to Johns-Mansville 115 KV substation site in Section 48, Township 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 54 at Page 379.

(3) 8.23 acres, Natchez Industrial Park 115 KV substation less 1.23 acres, easement to Adams County, Section 54, Township 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 10-E at Page 78 and in Book 10-J at Page 562.

(4) 2.56 acres, South Natchez 115 KV substation site:
Parcel 1: 2.17 acres along Government Fleet Road and Oscar Street, described as follows:




Tract 1 - 1.972 acres in Section 25, Township 17 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 7-0 at Page 486;
Tract 2 - 0.014 acres in Section 25, Tonwship 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 7-Q at Page 48; and
Tract 3 - 0.184 acres in Section 25, Township 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 7-P at Page 412.
Parcel 2: 0.39 acres in Section 25, Township 7 North, Range 3 West, being Lot 2, Block 2, as shown on Map 67, and as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 14-M at Page 493.
(5) 1.51 acres, South Natchez 115 KV substation site, in Section 25, Township 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 7-0 at Page 486.

(6) 0.31 acres, Natchez 115 KV substation roadway, in Section 25, Township 7 North, Range 3 West, being part of Anchorage Plantation, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 4W at Page 379.
AMITE COUNTY :
(1) 6.31 acres, Liberty 115 KV substation site in Section 2, Township 2 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 117 at Page 408.

(2) 10.80 acres, Gloster 115 KV substation site in Section 18, Township 3 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 79 at Page 248.

(3) 0.663 acres, Capline 115 KV substation easement in Section 2, Township 2 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 179 at Page 323.

(4) Interstate Pipeline 115 KV substation easement in Section 2, Township 2 North, Range 4 East.

ATTALA COUNTY :
(1) Attala 115/230 KV substation site, 5.33 acres in Section 3, Township 13 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 351 at Page 473.

(2) McAdams 500 KV substation site:




Parcels 1, 2, 3 and 4: 29.69 acres in Section 4, Township 13 North, Range 6 East, and Section 33, Township 14 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 351 at Page 260;
Parcel 5: 94.22 acres in Section 4, Township 13 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 351 at Page 242;
Parcel 6 (Hollingsworth): 138.49 acres in Section 3, Township 13 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 347 at Page 363 and in Book 349 at Page 481, less 94 acres to IPC 8/22/79, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 351 at Page 425;
Parcel 7 (McGowan): 23.10 acres in Section 3, Township 13 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 351 at Page 260.
(3) Kosciusko 115 KV substation site, 4.76 acres, in Section 14, Township 14 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Attala County, Mississippi, in Book 142 at Page 141.

BOLIVAR COUNTY :
(1) 0.978 acres, Stringtown 115 KV substation site, in Section 23, Township 20 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book H-47 at Page 357.

(2) 5.0 acres, Cleveland 115 KV substation site, in South Half of Section 9, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-14 at Page 562, less 0.10 acres off North side to Travenol, 12/30/80, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-145 at Page 606.

(3) 2.96 acres, South Cleveland 115 KV substation, in Northeast Quarter of Section 28, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-79 at Page 107.

(4) 5.74 acres, Rosedale 115 KV substation site in Sections 13 and 24, Township 23 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book H-10 at Page 551.

(5) 5.42 acres, 115 KV Shelby substation site, in Section 6, Township 24 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-64 at Page 503.




CLAIBORNE COUNTY :
(6) 4.48 acres, Port Gibson 115 KV substation site, in Section 20, Township 12 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Claiborne County, Mississippi, in Book 6-I at Page 71.
(7) GGNS 500 KV Switchyard Site: 52.37 acres, from Middle South Energy, Inc. in Section 12, Township 12 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Claiborne County, Mississippi, in Book 9-R at Page 177.
COAHOMA COUNTY :
1. 5.74 acres Jonestown 115 KV substation site in West Half of Southeast Quarter, Section 34, Township 29 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 319 at Page 494.

2. 3.133 acres, Clarksdale 115 KV substation site in the Northeast Quarter of Northeast Quarter of Section 36, Township 27 North, Range 4 West, and Northwest Quarter of Northwest Quarter of Section 31, Township 27 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 88 at Page 589, and in Book 222 at Pages 283 and 325.

3. Easement Rudyard 115 KV switching station site in Section 32, Township 29 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 323 at Page 398.
COPIAH COUNTY :
1. 4.56 acres, Hazlehurst 115 KV substation site, in Southeast Quarter of Northeast Quarter, Section 3, Township 10 North, Range 8 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 6-K at Page 133.

2. Crystal Springs 115 KV substation site; Parcel 1: 1.47 acres in Southeast Quarter of Northeast Quarter, Section 35, Township 2 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 4-G at Page 252;

3. Parcel 2: 0.43 acres in Southeast Quarter of Northeast Quarter of Section 35, Township 2 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 4-G at Page 253;

4. Parcel 3: 2.63 acres in Southeast Quarter of Northeast Quarter of Section 35, Township 2 North, Range 2 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 7-P at Pages 574, 577, 579, 581 and 583.
DESOTO COUNTY :
1. Leased 5.74 acres, Hernando 115 KV substation site in Northwest Quarter of Section 20, Township 3 South, Range 7 West, as more particularly described in the document




recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 14 Page 479.

2. 5.23 acres, Walls 115 KV substation site in Northwest Quarter of Northwest Quarter of Section 34, Township 1 South, Range 9 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 49 at Page 200, less .28 acres to MSHD, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 175 at Pages 389-390.

3. 4.20 acres, DeSoto 115 KV substation site in North Half of Northeast Quarter of Section 29, Township 1 South, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 91 at Page 367, less .8 acres sold to DeSoto County on 8-29-84, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 175 at Pages 389-390.

4. 9.93 acres, Horn Lake 161/115 KV substation site in Section 26, Township 1 South, Range 8 West, less 0.53 acres sold 4/6/61, less 0.35 acres granted for roadway, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 36 at Page 435, Book 49 at Page 407, and Book 80 at Page 487. Also less 3.06 acres dedicated to office, engineering and storeroom purposes.

5. 2.07 acres, Nesbit 115 KV substation site, in Southeast Quarter of Section 13, Township 2 South, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 49 at Page 11, less 0.22 acres to DeSoto County, including 10-foot easement, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 100 at Page 618.

6. 4.0 acres, Greenbrook 115 KV substation site along Swinnea Road in the Southwest Quarter of Section 29, Township 1 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 151 at Page 179.
FRANKLIN COUNTY :
1. 5.47 acres, Roxie 115 KV substation site in Southeast Quarter of Southwest Quarter of Section 19, Township 6 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book D-6 at Page 65.

2. Roadway to Franklin E.H.V. substation:
Parcel 1 (Paul C. Gill): 1.53 acres, Southeast Quarter of Northeast Quarter of Section 1, Township 6 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book N-6 at Page 35;
Parcel 2 (James E. Dickey, Jr.): 2.75 acres, Northwest Quarter of Section 6, Township 6 North, Range 6 East, and Northeast Quarter of Section 1, Township 6 North, Range 5 East, as more




particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book N-6 at Page 38.
3. 5.16 acres, Meadville 115 KV substation site, South Half of Northeast Quarter of Section 32, Township 6 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book J-5 at Page 329; less .55 acres sold 2/24/67, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book G-6 at Page 519.

4. Franklin E.H.V. substation:
Parcel 1 (James E. Dickey): 20.0 acres, East Half of Lot 10 in the East Half of Southwest Quarter of Southeast Quarter of Section 31, Township 7 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book M-6 at Page 521, less 5.0 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book 57 at Page 33.
Parcel 2 (L. Brantley Dickey): Lot 7 (44.7 acres) and part of Lot 8 (27.8 acres) in West Half of Section 6, Township 6 North, Range 6 East. West Half of Lot 10 (20 acres) in the West Half of Southwest Quarter of Southeast Quarter of Section 31, Township 7 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book M-6 at Page 506.
Parcel 3 (Vivian H. Posey): Lot 3C (13.5 acres) in North One-third of Southeast Quarter of Southwest Quarter of Section 31, Township 7 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book M-6 at Page 524.
Parcel 4 (Williard L. Herring): Lot 3B (13.5 acres), Middle One-third of Southeast Quarter of Southwest Quarter of Section 31, Township 7 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book M-6 at Page 517.
Parcel 5 (Venton L. Dickey): Lot 2B (13.5 acres) in the South One-third of Southeast Quarter of Southwest Quarter of Section 31, Township 7 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Franklin County, Mississippi, in Book M-6 at Page 513.
GRENADA COUNTY :
1. 3.71 acres, Grenada 115 KV substation site in the Bledsoe Addition in Southwest Quarter of Northwest Quarter of Section 7, Township 22 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 64 at Page 629.

2. 7.0 acres, South Grenada 115 KV substation site being Lots 7, 8 and 9 and part of Lots 6, 10-13 and 27 of North Sunnycrest Rev. as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 154 at Page 509.





3. 2.30 acres, Elliott 115 KV substation, along the East side of U.S. Highway 51 near the Montgomery-Grenada County Line in Section 21, Township 21 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 219 at Page 203.
HINDS COUNTY :
1. Bakers Creek Substation (proposed):
A parcel of land located in the Northwest Quarter of Section 11, Township 5 North, Range 2 West, Second Judicial District of Hinds County, Mississippi, and being more particularly described as follows:
Commence at the NW corner of Section 11, Township 5 North, Range 2 West, and run East 2310 feet to a point; run thence South along a fence line 1288.5 feet to a pin marking the POB of the tract herein described.
From the POB continue South along a fence line 1321.5 feet to a pin at the North ROW of Airport Road; run thence easterly along said North ROW 329.7 feet to a pin; run thence North and parallel to aforementioned west fence line a distance of 1088.9 feet to a point (said point being 220 feet at right angle to an existing MP&L. Co. Power Transmission Line); run thence N 16 ° 52’17” E (along a line parallel to and 220 feet at right angle to said MP&L Co. Power Transmission Line) a distance of 308.8 feet to a point; run thence S 82 ° 09’44”W a distance of 423.3 feet to the point of beginning.
The above described tract lies in the Northwest Quarter of Section 11, Township 5 North, Range 2 West, Second Judicial District of Hinds County, Mississippi, and contains 10.48 acres more or less, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County, at Raymond, Mississippi, in Book 3358 at Page 91.
2. North Jackson 115 KV substation site:
Parcel 1 (T.L. Carraway, Jr.): 7.50 acres in Lot 4, Hanging Moss Survey in Section 1, Township 6 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1246 at Page 194, Book 1446 at Page 63; and Book 2254 at Page 529;
Parcel 2 (T. G. Solomon & Others): 4.87 acres in Section 1, Township 6 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2258 at Page 116.
3. Hanging Moss 115 KV substation site:
Parcel 1: 1.9 acres in Southeast Quarter of Southeast Quarter of Section 10, Township 6 North, Range 1 East, First Judicial District of Hinds County, Mississippi, less .027 acres to City of Jackson, 12/23/81, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2616 at Page 262 and Book 2859 at Page 343.




Parcel 2: 1.07 acres, being Lot 11 and the South 38 feet of Lot 10 in Block B, Hanging Moss Survey, Part C, First Judicial District of Hinds County, Mississippi, Plat Book 11 at Page 11, less .044 acres to City of Jackson, 1/23/81, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2616 at Page 258 and Book 2859 at Page 343.
4. 2.06 acres, Medical Center 115 KV substation site easement only; includes 0.26 acres in roadway, in Southwest Quarter of Section 26, Township 6 North, Range 2 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2486 at Page 696.

5. Fondren 115 KV substation site, beign part of Lots D, E, F and G of Isham Cade Survey, part of Odeneal Survey in Sections 26 and 27, Township 6 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1620 at Page 495.

6. 7.15 acres, Old Canton Road substation site in Northeast Quarter of Section 13, Township 6 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2314 at Page 550, less 0.72 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2862 at Page 778.

7. 4.88 acres, Country Club 115 KV substation site, being a part of Lot 2 in the Northwest Quarter of Northeast Quarter of Section 17, Township 6 North, Range 2 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1618 at Page 497.

8. 5.51 acres, Northeast Jackson 115 KV substation site: In Lot 4 of Section 30, Township 6 North, Range 2 East, First Judicial District of Hinds County, Mississippi. Also 200-foot wide R.O.W. extended eastward, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 868 at Page 144, less 0.59 acre easement to City of Jackson for street, 5/21/65, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1574 at Page 330, less 0.89 acre easement to City of Jackson for street, 3/16/79, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Hinds County, Mississippi, in Book 2710 at Pge 259.

9. East Jackson 115 KV substation, 2.44 acres in Lot 34 of South Jackson Survey, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County, Mississippi, in Book 564 at Page 523, subject to an easement for sanitary sewer to City of Jackson, as more particularly described in the documents recorded among the land records in the office of the




Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1984 at Page 466 and Book 1884 at Page 489.

10. Miami Street 115 KV substation and R.O.W., 0.52 acres, being Lots 1-3, Block 4, Shady Oaks Subdivision, Part 6, in Northwest Quarter of Section 28, Township 6 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1076 at Page 180 and Book 1844 at Page 334; less portion sold to City of Jackson for streets.

11. 0.505 acre easement to Capline 115 KV substation in Northeast Quarter of Northeast Quarter of Section 21, Township 5 North, Range 2 West, Second Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 213 at Page 358.

12. 8 KV substation site (Kennington/McRae Store), part of the North Half of Lot 3, Square 10, South Jackson, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 448 at Page 393; less 10’ x 20’ area sold to Hederman, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 462 at page 287.

13. South Jackson 115/230 KV substation site:
Parcel 1: 13.89 acres in Lot 3 in Section 15, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, less 0.18 acre easement to City of Jackson for South West Street, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 156 at Page 471; Book 213 at Page 187; Book 262 at Page 630; Book 323 at Page 537; and Book 1006 at Page 158.
Parcel 2: 0.65 acres in Lot 3, Section 15, Township 5 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1006 at Page 158.
Parcel 3: 2.54 acres in Lot 4 in Section 15, Township 5 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 316 at Page 503; Book 1008 at page 352; and Book 1884 at Pages 235 and 257.
Parcel 4: 2.07 acres in Lot 4 in Section 15, Township 5 North, Range 1 East, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 316 at Page 503; Book 1008 at Page 352; and Book 1564 at Page 146.




Parcel 5: 0.12 acres, being all of Lot 39 and part of Lot 38, Block B, Galilee Subdivision, including a strip of land between Lot 39 and Lot 4 in Section 15, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1884 at Page 257.
Parcel 6: Parts of Lots 31 and 32 of Block A of Hightower Subdivision, Plat Book 2 at Page 7; also part of Lots 11 and 12 of Block A, Kiondyke Addition on Plat Book 2 at Page 66, in Section 15, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2446 at Page 247.
Parcel 7: Lot 33 and part of Lot 32 of Block B, Hightower Subdivision, First Judicial District, Hinds County, Mississippi, as shown on Surveyors Record Book B at Page 7, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2446 at Page 247.
14. 6.17 acres, West Jackson 115 KV substation site in the East Half of Southeast Quarter of Section 1, Township 5 North, Range 1 West, First Judicial District of Hinds County, Mississippi, as described in Cause No. 9302 in Hinds County Court First District, Minute Book 11 at page 593, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 840 at Page 79; less 0.56 acres sold to Highway Commission, 4/2/65, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1564 at Page 258.

15. Treatment Plant 115 KV substation site: Easement in Northeast Quarter of the Northeast Quarter of Section 32, Township 5 North, Range 1 East, First Judicial District of Hinds County, Mississippi.

16. 5.662 acres, Southwest Jackson 115 KV substation site, in East Half of Northeast Quarter of Section 25, Township 5 North, Range 1 West, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1356 at Page 337; less 0.051 acres to City of Jackson for street, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2732 at Page 794.

17. 6.48 acres, Forest Hill 115 KV substation site in the Southeast Quarter of Section 22, Township 5 North, Range 1 West, First Judicial District of Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2100 at Page 438.

18. Robinson Road 230 KV substation site:
Parcel 1: 6.36 acres, being a part of Lots 8 and 9 of Equitable Investment Company, Part 1, Plat Book 4 at Page 87, in North Half of Northwest Quarter of Section 13 and South Half of Southwest Quarter of Section 12, Township 5 North, Range 1 West, as more particularly described in the




document recorded among the land records in the office of the Chancery Clerk of Hinds County, Mississippi, in Book 2446 at Page 249.
Parcel 2: 0.99 acre Roadway easement across Lot 9 as described above in Parcel 1, and Lot 10, First Judicial District of Hinds County, Mississippi; all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2446 at Page 249.
19. 5.58 acre Northwest Jackson 115 KV substation site in Northeast Quarter of Section 25, Township 6 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1700 at Page 439.

20. 1.45 acres, Northside Drive 230 KV substation site; being part of a 6.20 acre tract in Sections 14 and 15, Township 6 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2862 at Page 786.

21. 3.26 acres, Terry 115 KV substation site (16th Section lease expiring 4/23/98), in Section 16, Township 3 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2236 at page 299 and Book 2238 at Page 192.

22. Monument Street 115 KV substation:
Parcel 1: Lots 5-7 and 26-29 of Block A, McLeod Garner Subdivision, First Judicial District, Hinds County, Mississippi, less parts of Lots 5-7 sold to City of Jackson, including a portion of property leased from Deposit Guaranty Bank & Trust Company, Trustee, all as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 844 at Page 282; Book 422 at Page 97; Book 1056 at Page 104; Book 1054 at Pages 263, 264 and 300; and Book 1188 at Page 485.
Parcel 2: Lots 2-4, Block A, McLeod-Garner Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1206 at Page 471.
Parcel 3: Lots 30, 31 and 32 West of Pleasant Avenue (Railroad Avenue), Block A, McLeod Garner Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1218 at Page 571; and Book 1250 at Page 488.
Parcel 4: Part of Lots 9 and 10, Block A, McLeod Garner Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1452 at Page 170.




Parcel 5: Lot 8, Block A, McLeod Garner Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1432 at Page 22.
23. 1.295 acres, South Gallatin 115 KV substation site, part of Lot 22 per H. C. Daniel 1875 Map, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2294 at Page 65.

24. Kingswood 115 KV substation site:
Parcel 1 (Irby Construction - Kelso): 0.48 foot strip in Lot 7, Block 4, Englewood Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1894 at Page 277.
Parcel 2: 0.29 acres in Lot 7, Block 4, Englewood Subdivision, less the North 20 feet thereof in Northeast Quarter of Section 20, Township 5 North, Range 1 East, First Judicial District, Hinds County, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1898 at Page 104.
Parcel 3: 1.31 acres, being that portion of Englewood Blvd. lying between the West R.O.W. of 1-55 and Kingswood Avenue closed and vacated by the City of Jackson in Ordinance dated 12/1/70, Minute Book ZZ, Page 411, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1914 at Page 480 and Book 1908 at Page 135.
25. 5.47 acres, Clinton 115 KV substation site in Southwest Quarter of Section 28, Township 6 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1556 at Page 124.

26. 5.42 acres, Clinton Industrial Park 230 KV substation in Southeast Quarter of Section 14, Township 6 North, Range 2 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 241 at Page 169.

27. 6.18 acres, Bolton 115 KV substation site in the Northeast Quarter of Northwest Quarter of Section 1, Township 5 North, Range 3 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 178 at Page 306.

28. 3.60 acres, Edwards 115 KV substation site in the North Half of Section 4, Township 5 North, Range 4 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District Hinds County at Raymond, Mississippi, in Book 259 at Pages 84 and 87.





29. 7.46 acres, Utica 115 KV substation site in Southeast Quarter of Southeast Quarter of Section 5, Township 3 North, Range 4 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 193 at page 551.

30. 4.08 acres, Raymond 115 KV substation site in the Southeast Quarter of Section 21, Township 5 North, Range 2 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 289 at Page 692.

31. 4.75 acres, Northside Drive 230 KV substation site, being part of a 6.20 acre tract in Sections 14 and 15, Township 6 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2862 at Page 786.

32. Ray Braswell E.H.V. Substation Site:
Parcel 1 (Johnson Tract): 80.49 acres in North Half of Northeast Quarter of Section 6, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1540 at Page 302 and Book 1584 at Page 338.
Parcel 2 (Foshee Tract): 40.50 acres, Northwest Quarter and Southwest Quarter, Section 5, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1320 at Page 336 and Book 1404 at Page 182.
Parcel 3 (Hall Tract): 144.55 acres, North Half of Northwest Quarter and Southeast Quarter of Northwest Quarter and Northeast Quarter of Southwest Quarter of Section 5, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1404 at Page 187.
33. 2.32 acres, Byram 115 KV substation site in the West Half of Southwest Quarter of Section 13, Township 4 North, Range 1 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 2096 at Page 127 and Book 2526 at Page 770.
HOLMES COUNTY :
1. 4.61 acres, Durant 115 KV substation site: In Northeast Quarter of Northwest Quarter, Section 23, Township 14 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 43 at Page 69.

2. Lexington 115 KV substation site:




Parcel 1: 4.41 acres in Lot 6, in Section 28, Township 15 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 85 at Page 502.
Parcel 2: 0.24 acres in Southwest Quarter of Southwest Quarter of Section 21, Township 15 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 85 at Page 500.
3. Pickens 230/115 KV substation site:
Parcel 1: 7.59 acres, in the Northeast Quarter of Section 36, Township 13 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 97 at Page 517.
Parcel 2: 5.17 acres in the Northeast Quarter of Section 36, Township 13 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 143 at Page 409.
4. Pickens 230 KV substation: 5.17 acres in the Northeast Quarter of Section 36, Township 13 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 143 at Page 409.
HUMPHREYS COUNTY :
1. 5.51 acres, Belzoni 115 KV substation site: In the Southeast Quarter of Southwest Quarter of Section 34, Township 16 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Humphreys County, Mississippi, in Book 46 at Page 17, less 0.25 acres to the Highway Commission, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Humphreys County, Mississippi, in Book 46 at Page 157.

2. 3.20 acres, Midnight 115 KV substation site: In Southeast Quarter of Section 23, Township 14 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Humphreys County, Mississippi, in Book 48 at Pages 229 and 285; less 0.08 acres to Highway Commission, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Humphreys County, Mississippi, in Book 82 at Page 513.
ISSAQUENA COUNTY :
1. Leasehold - Mayersville 115 KV substation site in Southeast Quarter of Northeast Quarter, Section 21, Township 12 North, Range 8 West.
JEFFERSON COUNTY :
1. 4.60 acres, Fayette 115 KV substation site in Section 4, Township 8 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Jefferson County, Mississippi, in Book 4-V at Page 23.
JEFFERSON DAVIS COUNTY :
1. 5.00 acres, New Hebron 115 KV substation site along the South Side of Highway 42 in Section 24, Township 9 North, Range 20 West, as more particularly described in the




document recorded among the land records in the office of the Chancery Clerk of Jefferson Davis County, Mississippi, in Book 114 at Page 147.
LAWRENCE COUNTY :
1. 4.07 acres, Silver Creek 115 KV substation site in Northeast Quarter of Southwest Quarter, Section 2, Township 7 North, Range 20 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Lawrence County, Mississippi, in Book A-27 at Page 270 and in Book A-49 at Page 600.
LEAKE COUNTY :
1. 7.00 acres, Carthage 115 KV substation site in West Half of Northwest Quarter, Section 15, Township 10 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Leake County, Mississippi, in Book 75 at Page 182.
LEFLORE COUNTY :
1. Greenwood 115 KV substation:
Parcel 1: 2.22 acres in Northeast Quarter of Southeast Quarter, Section 21, Township 19 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Leflore County, Mississippi, in Book 62 at Pages 237 and 457.
Parcel 2 (UC&M Building and substation site): 1.84 acres, being Lot 1, Map 1, Page 50 of Industrial Subdivision in South Half of Section 21, Township 19 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Leflore County, Mississippi, in Book 94 at Page 337.
Parcel 3: Being 0.165 acres in Section 21, Township 19 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Leflore County, Mississippi, in Book 245 at Page 219.
2. Leasehold - Mid Valley Pipeline 115 KV substation site: In Lot 8 of the Northeast Quarter of Southeast Quarter, Section 11, Township 21 North, Range 1 West.

3. 4.83 acres, Schlater 115 KV substation site in Southwest Quarter of Section 35, Township 21 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Leflore County, Mississippi, in Book 112 at Page 311.
LINCOLN COUNTY :
1. 6.73 acres, Brookhaven 115 KV substation site in Northwest Quarter, Section 8, Township 7 North, Range 8 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Lincoln County, Mississippi, in Book 148 at Page 82.

2. 12.30 acres, S. Brookhaven 115 KV substation site: In Northeast Quarter of Northeast Quarter, Section 25, Township 7 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Lincoln County, Mississippi, in Book 655 at Page 187.
MADISON COUNTY :
1. Canton 115 KV substation - Additional land for 230 KV conversion:




Commencing at the northwest corner of Section 21, Township 9 North, Range 3 East, Madison County, Mississippi, run South 25 feet to the south right of way line of the Illinois Central Gulf Railroad, run thence South 88 Degrees 53 Minutes East, along said south right of way line, a distance of 1,459.5 feet to a point, said point being the northeast corner of Mississippi Power & Light Company’s Canton 115 KV Substation property as described on Page 51 of Book 7 in the office of the Chancery Clerk of Madison County in Canton, Mississippi, and Point of Beginning of the land herein described; continue thence South 88 Degrees 53 Minutes East, along said south right of way line of Illinois Central Gulf Railroad; a distance of 345.2 feet to a point; run thence South 45 Degrees 40 Minutes West a distance of 1,011.3 feet to a point; run thence North 44 Degrees 20 Minutes West a distance of 246 feet to the southernmost corner of said Mississippi Power & Light Company property; run thence North 45 Degrees 40 Minutes East a distance of 769.13 feet, along the southeast property line of said Mississippi Power & Light Company property, to the Point of Beginning, containing 5.03 acres, more or less, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 228 at Page 298, and the plat attached as Exhibit “A” thereto.
2. 5.74 acres, Flora 115 KV substation site in Northwest Quarter of Northwest Quarter of Section 15, Township 8 North, Range 1 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 96 at Page 292.

3. Charity Church 115 KV substation site in the Northeast Quarter of the Northwest Quarter, Section 33, Township 7 North, Range 2 East: 2.21 acres along the south line of Charity Church Road 255.74 feet where P.O.B. is a point 50 feet East of the East R.O.W. line of the 115 KV transmission line. Includes right of ingress and ingress on a .22 acre parcel 50’ x 190’, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 211 at Page 644.

4. 2.46 acres, Livingston Road, 115 KV substation site in Section 33, Township 7 North, Range 1 East, Mary Myler Estate, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 190 at Pages 768-770; less .10 acres, roadway easement to the above site.

5. 2.22 acres, Ridgeland 115 KV substation site: Part of Lot 1, Highland Colony Subdivision, Section 31, Township 7 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 133 at Page 49.

6. 9.53 acres, Hoy Road 115 KV substation site in the Southwest Quarter of the Northeast Quarter, Section 10, Township 7 North, Range 2 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 130 at Page 527 and Book 169 at page 535; less 0.26 acres sold 6/18/80, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 174 at Page 134; also 0.70 acres, roadway easement to the above site.





7. 5.02 acres, Canton 115 KV substation site in Northwest Quarter of Section 21, Township 9 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 7 at Page 51.
MONTGOMERY COUNTY :
1. 8.0 acres, Winona 115 KV substation site in the North Half of Northwest Quarter of Northwest Quarter, Section 11, and the South Half of Southwest Quarter-of Southwest Quarter, Section 2, Township 18 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Montgomery County, Mississippi, in Book EE at Page 155.
PANOLA COUNTY :
1. 5.75 acres, Sardis 115 KV substation site in Southwest Quarter of Southwest Quarter of Southeast Quarter, Section 25, Township 7 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Panola County, Mississippi, in Book A-42 at Page 33.

2. 5.00 acres, Como 115 KV substation site in Northwest Quarter of Southeast Quarter, Section 4, Township 7 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Panola County, Mississippi, in Book A-21 at Page 69.

3. 4.00 acres, Crenshaw 115 KV substation site in Southwest Quarter of Southwest Quarter, Section 31, Township 6 South, Range 9 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Panola County, Mississippi, in Book A-21 at Page 39.

4. 2.43 acres, Enid 230/115 KV substation site in East Half of Northwest Quarter, Section 27, Township 10 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Panola County, Mississippi, in Book M-3 at Page 155.

5. 7.975 acres, Batesville 115/230 KV switching substation site: In East Half of Section 4, Township 9 South, Range 7 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Panola County, Mississippi, in Book E-1 at Page 301 and Book J-2 at Page 335.
PIKE COUNTY :
1. 13 KV substation site in Section 1, Township 3 North, Range 7 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Minute Book L at Page 338 and Deed Book 57 at Page 534.

2. South McComb 13 KV substation site in Northeast Quarter of Northwest Quarter of Northeast Quarter, Section 13, Township 3 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 58 at Page 170.





3. 4.72 acres, McComb 115 KV substation site in Northwest Quarter of Section 5, Township 3 North, Range 8 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 115 at Page 91.

4. Leasehold - Plantation Pipeline 115 KV substation site in the Northeast Quarter of Section 13, Township 1 North, Range 8 East, and the Northwest Quarter of Section 18, Township 1 North, Range 9 East.

5. 13.510 acres, West McComb 115 KV substation site in the Northwest Quarter of Southwest Quarter, Section 2, Township 3 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 157 at Page 119; less 0.021 acres to City of McComb, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 173 at Page 147.

6. Leasehold - Colonial Pipeline 115 KV substation site in Northeast Quarter of Southeast Quarter of Section 24, Township 2 North, Range 7 East.

7. 2.15 acres, Fernwood 115 KV substation site in Northwest Quarter of Southwest Quarter and Southwest Quarter of Northwest Quarter, Section 31, Township 3 North, Range 8 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 54 at Page 309.
QUITMAN COUNTY :
1. Marks 115 KV substation site:
Tract 1: 1.57 acres in Northeast Quarter of Southeast Quarter, Section 3, and Northwest Quarter of Southwest Quarter, Section 2, all in Township 27 North, Range 1 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Quitman County, Mississippi, in Book AA-8 at Page 518.
Tract 2: 4.51 acres in Northeast Quarter of Southeast Quarter of Section 3, Township 27 North, Range 1 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Quitman County, Mississippi, in Book AA-8 at Page 518; less 0.12 acres sold to Quitman County on 9/5/73, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Quitman County, Mississippi, in Book B-27 at Page 585.
RANKIN COUNTY :
1. Star 115 KV substation:
A parcel of land located in the Northeast Quarter of the Southeast Quarter of Section 2, Township 3 North, Range 3 East, Rankin County, Mississippi, and being more particularly described as follows:
Beginning at a point in the centerline of Westville Road, said point being marked by a nail 4,194.6 feet North and 2,621.1 feet West of the Southeast corner of the West Half of the Northwest 1/4 of Section 12, Township 3 North, Range 2 East, Rankin County, Mississippi, run thence South 89 degrees, 50 minutes East, along the south property line of that tract of land conveyed to Betty Dewees Stewart by Warranty Deed dated May 31, 1972, and recorded in Book 285, Page 212 of the records in the Office of the Chancery Clerk of Rankin County, Mississippi, a distance of 894.4




feet, more or less, to the west property line of that tract of land conveyed to Frazier Morris, Jim Henry Morris, Jewel Brown, Ruby Joyce Thornton, John Morris, Elizah Morris, Bertha Morris Wingate, Mary Morris, Myra Morris, Aitha Morris and Rogers Morris by Quitclaim Deed dated May 22, 1969, and recorded in Book 250, Page 503 of the records in the Office of the Chancery Clerk of Rankin County, Mississippi; run thence northerly, along said west property line a distance of 173.9 feet, more or less, to a point on the centerline of Mississippi Power & Light Company’s South Jackson to Magee 115 KV transmission line; run thence North 44 degrees, 57 minutes West, along the centerline of said transmission line, a distance of 1037.5 feet to a point on the centerline of Westville Road; run thence the following bearings and distances, along the centerline of said Westville Road, South 20 degrees 28 minutes West a distance of 184.72 feet, South 10 degrees 27 minutes West a distance of 592.42 feet; South 02 degrees, 02 minutes East a distance of 149.90 feet to the Point of Beginning, said tract of land containing 11.4 acres, less 0.3 acres of Westville Road right of way, for a net of 11.1 acres, more or less, in the Northeast 1/4 of the Southeast 1/4 of Section 2, Township 3 North, Range 2 East, Rankin County, Mississippi, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 524 at Page 448, and as shown on a map or plat attached thereto as Exhibit “A”.
2. Easement - Klean Steel 115 KV substation site in Section 31, Township 6 North, Range 2 East, including parking area and roadway.

3. Leasehold improvements - Marquette Cement 115 KV substation in Section 17, Township 5 North, Range 3 East.

4. Easement - Brandon 115 KV switching station site in East Half of West Half of Northeast Quarter, Section 5, Township 5 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 131 at Page 425.

5. Luckney 115 KV substation site:
Parcel 1: 1.7 acres, in Southwest Quarter of Northwest Quarter, Section 24, Township 6 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 297 at Page 363.
Parcel 2: 2.23 acres in the Southwest Quarter of Northwest Quarter, Section 24, Township 6 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 344 at Page 661.
6. 9.398 acres, Brandon 115 KV substation site in North Half of Section 17, Township 5 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 235 at Page 99.

7. 2.1 acres, Jackson-Rankin Industrial 115 KV substation site in the North Half of Section 23, Township 5 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 305 at Page 165.




8. Thompson Airport 115 KV substation site:
Parcel 1: 9.0 acres in West Half of Northwest Quarter, Section 15, Township 5 North, Range 2 East, as. more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 191 at Page 308.
Parcel 2: 14.5 acres in Northwest Quarter of Section 15, Township 5 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 191 at Page 323.
9. 2.92 acres, Fannin Road, 115 KV substation site in the Northeast Quarter of Northeast Quarter, Section 13, Township 5 North, Range 1 East, including roadway easement 50 feet in width from Highway 80, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 387 at Page 273.

10. Flowood 115 KV substation site:
Parcel 1: 5.07 acres in the South Half of Lot 7, Section 31, Township 6 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 154 at Page 4.
Parcel 2: 0.969 acres in South Half of Lot 7, Section 31, Township 6 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 155 at Page 461.
11. 4.02 acres, Florence 115 KV substation site in Northeast Quarter of Northeast Quarter, Section 13, Township 4 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 231 at Page 546.

12. 137.89 acres, Rankin 500 KV substation site in Section 11, Township 5 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 436 at Page 573.

13. 5.8 acres, Whitfield 115 KV substation site in Section 27, Township 5 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 504 at Pages 349‑351.

14. 5.74 acres, Pelahatchie 115 KV substation site in Northwest Quarter of Northwest Quarter, Section 36, Township 6 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 131 at Page 519.

SCOTT COUNTY :
1. 2.556 acres, Morton 115 KV substation site in Northeast Quarter of Northwest Quarter, Section 23, Township 6 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Scott County, Mississippi, in Book 5-Z at Page 528.





2. 0.575 acres, 115 KV Line Tower Site (Fee land) in Southeast Quarter of Southwest Quarter, Section 14, Township 6 North, Range 6 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Scott County, Mississippi, in Book 6-A at Page 331.
SHARKEY COUNTY :
1. 8.00 acres, Rolling Fork 115 KV substation site in Northeast Quarter of Section 14, Township 12 North, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sharkey County, Mississippi, in Book 95 at Page 60.
SIMPSON COUNTY :
1. Georgetown 115 KV substation site:
Parcel 1: 5.44 acres in the Southwest Quarter of Southwest Quarter, Section 32, Township 1 North, Range 2 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 368 at Page 125 and Book 380 at Page 393.
Parcel 2: 0.21 acres in Northwest Quarter of Southwest Quarter, Section 32, Township 1 North, Range 2 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 368 at Page 127 and Book 380 at Page 390.
2. 13 KV substation site in Lot 103 of L.H. May Addition to Mendenhall, Section 34, Township 2 North, Range 4 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 177 at Page 450; Book 590 at Page 40; and Book 589 at Page 514.

3. 7.026 acres, Mendenhall 115 KV substation site in the Northwest Quarter of Southeast Quarter, section 27, Township 2 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 460 at Page 507.

4. 4.25 acres, Magee 115 KV substation site in Southeast Quarter of Northwest Quarter, Section 35, Township 1 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 225 at Page 443; less 0.55 acres sold to Ray P. Jones, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 307 at Page 70.
SMITH COUNTY :
1. 5.28 acres, Raleigh 115 KV substation site in Southwest Quarter of Southwest Quarter, Section 30, Township 2 North, Range 8 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Smith County, Mississippi, in Book 133 at Page 331.
SUNFLOWER COUNTY :
1. 5.60 acres, Drew 115 KV substation site in Southwest Quarter of Southeast Quarter, Section 9, Township 23 North, Range 3 West, as more particularly described in the document




recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book M-13 at Page 322.

2. Indianola 115 KV substation site:
Parcel 1: 8.82 acres in North Half of North Half, Section 5, Township 18 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book M-7 at Page 230; less 0.39 acres to Highway Commission 12/20/78, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-22 at Page 575.
Parcel 2: 10.170 acres in East Half of East Half of Northwest Quarter and West Half of West Half of Northeast Quarter of Section 5, Township 18 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book W-14 at Page 63; less 0.003 acres to Highway Commission 12/20/78, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-22 at Page 575.
3. Indianola 230 KV substation site:
Parcel 1 (Moore-Levingston): 3.19 acres in West Half, Section 5, Township 18 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book U-19 at Page 398; less 0.06 acres to Highway Commission 12/20/78, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-22 at Page 575.
Parcel 2 (R.J. and David Allen): 1.32 acres in East Half of Section 5, Township 18 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book U-19 at Page 403; less 0.347 acres to Highway Commission 12/20/78, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-22 at Page 575.
4. 1.34 acres, Moorhead 115 KV substation site in the Northeast Quarter, Section 4, Township 18 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book I-18 at Page 345.

5. 3.38 acres, Ruleville 115 KV substation site in Section 30, Township 22 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book D-24 at Page 452.

6. City of Moorhead 13 KV substation site: All of Lot 5, Block 5, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book Q-7 at Page 146.

7. Leased Inverness 115 KV substation site: 2.41 acres in Northeast Quarter of Northeast Quarter, Section 15, Township 17 North, Range 4 West, as more particularly described in the document




recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book K-17 at Page 149.

8. City of Drew Old 13 KV substation site in Lot 7, Block 6, Parks Addition, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book C-10 at Page 517.

9. City of Ruleville 13 KV substation site in Lot 3, Block 3, Rule’s Second Addition, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book M-7 at Page 379.
TALLAHATCHIE COUNTY :
1. 13 KV substation site being Lot 8, Block 1, Cossar Subdivision, in Section 26, Township 25 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tallahatchie County, Mississippi, in Book 118 at Page 345.

2. 4.60 acres, Charleston 115 KV substation site in Northeast Quarter of Northeast Quarter, Section 31, Township 25 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tallahatchie County, Mississippi, in Book 197 at Page 162.

3. Old 13 KV substation site (vacant): Part of Lot 15, Block F, Thayer’s 1905 Survey, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Tallahatchie County, Mississippi, in Book 36 at Page 371, and Book 74 at Page 51.

4. 5.72 acres, Webb 115 KV substation site in the Southeast Quarter of Northwest Quarter, Section 19, Township 24 North, Range 1 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tallahatchie County, Mississippi, in Book 97 at Page 433; less 0.28 acres to Tallahatchie County in 1965, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tallahatchie County, Mississippi, in Book 149 at Page 456.
TATE COUNTY :
1. 13 KV substation site (vacant): Part of Lot 4, Block H, Heard’s Survey, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book “CC” at Page 542.

2. 4.75 acres, Senatobia 115 KV substation site described as 5.25 acres in Northeast Quarter, Section 29, Township 5 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book “NN” at Page 533; less 0.50 acres to City, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book A-17 at Page 310.

3. 6.0 acres, Coldwater 115 KV substation site in Northeast Quarter of Northeast Quarter, Section 32, Township 4 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book A-5 at Page 283.





4. Easement - 13 KV regulator site (vacant) in South Half of Section 6, Township 5 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book “TT” at Page 250.

5. Easement - 13 KV regulator site in Southeast Quarter, Section 25, Township 4 South, Range 7 West, and being located 3.6 miles East of Coldwater on Highway 306.
TUNICA COUNTY :
1. 13 KV substation site in the Northeast Quarter of Southeast Quarter, Section 3, Township 5 South, Range 12 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tunica County, Mississippi, in Book T-2 at Page 482.

2. 5.0 acres, Tunica 115 KV substation site in the East Half of Section 5, Township 5 South, Range 11 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tunica County, Mississippi, in Book S-2 at Page 580.

3. Tunica 230/115 KV substation site: Being 21 acres in the South Half of Section 5, Township 5 South, Range 11 West, as more particularly described in the document recorded among th eland records in the office of the Chancery Clerk of Tunica County, Mississippi, in Book N-4 at Pages 491-493.

4. Lula 115 KV substation site in Southeast Quarter of Southeast Quarter, Section 9, Township 7 South, Range 12 West:
Parcel 1: 0.39 acres, as more particularly described. in the document recorded among the land records in the office of the Chancery Clerk of Tunica County, Mississippi, in Book B-3 at Page 234.
Parcel 2: 0.183 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tunica County, Mississippi, in Book F-3 at Page 508.
WALTHALL COUNTY :
1. 10.50 acres, Tylertown 115 KV substation site in the Southwest Quarter of Southeast Quarter, Section 20, Township 2 North, Range 11 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Walthall County, Mississippi, in Book 70 at Page 413.
WARREN COUNTY :
1. 2.81 acres, Bovine 115 KV substation site in Section 17, Township 16 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 502 at Page 155.

2. 2.67 acres, Openwood 115 KV substation site in Sections 10 and 11, Township 16 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 578 at Page 417.

3. 4.21 acres, North Vicksburg 115 KV substation site in Lot 3 of Cathell Survey in Section 1, Township 16 North, Range 3 East, and Section 8, Township 16 North, Range 4 East, as more particularly




described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 342 at Page 390.

4. 1.75 acres, Spencer Potash 115 KV substation site in Section 10, Township 15 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 394 at Page 78.

5. Vicksburg 115 KV substation site:
Parcel 1: 4.0 acres in Section 30, Township 16 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 158 at Page 513.
Parcel 2: 5.94 acres adjoining Parcel 1 in Section 30, Township 16 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 306 at Page 228.
6. 0.853 acres, West Vicksburg 115 KV substation site: Lots 294 and 299, Square 62, Vicksburg Proper, including rights, title and interest in an adjoining alley, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 340 at Pages 151, 179, 180, 219, 229 and 280; and Book 488 at Page 323.

7. 7.2 acres, South Vicksburg 115 KV substation site: Part of Lot 13, Mattingly Magnolia Plantation in Sections 19 and 20, Township 15 North, Range 3 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 304 at Page 426 and Book 411 at Page 171.

8. 3.82 acres, S.E. Vicksburg 115 KV substation site in the West Half of Section 16, Township 15 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 554 at Page 84.

9. 2.14 acres, East Vicksburg 115 KV substation site:
Parcel 1 (J.F. Lindigrin): 1.88 acres in the East Half of Section 32, Township 16 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 462 at Page 430.
Parcel 2 (J.W. Foley): 0.26 acres, including 40’ easement for ingress and egress in Section 32, Township 16 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 463 at Page 490.
10. 3.63 acres, Redwood 115 KV switching station site in the Northwest Quarter of Section 26, Township 18 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 352 at Page 187; less .05 acres sold to YVEPA on 11/28/84, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 790 at Pages 132-133.

11. Leasehold - Miss. Valley Portland Cement, in Section 23, Township 18 North, Range 4 East, Warren County, Mississippi.




WASHINGTON COUNTY :
1. E. Greenville 115 KV substation site: Lots 25, 31 and 32, Block 1, and Lot 25, Block 2 of Douglas Lynn Addition; also a lot 200’ x 100’ adjoining Lot 25 to the south. Above parcel includes R.O.W. easement, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 480 at Page 42; less 0.267 acres to Washington County, 5/8/58, for road, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 666 at Page 266.

2. 0.20 Greenville Industrial 115 KV substation site in Section 15, Township 17 North, Range 9 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1244 at Page 325.

3. 9.60 acres, Greenville 115 KV substation site, being the “Hale” tract in Lot 6, Section 21, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 210 at Page 224; less portion sold, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 254 at Page 608; Book 291 at Page 535; and Book 1178 at Page 250.

4. 0.685 acres, Greenville Industrial 115 KV substation site in Section 15, Township 18 North, Range 9 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1244 at Page 325.

5. 8.664 acres, Leland 115 KV substation site in the Northeast Quarter of Northeast Quarter, Section 14, Township 18 North, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 532 at Page 258; less 0.15 acres to Highway Commission, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 584 at Page 587.

6. 3.92 acres, Hollandale 115 KV substation site in Southwest Quarter of Section 18, Township 15 North, Range 6 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 338 at Page 204 (excludes property sold to Highway Commission).

7. 13 KV substation site in Lots 3 and 4, Block 27, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 210 at Page 345.

8. S.E. Greenville 115 KV substation site and roadway, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1346 at Page 289:
Parcel 1: 1.82 acres in Section 30, Township 18 North, Range 8 West.
Parcel 2: 0.92 acres in roadway in Southeast Quarter, Section 30, Township 18 North, Range 8 West.




Parcel 3: 0.60 acres, perpetual R.O.W. and easement across a tract of land in Section 30, Township 18 North, Range 8 West.
Parcel 4: 0.66 acres, R.O.W. and easement in Sections 30 and 35, Township 18 North, Range 8 West.
9. 5.60 acres, N. Greenville 115 KV substation site in Section 2, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 480 at Page 275; less 0.21 acres to Highway Commission, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 640 at Page 20 and Book 648 at Page 235.

10. Leasehold - Midtown 115 KV substation site: Lots 1, 2, 4-7, Block 1, Brown’s Addition; leased from Salvador C. Sarullo, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1012 at Page 376.
WILKINSON COUNTY :
1. 4.0 acres, Centreville 115 KV substation site in Sections 4 and 15, Township 1 North, Range 1 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Wilkinson County, Mississippi, in Book 4-W at Page 283.
YALOBUSHA COUNTY :
1. 18.33 acres, Tillatoba 230 KV substation site in the Southeast Quarter of Northwest Quarter and Southwest Quarter of Northeast Quarter, Section 8, Township 24 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Yalobusha County, Mississippi, in Book D-20 at Page 220.

2. Leasehold - 115 KV switching station site in Southwest Quarter of Northeast Quarter and the Southeast Quarter of Northwest Quarter, Section 8, Township 24 North, Range 4 East:
Tract 1: 0.34 acres, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Yalobusha County, Mississippi, in Book 65 at Pages 355 and 362.
Tract 2: 0.06 acres, 0.12 acres, and 0.29 acres, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Yalobusha County, Mississippi, in Book D-8 at Pages 123, 125, 127 and 128.
YAZOO COUNTY :
1. 0.57 leasehold to Capline-Benton 115 KV substation site: In Northeast Quarter of Northwest Quarter, Section 18, Township 11 North, Range 1 East.

2. 7.0 acres, Yazoo City 115 KV substation site: A part of Lots 5 and 6 as described in Circuit Court Cause Number 3258, in Section 15, Township 12 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Yazoo County, Mississippi, in Book IX at Page 36.





3. 8.11 acres, Yazoo City switching station site in the West Half of Southeast Quarter and East Half of Southwest Quarter of Section 15, Township 12 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Yazoo County, Mississippi, in Book 34-A at Page 78.
Also all other electric substations and substation sites or parts thereof owned by the Company, whether developed or undeveloped, or partially developed, and whether now equipped or operating or not and wherever situated, and all property acquired for use in connection therewith, including towers, poles, machinery, equipment, appliances and devices and appurtenances, buildings and other structures, and all of the Company’s lands on which any of the same are situated and whether now owned, or hereafter acquired, and also all rights-of-way, easements, permits, franchises and privileges owned by the Company, used or enjoyed in connection therewith, whether nor or hereafter acquired, subject, however, to the provisions of Section 15.03 hereof.
PARAGRAPH THREE
THE ELECTRIC TRANSMISSION AND DISTRIBUTION LINES OF THE COMPANY, including the towers, poles, wires, cables, switch racks, conductors, transformers, pole type substations, insulators and all appliances, devices, and equipment used or useful in connection with said transmission and distribution lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways, or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the State of Mississippi, to-wit:
ADAMS COUNTY :
1. 0.40 acres, 115 KV R.O.W. (fee) in Section 27, Township 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 10-G at Page 529.

2. 1.472 acres, River Crossing Tower Site in Section 55, Township 7 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 10-E at Page 78.




3. 40.00 acres, 115 KV Mississippi River Crossing Tower Site in Section 12, Township 8 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 4-Z at Page 39.
AMITE COUNTY :
1. 1.38 acres, 115 KV R.O.W. (fee) in Section 18, Township 3 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 179 at Page 306.

2. 1.27 acres, 115 KV R.O.W. (fee) in Section 19, Township 3 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 179 at Page 306.

COAHOMA COUNTY :
1. 14.4 acres, 115 KV River Crossing Tower Site: Including accretions in North Half of Section 2, Township 30 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 152 at Page 492.

2. 230/500 KV River Crossing Site near Lula:
Parcel 1 (C.M.T. Kirkman): 14.664 acres along the Mississippi River in Section 13, Township 30 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 372 at Page 289.
Parcel 2 (C.M.T. Kirkman): A strip lying West of the west boundary line of Parcel One next above, containing 6.25 acres, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 372 at Page 290.
COPIAH COUNTY:
1. 115 KV Transmission Line R.O.W. (fee land):
Parcel 1 (Henley Estate): 0.25 acres in North Half of Southeast Quarter, Section 23, Township 2 North, Range 2 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 6-Y at Pages 546, 548, 550 and 553.
Parcel 2: A parcel of land in the South Half of the Southeast Quarter of Section 23, Township 2 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 6-Y at Page 552.
Parcel 3 (Berry): 0.08 acres, Southwest Quarter of Southeast Quarter, Section 23, Township 2 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 5-W at Page 547, less property sold to Highway Commission, as more particularly described in the documents




recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 6-X at Pages 238 and 241.
DESOTO COUNTY :
1. Being Lots 7, 9, and 15 of Oak Ridge Estates as shown in Plat Book 23, Pages 10-11, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of DeSoto County, Mississippi, in Book 192 at Page 302; Book 191 at Page 354; and Book 191 at Page 353.

GRENADA COUNTY :
1. 3.706 acres, Fee R.O.W. being part of Lots 10, 11 and 27 of North Sunnycrest Rev. Plat Book 1, Page 60, in East Half of Section 32, Township 22 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 154 at Page 509.

JEFFERSON COUNTY :
1. 500 KV Transmission Line R.O.W. (fee land):
Parcel 1: 40.96 acres in the Northeast Quarter of Section 21, Section 22, and the Southwest Quarter of Section 23, Township 9 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Jefferson County, Mississippi, in Book 5X at Page 200.
Parcel 2: 1.15 acres in the Southeast Quarter of Southeast Quarter, Section 7, Township 9 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Jefferson County, Mississippi, in Book 5X at Page 200.
Parcel 3: 4.68 acres, in the Southeast Quarter of Section 7, Township 9 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Jefferson County, Mississippi, in Book 5X at Page 200.
HINDS COUNTY :
1. Transmission R.O.W. (S/W Jackson - in fee): 0.35 acres in Northwest Quarter of Northeast Quarter, Section 31, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1332 at Page 180.

2. Transmission R.O.W. (S/W Jackson - in fee): 2.168 acres in the Southeast Quarter of Southwest Quarter, Section 30, and Southwest Quarter of Southeast Quarter, Section 30, and Northwest Quarter of Northeast Quarter, Section 31, in Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1338 at Page 134.

3. Transmission R.O.W. (S/W Jackson - in fee): 0.727 acres in Northwest Quarter of Southwest Quarter and 5.246 acres in East Half of Southwest Quarter, all in Section 30, Township 5




North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1338 at Page 128.

4. Transmission R.O.W. (S/W Jackson - in fee): 1.41 acres in Southwest Corner of Lot 17, Cooper Suburban Farms, Section 30, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1298 at Page 365.

5. Transmission R.O.W. (S/W Jackson - in fee): 2.73 acres in East Half of Southwest Quarter of Northwest Quarter, Section 30, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1326 at Page 92.

6. Transmission R.O.W. (S/W Jackson - in fee): 4.033 acres, East Half of East Half of Northeast Quarter, Section 25, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1356 at Page 337.

7. Transmission R.O.W. (R.B.S.E.S./Monument - in fee): Portion of Lot 9 of Cohea Estates Survey, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of the Hinds County at Jackson, Mississippi, in Book 1122 at Page 20, less .157 acres to City of Jackson 7/24/80, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2768 at Page 777.

8. Transmission R.O.W. (Kingswood/Terry - in fee): 100 foot strip of land between Block B, C, D and E of Creston Hills Subdivision, Part 3, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1006 at Page 208.

9. Transmission R.O.W. (Kingswood/Terry - in fee): 100 foot wide strip lying West of Block “D” and West of Lots 5 and 6, Block E, Creston Hills Subdivision, First Judicial District, Hinds County, Mississippi, as shown in Plat Book 7, Page 39; less area 50.0’ x 82.5’ sold to Hunt, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1298 at Page 502.

10. Transmission R.O.W. (Kingswood/Terry - in fee): 0.06 acres of Lot 6, Block 4, Englewood Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1526 at Page 609.

11. Transmission R.O.W. (Treatment Plant - in fee): 1.76 acres along the West Boundary of Meadows Subdivision, being a part of Lots 26 and 27 in Southwest Quarter of Northwest Quarter, Section 32, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more




particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2158 at Page 226.

12. Transmission R.O.W. (S/W Jackson - in fee): 3.87 acres in Northeast Quarter, Section 31, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1332 at Page 182.

13. Transmission R.O.W. (S/W Jackson - in fee): 0.06 acres in Northwest Quarter of Northeast Quarter, Section 31, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1340 at Page 159.

14. Transmission R.O.W. (S/W Jackson - in fee): 8.66 acres in Northwest Quarter of Northeast Quarter, Section 31, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1346 at Page 472.

15. 13 KV Line - Right-of-way (fee land) Jackson Air Base Line: Lot 2, Block 30, Country Club Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 347 at Page 407.

16. 13 KV Line - Right-of-way (fee land) M.P.I. Line: Part of Lot 5, Block F, Roebuck Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 518 at Page 463.

17. 19.89 acres, fee R.O.W. in South Half, Section 5, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1572 at Page 240 and Book 1634 at Page 198, less 6.75 acres sold 8/30/83, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2932 at Page 327.

18. 5.32 acres fee R.O.W. in Southeast Quarter of Southeast Quarter, Section 4, Township 4 North, Range 2 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 201 at Page 167.

19. Transmission R.O.W. in fee (RBEHV - Rankin 500 KV Lines) being 1.21 acres in the Southeast Quarter, Section 9, Township 4 North, Range 1 West, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 3306 at Page 21.





20. Transmission R.O.W. (at S. Jackson - in fee): 3.28 acres, West Half of Section 15, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 316 at Page 503 and Book 1564 at Page 146.

21. Transmission R.O.W. (Robinson/W. Jackson - in fee): 4.97 acres being a portion of Lots 15-22 of Block A, a portion of Lots 13-17 of Block B, a portion of Lots 12-15 of Block C, and a portion of Lots 10-13 of Block D, Green Hills Subdivision II in the West Half of Northeast Quarter, Section 12, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1830 at Page 533.

22. Transmission R.O.W. (R.B.S.E.S./Monument - in fee): Lots 1-3, Block C of Shady Oaks Subdivision, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1090 at Page 444. Also North Half of Corley Avenue as set out in Minute Book JJ, Page 167, and as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1176 at Page 415, less 0.504 acre easement to City, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1136 at Page 412, and less 0.405 acres sold to W.Y. McCain, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1946 at Page 116.

23. Transmission R.O.W. (R.B.S.E.S./Monument - in fee): Lot 31, Block 4, Shady Oaks Subdivision, Part 6, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1090 at Page 444; less easement to City, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1136 at Page 412.

24. Transmission R.O.W. (R.B.S.E.S./Monument - in fee): Lot 11, Block W of Shady Oaks Subdivision, Part 5, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1076 at Page 84.

25. Transmission R.O.W. (R.B.S.E.S./Monument - in fee): Lot 1, Block 19, Shady Oaks Subdivision, Part 10, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of First Judicial District of Hinds County at Jackson, Mississippi, in Book 1076 at Page 86.

26. Transmission R.O.W. (R.B.S.E.S./Monument - in fee): Lot 21, Block 28, Shady Oaks Subdivision, Part 10, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1076 at Page 82.




MADISON COUNTY :
1. Transmission R.O.W. (in fee): Being .49 acres in the Rex Brown Steam Electric Station to Hoy Road 230/115 transmission line, being a strip of land 50 feet wide extending 424.47 feet from the South line of Charity Church Road, in the Northeast Quarter of the Northwest Quarter, Section 33, Township 7 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 211 at Page 644.
PIKE COUNTY :
1. 13 KV Right-of-way (fee land) across Square 52 in Section 13, Township 3 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Page 418.

2. Fernwood 13 KV Line Right-of-way (fee land): Land 50 feet wide across the South Half of Southeast Quarter of Section 25 and Northeast Quarter of Northeast Quarter, Section 36, all in Township 3 North, Range 7 East; also across the West Half of Northwest Quarter and Northwest Quarter of Southwest Quarter, Section 31, Township 3 North, Range 8 East, and all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Page 370.

3. Fernwood 13 KV Line Right-of-way (fee land): Land 100 feet wide across the Northwest Quarter of Southwest Quarter, Section 31, Township 3 North, Range 8 East; also across the Northeast Quarter of Southeast Quarter and the Southeast Quarter of Southeast Quarter, Section 36, Township 3 North, Range 7 East, all as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Pages 370, 436, 451 and 453, subject to R.O.W. easement to City of Magnolia, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 172 at Page 12.

4. Fernwood 13 KV Right-of-way (fee land): Land 100 feet wide across South Half, Section 24, Township 3 North, Range 7 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Pages 390, 391, 416, 417, 430 and 450.

5. Fernwood 13 KV Line Right-of-way (fee land): Land 100 feet wide across Northeast Quarter of Section 25, and the Southeast Quarter of Section 25, Township 3 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Page 370.

6. 13 KV Line Right-of-way (fee land): Land 75 feet wide across the North Half of Southwest Quarter of Southeast Quarter and South Half of Northwest Quarter of Southeast Quarter of Section 1, Township 2 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Page 451.

7. Magnolia 13 KV Line Right-of-way (fee land): Land 100 feet wide across the Northeast Quarter and South Half of Southwest Quarter of Southeast Quarter and North Half of Northwest quarter of Southeast Quarter, Section 1, Township 2 North, Range 7 East; also across the North Half, Section 12,




Township 2 North, Range 7 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 39 at Pages 370, 431, 432, 434, 437, 439, 451, 453 and 454.

8. Magnolia 13 KV Line Right-of-way (fee land): Land in the North Half of Section 12, Township 2 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book L at Page 196.
SIMPSON COUNTY :
1. 13 KV Line R.O.W. (fee land): 0.09 acres in Southeast Quarter of Northwest Quarter, Section 35, Township 1 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 617 at Page 387.
SUNFLOWER COUNTY :
1. 230 KV Transmission Line R.O.W. (fee land):
Parcel 1 (Moore-Levingston): 1.63 acres in Southwest Quarter, Section 5, Township 18 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book U-19 at Page 398, less 0.01 acres to Highway Commission 12/20/78, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-22 at Page 575.
Parcel 2 (R.J. and David Allen): 1.81 acres in Southeast Quarter, Section 5, Township 18 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book U-19 at Page 403, less 0.11 acres to Highway Commission 12/20/78, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-22 at Page 575.
WARREN COUNTY :
1. 115 KV Transmission Line R.O.W. (fee land):
Parcel 1 (Anderson Tully Co.): 22.58 acres 150 feet in width across the Southeast Quarter of Southwest Quarter, Section 4, and the Northwest Quarter, Section 9, and East Half, Section 8, all in Township 16 North, Range 5 East, and all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 406 at Page 12.
Parcel 2 (Anderson Tully Co.): 6.75 acres 150 feet in width across the Northeast Quarter, Section 4, Township 16 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 406 at Page 18.
Parcel 3 (Anderson Tully Co.): 45.06 acres 150 feet wide across the Northeast Quarter of Section 34, Northwest Quarter of Northwest Quarter of Section 35, Section 26, Southeast Quarter of Southeast Quarter of Section 23, West Half of Southwest Quarter of Section 24, all in Township 17 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 406 at Page 9.




Parcel 4 (Anderson Tully Co.): 24.95 acres 150 feet wide across the Northwest Quarter of Section 34, and the Southwest Quarter of Section 27, Township 8 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 406 at Page 15.
2. Leasehold - Vertac 115 KV Substation, in Section 11, Township 15 North, Range 3 East.

3. G.G.N.S. - B.W.S.E.S. - 500 KV R.O.W. (leased from Board of Supervisors);
Parcel 1: 8.72 acres. A 200 foot wide strip of land extending from the South Line of Section 16, Township 14 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 620 at Page 301.
Parcel 2: 23.29 acres. A 200 foot wide strip extending south from Goodrun Road, in Section 28, Township 15 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 620 at Page 301.
Parcel 3: 9.18 acres. A 200 foot wide strip extending Northwesterly from the South Line of Section 16, Township 15 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 620 at Page 301.
4. 500 KV Transmission Lines R.O.W. (fee land): Lot 115 of the Warrenton Lots in Sections 29 and 31, Township 15 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 596 at Page 279.

5. 14.4 acres, North Vicksburg - Redwood 115 KV Line R.O.W. (fee land) in Northeast Quarter of Southwest Quarter and Northwest Quarter of Southeast Quarter, Section 26, Township 18 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 344 at Page 311.

WASHINGTON COUNTY :
1. 115 KV Line R.O.W. (K.C. Archer, et al): 1.42 acres across the West Half of Southwest Quarter, Section 22, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 216 at Page 67.

2. 115 KV Line R.O.W. (Mrs. Kate C. Archer); 2.70 acres across Lots 1, 2, and 5 in Section 21, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 208 at Page 165, less 1.25 acres to Geo. Archer 11/29/50, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 441 at Page 511.

3. 115 KV Line R.O.W. (Greenville Law Association): 3.88 acres in Section 22, Township 18 North, Range 8 West, as more particularly described in the documents recorded among the land records in




the office of the Chancery Clerk of Washington County, Mississippi, in Book 208 at Pages 192 and 195, and Book 212 at Page 472.

4. 115 KV Line R.O.W. (H.J. Smyth): 1.68 acres in the Southeast Quarter of Section 22 and the Southwest Quarter of Section 23, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 208 at Page 250.

5. 115 KV Line R.O.W. (M.L. Leavenworth): 1.13 acres in Block 1 of Section 22, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 208 at Page 175.

6. 115 KV Line R.O.W. (H.L. Westherbee, et al): 1.50 acres in Southwest Quarter, Section 22, Township 18 North, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book, 566 at Page 200.

7. 115 KV Line R.O.W. (Geo. E. Archer): Lot 6, Block 4, Southside Addition, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 734 at Page 582.

TRANSMISSION AND POWER LINES





FROM
TO
POLE
MILES
 
 
 
500KV Lines :
 
 
 
 
 
1/2 Mississippi River Crossing
S. of Vicksburg
0.45
Miss. River Crossing Tower
Dead End Tower
0.21
Dead End Tower
B. Wilson S.E.S.
0.86
B. Wilson S.E.S.
Ray Braswell E.H.V.
35.68
Ray Braswell E.H.V. Sub.
McAdams E.H.V. Sub.
65.34
McAdams E.H.V. Sub.
French Camp (tie with TVA)
24.84
Ray Braswell E.H.V.
Franklin E.H.V. Sub.
58.25
Franklin E.H.V. Sub.
La. State Line (Amite)
38.37
Franklin E.H.V. Sub.
La. State Line (Bogalusa)
51.48
B. Wilson S.E.S.
Grand Gulf 500KV Sw. Yard
21.46
Grand Gulf 500 KV Sw. Yard
Franklin E.H.V.
43.53
 
 
 
230KV LINES :
 
 
 
 
 
1/2 Mississippi River Crossing
Near Lula
0.58
Miss. River Cr. Tower (Lula)
Batesville 230 KV Sub.
39.28
G. Andrus S.E.S.
Miss. - Ark. State Line
3.59
G. Andrus S.E.S.
Indianola 230 KV Sub.
33.82
Indianola 230KV Sub.
Tillatobia 230 KV Sub.
56.48
Tillatoba 230 KV Sub.
Enid 230KV Sub.
16.23
Enid 230KV Sub.
Batesville 230 KV Sub.
10.00
G.A.S.E.S./Indianola Jct.
Clinton Ind. 230 KV Sub.
75.71
Clinton Ind. 230 KV Sub.
Ray Braswell E.H.V. Sub.
1.95
Ray Braswell E.H.V. Sub.
Northside Dr. 230KV Sub.
5.14
Northside Dr. 230KV Sub.
Rex Brown 230KV Sub.
3.99
Ray Braswell E.H.V. Sub.
Robinson Rd. 230KV Sub.
4.89
Rex Brown S.E.S.
Luckney 230KV Sub.
4.67
Luckney 230KV Sub.
Rankin 230/115KV Sub.
8.50
 
 
 
FROM
TO
POLE
MILES
 
 
 
Robinson Rd. 230KV Sub.
South Jackson 230KV Sub.
4.63
McAdams E.H.V. Sub.
Attala 230KV Sub.
1.19
McAdams E.H.V. Sub.
Pickens 230KV Sub.
16.20
Hoy Road 230KV Sub.
Canton 115KV Sub.
11.45
 
 
 
161KV LINES :
 
 
 
 
 
Hornlake 115KV Sub.
Tenn. State Line
5.90
 
 
 






115KV Lines :
 
 
 
 
 
Delta S.E.S.
Shelby Sw. Station
11.83
Shelby Sw. Station
Shelby 115KV Sub.
5.76
Shelby Sw. Station
Roundaway Sw. Station
4.63
Roundaway Sw. Station
Clarksdale 115KV Sub.
12.17
Clarksdale 115KV Sub.
Jonestown Sw. Station
11.97
Jonestown Sw. Station
Jonestown 115KV Sub.
2.08
Jonestown Sw. Station
Lula 115KV Sub.
10.42
Lula 115KV Sub.
Miss. River Crossing Tower
6.44
1/2 Miss. River Crossing
Near Lula
0.70
Lula 115KV Sub.
Tunica 230KV Sub.
14.19
Tunica 230KV Sub.
Tunica 115KV Sub.
0.58
Tunica 115KV Sub.
Walls 115KV Sub.
25.18
Walls 115KV Sub.
DeSoto 115KV Sub.
6.55
DeSoto 115KV Sub.
Horn Lake 115KV Sub.
2.78
Tunica 115KV Sub.
Crenshaw 115KV Sub.
16.33
Crenshaw 115KV Sub.
Como 115KV Sub.
14.80
Como 115KV Sub.
Batesville 230KV Sub.
12.57
Batesville 230KV Sub.
Sardis 115KV Sub.
8.73
Sardis 115KV Sub.
Senatobia 115KV Sub.
13.61
Senatobia 115KV Sub.
Coldwater 115KV Sub.
5.57
Coldwater 115KV Sub.
Hernando 115KV Sub.
8.15
Hernando 115KV Sub.
Nesbit Sw. Station
6.77
Nesbit Sw. Station
Nesbit 115KV Sub.
1.46
Nesbit Sw. Station
Horn Lake 115KV Sub.
5.79
Horn Lake 115KV Sub.
Greenbrook 115KV Sub.
3.23
Delta S.E.S.
Drew 115KV Sub.
13.25
Drew 115KV Sub.
Webb 115KV Sub.
11.19
Webb 115KV Sub.
Marks 115KV Sub.
22.67
Marks 115KV Sub.
Batesville 230KV Sub.
22.30
Tillatoba 230KV Sub.
Charleston 115KV Sub.
7.33
Tillatoba 230KV Sub.
Grenada 115KV Sub.
13.70
Grenada 115KV Sub.
South Grenada 115KV Sub.
5.51
South Grenada 115KV Sub.
Elliott Sw. Station
4.11
Elliott Sw. Station
Elliott 115KV Sub.
1.10
 
 
 
FROM
TO
POLE
MILES
 
 
 
Elliott Sw. Station
Sawyer Sw. Station
11.62
Sawyer 115KV Sw. Station
Winona 115KV Sub.
5.03
Delta S.E.S.
Ruleville 115KV Sub.
11.06
Ruleville 115KV Sub.
Schlater 115KV Sub.
12.14
Schlater 115KV Sub.
Greenwood 115KV Sub.
18.43




Delta S.E.S.
Cleveland 115KV Sub.
2.14
Cleveland 115KV Sub.
South Cleveland 115KV Sub.
4.23
South Cleveland 115KV Sub.
Shaw Sw. Station
11.11
Shaw Sw. Station
Indianola 115KV Sub.
9.85
Indianola 115KV Sub.
Indianola 230KV Sub.
0.38
 
 
 
Delta S.E.S.
Pace Sw. Station
7.81
Pace Sw. Station
Rosedale 115KV Sub.
8.57
Rosedale 115KV Sub.
Stringtown 115KV Sub.
18.40
Stringtown 115KV Sub.
North Greenville 115KV Sub.
10.02
North Greenville 115KV Sub.
East Greenville 115KV Sub.
4.07
East Greenville 115KV Sub.
Greenville 115KV Sub.
3.48
Greenville 115KV Sub.
Leland 115KV Sub.
7.64
Leland 115KV Sub.
Indianola 230KV Sub.
15.16
Indianola 230KV Sub.
Moorhead 115KV Sub.
7.95
Moorhead 115KV Sub.
Itta Bena Sw. Station
11.24
Itta Bena Sw. Station
Greenwood 115KV Sub.
8.51
Greenwood 115KV Sub.
Browning Sw. Station
3.97
Browning Sw. Station
Carrollton Sw. Station
12.60
Carrollton Sw. Station
D.E.P.A. 115KV Sub.
0.25
Carrollton Sw. Station
Winona 115KV Sub.
10.66
Rankin 230/115KV Sub.
Brandon 115KV Sub.
2.09
Rankin 230/115KV Sub.
Pelahatchie 115KV Sub.
15.02
Pelahatchie 115KV Sub.
Morton 115KV Sub.
6.07
Morton 115KV Sub.
Miss. Power Co., Tie (Forest)
8.93
Pelahatchie 115KV Sub.
Scott Sw. Station
16.79
Scott Sw. Station
Carthage 115KV Sub.
14.49
Carthage 115KV Sub.
Attala 230KV Sub.
26.89
Attala 230KV Sub.
Kosciusko 115KV Sub.
4.78
Kosciusko 115KV Sub.
Winona 115KV Sub.
29.70
Rex Brown S.E.S.
Hoy Road 115KV Sub.
14.78
Canton 115KV Sub.
Pickens 115KV Sub.
22.59
Pickens 115KV Sub.
Durant 115KV Sub.
10.64
Durant 115KV Sub.
Bowling Green Sw. Station
11.62
Bowling Green Sw. Station
Lexington 115KV Sub.
9.43
Bowling Green Sw. Station
Acona Sw. Station
5.70
Acona Sw. Station
Greenwood D.E.P.A.Sw.Station
8.43
Greenwood D.E.P.A.Sw Station
Greenwood 115KV Sub.
9.38
Rex Brown S.E.S.
Flora 115KV Sub.
14.14
Flora 115KV Sub.
Little Yazoo Sw. Station
13.42
Little Yazoo Sw. Station
Yazoo City Sw. Station
12.94
Yazoo City Sw. Station
Midway Sw. Station
11.62
 
 
 
FROM
TO
POLE
MILES
 
 
 
Midway Sw. Station
Pickens 115KV Sub.
15.24




B. Wilson S.E.S.
S.E. Vicksburg 115KV Sub.
0.38
S.E. Vicksburg 115KV Sub.
Bovina 115KV Sub.
8.19
Bovina 115KV Sub.
Openwood 115KV Sub.
5.15
Openwood 115KV Sub.
N. Vicksburg 115KV Sub.
4.35
Bovina 115KV Sub.
Yazoo City Mun.Sw.Station
40.57
Yazoo City Mun. Sw. Station
Y.V.E.P.A. Sw. Station
3.38
Y.V.E.P.A. Sw. Station
Yazoo City Sw. Station
0.81
Yazoo City Sw. Station
Yazoo City 115KV Sub.
0.12
Yazoo City Sw. Station
Midnight 115KV Sub.
15.61
Midnight 115KV Sub.
Belzoni Sw. Station
1.70
Belzoni Sw. Station
Belzoni 115KV Sub.
12.38
Belzoni 115KV Sub.
Isola Sw. Station
7.54
Isola Sw. Station
Inverness Sw. Station
5.45
Inverness Sw. Station
Inverness 115KV Sub.
1.57
Inverness Sw. Station
Indianola 230KV Sub.
8.06
Indianola 230KV Sub.
Indianola 115KV Sub.
0.38
Belzoni Sw. Station
Murphy Sw. Station
7.62
Murphy Sw. Station
Hollandale 115KV Sub.
9.74
Hollandale 115KV Sub.
T.C.E.P.A. Sw. Station
17.14
T.C.E.P.A. Sw. Station
S.E. Greenville 115KV Sub.
2.70
S.E. Greenville 115KV Sub.
Greenville 115KV Sub.
2.66
Greenville 115KV Sub.
Greenville Ind. 115KV Sub.
3.45
Greenville Ind. 115KV Sub.
G. Andrus S.E.S.
1.84
Greenville 115KV Sub.
G. Andrus S.E.S.(W/L of D.C.)
0.13
Greenville 115KV Sub.
Midtown 115KV Sub.
2.73
Midtown 115KV
North Greenville 115KV Sub.
2.36
Hollandale 115KV Sub.
Nitta Yuma Sw. Station
8.97
Nitta Yuma Sw. Station
Rolling Fork 115KV Sub.
9.97
Rex Brown S.E.S.
Hico Sw. Station
1.89
Hico Sw. Station
North Jackson 115KV Sub.
2.75
North Jackson 115KV Sub.
Canton Road 115KV Sub.
2.41
Canton Road 115KV Sub.
N.E. Jackson 115KV Sub.
3.12
Hico Sw. Station
Fondren 115KV Sub.
3.47
Fondren 115KV Sub.
Medical Center 115KV Sub.
1.05
Fondren 115KV Sub.
Monument St. 115KV Sub.
2.43
Rex Brown S.E.S.
Livingston Rd. 115KV Sub.
4.01
Livingston Rd. 115KV Sub.
Ridgeland 115KV Sub.
4.20
Ridgeland 115KV Sub.
Country Club 115KV Sub.
4.37
Country Club 115KV Sub.
N.E. Jackson 115KV Sub.
3.54
N.E. Jackson 115KV Sub.
Klean Steel 115KV Sub.
2.63
Klean Steel 115KV Sub.
Flowood 115KV Sub.
0.27
Flowood 115KV Sub.
Fannin Road 115KV Sub.
2.24
Fannin Road 115KV Sub.
East Jackson 115KV Sub.
3.54
East Jackson 115KV Sub.
South Jackson 115KV Sub.
1.78
Ray Braswell E.H.V. Sub.
West Jackson 115KV Sub.
2.02
 
 
 




FROM
TO
POLE
MILES
 
 
 
West Jackson 115KV Sub.
South Jackson 115KV Sub.
1.18
Ray Braswell E.H.V. Sub.
Forest Hill 115KV Sub.
5.24
Forest Hill 115KV Sub.
S.W. Jackson 115KV Sub.
2.84
Rex Brown S.E.S.
Miami St. 115KV Sub.
1.76
Miami St. 115KV Sub.
Monument St. 115KV Sub.
2.80
Monument St. 115KV Sub.
Gallatin 115KV Sub.
0.82
Gallatin 115KV Sub.
S. Jackson 115KV Sub.
1.55
Rex Brown 230KV Sub.
Rex Brown S.E.S.
0.22
Rex Brown S.E.S.
N.W. Jackson Sw. Station
2.26
N.W. Jackson Sw. Station
N.W. Jackson 115KV Sub.
1.70
 
 
 
N.W. Jackson Sw. Station
Clinton 115KV Sub.
4.61
Clinton 115KV Sub.
Ray Braswell E.H.V. Sub.
2.39
Ray Braswell E.H.V. Sub.
Bolton 115KV Sub.
7.80
Bolton 115KV Sub.
Utica 115KV Sub.
16.62
Bolton 115KV Sub.
Raymond Capline 115KV Sub.
5.15
Raymond Capline 115KV Sub.
Raymond 115KV Sub.
1.29
Bolton 115KV Sub.
Edwards 115KV Sub.
9.13
Edwards 115KV Sub.
East Vicksburg Sw. Station
11.42
East Vicksburg Sw. Station
East Vicksburg 115KV Sub.
3.14
East Vicksburg Sw. Station
Waterways 115KV Sub.
3.15
Waterways 115KV Sub.
Vicksburg 115KV Sub.
1.83
Vicksburg 115KV Sub.
Spencer Potash 115KV Sub.
1.95
Spencer Potash 115KV Sub.
B. Wilson S.E.S.
2.62
B. Wilson S.E.S.
B. Wilson Sw. Yard
0.07
B. Wilson S.E.S.
E.H.V. River Tower
0.48
B. Wilson S.E.S.
South Vicksburg 115KV Sub.
1.83
South Vicksburg 115KV Sub.
Port Gibson 115KV Sub.
22.85
Vicksburg 115KV Sub.
West Vicksburg 115KV Sub.
2.76
West Vicksburg 115KV Sub.
North Vicksburg 115KV Sub.
2.84
North Vicksburg 115KV Sub.
Redwood (MVC) Sw. Station
10.12
Redwood (MVC) Sw. Station
Onward Sw. Station
16.34
Onward Sw. Station
Rolling Fork 115KV Sub.
13.40
South Jackson 115KV Sub.
Florence 115KV Sub.
7.61
Florence 115KV Sub.
Florence Sw. Station
3.45
Florence Sw. Station
Star 115KV Sub.
3.66
Star 115KV Sub.
Mendenhall 115KV Sub.
15.75
Mendenhall 115KV Sub.
Magee 115KV Sub.
10.04
Magee 115KV Sub.
Raleigh 115KV Sub.
15.68
Magee 115KV Sub.
Mt. Olive (Tie to M.P.& Co.)
12.54
Magee 115KV Sub.
NewHebron 115KV Sub.
16.63
NewHebron 115KV Sub.
Silver Creek 115KV Sub.
9.16
South Jackson 115KV Sub.
Georgetown 115KV Sub.
29.04
Georgetown 115KV Sub.
Silver Creek 115KV Sub.
20.80




Silver Creek 115KV Sub.
Tylertown 115KV Sub.
36.03
Tylertown 115KV Sub.
Dexter Sw. Station
7.21
Dexter Sw. Station
La. State Line
3.05
 
 
 
FROM
TO
POLE
MILES
 
 
 
South Jackson 115KV Sub.
Rankin Industrial 115KV Sub.
2.42
Rankin Industrial 115KV Sub.
Jackson Airport 115KV Sub.
5.49
Jackson Airport 115KV Sub.
Brandon 115KV Sub.
5.92
South Jackson 115KV Sub.
Kingswood 115KV Sub.
1.00
Kingswood 115KV Sub.
Caney Creek Sw. Station
2.40
Caney Creek Sw. Station
S.W. Jackson 115KV Sub.
1.82
S.W. Jackson 115KV Sub.
Byram 115KV Sub.
4.05
Byram 115KV Sub.
Terry 115KV Sub.
6.36
Terry 115KV Sub.
Crystal Springs 115KV Sub.
10.70
Crystal Springs 115KV Sub.
Copiah Sw. Station
6.91
Copiah Sw. Station
Hazlehurst 115KV Sub.
0.66
Hazlehurst 115KV Sub.
Brookhaven 115KV Sub.
19.57
Brookhaven 115KV Sub.
Mallalieu Sw. Station
6.83
Mallalieu Sw. Station
Norfield Sw. Station
6.88
Norfield Sw. Station
McComb 115KV Sub.
9.39
McComb 115KV Sub.
Jayess Sw. Station
7.91
Jayess Sw. Station
Tylertown 115KV Sub.
14.37
McComb 115KV Sub.
West McComb 115KV Sub.
4.71
McComb 115KV Sub.
Oakdale Sw. Station
2.90
Oakdale Sw. Station
Fernwood 15KV Sub.
3.28
Fernwood 115KV Sub.
Colonial P.L. 115KV Sub.
4.50
Colonial P.L. 115KV Sub.
La. State Line
8.88
Natchez S.E.S.
Miss. River Crossing Tower
4.50
1/2 of River Crossing
North of Natchez (Red Gum)
0.78
Natchez S.E.S.
Fayette 115KV Sub.
18.31
Fayette 115KV Sub.
Lorman Sw. Station
11.76
Lorman Sw. Station
Port Gibson 115KV Sub.
9.79
Natchez S.E.S.
Pine Ridge Sw. Station
1.12
Pine Ridge Sw. Station
Natchez 115KV Sub.
3.19
Natchez 115KV Sub.
Johns-Manville 115KV Sub.
2.97
Johns-Manville 115KV Sub.
I.P.C. Sw. Station
3.15
I.P.C. Sw. Station
South Natchez 115KV Sub.
2.20
South Natchez 115KV Sub.
Natchez Ind. Park 115KV Sub.
1.94
Natchez Ind. Park 115KV Sub.
Miss. River Crossing Tower
0.74
1/2 Miss. River Crossing
South of Natchez
0.59
Natchez 115KV Sub.
S. Natchez 115KV Sub.
4.74
Natchez S.E.S.
Washington Sw. Station
4.13
Washington Sw. Station
Roxie 115KV Sub.
14.82
Roxie 115KV Sub.
Meadville (Bude) 115KV Sub.
12.79
Meadville (Bude) 115KV Sub.
Franklin E.H.V. Sub.
20.26




Franklin E.H.V. Sub.
Vaughn Sw. Station
3.08
Vaughn Sw. Station
W. Brookhaven Sw. Station
5.17
W. Brookhaven Sw. Station
Brookhaven 115KV Sub.
6.17
Franklin E.H.V. Sub.
S. Brookhaven 115KV Sub.
12.49
So. Brookhaven 115KV Sub.
Brookhaven 115KV Sub.
4.32
Franklin E.H.V. (Leased)
Magnolia E.P.A. (Smithdale)
11.95
Magnolia E.P.A. (Smithdale)
Liberty 115KV Sub.
14.70
Natchez S.E.S.
Natchez 115KV Sub.
2.82
Natchez 115KV Sub.
S.E. Natchez Sw. Station
5.74
S.E. Natchez Sw. Station
Crosby Sw. Station
20.62
Crosby Sw. Station
Gloster 115KV Sub.
6.28
Gloster 115KV Sub.
Centreville 115KV Sub.
11.10
Gloster 115KV Sub.
Liberty 115KV Sub.
21.12
Liberty 115KV Sub.
Gillsburg Sw. Station
14.95
Gillsburg Sw. Station
La. State Line
0.92
And also all extension, replacements, branches, taps, developments and improvements of said transmission and distribution lines, or any of them, and all other transmission and distribution lines owned by the Company wherever situated, whether connected or not connected with any of the foregoing lines, or whether now owned or hereafter acquired, and/or constructed hereafter, as well as all of the Company’s rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation of said lines, or any of them, or any part thereof, under or upon the public streets or highways, or any public or private lands, subject, however, to the provisions of Section 15.03 hereof.
PARAGRAPH FOUR
THE ELECTRIC DISTRIBUTION SYSTEMS OF THE COMPANY, including the towers, poles, wires, cables, switch racks, conductors, transformers, insulators and all appliances and devices used or useful in connection with said distribution systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, permits, privileges, licenses, consents, immunities and rights, for or relating to the construction, maintenance or operation thereof, through, over, under or upon any public streets or highways, or other lands, public or




private, including all of the Company’s right, title and interest in and to the following property situated in the State of Mississippi, to-wit:
The electric distribution systems of the Company as constructed and equipped in or near the Cities, Towns, Municipalities, Villages and Communities listed below, to-wit:
Name
County
 
 
Albin
Tallahatchie
Aldens
DeSoto
Aldridge
Washington
Allen
Warren
Alligator
Bolivar
Allison’s Wells
Madison
Alphaba
DeSoto
Anchorage
Humphreys
Andrews Chapel
Rankin
Anguilla
Sharkey
Anse
Rankin
Arcola
Washington
Ariel
Amite
Asia Plantation
Bolivar
Austin
Tunica
Avalon
Carroll
Baird
Sunflower
Ballston
Sunflower
Banks
Tunica
Barksdale
Sunflower
Barnesville
DeSoto
Barr
Tate
Bear Creek
Attala
Bear Town
Pike
Beatty
Carroll
Beauregard
Copiah
Beaver Dam
Tunica
Beechwood
Amite
Beechwood
Warren
Belen
Quitman
Belmont
Bolivar
Belzoni
Humphreys
Benoit
Bolivar
Benton
Yazoo
Bentonia
Yazoo
Berclair
Leflore
Berthdale
Pike
Berwick
Amite
Betts
Tate
Beulah
Bolivar




Bew Springs
Grenada
Bewelcome
Amite
Black Bayou
Tallahatchie
Black Bayou Junction
Tallahatchie
Blaine
Sunflower
Blanton
Sharkey
Blue Lake
Tallahatchie
Bobo
Coahoma
Bogue Chitto
Lincoln
Bolivar
Bolivar
Bolton
Hinds
Bourbon
Washington
Bowdre
Tunica
Bowmantown
Tate
Boyette
Attala
Boyle
Bolivar
Brandon
Rankin
Braxton
Simpson
Bright
DeSoto
Bright Corner
Leflore
Brookhaven
Lincoln
Browning
Leflore
Bude
Franklin
Bullfrog Corner
DeSoto
Burdett
Washington
Burgess
Quitman
Bushtown
Simpson
Busy Corner
Amite
Byram
Hinds
Caile
Sunflower
Camaron
Madison
Camden
Madison
Cameta
Sharkey
Camp McCain
Grenada
Canton
Madison
Carrollton
Carroll
Carthage
Leake
Cary
Sharkey
Castalian Springs
Holmes
Cedars
Warren
Center
Attala
Centreville
Wilkinson
Champion Hill
Hinds
Charleston
Tallahatchie
Clack
Tunica
Claremont
Coahoma
Clarksburg
Rankin
Clarksdale Rural
Coahoma
Clayton
Tunica
Cleveland
Bolivar




Clinton
Hinds
Cloverhill
Coahoma
Coahoma
Coahoma
Cockrum
DeSoto
Colby
Yazoo
Coldwater
Tate
Commerce
Tunica
Como
Panola
Corley
Quitman
Cottondale
Sunflower
Courtland
Panola
Crenshaw
Panola
Crockett
Tate
Crosby
Amite-Wilkinson
Cruger
Holmes
Crystal Springs
Copiah
Cynthia
Hinds
D’Lo
Simpson
Dahomey
Bolivar
Dark Corner
DeSoto
Darling
Quitman
Davo
Walthall
Days
DeSoto
Deans Corner
Tate
Deansonville
Yazoo
Delta City
Sharkey
Delta Exper. Station
Washington
Dickerson
Coahoma
Dixon
Hinds
Dockery
Sunflower
Doddsville
Sunflower
Drew
Sunflower
Dubbs
Tunica
Dublin
Coahoma
Duck Hill
Montgomery
Duncan
Bolivar
Dundee
Tunica
Dunleith
Washington
Durant
Holmes
Durham
Coahoma
Dwiggins
Sunflower
Eagle Nest
Coahoma
East Jackson
Rankin
Eastland
Sunflower
Eddiceton
Franklin
Eden
Yazoo
Edwards
Hinds
Egremont
Sharkey
Elizabeth
Washington
Elliott
Grenada




Enid
Tallahatchie
Eskridge
Montgomery
Essex
Quitman
Estill
Washington
Ethel
Attala
Eudora
DeSoto
Eutaw
Bolivar
Evansville
Tunica
Fair River
Lincoln
Falcon
Quitman
Fallback
Bolivar
Farrell
Coahoma
Fayette
Jefferson
Fernwood
Pike
Fishlake
Washington
Fitzhugh
Sunflower
Flautt
Tallahatchie
Flora
Madison
Florence
Rankin
Flowood
Rankin
Fort Loring
Leflore
Freeze Corner
DeSoto
Friars Point
Coahoma
Friendship
Lincoln
Futheyville
Grenada
Gallman
Copiah
Geeslin Corner
Grenada
Geneill
Washington
George
Rankin
Georgetown
Copiah
Ginger Hill
Tate
Gladys
Attala
Glen Allan
Washington
Glen Aubin
Coahoma
Glendora
Tallahatchie
Glenwild
Grenada
Gloster
Amite
Glover
DeSoto
Goldfield
Sunflower
Goodman
Holmes
Gore Springs
Grenada
Grapeland
Bolivar
Greenleaf
Tate
Greens Crossing
Hinds
Greenville
Washington
Greenwood Rural
Leflore
Grenada
Grenada
Guide
Rankin
Gunnison
Bolivar
Gwin
Holmes




Halstead
Sunflower
Hamlin
Tunica
Hannah
Bolivar
Harlow
Bolivar
Haserway
Grenada
Haynes Chapel
Rankin
Hazlehurst
Copiah
Heathman
Sunflower
Hernando
DeSoto
Hesterville
Attala
Highlandale
Leflore
Hinchcliff
Quitman
Hitt Spur
Tallahatchie
Holcomb
Grenada
Hollandale
Washington
Holly Bluff
Yazoo
Holly Bush
Rankin
Holly Ridge
Sunflower
Hollyknowe
Washington
Hollywood
Tunica
Home Park
Yazoo
Hopsons
Coahoma
Horn Lake
DeSoto
Howard
Holmes
Howell
Rankin
Hushpuckena
Bolivar
Idlewild
Pike
Independence
Tate
Indianola
Sunflower
Inverness
Sunflower
Isola
Humphreys
Issaquena
Sharkey
Jackson
Hinds
Jacquith
Sunflower
Jago
DeSoto
Johnston
Washington
Jones Crossing
Holmes
Jonestown
Coahoma
Keirn
Holmes
Kilmichael
Montgomery
Kimball Lake
Bolivar
Kincaid
Grenada
King & Anderson
Coahoma
Kings
Warren
Kioto
Walthall
Kirby
Franklin
Kirkman
Grenada
Kosciusko
Attala
Lake Cormorant
DeSoto
Lake Vista
Bolivar




Lakeland
Rankin
Lambert
Quitman
Lamont
Bolivar
Laughlin
Bolivar
Learned
Hinds
Lee Store
DeSoto
Leflore
Grenada
Leland
Washington
LeTourneau
Warren
Lewisburg
DeSoto
Lexie
Walthall
Lexington
Holmes
Liberty
Amite
Linsey
Washington
Lobdell
Bolivar
Lombardy
Sunflower
Longswitch
Washington
Louise
Humphreys
Love
DeSoto
Lucien
Franklin
Luckney
Rankin
Lula
Coahoma
Lurline
Tate
Lynchburg
DeSoto
Lyon
Coahoma
Madison
Madison
Magee
Simpson
Magnolia
Pike
Malmaison
Carroll
Malvina
Bolivar
Manhattan
Washington
Markham
Sunflower
Marks
Quitman
Martha
Washington
Martindale
Tunica
Mason
Grenada
Matagorda
Coahoma
Mattson
Coahoma
Maud
Tunica
McAdams
Attala
McAfee
Leake
McCall Creek
Franklin
McComb
Pike
McCool
Attala
McCutcheon
Washington
McGehee
Panola
McMillan
Holmes
Meadville
Franklin
Mendenhall
Simpson
Merigold
Bolivar




Merit
Simpson
Mesa
Walthall
Metcalfe
Washington
Midnight
Humphreys
Minot
Sunflower
Minter City
Leflore
Mize
Smith
Money
Leflore
Monroe
Franklin
Mont Helena
Sharkey
Monticello
Lawrence
Moon
Coahoma
Mooretown
DeSoto
Moorhead
Sunflower
Morgan City
Leflore
Morton
Scott
Mound Bayou
Bolivar
Mount Olive
Covington
Murphreesboro
Tallahatchie
Natchez
Adams
Nesbitt
DeSoto
New Garden
Tate
New Hebron
Lawrence
New Hope
Tate
New Town
Tate
New Zion
Walthall
Newsport
Attala
Niles
Bolivar
Nitta Yuma
Sharkey
Nixona
Humphreys
Norfolk
DeSoto
North Carrollton
Carroll
Oak Grove
DeSoto
Oakdale
Pike
Oakland
Yalobusha
Oakley
Hinds
Oaks
Madison
Ofahoma
Leake
Onward
Sharkey
Osyka
Pike
Overpark
DeSoto
Owen Wells
Holmes
Pace
Bolivar
Paducah
Washington
Palestine
Tate
Pantherburn
Sharkey
Parchman
Sunflower
Patozi
Yazoo
Pearl
Rankin
Pearson
Rankin




Pelahatchie
Rankin
Pellez
Webster
Penton
DeSoto
Percy
Washington
Perthshire
Bolivar
Phillip
Tallahatchie
Pickens
Holmes
Pine Hill
Grenada
Pine Tree
Leake
Piney Woods
Rankin
Pinola
Simpson
Plain
Rankin
Pleasant Grove
Panola
Plum Point
DeSoto
Poagville
Tate
Pocahontas
Hinds
Pollack
Sunflower
Pope
Panola
Poplar Corner
DeSoto
Poplar Creek
Montgomery
Port Gibson
Claiborne
Powell
Coahoma
Prentiss
Jefferson Davis
Pugh City
Leflore
Quinten
Franklin
Quinto
Leflore
Rabbit Ridge
DeSoto
Rainbow
Tallahatchie
Raleigh
Smith
Rankin
Rankin
Raymond
Hinds
Redding
Grenada
Rehobeth
Rankin
Renova
Bolivar
Renshaw
Yazoo
Rexburg
Washington
Rich
Coahoma
Richland
Rankin
Ridgeland
Madison
Robinsonville
Tunica
Rolling Fork
Sharkey
Rome
Sunflower
Roseacres
Coahoma
Rosedale
Bolivar
Roxie
Franklin
Ruby
Leflore
Ruleville
Sunflower
Rushing
Walthall
Sallis
Attala
Sanatorium
Simpson




Sardis
Panola
Schlater
Leflore
Scobey
Yalobusha
Scott
Bolivar
Senatobia
Tate
Session
Coahoma
Shady Grove
DeSoto
Sharkey
Tallahatchie
Sharpsburg
Madison
Shaw
Bolivar
Shelby
Bolivar
Shellmound
Leflore
Shepardtown
Leflore
Sherard
Coahoma
Shivers
Simpson
Sibleyton
Montgomery
Sidon
Leflore
Silver City
Humphreys
Silver Creek
Lawrence
Siwell
Hinds
Skene
Bolivar
Sledge
Quitman
Sligo
Washington
Smokeyhollow
DeSoto
Smyrna
Attala
Somerville
Leflore
South Lake
Tallahatchie
Star
Rankin
State Line
DeSoto
Stewart
Montgomery
Stillions
Coahoma
Stoneville
Washington
Stout
Warren
Stovall
Coahoma
Stover
Tallahatchie
Street
Amite
Stringtown
Bolivar
Summit
Pike
Sumner
Tallahatchie
Sunflower
Sunflower
Sunflower Plantation
Sunflower
Sunnyside
Leflore
Swan Lake
Tallahatchie
Sweethome
Grenada
Swiftown
Leflore
Symonds
Bolivar
Tallahatchie
Panola
Tchula
Holmes
Terry
Hinds
Thayer
Lincoln




Thornhill
Rankin
Tie Plant
Grenada
Tillotoba
Yalobusha
Tomnolen
Webster
Tougaloo
Hinds
Tralake
Washington
Tribbett
Washington
Tunica
Tunica
Turnbull
Wilkinson
Tutwiler
Tallahatchie
Tylertown
Walthall
Union
Simpson
Utica
Hinds
Vaiden
Carroll
Valley Hill
Carroll
Value
Rankin
Van Winkle
Hinds
Vance
Quitman
Vaughan
Yazoo
Vicksburg
Warren
Victor
Bolivar
Waco
Washington
Wade
Tallahatchie
Wakefield
Tate
Walkers Bridge
Walthall
Walls
DeSoto
Waltersville
Warren
Warfield
Washington
Washington
Adams
Waveland
Bolivar
Waxhaw
Bolivar
Way
Madison
Weathersby
Simpson
Webb
Tallahatchie
Wesson
Copiah
West
Holmes
West Days
DeSoto
West Hill
Holmes
Whaley
Carroll
Whitaker
Wilkinson
Whitehead
Tallahatchie
Whitfield
Rankin
Whitney
Sunflower
Wildwood
Coahoma
Williamsville
Attala
Wilmot
Washington
Winona
Montgomery
Winstonville
Bolivar
Wintersville
Washington
Woodlawn
Washington




Woodville
Wilkinson
Woolworth
Lincoln
Wright
Bolivar
Yazoo City Rural
Yazoo
Yokena
Warren
Zemuly
Attala
Zetus
Lincoln

Also all branches, extensions, improvements and developments of or appertaining to or connected with said distribution systems, or any of them, and all other distribution systems of the Company and parts thereof wherever situated whether connected or not connected with any of the foregoing systems, and whether now owned or hereafter acquired and/or constructed during the existence of this trust, as well as all of the Company’s rights-of-way, easements, privileges, permits, municipal or other franchises, consents and rights for or relating to the construction, maintenance or operation thereof or any part thereof, through, over, under or upon any public streets or highways, or public or private lands, subject, however, to the provisions of Section 15.03 hereof.

PARAGRAPH FIVE
All franchises, licenses, ordinances, permits, privileges and Certificates of Public Convenience and Necessity issued, granted or held by the Company or its predecessors in interest, including among others, the following Certificates of Public Convenience and Necessity:
1.
Mississippi Public Service Commission Docket U-176 Certificate of Public Convenience and Necessity issued November 27, 1956.
2.
Mississippi Public Service Commission Docket U-190 Certificate of Public Convenience and Necessity issued January 23, 1957.
3.
Mississippi Public Service Commission Docket U-200 Certificate of Public Convenience and Necessity issued April 23, 1957.
4.
Mississippi Public Service Commission Docket U-210 Certificate of Public Convenience and Necessity issued April 18, 1957.
5.
Mississippi Public Service Commission Docket U-211 Certificate of Public Convenience and Necessity issued March 22, 1957.
6.
Mississippi Public Service Commission Docket U-228 Certificate of Public Convenience and Necessity issued June 7, 1957.
7.
Mississippi Public Service Commission Docket U-259 Certificate of Public Convenience and Necessity issued December 2, 1957.




8.
Mississippi Public Service Commission Docket U-260 Certificate of Public Convenience and Necessity issued December 2, 1957.
9.
Mississippi Public Service Commission Docket U-281 Certificate of Public Convenience and Necessity issued March 4, 1958.
10.
Mississippi Public Service Commission Docket U-282 Certificate of Public Convenience and Necessity issued March 4, 1958.
11.
Mississippi Public Service Commission Docket U-318 Certificate of Public Convenience and Necessity issued June 11, 1958.
12.
Mississippi Public Service Commission Docket U-359 Certificate of Public Convenience and Necessity issued December 15, 1958.
13.
Mississippi Public Service Commission Docket U-390 Certificate of Public Convenience and Necessity issued August 10, 1959.
14.
Mississippi Public Service Commission Docket U-399 Certificate of Public Convenience and Necessity issued June 4, 1959.
15.
Mississippi Public Service Commission Docket U-448 Certificate of Public Convenience and Necessity issued October 6, 1959.
16.
Mississippi Public Service Commission Docket U-474 Certificate of Public Convenience and Necessity issued January 5, 1960.
17.
Mississippi Public Service Commission Docket U-481 Certificate of Public Convenience and Necessity issued January 5, 1960.
18.
Mississippi Public Service Commission Docket U-484 Certificate of Public Convenience and Necessity issued February 2, 1960.
19.
Mississippi Public Service Commission Docket U-551 Certificate of Public Convenience and Necessity issued October 4, 1960.
20.
Mississippi Public Service Commission Docket U-573 Certificate of Public Convenience and Necessity issued December 14, 1960.
21.
Mississippi Public Service Commission Docket U-593 Certificate of Public Convenience and Necessity issued March 7, 1961.
22.
Mississippi Public Service Commission Docket U-630 Certificate of Public Convenience and Necessity issued October 17, 1961.
23.
Mississippi Public Service Commission Docket U-655 Certificate of Public Convenience and Necessity issued January 3, 1962.
24.
Mississippi Public Service Commission Docket U-737 Certificate of Public Convenience and Necessity issued October 31, 1962.
25.
Mississippi Public Service Commission Docket U-741 Certificate of Public Convenience and Necessity issued November 6, 1962.
26.
Mississippi Public Service Commission Docket U-780 Certificate of Public Convenience and Necessity issued March 5, 1963.
27.
Mississippi Public Service Commission Docket U-781 Certificate of Public Convenience and Necessity issued March 5, 1963.
28.
Mississippi Public Service Commission Docket U-821 Certificate of Public Convenience and Necessity issued July 2, 1963.
29.
Mississippi Public Service Commission Docket U-825 Certificate of Public Convenience and Necessity issued August 12, 1963.
30.
Mississippi Public Service Commission Docket U-826 Certificate of Public Convenience and Necessity issued August 12, 1963.
31.
Mississippi Public Service Commission Docket U-896 Certificate of Public Convenience and Necessity issued March 3, 1964.




32.
Mississippi Public Service Commission Docket U-942 Certificate of Public Convenience and Necessity issued September 1, 1964.
33.
Mississippi Public Service Commission Docket U-991 Certificate of Public Convenience and Necessity issued February 2, 1965.
34.
Mississippi Public Service Commission Docket U-1000 Certificate of Public Convenience and Necessity issued April 6, 1965.
35.
Mississippi Public Service Commission Docket U-1013 Certificate of Public Convenience and Necessity issued April 6, 1965.
36.
Mississippi Public Service Commission Docket U-1063 Certificate of Public Convenience and Necessity issued October 25, 1965.
37.
Mississippi Public Service Commission Docket U-1067 Certificate of Public Convenience and Necessity issued August 12, 1965.
38.
Mississippi Public Service Commission Docket U-1171 Certificate of Public Convenience and Necessity issued March 1, 1966.
39.
Mississippi Public Service Commission Docket U-1189 Certificate of Public Convenience and Necessity issued April 5, 1966.
40.
Mississippi Public Service Commission Docket U-1223 Certificate of Public Convenience and Necessity issued June 7, 1966.
41.
Mississippi Public Service Commission Docket U-1328 Certificate of Public Convenience and Necessity issued January 4, 1967.
42.
Mississippi Public Service Commission Docket U-1341 Certificate of Public Convenience and Necessity issued January 4, 1967.
43.
Mississippi Public Service Commission Docket U-1352 Certificate of Public Convenience and Necessity issued February 13, 1967.
44.
Mississippi Public Service Commission Docket U-1362 Certificate of Public Convenience and Necessity issued February 7, 1967.
45.
Mississippi Public Service Commission Docket U-1372 Certificate of Public Convenience and Necessity issued March 7, 1967.
46.
Mississippi Public Service Commission Docket U-1392 Certificate of Public Convenience and Necessity issued April 4, 1967.
47.
Mississippi Public Service Commission Docket U-1440 Certificate of Public Convenience and Necessity issued October 24, 1967.
48.
Mississippi Public Service Commission Docket U-1559 Certificate of Public Convenience and Necessity issued February 6, 1968.
49.
Mississippi Public Service Commission Docket U-1564 Certificate of Public Convenience and Necessity issued March 6, 1968.
50.
Mississippi Public Service Commission Docket U-1586 Certificate of Public Convenience and Necessity issued April 2, 1968.
51.
Mississippi Public Service Commission Docket U-1594 Certificate of Public Convenience and Necessity issued April 2, 1968.
52.
Mississippi Public Service Commission Docket U-1644 Certificate of Public Convenience and Necessity issued June 4, 1968.
53.
Mississippi Public Service Commission Docket U-1702 Certificate of Public Convenience and Necessity issued November 5, 1968.
54.
Mississippi Public Service Commission Docket U-1801 Certificate of Public Convenience and Necessity issued March 4, 1969.
55.
Mississippi Public Service Commission Docket U-1812 Certificate of Public Convenience and Necessity issued April 1, 1969.




56.
Mississippi Public Service Commission Docket U-1901 Certificate of Public Convenience and Necessity issued November 10, 1969.
57.
Mississippi Public Service Commission Docket U-1954 Certificate of Public Convenience and Necessity issued April 7, 1970.
58.
Mississippi Public Service Commission Docket U-1995 Certificate of Public Convenience and Necessity issued July 13, 1970.
59.
Mississippi Public Service Commission Docket U-2042 Certificate of Public Convenience and Necessity issued January 5, 1971.
60.
Mississippi Public Service Commission Docket U-2043 Certificate of Public Convenience and Necessity issued January 15, 1971.
61.
Mississippi Public Service Commission Docket U-2110 Certificate of Public Convenience and Necessity issued May 25, 1971.
62.
Mississippi Public Service Commission Docket U-2201 Certificate of Public Convenience and Necessity issued October 5, 1971.
63.
Mississippi Public Service Commission Docket U-2249 Certificate of Public Convenience and Necessity issued December 17, 1971.
64.
Mississippi Public Service Commission Docket U-2288 Certificate of Public Convenience and Necessity issued April 4, 1972.
65.
Mississippi Public Service Commission Docket U-2419 Certificate of Public Convenience and Necessity issued October 3, 1972.
66.
Mississippi Public Service Commission Docket U-2497 Certificate of Public Convenience and Necessity issued February 12, 1973.
67.
Mississippi Public Service Commission Docket U-2563 Certificate of Public Convenience and Necessity issued June 5, 1973.
68.
Mississippi Public Service Commission Docket U-2629 Certificate of Public Convenience and Necessity issued August 7, 1973.
69.
Mississippi Public Service Commission Docket U-2659 Certificate of Public Convenience and Necessity issued October 2, 1973.
70.
Mississippi Public Service Commission Docket U-2764 Certificate of Public Convenience and Necessity issued March 11, 1974.
71.
Mississippi Public Service Commission Docket U-2800 Certificate of Public Convenience and Necessity issued May 29, 1974.
72.
Mississippi Public Service Commission Docket U-2819 Certificate of Public Convenience and Necessity issued June 4, 1974.
73.
Mississippi Public Service Commission Docket U-2993 Certificate of Public Convenience and Necessity issued June 3, 1975.
74.
Mississippi Public Service Commission Docket U-3166 Certificate of Public Convenience and Necessity issued August 3, 1976.
75.
Mississippi Public Service Commission Docket U-3247 Certificate of Public Convenience and Necessity issued March 1, 1977.
76.
Mississippi Public Service Commission Docket U-3315 Certificate of Public Convenience and Necessity issued July 19, 1977.
77.
Mississippi Public Service Commission Docket U-3365 Certificate of Public Convenience and Necessity issued October 6, 1977.
78.
Mississippi Public Service Commission Docket U-3410 Certificate of Public Convenience and Necessity issued December 8, 1977.
79.
Mississippi Public Service Commission Docket U-3411 Certificate of Public Convenience and Necessity issued December 8, 1977.




80.
Mississippi Public Service Commission Docket U-3615 Certificate of Public Convenience and Necessity issued February 2, 1979.
81.
Mississippi Public Service Commission Docket U-3616 Certificate of Public Convenience and Necessity issued January 22, 1979.
82.
Mississippi Public Service Commission Docket U-3707 Certificate of Public Convenience and Necessity issued September 10, 1979.
83.
Mississippi Public Service Commission Docket U-3865 Certificate of Public Convenience and Necessity issued September 2, 1980.
84.
Mississippi Public Service Commission Docket U-3866 Certificate of Public Convenience and Necessity issued August 19, 1980.
85.
Mississippi Public Service Commission Docket U-3967 Certificate of Public Convenience and Necessity issued June 19, 1981.
86.
Mississippi Public Service Commission Docket U-4005 Certificate of Public Convenience and Necessity issued April 16, 1981.
87.
Mississippi Public Service Commission Docket U-4093 Certificate of Public Convenience and Necessity issued October 20, 1981.
88.
Mississippi Public Service Commission Docket U-4326 Certificate of Public Convenience and Necessity issued June 7, 1983.
89.
Mississippi Public Service Commission Docket U-4472 Certificate of Public Convenience and Necessity issued April 3, 1984.
90.
Mississippi Public Service Commission Docket U-4473 Certificate of Public Convenience and Necessity issued April 3, 1984.
91.
Mississippi Public Service Commission Docket U-4489 Certificate of Public Convenience and Necessity issued June 5, 1984.
92.
Mississippi Public Service Commission Docket U-4579 Certificate of Public Convenience and Necessity issued October 2, 1984.
93.
Mississippi Public Service Commission Docket U-4709 Certificate of Public Convenience and Necessity issued July 2, 1985.
94.
Mississippi Public Service Commission Docket U-4807 Certificate of Public Convenience and Necessity issued May 5, 1986.
95.
Mississippi Public Service Commission Docket U-4929 Certificate of Public Convenience and Necessity issued December 9, 1986.
96.
Mississippi Public Service Commission Docket U-4989 Certificate of Public Convenience and Necessity issued May 5, 1987.
Also all extensions, renewals, improvements, modifications and amendments connected with or affecting such Certificates of Public Convenience and Necessity, and any hereafter acquired by or granted to the Company, subject, however, to the provisions of Section 15.03 hereof.





PARAGRAPH SIX
ALL AND SINGULAR THE MISCELLANEOUS LANDS AND REAL ESTATE OR RIGHT AND INTERESTS THEREIN OF THE COMPANY NOW OWNED, OR HEREAFTER ACQUIRED DURING THE EXISTENCE OF THIS TRUST, INCLUDING:

ADAMS COUNTY :
1. Vacant lots (old storeroom and diesel plant) North Side St. Catherine Street, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 4-0 at Page 201; also lot being 523 Aldrich as shown on 1929 tax receipt 1434 of Southwestern G. & E. Co. less 0.42 acre to City of Natchez for streets, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 12-Q at Pages 158-R and 160.

2. Vacant Lot No. 11, Block A, Bellevue Subdivision, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 4-0 at Page 201.

3. 3.69 acre Service Center and Office Site, a part of Phardusky Subdivision, Plat Book 2, Page 49; less 0.31 acre to Highway Commission, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 9-H at Page 623 and Book 10-N at Page 138.

4. 0.14 acre N.S.E.S. Pipeline R.O.W. (fee) in Section 4, Township 6 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 12-H at Page 528.

5. 2.07 acre Cranfield Microwave Tower Site in Section 55, Township 7 North, Range 1 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book 7-F at Page 568.

AMITE COUNTY :
1. 2.07 acre Microwave Tower Site in Section 23, Township 3 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 105 at Page 475.

2. Gloster Office: Part of Lots 7, 8, 9, 10, 11 and 12 of Block 52; also an area between Blocks 52 and 84 in Section 34, Township 3 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Amite County, Mississippi, in Book 181 at Page 55.





ATTALA COUNTY :
1. Easement to 13 KV Regulator Site in Section 34, Township 14 North, Range 5 East.

BOLIVAR COUNTY :
1. Easement to Dahoney Regulator Site in Section 34, Township 21 North, Range 8 West, located just north of Dahoney on Highway No. 1.

2. 2.0 acres, Caretaker’s house site, in Southwest Quarter of Section 3, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-71 at Page 301.

3. Water rights for pumping in Sections 1, 2, 11 and 12, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Adams County, Mississippi, in Book M-58 at Pages 353 and 468; also Sections 13, 24, 25, 26 and 35 in Township 23 North, Range 5 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-58 at Pages 251, 254, 533, 537, 549 and 556, and Book M-59 at Pages 195, 197 and 296.

4. Leased vacant lot (old 13 KV substation) - Lease expires 12/31/2070, in the Southwest Quarter, Section 16, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-108 at Page 646.

5. Old 13 KV Switching Station (vacant) in Section 9, Township 23 North, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book G-4 at Pages 110 and 137.

6. Water rights for pumping water in Section 12, Township 23 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-58 at Page 581.

7. Shelby Office Building Site: Lot 5, Block 6, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-59 at Pages 345 and 377 and Book M-60 at Page 451.

8. 13 KV Regulator Site (vacant) in Section 21, Township 23 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-26 at Page 385.

9. Easement - 13 KV Regulator Site in Southeast Quarter of Southwest Quarter, Section 27, Township 26 North, Range 5 West.

10. Easement - 0.29 acre 115 KV Shelby Switching Station Site in Section 1, Township 24 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-65 at Page 501.





11. Leased Cleveland Office Site (expires 12/31/2070) in Section 16, Township 22 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-108 at Page 645, less portion to City of Cleveland, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Bolivar County, Mississippi, in Book M-133 at Page 463.

CARROLL COUNTY:
1. Easement - 13 KV Regulator Site in Southeast Quarter, Section 12, Township 19 North, Range 3 East.

CLAIBORNE COUNTY :
1. Port Gibson Office Building Site: Lot 1, Square 1 of the Suburb of St. Mary, along East Side Market (Main) Street, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Claiborne County, Mississippi, in Book 6-N at Page 348.

COAHOMA COUNTY :
1. Easement - 13 KV Regulator Site in Southeast Quarter, Section 25, Township 28 North, Range 5 West.

2. 0.57 acre Regulator Site (vacant) in Southwest Quarter of Southeast Quarter, Section 34, Township 26 North, Range 3 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 98 at Page 35.

3. 5.74 acre Leased Microwave Tower Site: In Northeast Quarter of Northeast Quarter, Section 13, Township 26 North, Range 5 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 299 at Page 437.

4. 1.12 acre Clarksdale Office Site fronting 180 feet along the West R.O.W. line of U.S. Highway 49 in Section 31, Township 27 North, Range 3 West, and Section 36, Township 27 North, Range 4 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Coahoma County, Mississippi, in Book 88 at Page 589, and Book 222 at Pages 283 and 325.

COPIAH COUNTY :
1. Crystal Springs Office Building Site:
Parcel 1: Part of Lots 6, 7 and 8, Square 9 of Dabney Map (also described as being part of Lots 9, 10 and 11, Square 16 of Stowell Map), as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 7-D at Pages 540, 544, 546 and 621.
Parcel 2: Part of Lot 8, Square 9, Dabney Map (also being Lot 9, Square 16, Stowell Map), as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 7-0 at Page 595.




2. Hazlehurst Office Building Site: A part of Lot 100, Plummer Plat, less part of lot and building sold to Hazlehurst, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 7-F at Page 42; Book 6-R at Page 341; Book 6-S at Page 348; Book 6-T at Page 403; and Book 7-0 at Page 521.

3. 0.1921 acre roadway to Crystal, Springs 115 KV substation in Southeast Quarter of Northeast Quarter and the Southeast Quarter, Section 35, Township 2 North, Range 2 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 4-I at Pages 47 and 159.

4. Old Power Plant Site in Block JJ, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 4-F at Page 532.

5. 13 KV Substation Site in Lot 7, Square E, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Copiah County, Mississippi, in Book 4-F at Page 605.

DESOTO COUNTY :
1. Hernando Office Building Site being part of Lots 7, 8, 27 and 30, all of Lot 28, and a closed alley in Section 13, Township 3 South, Range 8 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of De Soto County, Mississippi, in Book 55 at Page 7.

2. Easement - 13 KV Regulator Site in Southwest Quarter, Section 13, Township 4 South, Range 8 West.

3. Easement - 13 KV Regulator Site in Southeast Quarter, Section 32, Township 2 South, Range 10 West.

FRANKLIN COUNTY :
1. Easement to Regulator Site - Northeast Quarter, Section 19, Township 6 North, Range 1 East.

GRENADA COUNTY :
1. Grenada Office: 50 feet off North side of South Half of Lot 175, East Ward, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 99 at Page 593.

2. Grenada Office Parking Lot: South Half of Lot 175, East Ward; less 50 feet; also, North Half of a 10-foot alley between Lots 175 and 180, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 125 at Page 176, and Book 172 at page 276; less North Half of a 10-foot alley sold to Magnolia Federal Bank on 10/1/85, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 225 at Page 56.





3. Grenada Service Center: 0.33 acre, part of West Half of Lot 179, East Ward, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 177 at Pages 71 and 426.

4. Storage Lot (Cooley): Part of West Half of Lot 176, East Ward, in Section 8, Township 22 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 108 at Page 46.

5. Storage Lot (K. Penn): East Ward; also an 8-foot alley closed in 1939, Minute Book 1935, Page 363, all in Section 8, Township 22 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 160 at Page 183.

6. Storage Lot (M. Cooley): 0.35 acres, part of West Half of Lot 176, East Ward, in Section 8, Township 22 North, Range 5 East, less 62.00’ x 104.57’ portion on south end, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 175 at Page 584 and in Book 210 at Page 350.

7. 0.08 acre 13 KV Regulator Site in the Northwest Quarter of Southwest Quarter, Section 11, Township 23 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Grenada County, Mississippi, in Book 89 at Page 330.

8. Easement to 13 KV Regulator Site in Section 24, Township 22, Range 6 East, being 11 miles East of Grenada on Highway No. 8.

HINDS COUNTY :
1. MP&L Conference Center:
A part of Lot 11 of Garland Community Farm Subdivision, First Judicial District, Hinds County, Mississippi, a map or plat of said subdivision being recorded in Surveyor’s Record Book “B” at page 67, in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, being more particularly described as follows, to-wit:
Beginning at the Northeast corner of Lot 12 of said subdivision and run thence west along and on the North line of said Lot 12 a distance of 400 feet to a point; thence angle right 90 degrees 03 minutes and 30 seconds for a distance of 1016.05 feet to a point on the North line of Lot 11 of said subdivision; thence angle right 90 degrees 10 minutes for a distance of 615.3 feet to a point on the South right of way line of Y.& M.V. Railroad; thence angle right 40 degrees 16 minutes (on long chord) for a distance of 367 feet to the point of tangent on South line of said railroad right of way; thence angle left 1 degree 39 minutes and 30 seconds along and on the South line of Y.& M.V. Railroad right of way line a distance of 266.9 feet to a point; thence angle right 100 degrees 21 minutes for a distance of 929.2 feet to point of beginning, containing 17.95 acres; together with all improvements and appurtenances thereon.
Also, a strip of land 30 feet in width parallel with and adjacent to the South line of Lot 11 of Garland Community Farm Subdivision, First Judicial District, Hinds County, Mississippi, a map or plat of said subdivision being recorded in Surveyor’s Record book “B” at page 67, in the office of




the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, the center line of said 30 foot strip being more particularly described as follows, to-wit:
Commencing at the Northeast corner of Lot 12 of said subdivision and run thence West along and on the North line of said Lot 12 a distance of 400 feet to a point; thence angle right 90 degrees 03 minutes and 30 seconds for a distance of 15 feet to the point of beginning of the center line herein described; run thence West 15 feet North of and parallel to South line of Lot 11 of Garland Community Farm Subdivision a distance of 892 feet to the East right of way line of county road containing 0.61 acres, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 3384 at Page 520.
2. Mayes Street Storeroom and Transformer Shop: 8.178 acres, being a part of Lots 6, 7 and 8 of the E & S Virden Subdivision of Nichols Place in Section 22, Township 6 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 614 at Page 267, and Book 2478 at Page 285, subject to easement to City of Jackson for street, 4/18/57.

3. Lots 23-29 of Block G, Cottage Grove Subdivision, Part 2, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 864 at Page 300.

4. 1.34 acres, Division Engineering Office Site in Lot 39, E & S Virden Subdivision of Nichols Place in Section 22, First Judicial District, Hinds County, Mississippi.

5. Clinton Office (Former C.E.P.A. Office) and Skill Development Center Site: 8.0 acres in West Half of Southwest Quarter, Section 28, Township 6 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2096 at Page 131.

6. Division Construction Center and Storeroom Site: Lots 2, 3, 4, 5 and Part of Lot 6, Court Green Addition, in East Half of Northeast Quarter, Section 10, Township 5 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 148 at Page 201, and Book 1514 at Page 68.

7. Dispatcher Office and Service Center: 1.12 acres in Lot 34 of South Jackson Survey, First Judicial District, Hinds County, Mississippi, subject to an easement for sanitary sewer sold to City of Jackson, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1402 at Page 210, and Book 1884 at Page 489.

8. Mayes-Lawson Street Storage Lot: 3.09 acres in South Half of Section 22, Township 6 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2286 at Page 240.





9. Leasehold in 8.0 acres, General Storeroom Site owned by Ross, Eubanks, Betts & Co., being a part of Lots 6-8 of E. & S. Virden Subdivision of Nichols Place in Section 22, Township 6 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 512 at Page 557, and subject to easement to City of Jackson for a street, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1020 at Page 473.

10. Leasehold to 0.41 acre Spur Track Site to General Storeroom, being a part of Lot 39, E & S Virden Subdivision of Nichols Place in Section 22, Township 6 North, Range 1 East, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 514 at Page 90.

11. Electric (Lampton) Building Site, being the South Half of Lot 6 and South Half of Lot 5 less 11 feet off East side in Southwest corner of Square 11 South, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 1800 at Page 116.

12. 6.91 acre Railroad Spur in the Southwest Quarter, Section 5, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2854 at Page 1185.

13. Chevron Property being Lots 7, 8, 9, 10 and 11 of Green Court, South Jackson, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 3180 at Page 344.

14. 2.40 acre Newman Microwave Tower Site in the East Half of Northeast Quarter, Section 26, Township 15 North, Range 5 East, Second Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the Second Judicial District of Hinds County at Raymond, Mississippi, in Book 212 at Page 61.

15. Easement to 13 KV Regulator Site in the Southwest Quarter of Section 16, Township 5 North, Range 2 West, Second Judicial District, Hinds County, Mississippi.

16. Leasehold in Pole Yard Site: Lot 5 of Virden’s Survey, First Judicial District, Hinds County, Mississippi, leased from G.M. & O. R.R. along the North R.O.W. line of Tombigbee Street.

17. 13 KV Switchrack Site: A 25-year leasehold expiring 11/27/91 under House Bill 1602 (Ch. 475) of the 1973 Regular Session, Lots 21 and 22 of A. Virden Survey, Square 8, East Jackson, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2490 at Page 508.





18. 21.02 acre Railroad Spur in Sections 3, 4 and 5, Township 5 North, Range 1 West, First Judicial District, Hinds County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of the First Judicial District of Hinds County at Jackson, Mississippi, in Book 2854 at Page 1185.

HOLMES COUNTY :
1. Lexington Office Building Site:
Parcel 1 (Ervin-Dunn): In Southwest corner of Lot 4, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 96 at Page 118.
Parcel 2 (Ellis E. Wynn): South 112 feet of Lot 4 less Parcel 1 above, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 95 at Page 562.
Parcel 3 (Annie Wynn): North 19.25 feet of Lot 4 and the South 0.75 feet of Lot 3, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 122 at Page 794.
Parcel 4 (Joy Wynn Brooks and Anne W. Love): The North Part of Lot 3, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 127 at Page 628.
2. Easement - 13 KV Regulator Site (vacant) in Northwest Quarter of Northeast Quarter, Section 30, Township 13 North, Range 4 East.

3. 0.075 acre 13 KV Regulator Site: In Northwest Quarter of Southeast Quarter of Section 17, Township 15 North, Range 5 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 55 at Page 129.

4. 0.98 acre Roadway Easement to Durant 115 KV Substation and 0.39 acre portion of Durant 115 KV Substation in Southwest Quarter, Section 14, Township 14 North, Range 4 East, a total of 1.37 acres, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 43 at Page 68, and Book 44 at Page 219.

5. Easement 13 KV Regulator Site in Southeast Quarter, in Section 33, Township 14 North, Range 3 East.

6. 13 KV Substation Site, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Holmes County, Mississippi, in Book 42 at Page 331.

HUMPHREYS COUNTY :
1. Belzoni Office Building Site: Lots 5-8, 14-21 of Block 5, West Side Addition; also a closed alley, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Humphreys County, Mississippi, in Book 73 at Pages 230, 232, 235 and 236.




JEFFERSON COUNTY :
1. 5.17 acres, Microwave Tower Site (vacant) in Section 4, Township 8 North, Range 4 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Jefferson County, Mississippi, in Book 4-S at Pages 151 and 166.

LAWRENCE COUNTY :
1. Easement - 13 KV Regulator Site in Northwest Quarter, Section 18, Township 7 North, Range 20 West.

LEAKE COUNTY :
1. Carthage Office Building Site: Lot 4, Block 11, Original Survey less the East 24 feet, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Leake County, Mississippi, in Book 102 at Page 196.

LEFLORE COUNTY :
1. Easement - 13 KV Regulator Site in Section 5, Township 17 North, Range 1 East.

2. Easement - 13 KV Regulator Site in Section 17, Township 21 North, Range 1 West.

3. Easement - 13 KV Regulator Site in Section 29, Township 18 North, Range 1 West, 2 miles North of Morgan City - Swiftown Line.

LINCOLN COUNTY :
1. Leasehold - Brookhaven Office Site at 111 South Whitworth Avenue, in Section 18, Township 7 North, Range 8 East.

2. 3.97 acre Brookhaven Service Center and Storeroom Site: Part of Block 164 in Northeast Quarter of Southwest Quarter, Section 13, Township 7 North, Range 7 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Lincoln County, Mississippi, in Book 490 at Page 42.

3. Easement - 13 KV Regulator site in Southeast Quarter, Section 31, Township 7 North, Range 7 East.

4. Easement - 13 KV Regulator Site in Northeast Quarter, Section 27, Township 7 North, Range 9 East.

MADISON COUNTY :
1. 3.00 acre Radio Tower Site: In Southwest Quarter of Northwest Quarter of Section 30, Township 10 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 161 at Page 131.





2. Easement to 13 KV Regulator Site in Southwest Quarter, Section 22, Township 8 North, Range 1 West.

3. 13 KV Regulator Site (vacant) in Southeast Quarter of Northwest Quarter, Section 2, Township 9 North, Range 4 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 31 at Page 428.

4. New Madison Office Building Site:
Parcel No. 1 (J.S. Harris, Jr.): 4.11 acres in North Half of the Northeast Quarter of Section 8, Township 7 North, Range 2 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 179 at Pages 249 and 732.
Parcel No. 2 (Marian H. Quinn): 3.62 acres adjacent and to the South of Parcel No. 1 in Section 8, Township 7 North, Range 2 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 179 at Pages 251 and 729.
5. Leasehold - Lots 5 and 7 of Overlook Subdivision, in North Half of Section 27, Township 7 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Madison County, Mississippi, in Book 335 at Page 85.

MONTGOMERY COUNTY :
1. Winona Office Building Site in Lot 154 and part of Lot 159, Mercer Map, in Southwest Quarter, Section 25, Township 19 North, Range 5 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Montgomery County, Mississippi, in Book HH at Page 373 and in Book II at Page 45.

PANOLA COUNTY :
1. Sardis Office Building Site: A part of Block 2, in Section 34, Township 7 South, Range 7 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Panola County, Mississippi, in Book A-32 at Pages 276, 277 and 499.

PIKE COUNTY :
1. McComb Office Building Site:
Parcel No. 1 (City of McComb): Land between the South side of Lot 8, Square G, of West McComb, and the North side of Clark Street, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 130 at Page 116.
Parcel No. 2 (Palmer & Wilson): Part of Lot 8, Square G of West McComb, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 127 at Page 304.




Parcel No. 3 (Mrs. K. M. Benjamin): Part of Lot 7, Square G, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 127 at Page 327.
Parcel No. 4 (C.C. Cotten Estate): Part of Lot 7, Square G, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 127 at Pages 329, 379 and 394.
Parcel No. 5 (Mrs. B. Jackson): Lot 2, Square G, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 145 at Pages 106 and 391.
Parcel No. 6 (J.T. and Polly Stewart): Part of Lot 8, Square G, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 171 at Page 301.
Parcel No. 7 (R.L. and Wilda Crutcher): A lot in Square G, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 171 at Page 299.
2. 4.84 acres, Storage Lot Site in Section 13, Township 3 North, Range 7 East, White - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 112 at Page 116; Sherman - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 107 at Page 394; Caruth - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 108 at Page 159; Jones - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 105 at Page 125; Gillis - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 105 at Page 98; M.C.P. Co. - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 57 at Page 534; Highway Commission - as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 187 at Page 507.

3. Old 13 KV Substation Site (vacant), located in Section 1, Township 3 North, Range 7 East, in Pike County, Mississippi, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Pike County, Mississippi, in Book 57 at Page 534.

QUITMAN COUNTY :
1. Easement - 13 KV Regulator Site in Section 25, Township 29 North, Range 1 West.

2. Leasehold - Marks Office Building Site on Lots 1-6, Block 35, Addition 1, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Quitman County, Mississippi, in Book B-13 at Page 486.

RANKIN COUNTY :




1. 13 KV Regulator Site in Southeast Quarter of Northwest Quarter, Section 30, Township 4 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 99 at Page 535.

2. Easement - 13 KV Regulator Site in Northwest Quarter, Section 2, Township 5 North, Range 4 East.

3. 7.68 acres, Pearl District Office Site in the Southwest Quarter of the Northwest Quarter, Section 7, Township 5 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 411 at Page 59.

4. 6.04 acre Rankin Office Site (new) in Section 13, Township 5 North, Range 2 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Rankin County, Mississippi, in Book 438 at Page 218.

SCOTT COUNTY :
1. Morton Office Building Site:
Parcel 1 (A.S. Byrd, Jr.): Part of Lots 13 and 14, Block 3, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Scott County, Mississippi, in Book 5-N at Page 282.
Parcel 2 (D.R. Ott): Part of Lot 13, Block 3, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Scott County, Mississippi, in Book 5-N at Page 185.
Parcel 3 (J.N. & Mrs. M.A. Stuart): Part of Lots 13, 15 and 16, Block 3, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Scott County, Mississippi, in Book 5-N at Page 283.
SHARKEY COUNTY :
1. Rolling Fork Office Building Site: Lots 1 and 6, Block 6 of East Rolling Fork, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sharkey County, Mississippi, in Book 100 at Page 558, less 6-foot strip sold to Town of Rolling Fork, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sharkey County, Mississippi, in Book 152 at Page 564.

SIMPSON COUNTY:
1. Easement - 13 KV Regulator Site in Section 1, Township 10 North, Range 17 West.

2. Magee Office Building Site in Lots 1, 12 and part of 2 and 11, in Block 81, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 442 at Page 101.





3. Mendenhall Office Building Site: Part of Lots 6 and 8, all of Lot 7 in Block 4 of Original Survey of the Town of Edna, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Simpson County, Mississippi, in Book 431 at Page 145.

SUNFLOWER COUNTY :
1. Water Rights for pumping (Sunflower River) in Sections 18 and 19, Township 21 North, Range 3 West; Sections 18-20 and 30-35, Township 22 North, Range 4 West; Sections 2, 3 and 12, Township 21 North, Range 4 West; all as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book P-14 at Pages 82, 85, 88 and 334; Book R-14 at Page 147; and Book 0-14 at Pages 540, 546, 551 and 556.

2. Water Rights for pumping water in Sections 19 and 20, Township 23 North, Range 4 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book X-14 at Page 427.

3. New Indianola Office Building Site in Southeast Quarter, Section 31, Township 19 North, Range 4 West:

Parcel 1: 1.0 acre being a part of Lot 27, Block “0”, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book M-13 at Page 241.
Parcel 2: 0.11 acre being a part of Lot 26, Block “0”, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book M-13 at Page 241.
Parcel 3: 0.19 acres being part of Lot 26, Block “0”, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book W-19 at Page 89.
Parcel 4: 0.40 acres being Lot 26, Block “0” less a 40-foot strip off the South Side, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book S-20 at Page 147.
4. Drew Office Building Site: Part of Lots 3 and 4 and Lot 5 in Block 3, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Sunflower County, Mississippi, in Book Q-14 at Pages 165 and 205.

TALLAHATCHIE COUNTY :
1. Easement - 13 KV Regulator Site in Section 28, Township 23 North, Range 1 West.

2. Charleston Office Building Site: Lots 1 and 2, Block 1, Northwest Ward, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tallahatchie County, Mississippi, in Book 215 at Page 176.





TATE COUNTY :
1. Coldwater Office Building Site: Lot 32, and part of Lot 31, an area 86’ x 115’ adjoining said Lot, also an area 75’ x 175’ adjacent to Lot 29, all in Block 29, Part 4 of 1941 Extension to Coldwater in the Southeast Quarter of Section 31, Township 4 South, Range 7 West, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book “NN” at Page 74, and Book “YY” at Page 438.

2. Senatobia Office Building Site: All of Lots 69-71, 76 and 77, Part of Lots 68, 72, 75 and 78, Block 1, Tatum’s Survey, in Northwest Quarter, Section 29, Township 5 South, Range 7 West, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book “MM” at Pages 433 and 456, Book “NN” at Page 89; Book “00” at Page 600, and Book A-5 at Page 200.

3. 4.35 acres, Arkabutla Repeater Station Site in Northeast Quarter of Northwest Quarter, Section 2, Township 5 South, Range 9 West, less 0.19 acre in Road R.O.W. and 1.24 acres reserved for cemetery, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Tate County, Mississippi, in Book A-39 at Page 515.

TUNICA COUNTY :
1. Tunica Office Building being the Northeast Quarter, Block 2 in the Southeast Quarter of Tunica, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Tunica County, Mississippi, in Book H-3 at Page 410, and Book J-3 at Page 1.

2. Easement - 13 KV Regulator Site in the Northeast Quarter, Section 16, Township 4 South, Range 11 West, and being located .5 miles West of Hollywood.

3. Easement - 13 KV Regulator Site in Section 36, Township 5 South, Range 12 West, and being located .25 miles North of Clayton.

WALTHALL COUNTY :
1. Leased Tylertown Office Site.
 
WARREN COUNTY :
1. Parking Lot at Vicksburg Leased Office: Part of Lot 236, Square 38, Vicksburg Proper, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 292 at Page 294.

2. 0.17 acre, Leased Vicksburg Office Building Site in Lot 236, Square 38, Vicksburg Proper, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 274 at Page 575.

3. Vickburg Office Building Site (new) in Section 32, Township 16 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 158 at Page 424.





4. 1.55 acres, Vicksburg Service Center Site in Section 32, Township 16 North, Range 3 East, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 254 at Page 477, and Book 324 at Page 295.

5. Leased Microwave Tower Site in Section 16, Township 15 North, Range 3 East, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Warren County, Mississippi, in Book 432 at Page 64.

WASHINGTON COUNTY :
1. 115 KV Tower Anchor Site (vacant): .537 acre being Lot 1, part of Lots 2 and 3, Block 41, Skinners Addition, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 206 at Page 506.

2. Service Center and Storage Yard Site leased from Belhaven College: Part of Block 16, Third Addition, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 416 at Page 210.

3. Office Building and Storage Yard Site, being Lots 3 and 4, Block 16, Third Addition, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 882 at Page 119.

4. Hollandale Office Building Site: Lot 3 and part of Lot 4, Block 29, Original Town, as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 608 at Page 455.

5. Easement - 13 KV Regulator Site in Northwest Quarter, Section 1, Township 16 North, Range 7 West.

6. Easement - 13 KV Regulator Site in Southeast Quarter, Section 3, Township 17 North, Range 6 West.

7. Storage Lot Site (Old Plant Site): Lots 2, 3, 6-8, and part of Lot 1 in Block 19, Skinners Addition, as more particularly described in the documents recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 197 at Page 100, and Book 566 at Pages 264 and 266.

8. Greenville Service Center:
Commencing at the Northwest corner of Block 16 of the Third Addition to the City of Greenville, where the Eastern boundary of Broadway intersects the Southern boundary of Main Street; thence running easterly along the Southern Boundary of Main Street, which coincides with the Northern boundary of Lots 1 and 2 of said Block, 170 feet to and for the point of beginning; thence from said point of beginning, running Southerly on a line perpendicular to Main Street, 310 feet to an alley; thence running Easterly along the Northern Boundary of said alley, 94 feet to the Eastern boundary of Lot 2 of said block; thence running Northerly along the Eastern boundary of said Lot 2, and perpendicular to Main Street, 310 feet to the Southern boundary of Main Street; thence running Westerly along the Southern boundary of Main Street 94 feet to the point of beginning,




and being the East 94 feet of Lot 2 of Block 16 of the Third Addition, as shown by a map or plat of said Addition on file in the office of the Chancery Clerk of Washington County in Book K-2, Page 1, all as more particularly described in the document recorded among the land records in the office of the Chancery Clerk of Washington County, Mississippi, in Book 1616 at Page 366.
YAZOO COUNTY :
1. Easement - 13 KV Regulator Site in the Northeast Quarter, Section 23, Township 12 North, Range 3 West.




IN WITNESS WHEREOF, MISSISSIPPI POWER & LIGHT COMPANY, party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and Bank of Montreal Trust Company, one of the parties hereto of the second part, in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and Z. George Klodnicki, the other party hereto of the second part, for like purposes, has hereunto set his hand and affixed his seal, all as of the day and year first above written.
MISSISSIPPI POWER & LIGHT COMPANY


By      /s/ G.A. GOFF     
G.A. GOFF
Senior Vice President
[CORPORATE SEAL]

ATTEST:


/s/ J.R. MARTIN     
J. R. MARTIN
Assistant Secretary


Executed, sealed and delivered by
MISSISSIPPI POWER & LIGHT COMPANY,
in the presence of:

/s/ ALLAN H. MAPP     
ALLAN H. MAPP
/s/ JAMES E. COFER     
JAMES E. COFER











BANK OF MONTREAL TRUST COMPANY
as Trustee


/s/ K. O. HEALEY     
K. O. HEALEY
Vice President and Trust Officer


[CORPORATE SEAL]

ATTEST:


/s/ T. GABALLAH     
T. GABALLAH
Assistant Secretary

/s/ Z. GEORGE KLODNICKI      [L.S.]
Z. GEORGE KLODNICKI,
as Co-Trustee



Executed, sealed and delivered by
BANK OF MONTREAL TRUST COMPANY and
Z. GEORGE KLODNICKI, in the
presence of:


/s/ MIRIAM M. PICO     
MIRIAM M. PICO
/s/ TIMMY CORTES     
TIMMY CORTES









STATE OF MISSISSIPPI      )
) SS.:
COUNTY OF HINDS     


Personally appeared before me, the undersigned authority in and for the aforesaid County and State, the within named G. A. GOFF, as Senior Vice President, and J. R. MARTIN, as Assistant Secretary of MISSISSIPPI POWER & LIGHT COMPANY, who acknowledged that they signed, attached the corporate seal of the corporation thereto and delivered the foregoing instrument on the day and year therein stated, by the authority and as the act and deed of the corporation.
On the 9th day of February, 1988, before me personally came G. A. GOFF, to me known, who, being by me duly sworn, did depose and say that he resides at 425 North Pointe Parkway, Jackson, Mississippi 39211; that he is Senior Vice President of MISSISSIPPI POWER & LIGHT COMPANY, the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
Given under my hand and seal this 9th day of February, 1988.


/s/ JOY L. SPEARS     
JOY L. SPEARS
My Commission Expires
March 30, 1990










STATE OF NEW YORK      )
) SS.:
COUNTY OF NEW YORK      )


Personally appeared before me, the undersigned authority in and for the aforesaid County and State, the within named K. O. HEALEY, as Vice President and Trust Officer, and T. GABALLAH, as Assistant Secretary of BANK OF MONTREAL TRUST COMPANY, who acknowledged that they signed, attached the corporate seal of the corporation thereto and delivered the foregoing instrument on the day and year therein stated, by the authority and as the act and deed of the corporation.
On the 8th day of February, 1988, before me personally came K. O. HEALEY, to me known, who, being by me duly sworn, did depose and say that he resides at 25 McCutcheon Court, Middletown, New Jersey 07748; that he is a Vice President and Trust Officer of BANK OF MONTREAL TRUST COMPANY, the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
Given under my hand and seal this 8th day of February, 1988.


/s/ MAUREEN RADIGAN     
MAUREEN RADIGAN
Notary Public, State of New York
No. 31-4865983
Qualified in New York County
Commission Expires July 28, 1988













STATE OF NEW YORK      )
) SS.:
COUNTY OF NEW YORK      )

Personally appeared before me, the undersigned authority in and for the aforesaid County and State, the within named Z. GEORGE KLODNICKI, who acknowledged that he signed, sealed and delivered the foregoing instrument on the day and year therein mentioned.
On the 8th day of February, 1
988, before me personally came Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.
Given under my hand and seal this 8th day of February, 1988.


/s/ MAUREEN RADIGAN     
MAUREEN RADIGAN
Notary Public, State of New York
No. 31-4865983
Qualified in New York County
Commission Expires July 28, 1988





SUMMARY OF RECORDING DATA

(to be inserted)






Exhibit 4(e)1


MISSISSIPPI POWER & LIGHT COMPANY

to

BANK OF MONTREAL TRUST COMPANY

and

Z. GEORGE KLODNICKI,
As Trustees under Mississippi
Power & Light Company’s Mortgage and
Deed of Trust, dated as of February 1, 1988

    


SIXTH SUPPLEMENTAL INDENTURE
Providing among other things for

General and Refunding Mortgage Bonds
8.65% Series due January 15, 2023
    







Dated as of January 1, 1993














Table of Contents
Page

Parties
1
Recitals
1

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.01.
Terms From the Original Indenture      5
Section 1.02.
Certain Defined Terms      5
Section 1.03.
References Are to Sixth Supplemental Indenture      6
Section 1.04.
Number and Gender      6
ARTICLE II
THE ELEVENTH SERIES
Section 2.01.
Bonds of the Eleventh Series      6
Section 2.02.
Optional Redemption of Bonds of the Eleventh Series      6
Section 2.03.
Transfer and Exchange      7
Section 2.04.
Dating of Bonds and Interest Payments      8
ARTICLE III
COVENANTS
Section 3.01.
Maintenance of Paying Agent      8
Section 3.02.
Further Assurances      9
Section 3.03.
Limitation on Restricted Payments      9
Section 3.04.
Protection of Rate Order      9
Section 3.05.
Limitation on Sale, Transfer or Pledge of Deferred Grand Gulf I Costs      10
Section 3.06.
Preconsent to Modification of Rights under Sections 3.04 and 3.05      10
ARTICLE IV
THE COMPANY RESERVES THE RIGHT TO AMEND
CERTAIN PROVISIONS OF THE ORIGINAL INDENTURE
Section 4.01.
Reservation of the Right of Amendment - Excepted Encumbrances and Releases      10
Section 4.02.
Reservation of the Right of Amendment - Release of Mortgaged and Pledged Property      11
Section 4.03.
Reservation of the Right of Amendment - Net Earning Certificate      13
Section 4.04.
Reservation of the Right of Amendment - Defaults      13




ARTICLE V
MISCELLANEOUS PROVISIONS
Section 5.01.
Acceptance of Trusts      14
Section 5.02.
Effect of Sixth Supplemental Indenture under Louisiana Law      14
Section 5.03.
Record Date      15
Section 5.04.
Titles      15
Section 5.05.
Counterparts      15
Section 5.06.
Governing Law      15

Signatures
Acknowledgments
Exhibit A - Form of Bond of Eleventh Series












SIXTH SUPPLEMENTAL INDENTURE
SIXTH SUPPLEMENTAL INDENTURE, dated as of January 1, 1993, between MISSISSIPPI POWER & LIGHT COMPANY, a corporation of the State of Mississippi, whose post office address is P.O. Box 1640, Jackson, Mississippi 39215-1640 (tel. 601-969-2311) (the “Company”) and BANK OF MONTREAL TRUST COMPANY, a corporation of the State of New York, whose principal office is located at 77 Water Street, New York, New York 10005 (tel. 212-701-7650) and Z. GEORGE KLODNICKI, whose post office address is 87 Prospect Avenue, Westwood, New Jersey 07675 (tel. 212-701-7650), as trustees under the Mortgage and Deed of Trust, dated as of February 1, 1988, executed and delivered by the Company (herein called the “Original Indenture”; the Original Indenture together with any and all indentures and instruments supplemental thereto being herein called the “Indenture”);
WHEREAS, the Original Indenture has been duly recorded or filed as required in the States of Mississippi, Arkansas and Wyoming; and
WHEREAS, the Company has executed and delivered to the Trustees (such term and all other defined terms used herein and not defined herein having the respective definitions to which reference is made in Article I below) its First Supplemental Indenture, dated as of February 1, 1988, its Second Supplemental Indenture, dated as of July 1, 1988, its Third Supplemental Indenture, dated as of May 1, 1989, its Fourth Supplemental Indenture, dated as of May 1, 1990 and its Fifth Supplemental Indenture, dated as of November 1, 1992, each as a supplement to the Original Indenture, which Supplemental Indentures have been duly recorded or filed as required in the States of Mississippi, Arkansas and Wyoming; and
WHEREAS, in addition to property described in the Original Indenture, as heretofore supplemented, the Company has acquired certain other property rights and interests in property; and
WHEREAS, the Company has heretofore issued, in accordance with the provisions of the Indenture, the following series of bonds:
Series
Principal Amount
Issued and Outstanding
14.65% Series due February 1, 1993
$55,000,000
14.95% Series due February 1, 1995
$20,000,000
11.11% Series due July 15, 1994
$18,000,000
11.14% Series due July 15, 1995
$10,000,000
11.18% Series due July 15, 1996
$26,000,000
11.20% Series due July 15, 1997
$46,000,000
9.90% Series due April 1, 1994
$30,000,000
5.95% Series due October 15, 1995
$15,000,000
6.95% Series due July 15, 1997
$50,000,000
; and
WHEREAS, Section 19.04 of the Original Indenture provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Indenture, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations, restrictions or provisions for the benefit of any one or more series of bonds issued




thereunder, or the Company may establish the terms and provisions of any series of bonds by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to be recorded in all of the states in which any property at the time subject to the Lien of the Indenture shall be situated; and
WHEREAS, the Company desires to create a new series of bonds under the Indenture and to add to its covenants and agreements contained in the Indenture certain other covenants and agreements to be observed by it; and
WHEREAS, all things necessary to make this Sixth Supplemental Indenture a valid, binding and legal instrument have been performed, and the issue of said series of bonds, subject to the terms of the Indenture, has been in all respects duly authorized;
NOW, THEREFORE, THIS SIXTH SUPPLEMENTAL INDENTURE WITNESSETH: That the Company, in consideration of the premises and of Ten Dollars ($10) to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to further secure the payment of both the principal of and interest on the bonds from time to time issued under the Indenture, according to their tenor and effect and the performance of all provisions of the Indenture and of said bonds, hereby grants, bargains, sells, releases, conveys, assigns, transfers, mortgages, hypothecates, affects, pledges, sets over and confirms a security interest in (subject, however, to Excepted Encumbrances as defined in Section 1.06 of the Original Indenture), unto Z. GEORGE KLODNICKI and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, as Trustees, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, all properties of the Company real, personal and mixed, of any kind or nature (except as in the Indenture expressly excepted), now owned (including, but not limited to, that located in the following counties in the State of Mississippi: Adams, Amite, Attala, Bolivar, Calhoun, Carroll, Choctaw, Claiborne, Coahoma, Copiah, Covington, DeSoto, Franklin, Grenada, Hinds, Holmes, Humphreys, Issaquena, Jefferson, Jefferson Davis, Lawrence, Leake, Leflore, Lincoln, Madison, Montgomery, Panola, Pike, Quitman, Rankin, Scott, Sharkey, Simpson, Smith, Sunflower, Tallahatchie, Tate, Tunica, Walthall, Warren, Washington, Webster, Wilkinson, Yalobusha and Yazoo; and in Independence County, Arkansas, and Campbell County, Wyoming) or, subject to the provisions of Section 15.03 of the Original Indenture, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same, the scope and intent of the foregoing or of any general description contained in the Indenture) all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same; all power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, street lighting systems, standards and other equipment incidental thereto; all telephone, radio and television systems, air conditioning systems and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, electric, gas and water lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generators and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, towers,




overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment, and all other fixtures and personalty; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith and (except as in the Indenture expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property in the Indenture described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 11.01 of the Original Indenture) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property, rights and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 15.03 of the Original Indenture, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any in the Indenture expressly excepted, shall be and are as fully granted and conveyed by the Indenture and as fully embraced within the Lien of the Indenture as if such property, rights and franchises were now owned by the Company and were specifically described by the Indenture and granted and conveyed by the Indenture.
PROVIDED that the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder, nor is a security interest therein hereby granted or intended to be granted, and the same are hereby expressly excepted from the Lien and operation of the Indenture, viz: (1) cash, shares of stock, bonds, notes and other obligations and other securities not in the Indenture specifically pledged, paid, deposited, delivered or held under the Indenture or covenanted so to be; (2) merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or part) any rolling stock, buses, motor coaches, automobiles or other vehicles or aircraft or boats, ships, or other vessels and any fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; boats, ships and other vessels; all timber, minerals, mineral rights and royalties; (3) bills, notes and other instruments and accounts receivable, judgments, demands and choses in action, and all contracts, leases and operating agreements not specifically pledged under the Indenture or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the Lien of the Indenture; (5) electric energy, gas, water, steam, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; (6) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system, and any natural gas distribution system; and (7) the Company’s franchise to be a corporation; provided, however, that the property and rights expressly excepted from the Lien and operation of the Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver




or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XII of the Original Indenture by reason of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed or in which a security interest has been granted by the Company as aforesaid, or intended so to be (subject, however, to Excepted Encumbrances as defined in Section 1.06 of the Original Indenture), unto Z. GEORGE KLODNICKI and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, and their successors and assigns forever.
IN TRUST NEVERTHELESS, upon the terms and trusts in the Indenture set forth, for the equal pro rata benefit and security of all and each of the bonds and coupons issued and to be issued under the Indenture, or any of them, in accordance with the terms of the Indenture, without preference, priority or distinction as to the Lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject to the provisions in the Indenture set forth in reference to extended, transferred or pledged coupons and claims for interest; it being intended that, subject as aforesaid, the Lien and security of all of said bonds and coupons of all series issued or to be issued under the Indenture shall take effect from the date of the initial issuance of bonds under the Indenture, and that the Lien and security of the Indenture shall take effect from said date as though all of the said bonds of all series were actually authenticated and delivered and issued upon such date.
PROVIDED, HOWEVER, these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid, the principal of and interest on said bonds, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon for principal and interest, and if the Company shall also pay or cause to be paid all other sums payable hereunder by it, then the Indenture and the estate and rights granted under the Indenture shall cease, determine and be void, otherwise to be and remain in full force and effect.
AND IT IS HEREBY COVENANTED, DECLARED AND AGREED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Indenture shall affect and apply to the property hereinbefore described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and their successor or successors as Trustees in such trust in the same manner and with the same effect as if the said property had been owned by the Company at the time of the execution of the Original Indenture and had been specifically and at length described in and conveyed to said Trustees by the Original Indenture as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in such trust as follows:


ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.01.     Terms From the Original Indenture . All defined terms used in this Sixth Supplemental Indenture and not otherwise defined herein shall have the respective meanings ascribed to them in the Original Indenture.




Section 1.02.     Certain Defined Terms . As used in this Sixth Supplemental Indenture, the following defined terms shall have the respective meanings specified unless the context clearly requires otherwise:

The term “ Eleventh Series ” shall have the meaning specified in Section 2.01.
The term “ Original Indenture ” shall have the meaning specified in the first paragraph hereof.
The term “ Person ” shall mean any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
The term “ Rate Order ” shall mean the Final Order on Rehearing, dated September 16, 1985, as amended by further orders dated, respectively, September 29, 1988 and September 7, 1989, issued by the Mississippi Public Service Commission providing for, among other things, the recovery by the Company of Deferred Grand Gulf I Costs.
The term “ System Energy ” shall mean System Energy Resources, Inc., an Arkansas corporation, or any successor company to which the Company shall be obligated to purchase capacity and energy from Grand Gulf I.
Section 1.03.     References Are to Sixth Supplemental Indenture . Unless the context otherwise requires, all references herein to “Articles”, “Sections” and other subdivisions refer to the corresponding Articles, Sections and other subdivisions of this Sixth Supplemental Indenture, and the words “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Sixth Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision hereof or to the Original Indenture or any other supplemental indenture thereto.

Section 1.04.     Number and Gender . Unless the context otherwise requires, defined terms in the singular include the plural, and in the plural include the singular. The use of a word of any gender shall include all genders.



ARTICLE II

THE ELEVENTH SERIES

Section 2.01.     Bonds of the Eleventh Series . There shall be a series of bonds designated as the 8.65% Series due January 15, 2023 (herein sometimes referred to as the “Eleventh Series”), each of which shall also bear the descriptive title “General and Refunding Mortgage Bond” unless subsequent to the issuance of such bonds a different descriptive title is permitted by Section 2.01 of the Original Indenture. The form of bonds of the Eleventh Series shall be substantially in the form of Exhibit A hereto. Bonds of the Eleventh Series shall mature on January 15, 2023, and shall be issued only as fully registered bonds in denominations of One Thousand Dollars and, at the option of the Company, in any multiple or multiples thereof (the exercise of such option to be evidenced by the execution and delivery thereof). Bonds of the Eleventh Series shall bear interest at the rate of eight and sixty-five one hundredths per centum (8.65%) per annum (except as hereinafter provided), payable semi-annually on January 15 and July 15 of each year, and at maturity, the first interest payment to be made on July 15, 1993 for the period from January 15, 1993 to July 15, 1993; the principal and interest on each said bond to be payable at the office or




agency of the Company in the Borough of Manhattan, The City of New York, New York, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts. Interest on the bonds of the Eleventh Series may at the option of the Company be paid by check mailed to the registered owners thereof. Overdue principal and overdue interest in respect of the bonds of the Eleventh Series shall bear interest (before and after judgment) at the rate of nine and sixty-five one hundredths per centum (9.65%) per annum. Interest on the bonds of the Eleventh Series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on the bonds of the Eleventh Series in respect of a portion of a month shall be calculated based on the actual number of days elapsed.
The Company reserves the right to establish at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Eleventh Series and to provide for exchangeability of such coupon bonds with the bonds of said Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose.
Section 2.02.     Optional Redemption of Bonds of the Eleventh Series . (a) Bonds of the Eleventh Series shall not be redeemable prior to January 15, 1998. On and after January 15, 1998, bonds of the Eleventh Series shall be redeemable, at the option of the Company, in whole at any time, or in part from time to time, prior to maturity, upon notice mailed to each registered owner at his last address appearing on the registry books not less than 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:

GENERAL REDEMPTION PRICES
If redeemed during 12 month period ending January 14,
1999
106.35%
2008
102.54%
2016
100.00%
2000
105.93%
2009
102.12%
2017
100.00%
2001
105.50%
2010
101.69%
2018
100.00%
2002
105.08%
2011
101.27%
2019
100.00%
2003
104.66%
2012
100.85%
2020
100.00%
2004
104.23%
2013
100.42%
2021
100.00%
2005
103.81%
2014
100.00%
2022
100.00%
2006
103.39%
2015
100.00%
2023
100.00%
2007
102.96%
 
 
 
 

in each case together with accrued interest to the date fixed for redemption.
(b) On and after January 15, 1998, bonds of the Eleventh Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Original Indenture) of cash delivered to or deposited with the Trustee pursuant to the provisions of Section 9.05 of the Original Indenture or subject to the provisions of Section 11.05 of the Original Indenture at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 month period ending January 14,




1999
100.00%
2008
100.00%
2016
100.00%
2000
100.00%
2009
100.00%
2017
100.00%
2001
100.00%
2010
100.00%
2018
100.00%
2002
100.00%
2011
100.00%
2019
100.00%
2003
100.00%
2012
100.00%
2020.
100.00%
2004
100.00%
2013
100.00%
2021
100.00%
2005
100.00%
2014
100.00%
2022
100.00%
2006
100.00%
2015
100.00%
2023
100.00%
2007
100.00%
 
 
 
 

in each case together with accrued interest to the date fixed for redemption.
Section 2.03.     Transfer and Exchange . (a) At the option of the registered owner, any bonds of the Eleventh Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.

b. Bonds of the Eleventh Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York.

c. Upon any such exchange or transfer of bonds of the Eleventh Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 2.05 of the Original Indenture, but the Company hereby waives any right to make a charge in addition thereto for any such exchange or transfer of bonds of the Eleventh Series.

Section 2.04.     Dating of Bonds and Interest Payments . (a) Bonds of the Eleventh Series shall be dated and bear interest from the date of issuance, provided that if any bond of the Eleventh Series shall be authenticated and delivered upon a transfer of, or in exchange for or in lieu of, any other bond or bonds of the Eleventh Series, it shall be dated so that such bond shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such bond shall have been delivered or from January 15, 1993 if authenticated and delivered prior to July 15, 1993.

b. Notwithstanding the foregoing, bonds of the Eleventh Series shall be dated so that the Person in whose name any bond of the Eleventh Series is registered at the close of business on any record date for the Eleventh Series with respect to any interest payment shall be entitled to receive the interest payable on the interest payment date notwithstanding the cancellation of such bond upon any transfer or exchange thereof subsequent to the record date of the Eleventh Series and prior to such interest payment date, except if, and to the extent that, the Company shall default in the payment of the interest due on such interest payment date, in which case such defaulted interest shall be paid to the Persons in whose names Outstanding bonds of the Eleventh Series are registered on the day immediately preceding the date of payment of such defaulted interest. Any bond of the Eleventh Series issued upon any transfer or exchange subsequent to the record date for the Eleventh Series for any interest payment date and prior to such interest payment date shall bear interest from such interest payment date. The term “record date for the Eleventh Series”, as used with respect to any interest payment date, shall mean the 14th day of the month, whether or not a business day, in which such interest payment date occurs.






ARTICLE III

COVENANTS

Section 3.01.     Maintenance of Paying Agent . So long as any bonds of the Eleventh Series are Outstanding, the Company covenants that the office or agency of the Company in the Borough of Manhattan, The City of New York, New York where the principal of or interest on any bonds of such series shall be payable shall also be an office or agency where any such bonds may be transferred or exchanged and where notices, presentations or demands to or upon the Company in respect of such bonds or in respect of the Indenture may be given or made.

Section 3.02.     Further Assurances . From time to time whenever reasonably requested by the Trustee or the holders of not less than a majority in principal amount of the Eleventh Series Bonds then Outstanding, the Company will make, execute and deliver or cause to be made, executed and delivered any and all such further and other instruments and assurances as may be reasonably necessary or proper to carry out the intention of or to facilitate the performance of the terms of the Indenture or to secure the rights and remedies of the holders of such bonds.

Section 3.03.     Limitation on Restricted Payments .
a. So long as any bonds of the Eleventh Series are Outstanding, the Company covenants that it will not declare any dividends on its common stock (other than (1) a dividend payable solely in shares of its common stock or (2) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its common stock) or make any distribution on outstanding shares of its common stock or purchase or otherwise acquire for value any outstanding shares of its common stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its common stock) unless, after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases or acquisitions paid or made subsequent to December 31, 1992 (other than any dividend declared by the Company on or before December 31, 1992) does not exceed (without giving effect to (1) any such dividends, distributions, purchases or acquisitions or (2) any net transfers from earned surplus to stated capital accounts) the sum of (A) the aggregate amount credited subsequent to December 31, 1992 to earned surplus, (B) $250,000,000 and (C) such additional amounts as shall be authorized or approved, upon application by the Company and after notice, by the SEC under the Holding Company Act.

b. For the purpose of this Section, the aggregate amount credited subsequent to December 31, 1992 to earned surplus shall be determined in accordance with generally accepted accounting principles and practices (or, if in the opinion of the Company’s independent public accountants (delivered to the Trustee), there is an absence of any such generally accepted accounting principles and practices as to the determination in question, then in accordance with sound accounting practices) and after making provision for dividends upon any preferred stock of the Company accumulated subsequent to such date, and in addition there shall be deducted from earned surplus all amounts (without duplication) of losses, write-offs, write-downs or amortization of property, whether extraordinary or otherwise, recorded in and applicable to a period or period subsequent to December 31, 1992. Also for purposes of this Section, credits to earned surplus shall be determined without reference to and shall not include undistributed retained earnings of Subsidiaries.




Section 3.04.     Protection of Rate Order . So long as any bonds are Outstanding under the Indenture that were issued under Article IV of the Original Indenture, the Company covenants that it will:

a. take all reasonable actions (i) to maintain in full force and effect the Rate Order or any other regulatory authorization or legal or other authority pursuant to which the Company recovers amounts paid to System Energy in respect of capacity and energy from Grand Gulf I and records Deferred Grand Gulf I Costs on its books as assets and (ii) to defend against any action, suit or regulatory proceeding seeking to abrogate, invalidate or materially adversely modify the Rate Order or such regulatory authorization or legal or other authority; and

b. not take any action to modify the Rate Order or such other regulatory authorization or legal or other authority unless it first delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel to the effect that, in the opinion of the signers, such proposed modification is not materially adverse to the interest of the registered owners of Outstanding bonds that were issued under Article IV of the Original Indenture.

Section 3.05.     Limitation on Sale, Transfer or Pledge of Deferred Grand Gulf I Costs . So long as any Bonds are Outstanding under the Indenture that were issued under Article IV of the Original Indenture, the Company covenants that it will not sell, assign, transfer or otherwise dispose of, or grant, incur or permit to exist any Lien on, any of its Deferred Grand Gulf I Costs, other than the Lien of the Indenture or as may be contem-plated by the granting clauses of the 1944 Mortgage as of the date of this Sixth Supplemental Indenture.

Section 3.06.     Preconsent to Modification of Rights under Sections 3.04 and 3.05 . The Holders of the bonds of the Eleventh Series hereby consent to any modification of the Rate Order or any other act, disposition, Lien or thing prohibited or limited by Sections 3.04 or 3.05 of this Sixth Supplemental Indenture or the failure to take any action required by such Sections or the waiver or amendment of any provision of such Sections if the Company obtains the consent (in any number of instruments of similar tenor executed by registered owners of bonds or by their attorneys appointed in writing) to such modification, act, omission, disposition, Lien, thing, failure to act, waiver or amendment of the registered owners of at least a majority in aggregate principal amount of the bonds then Outstanding under the Indenture that were issued under Article IV of the Original Indenture.


ARTICLE IV

THE COMPANY RESERVES THE RIGHT TO AMEND CERTAIN PROVISIONS OF THE ORIGINAL INDENTURE

Section 4.01.     Reservation of the Right of Amendment - Excepted Encumbrances and Releases . The Company reserves the right, without any consent or other action by holders of bonds of the Eleventh Series or of any subsequently created series, to amend the Original Indenture as heretofore amended and supplemented, as follows:

To amend subdivision (e) of Section 1.06 of the Original Indenture to read as follows:
“(e) easements, ground leases, restrictions, exceptions or reservations in any property and/or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communication lines, railways, removal of coal or other




minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment, and defects, irregularities and deficiencies in titles of any property and/or rights of way which do not materially impair the use of such property and/or rights of way for the purposes for which such property and/or rights of way are held by the Company;”
To amend Section 11.02 of the Original Indenture by deleting the word “and” at the end of subdivision (2), replacing the period at the end of subdivision (3) with a semicolon, and adding the following subdivision (4) at the end of Section 11.02 to read as follows:
“and (4) grant, free from the Lien of this Indenture, and effect the subordination of the Lien of this Indenture to, easements, ground leases or rights of way in, upon, over and across the property or rights of way to the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communications lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment; provided that such grant does not materially impair the use of the property or rights of way for the purposes for which such property or rights of way are held by the Company.”
Section 4.02.     Reservation of the Right of Amendment -- Release of Mortgaged and Pledged Property . The Company reserves the right, without any consent or other action by holders of bonds of the Eleventh Series or of any subsequently created series, to amend the Original Indenture, as heretofore amended and supplemented, as follows:

To amend Section 11.04 of the Original Indenture by inserting “(I)” before the word “Unless” in the first line thereof, and by adding the following Subsection (II) at the end of Section 11.04;
“(II) Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more of the Defaults shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property that is not Funded Property, except cash then held by the Trustee (provided, however, that obligations secured by purchase money mortgage deposited with the Trustee shall not be released except as provided in Section 11.05 hereof), and the Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon application of the Company and receipt by the Trustee of the following (in lieu of complying with the requirements of Section 11.03 hereof):
(1) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and describing in reasonable detail the property to be released and requesting such release, and stating:
(a) that the Company is not in default in the payment of interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing;
(b) that the Company has sold, leased, granted an interest in, exchanged, dedicated or disposed of, or intends or has agreed to sell, lease, grant an interest in, exchange, dedicate or dispose of or that a governmental body or agency has exercised a right to order the Company to divest itself of, the property to be released;
(c) that the property to be released is not Funded Property;
(d) that (except in any case where a governmental body or agency has exercised a right to order the Company to divest itself of such property) such release is in the opinion of the signers desirable in the conduct of the businesses of the Company; and
(e) the amount of cash and/or principal amount of obligations secured by purchase money mortgage received or to be received for any portion of said property sold




to any Federal, State, County, Municipal or other governmental bodies or agencies or public or semi-public corporations, districts, or authorities;
(2) an Engineer’s Certificate, made and dated not more than ninety (90) days prior to the end of such application, stating:
(a) the fair value, in the opinion of the signers, of the property (or securities) to be released;
(b) that in the opinion of the signers such release will not impair the security under this Indenture in contravention of the provisions hereof; and
(c) that the Company has Property Additions constituting property that is not Funded Property (not including the Property Additions then being released) of a Cost or fair value to the Company (whichever is less) of not less than one dollar ($1) (after making any deductions and any additions pursuant to the provisions of Section 1.04 hereof) after deducting the Cost of the property then being released;
(3) an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating that all conditions precedent provided for in this Indenture relating to the release of the property in question have been complied with; and
(4) in case the Trustee is requested to release any franchise, an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating that in his or their opinion such release will not impair to any material extent the right of the Company to operate any of its remaining properties.”
To amend the eleventh paragraph of Section 1.02 of the Original Indenture to read as follows:
“The term ‘Engineer’s Certificate’ shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, the President or a Vice-President of the Company and by an Engineer (who may be an employee of the Company) appointed by the Board of Directors of the Company; provided, however, if any property or securities are to be released from the Lien of this Indenture, the Engineer’s Certificate as to the fair value of such property or securities and as to matters referred to in clause (f) of subdivision (2) of Section 11.03 hereof or clause (b) of subdivision (2) of Section 11.04 (II) hereof shall be made by an Independent Engineer, appraiser, or other expert, if the fair value of such property or securities and of all other property or securities released since the commencement of the then current calendar year, as set forth in the certificates required by this Indenture, is ten per centum (10%) or more of the aggregate principal amount of the bonds at the time Outstanding; but such a certificate of an Independent Engineer, appraiser, or other expert shall not be required in the case of any release of property or securities, if the fair value thereof as set forth in the certificates required by this Indenture is less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds at the time Outstanding, as therein defined, under the 1944 Mortgage. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.”
Section 4.03.     Reservation of the Right of Amendment - Net Earning Certificate . The Company reserves the right, without consent or other action by holders of bonds of the Eleventh Series or of any subsequently created series, to amend the Original Indenture, as heretofore amended and supplemented, as follows:





To amend the third line of subdivision (A) of Section 1.07 of the Original Indenture by replacing the phrase “within the fifteen (15) calendar months” with the phrase “within the eighteen (18) calendar months”.
Section 4.04.     Reservation of the Right of Amendment - Defaults . The Company reserves the right, without consent or other action by holders of bonds of the Eleventh Series or of any subsequently created series, to amend the Original Indenture, heretofore amended and supplemented, as follows:

Subdivision (b) of Section 12.01 of the Original Indenture shall be amended to read as follows:
“(b) Failure to pay interest upon any bond hereby secured for a period of thirty (30) days after such interest shall have become due and payable;”
Subdivision (e) of Section 12.01 of the Original Indenture shall be amended to read as follows:
“(e) The expiration of a period of ninety (90) days after the mailing by the Trustee to the Company of a written demand (citing this provision), or by the holders of fifteen per centum (15%) in principal amount of the bonds at the time Outstanding hereunder (determined as provided in Section 12.07 hereof) to the Company and to the Trustee of a written demand, that the Company perform a specified covenant or agreement contained herein or in any indenture supplemental hereto or in any bond secured hereby, which specified covenant or agreement the Company shall have failed to perform prior to such mailing, unless the Company during such period shall have performed such specified covenant or agreement or shall have in good faith commenced efforts to perform the same. The Trustee may, and, if requested in writing so to do by the holders of a majority in principal amount of the bonds then Outstanding, shall, make such demand;”
First two paragraphs of Section 12.14 of the Original Indenture shall be amended to read as follows:
“Section 12.14. The Company covenants that if default shall be made in the payment of the principal of any bond hereby secured when the same shall become due and payable, whether by the maturity of said bond or otherwise, or in the case of a default in the payment of the interest on any bond for a period of thirty (30) days after such interest shall have become due and payable, then upon demand of the Trustee, the Company will pay to the Trustees, for the benefit of the holders of the bonds and coupons then secured hereby, the whole amount due and payable on all such bonds and coupons for principal, premium, if any, and interest, with interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.
In the case of a default in payment of the principal of any bond when the same shall become due and payable, or in the case of a default in the payment of the interest on any bond for a period of thirty (30) days after such interest shall have become due and payable, the Trustees, or either of them, may recover judgment, in their own names and as trustees of an express trust, against the Company for the whole amount of such principal, interest and any premium remaining unpaid together with interest on any overdue principal and (to the extent that payment of such interest is not prohibited under applicable law) on any overdue interest at the rate borne by the




bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.”

ARTICLE V

MISCELLANEOUS PROVISIONS

Section 5.01.     Acceptance of Trusts . The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Original Indenture, as heretofore supplemented, set forth and upon the following terms and conditions:

The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Sixth Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article XVI of the Original Indenture shall apply to and form part of this Sixth Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Sixth Supplemental Indenture.
Section 5.02.     Effect of Sixth Supplemental Indenture under Louisiana Law . It is the intention and it is hereby agreed that, so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Sixth Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance and that, so far as the said Louisiana property is concerned, this Sixth Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds of the Eleventh Series and any coupons thereto issued hereunder, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued hereunder and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 5.03.     Record Date . The holders of the bonds of the Eleventh Series shall be deemed to have consented and agreed that the Company may, but shall not be obligated to, fix a record date for the purpose of determining the holders of the bonds of the Eleventh Series entitled to consent to any amendment or supplement to the Indenture or the waiver of any provision thereof or any act to be performed thereunder. If a record date is fixed, those persons who were holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date.

Section 5.04.     Titles . The titles of the several Articles and Sections of this Sixth Supplemental Indenture and the table of contents shall not be deemed to be any part hereof.

Section 5.05.     Counterparts . This Sixth Supplemental Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.




Section 5.06.     Governing Law . The laws of the State of New York shall govern this Sixth Supplemental Indenture and the bonds of the Eleventh Series, except to the extent that the validity or perfection of the Lien of the Indenture, or remedies thereunder, are governed by the laws of a jurisdiction other than the State of New York.





IN WITNESS WHEREOF, MISSISSIPPI POWER & LIGHT COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and BANK OF MONTREAL TRUST COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and its corporate seal to be attested by one of its Assistant Vice Presidents or Assistant Secretaries, and Z. GEORGE KLODNICKI has hereunto set his hand and affixed his seal, all as of the day and year first above written.
MISSISSIPPI POWER & LIGHT COMPANY



By:      /s/ Glenn E. Harder     
Glenn E. Harder
Vice President



Attest:


/s/ Lee W. Randall     
Lee W. Randall
Assistant Secretary








BANK OF MONTREAL TRUST COMPANY
As Trustee



By:      /s/ Mark F. McLaughlin     
Name:      Mark F. McLaughlin
Title:      Vice President and
Trust Officer



Attest:


/s/ Therese Gaballah     
Name:      Therese Gaballah
Title:      Assistant Secretary
 

By:      /s/ Z. George Klodnicki      [L.S.]
Z. GEORGE KLODNICKI as
Co-Trustee







STATE OF LOUISIANA      )
) ss.:
PARISH OF ORLEANS      )


Personally appeared before me, the undersigned authority in and for the aforesaid Parish and State, the within named Glenn E. Harder, as Vice President and Lee W. Randall, as Assistant Secretary of MISSISSIPPI POWER & LIGHT COMPANY, who acknowledged that they signed, attached the corporate seal of the corporation thereto and delivered the foregoing instrument on the day and year therein stated, by the authority and as the act and deed of the corporation.
On the 15th day of January, 1993, before me personally came Glenn E. Harder, to me known, who, being by me duly sworn, did depose and say that he resides at 106 West Ruelle, Mandeville, Louisiana 70448; that he is a Vice President of MISSISSIPPI POWER & LIGHT COMPANY, the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
Given under my hand and seal this 15th day of January, 1993.


/s/ Chris Screen     
CHRISTOPHER T. SCREEN
Notary Public
Parish of Jefferson, State of Louisiana
My Commission is Issued for Life





STATE OF NEW YORK      )
) ss.:
COUNTY OF NEW YORK      )


Personally appeared before me, the undersigned authority in and for the aforesaid County and State, the within named MARK F. MCLAUGHLIN, as Vice President, and THERESE GABALLAH, as Assistant Secretary of BANK OF MONTREAL TRUST COMPANY, who acknowledged that they signed, attached the corporate seal of the corporation thereto and delivered the foregoing instrument on the day and year therein stated, by the authority and as the act and deed of the corporation.
On the 19th day of January, 1993, before me personally came MARK F. MCLAUGHLIN, to me known, who, being by me duly sworn, did depose and say that he resides at 44 Norwood Avenue, Allenhurst, New Jersey 07711; that he is a Vice President and Trust Officer of BANK OF MONTREAL TRUST COMPANY, the corporation described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
Given under my hand and seal this 19th day of January, 1993.



/s/ Maureen Radigan     
Maureen Radigan
Notary Public, State of New York
No. 31-4971219
Qualified in New York County
Commission Expires August 27, 1994





STATE OF NEW YORK      )
) ss.:
COUNTY OF NEW YORK      )


Personally appeared before me, the undersigned authority in and for the aforesaid County and State, the within named Z. GEORGE KLODNICKI, who acknowledged that he signed, sealed and delivered the foregoing instrument on the day and year therein mentioned.
On the 19th day of January, 1993, before me personally came Z. GEORGE KLODNICKI, to me known to be the person described in and who acknowledged the foregoing instrument, and acknowledged that he executed the same.
Given under my hand and seal this 19th day of January, 1993.




/s/ Maureen Radigan     
Maureen Radigan
Notary Public, State of New York
No. 31-4971219
Qualified in New York County
Commission Expires August 27, 1994









EXHIBIT A

[FORM OF BOND OF ELEVENTH SERIES]
(See legend at the end of this bond for
restrictions on transferability and change of form)

GENERAL AND REFUNDING MORTGAGE BOND

8.65% Series due January 15, 2023
No.      _______      $ ____________
MISSISSIPPI POWER & LIGHT COMPANY, a corporation duly organized and validly existing of the State of Mississippi (hereinafter called the Company), for value received, hereby promises to pay to __________________ or registered assigns, at the office or agency of the Company in New York, New York, the principal sum of $_________ on January 15, 2023 in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay in like manner to the registered owner hereof interest thereon from January 15, 1993, if the date of this bond is prior to July 15, 1993 or, if the date of this bond is on or after July 15, 1993, from the July 15 or January 15 next preceding the date of this bond to which interest has been paid (unless the date hereof is an interest payment date to which interest has been paid, in which case from the date hereof), at the rate of eight and sixty‑five one hundredths per centum (8.65%) per annum in like coin or currency on July 15 and January 15 in each year and at maturity, until the principal of this bond shall have become due and been duly paid or provided for, and to pay interest (before and after judgment) on any overdue principal, premium, if any, and on any defaulted interest at the rate of nine and sixty‑five one hundredths per centum (9.65%) per annum. Interest on this bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on this bond in respect of a portion of a month shall be calculated based on the actual number of days elapsed.
The interest so payable on any interest payment date will, subject to certain exceptions provided in the Mortgage hereinafter referred to, be paid to the person in whose name this bond is registered at the close of business (whether or not a business day) on the 14th day of the month in which such interest payment occurs. At the option of the Company, interest may be paid by check mailed on or prior to such interest payment date to the address of the person entitled thereto as such address shall appear on the register of the Company.
This bond shall not become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its respective successor thereunder, shall have signed the authentication certificate endorsed hereon.
This bond is one of a series of bonds of the Company issuable in series and is one of a duly authorized series known as its General and Refunding Mortgage Bonds, 8.65% Series due January 15, 2023 (herein called bonds of the Eleventh Series), all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of February 1, 1988, duly executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the mortgaged and pledged property, assets and rights, the nature and extent of the lien and security, the respective rights, limitations of rights, covenants, obligations, duties and immunities thereunder of the Company, the holders of bonds and the Trustees and the terms and conditions upon which the bonds are,




and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms herein used, to all of which, by its acceptance of this bond, the holder of this bond agrees.
The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided. The Mortgage provides that in certain circumstances and upon certain conditions such a declaration and its consequences or certain past defaults and the consequences thereof may be waived by such affirmative vote of holders of bonds as is specified in the Mortgage.
The Mortgage contains provisions permitting the Company and the Trustee to execute supplemental indentures amending the Mortgage for certain specified purposes without the consent of holders of bonds. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds of the Eleventh Series and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
Any consent or waiver by the holder of this bond (unless effectively revoked as provided in the Mortgage) shall be conclusive and binding upon such holder and upon all future holders of this bond and of any bonds issued in exchange or substitution herefore, irrespective of whether or not any notation of such consent or waiver is made upon this bond or such other bond.
No reference herein to the Mortgage and no provision of this bond or of the Mortgage shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this bond in the manner, at the respective times, at the rate and in the currency herein prescribed.
The bonds are issuable as registered bonds without coupons in the denominations of $1,000 and integral multiples thereof. At the office or agency to be maintained by the Company in the City of New York, State of New York, and in the manner and subject to the provisions of the Mortgage, bonds may be exchanged for a like aggregate principal amount of bonds of other authorized denominations, without payment of any charge other than a sum sufficient to reimburse the Company for any tax or other governmental charge incident thereto. This bond is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in New York, New York, upon surrender of this bond, and upon payment, if the Company shall require it, of the transfer charges provided for in the Mortgage, and, thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange hereof as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
This bond is redeemable at the option of the Company under certain circumstances in the manner and at such redemption prices as are provided in the Mortgage.
No recourse shall be had for the payment of the principal of, premium, if any, or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner




hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
As provided in the Mortgage, this bond shall be governed by and construed in accordance with the laws of the State of New York.





IN WITNESS WHEREOF, Mississippi Power & Light Company has caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof.
Dated:
MISSISSIPPI POWER & LIGHT COMPANY




By:         
Title:     
    


Attest:


        
Title:     






[FORM OF TRUSTEE’S
AUTHENTICATION CERTIFICATE]

TRUSTEE’S AUTHENTICATION CERTIFICATE

This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned mortgage.

BANK OF MONTREAL TRUST
COMPANY, as Trustee,




By:         
Authorized Officer



LEGEND
Unless and until this bond is exchanged in whole or in part for certificated bonds registered in the names of the various beneficial holders hereof as then certified to the Trustee by the Depository Trust Company or its successor (the “Depositary”), this bond may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.
Unless this certificate is presented by an authorized representative of the Depositary to the Company or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co., or such other name as requested by an authorized representative of the Depositary and any amount payable thereunder is made payable to Cede & Co., or such other name, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
This bond may be exchanged for certificated bonds registered in the names of the various beneficial owners hereof if (a) the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, or (b) the Company elects to issue certificated bonds to beneficial owners (as certified to the Company by the Depositary).






Exhibit 4(f)1



NEW ORLEANS PUBLIC SERVICE INC.


TO


BANK OF MONTREAL TRUST COMPANY

And

Z. GEORGE KLODNICKI,
As Trustees under New Orleans
Public Service Inc.’s Mortgage and
Deed of Trust, dated as of May 1, 1987

_________________


THIRD SUPPLEMENTAL INDENTURE


Providing among other things for
General and Refunding Mortgage Bonds
7% Series due March 1, 2003
(Fifth Series)
and
General and Refunding Mortgage Bonds
8% Series due March 1, 2023
(Sixth Series)

_________________



Dated as of March 1, 1993










THIRD SUPPLEMENTAL INDENTURE
_________________
THIRD SUPPLEMENTAL INDENTURE , dated as of March 1, 1993, between NEW ORLEANS PUBLIC SERVICE INC., a corporation of the State of Louisiana, whose post office address is 317 Baronne Street, New Orleans, Louisiana 70112 and BANK OF MONTREAL TRUST COMPANY, a corporation of the State of New York, whose principal office is located at 77 Water Street, New York, New York 10005 and Z. GEORGE KLODNICKI, whose post office address is 87 Prospect Avenue, Westwood, New Jersey 07675, as trustees under the Mortgage and Deed of Trust, dated as of May 1, 1987, executed and delivered by the Company (herein called the “Original Indenture”; the Original Indenture and any and all indentures and instruments supplemental thereto being herein called the “Indenture”);
WHEREAS, the Original Indenture has been duly recorded and filed in various Parishes of the State of Louisiana simultaneously with the recording and filing of the First Supplemental Indenture thereto, dated as of May 1, 1987, between the Company and BANK OF MONTREAL TRUST COMPANY and Z. GEORGE KLODNICKI, as trustees (herein called the “First Supplemental Indenture”); and
WHEREAS, the Original Indenture was recorded in various Parishes in the State of Louisiana, which Parishes are the same Parishes in which this Third Supplemental Indenture is to be recorded; and
WHEREAS, Section 19.04 of the Original Indenture provides, among other things, that any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of the Indenture, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted, or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations, restrictions or provisions for the benefit of any one or more series of bonds issued thereunder, or the Company may establish the terms and provisions of any series of bonds by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to be recorded in all of the states in which any property at the time subject to the Lien of the Indenture shall be situated; and
WHEREAS, the Company desires to create two new series of bonds under the Indenture and to add to its covenants and agreements contained in the Indenture certain other covenants and agreements to be observed by it; and
WHEREAS, all things necessary to make this Third Supplemental Indenture a valid, binding and legal instrument have been performed, and the issue of said series of bonds, subject to the terms of the Indenture, has been in all respects duly authorized;

NOW, THEREFORE, THIS THIRD SUPPLEMENTAL INDENTURE WITNESSETH: That NEW ORLEANS PUBLIC SERVICE INC., in consideration of the premises and of Ten Dollars ($10) to it duly paid by the Trustee at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued under the Indenture, according to their tenor and effect and the performance of all provisions of the Indenture (including any modification made as in the Indenture provided) and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over and confirmed and granted a security interest in, and by these presents doth grant, bargain, sell, release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set




over and confirm and grant a security interest in (subject, however, to Excepted Encumbrances as defined in Section 1.06 of the Original Indenture), unto Z. GEORGE KLODNICKI and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, as Trustees, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever (1) all rights, legal and equitable, of the Company (whether in accordance with Paragraph 32 of that certain Resolution No. R-86-112, adopted by the Council of the City of New Orleans on March 20, 1986 and accepted by the Company on March 25, 1986, as superseded by Resolution No. R-91-157, effective October 4, 1991, or pursuant to other regulatory authorization or by operation of law or otherwise), in the event of the purchase and acquisition by the City of New Orleans (or any other governmental authority or instrumentality or designee thereof) of properties and assets of the Company, to recover and receive payment and compensation from the City (or from such other governmental authority or instrumentality or designee thereof or any other person) of an amount equal to the aggregate uncollected balance of (A) the deferrals of Grand Gulf I Costs (as defined in the Original Indenture) and the deferred carrying charges accrued thereon that have accumulated prior to the City or such other entity providing official notice to the Company of the City’s or such other entity’s intent to effect such purchase and acquisition and (B) if and to the extent that the City or such other entity and the Company agree that the City or such other entity is liable for all or a portion of the aggregate uncollected balance of such deferrals accumulating thereafter or a court of final resort so holds, such deferrals that have accumulated subsequent to such notice (said rights of the Company, together with the proceeds and products thereof, being defined in the Original Indenture as the “Municipalization Interest”); and (2) all properties of the Company, real, personal and mixed of the kind or nature described or mentioned in the Original Indenture; and (3) all properties of the Company specifically described in Article VIII hereof and all other properties of the Company real, personal and mixed, of the kind or nature specifically mentioned in the Original Indenture or of any other kind or nature acquired by the Company on or after the date of the execution and delivery of the Original Indenture (except any herein or in the Original Indenture, as heretofore supplemented, expressly excepted), now owned or, subject to the provisions of Section 15.03 of the Original Indenture, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same, the scope and intent of the foregoing or of any general description contained herein or in the Original Indenture, as heretofore supplemented), all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same; all power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all telephone, radio and television systems, air-conditioning systems, and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, electric, gas and water lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generators and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment, and all other fixtures and personalty; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith and (except as herein or in the Original Indenture, as heretofore supplemented, expressly excepted) all the rights, title and interest of the Company in and to all other property




of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property herein or in the Original Indenture, as heretofore supplemented, described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 11.01 of the Original Indenture) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property, rights and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 15.03 of the Original Indenture, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any herein or in the Original Indenture, as heretofore supplemented, expressly excepted, shall be and are as fully granted and conveyed hereby and as fully embraced within the Lien of the Original Indenture and the Lien hereof as if such property, rights and franchises were now owned by the Company and were specifically described herein and granted and conveyed hereby.
PROVIDED that, except as provided herein and in the Original Indenture with respect to the Municipalization Interest, the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder, nor is a security interest therein hereby or by the Original Indenture, as heretofore supplemented, granted or intended to be granted, and the same are hereby expressly excepted from the Lien of the Indenture and the operation of this Third Supplemental Indenture, viz.: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereinbefore or hereafter specifically pledged, paid, deposited, delivered or held hereunder or covenanted so to be; (2) merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or part) any rolling stock, buses, motor coaches, automobiles and other vehicles or aircraft or boats, ships, or other vessels and any fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; boats, ships and other vessels; all timber, minerals, mineral rights and royalties; (3) bills, notes and other instruments and accounts receivable, judgments, demands, general intangibles and choses in action, and all contracts, leases and operating agreements not specifically pledged hereunder or under the Original Indenture or covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the Lien of the Indenture; (5) electric energy, gas, water, steam, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; (6) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system; and (7) the Company’s franchise to be a corporation; provided, however, that the property and rights expressly excepted from the lien and operation of the Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XII of the Original Indenture by reason of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed




or in which a security interest has been granted by the Company as aforesaid, or intended so to be (subject, however, to Excepted Encumbrances as defined in Section 1.06 of the Original Indenture), unto Z. GEORGE KLODNICKI and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, and their successors and assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms, trusts and conditions and subject to and with the same provisos and covenants as are set forth in the Original Indenture, as heretofore supplemented, this Third Supplemental Indenture being supplemental thereto.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions, provisos, covenants and provisions contained in the Original Indenture, as heretofore supplemented, shall affect and apply to the property hereinbefore and hereinafter described and conveyed and to the estate, rights, obligations and duties of the Company and the Trustees and the beneficiaries of the trust with respect to said property, and to the Trustees and their successors as Trustees of said property in the same manner and with the same effect as if the said property had been owned by the Company at the time of the execution of the Original Indenture and had been specifically and at length described in and conveyed to said Trustees by the Original Indenture as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustees and their successor or successors in said trust under the Indenture, as follows:


ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.01.     Terms From the Original Indenture and First Supplemental Indenture . All defined terms used in this Third Supplemental Indenture and not otherwise defined herein shall have the respective meanings ascribed to them in the Original Indenture or the First Supplemental Indenture, as the case may be.

Section 1.02.     References are to Third Supplemental Indenture . Unless the context otherwise requires, all references herein to “Articles”, “Sections” and other subdivisions refer to the corresponding Articles, Sections and other subdivisions of this Third Supplemental Indenture, and the words “herein”, “hereof”, “hereby”, “hereunder” and words of similar import refer to this Third Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision hereof or to the Original Indenture or any other supplemental indenture thereto.


ARTICLE II

THE FIFTH SERIES

Section 2.01.     Bonds of the Fifth Series . There shall be a series of bonds designated 7% Series due March 1, 2003 (herein sometimes referred to as “Fifth Series”), each of which shall also bear the descriptive title “General and Refunding Mortgage Bond” unless subsequent to the issuance of such bonds a different descriptive title is permitted by Section 2.01 of the Original Indenture. The form of bonds of the Fifth Series shall be substantially in the form of Exhibit A hereto. Bonds of the Fifth Series shall mature on March 1, 2003, and shall be issued only as fully registered bonds in denominations of One Thousand Dollars and, at the option of the Company, in any multiple or multiples thereof (the exercise of such option to be evidenced




by the execution and delivery thereof). Bonds of the Fifth Series shall bear interest at the rate of seven per centum (7%) per annum (except as hereinafter provided), payable semi-annually on March 1 and September 1 of each year, and at maturity, the first interest payment to be made on September 1, 1993 for the period from March 1, 1993 to September 1, 1993; the principal and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, payable in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts. Interest on the bonds of the Fifth Series may at the option of the Company be paid by check mailed to the registered owners thereof. Overdue principal and (to the extent permitted by law) overdue interest in respect of the bonds of the Fifth Series shall bear interest (before and after judgment) at the rate of eight per centum (8%) per annum. Interest on the bonds of the Fifth Series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on the bonds of the Fifth Series in respect of a portion of a month shall be calculated based on the actual number of days elapsed.

The Company reserves the right to establish at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Fifth Series and to provide for exchangeability of such coupon bonds with the bonds of said Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose.
Section 2.02.     Optional Redemption of Bonds of the Fifth Series . (a) Except as provided in Section 9.13 of the Original Indenture and Section 3.04 of the First Supplemental Indenture, as amended, bonds of the Fifth Series shall not be redeemable prior to March 1, 1998. On and after March 1, 1998, bonds of the Fifth Series shall be redeemable, at the option of the Company, in whole at any time, or in part from time to time, prior to maturity, upon notice mailed to each registered owner at his last address appearing on the registry books not less than 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:

GENERAL REDEMPTION PRICES
If redeemed during 12 month period ending the last day of February,
1994
106.90%
1999
101.97%
1995
105.91%
2000
100.99%
1996
104.93%
2001
100.00%
1997
103.94%
2002
100.00%
1998
102.96%
2003
100.00%
 
 
 
 
in each case together with accrued interest to the date fixed for redemption.
(b) On and after March 1, 1998, bonds of the Fifth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Original Indenture) of cash delivered to or deposited with the Trustee pursuant to the provisions of Section 9.05 of the Original Indenture or subject to the provisions of Section 11.05 of the Original Indenture at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 month period ending the last day of February,




1999
100.00%
2002
100.00%
2000
100.00%
2003
100.00%
2001
100.00%
 
 
 
 
 
 
in each case together with accrued interest to the date fixed for redemption.
(c) Bonds of the Fifth Series are also redeemable after March 1, 1998 as provided in Section 4.11 of the First Supplemental Indenture, as amended.

(d) Bonds of the Fifth Series are also redeemable, at the option of the holders thereof, at any time as provided in Section 9.13 of the Original Indenture and Section 3.04 of the First Supplemental Indenture, as amended.

Section 2.03.     Transfer and Exchange . At the option of the registered owner, any bonds of the Fifth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.

Bonds of the Fifth Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York.
Upon any such exchange or transfer of bonds of the Fifth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 2.05 of the Original Indenture, but the Company hereby waives any right to make a charge in addition thereto for any such exchange or transfer of bonds of the Fifth Series.
Section 2.04.     Dating of Bonds and Interest Payments . (a) Bonds of the Fifth Series shall be dated as of the date of authentication and bear interest from March 1, 1993, provided that if any bond of the Fifth Series shall be authenticated and delivered upon a transfer of, or in exchange for or in lieu of, any other bond or bonds of the Fifth Series after a date to which interest shall have been paid on such other bond or bonds, it shall be dated so that such bond shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such bond shall have been delivered or from March 1, 1993 if authenticated and delivered prior to September 1, 1993.

(e) Notwithstanding the foregoing, bonds of the Fifth Series shall be dated so that the person in whose name any bond of the Fifth Series is registered at the close of business on the day (whether or not a business day) immediately preceding an interest payment date shall be entitled to receive the interest payable on the interest payment date notwithstanding the cancellation of such bond upon any transfer or exchange thereof subsequent to such close of business and prior to such interest payment date, except if, and to the extent that, the Company shall default in the payment of interest due on such interest payment date, in which case such defaulted interest shall be paid to the persons in whose names Outstanding bonds of the Fifth Series are registered on the day immediately preceding the date of payment of such defaulted interest. Any bond of the Fifth Series issued upon any transfer or exchange subsequent to such close of business and prior to such interest payment date shall bear interest from such interest payment date. In the event there shall be more than one registered owner of bonds of the Fifth Series, then the Company shall not be required to make transfers or exchanges of bonds of said series for a period of fifteen (15) days next preceding any interest payment date of said series.






ARTICLE III

THE SIXTH SERIES

Section 3.01     Bonds of the Sixth Series . There shall be a series of bonds designated 8% Series due March 1, 2023 (herein sometimes referred to as “Sixth Series”), each of which shall also bear the descriptive title “General and Refunding Mortgage Bond” unless subsequent to the issuance of such bonds a different descriptive title is permitted by Section 2.01 of the Original Indenture. The form of bonds of the Sixth Series shall be substantially in the form of Exhibit B hereto. Bonds of the Sixth Series shall mature on March 1, 2023, and shall be issued only as fully registered bonds in denominations of One Thousand Dollars and, at the option of the Company, in any multiple or multiples thereof (the exercise of such option to be evidenced by the execution and delivery thereof). Bonds of the Sixth Series shall bear interest at the rate of eight per centum (8%) per annum (except as hereinafter provided), payable semi-annually on March 1 and September 1 of each year, and at maturity, the first interest payment to be made on September 1, 1993 for the period from March 1, 1993 to September 1, 1993; the principal and interest on each said bond to be payable at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, payable in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts. Interest on the bonds of the Sixth Series may at the option of the Company be paid by check mailed to the registered owners thereof. Overdue principal and (to the extent permitted by law) overdue interest in respect of the bonds of the Sixth Series shall bear interest (before and after judgment) at the rate of nine per centum (9%) per annum. Interest on the bonds of the Sixth Series shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on the bonds of the Sixth Series in respect of a portion of a month shall be calculated based on the actual number of days elapsed.

The Company reserves the right to establish at any time, by Resolution of the Board of Directors of the Company, a form of coupon bond, and of appurtenant coupons, for the Sixth Series and to provide for exchangeability of such coupon bonds with the bonds of said Series issued hereunder in fully registered form and to make all appropriate provisions for such purpose.
Section 3.02.     Optional Redemption of Bonds of the Sixth Series . (a) Except as provided in Section 9.13 of the Original Indenture and Section 3.04 of the First Supplemental Indenture, as amended, bonds of the Sixth Series shall not be redeemable prior to March 1, 1998. On and after March 1, 1998, bonds of the Sixth Series shall be redeemable, at the option of the Company, in whole at any time, or in part from time to time, prior to maturity, upon notice mailed to each registered owner at his last address appearing on the registry books not less than 30 days prior to the date fixed for redemption, at the following general redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:

GENERAL REDEMPTION PRICES
If redeemed during 12 month period ending the last day of February,




1994
107.32%
2009
101.83%
1995
106.96%
2010
101.46%
1996
106.59%
2011
101.10%
1997
106.23%
2012
100.73%
1998
105.86%
2013
100.37%
1999
105.49%
2014
100.00%
2000
105.13%
2015
100.00%
2001
104.76%
2016
100.00%
2002
104.39%
2017
100.00%
2003
104.03%
2018
100.00%
2004
103.66%
2019
100.00%
2005
103.30%
2020
100.00%
2006
102.93%
2021
100.00%
2007
102.56%
2022
100.00%
2008
102.20%
2023
100.00%
 
 
 
 
in each case together with accrued interest to the date fixed for redemption.
(f) On and after March 1, 1998, bonds of the Sixth Series shall also be redeemable in whole at any time, or in part from time to time, prior to maturity, upon like notice, by the application (either at the option of the Company or pursuant to the requirements of the Original Indenture) of cash delivered to or deposited with the Trustee pursuant to the provisions of Section 9.05 of the Original Indenture or subject to the provisions of Section 11.05 of the Original Indenture at the following special redemption prices, expressed in percentages of the principal amount of the bonds to be redeemed:
SPECIAL REDEMPTION PRICES
If redeemed during 12 month period ending the last day of February,
1999
100.00%
2012
100.00%
2000
100.00%
2013
100.00%
2001
100.00%
2014
100.00%
2002
100.00%
2015
100.00%
2003
100.00%
2016
100.00%
2004
100.00%
2017
100.00%
2005
100.00%
2018
100.00%
2006
100.00%
2019
100.00%
2007
100.00%
2020
100.00%
2008
100.00%
2021
100.00%
2009
100.00%
2022
100.00%
2010
100.00%
2023
100.00%
2011
100.00%
 
 
 
 
 
 
in each case together with accrued interest to the date fixed for redemption.
(g) Bonds of the Sixth Series are also redeemable after March 1, 1998 as provided in Section 4.11 of the First Supplemental Indenture, as amended.




(h) Bonds of the Sixth Series are also redeemable, at the option of the holders thereof, at any time as provided in Section 9.13 of the Original Indenture and Section 3.04 of the First Supplemental Indenture, as amended.

Section 3.03.     Transfer and Exchange . At the option of the registered owner, any bonds of the Sixth Series, upon surrender thereof for cancellation at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, shall be exchangeable for a like aggregate principal amount of bonds of the same series of other authorized denominations.

Bonds of the Sixth Series shall be transferable, upon the surrender thereof for cancellation, together with a written instrument of transfer in form approved by the registrar duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York.
Upon any such exchange or transfer of bonds of the Sixth Series, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge, as provided in Section 2.05 of the Original Indenture, but the Company hereby waives any right to make a charge in addition thereto for any such exchange or transfer of bonds of the Sixth Series.
Section 3.04.     Dating of Bonds and Interest Payments . (a) Bonds of the Sixth Series shall be dated as of the date of authentication and bear interest from March 1, 1993, provided that if any bond of the Sixth Series shall be authenticated and delivered upon a transfer of, or in exchange for or in lieu of, any other bond or bonds of the Sixth Series after a date to which interest shall have been paid on such other bond or bonds, it shall be dated so that such bond shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such bond shall have been delivered or from March 1, 1993 if authenticated and delivered prior to September 1, 1993.

(i) Notwithstanding the foregoing, bonds of the Sixth Series shall be dated so that the person in whose name any bond of the Sixth Series is registered at the close of business on the day (whether or not a business day) immediately preceding an interest payment date shall be entitled to receive the interest payable on the interest payment date notwithstanding the cancellation of such bond upon any transfer or exchange thereof subsequent to such close of business and prior to such interest payment date, except if, and to the extent that, the Company shall default in the payment of interest due on such interest payment date, in which case such defaulted interest shall be paid to the persons in whose names Outstanding bonds of the Sixth Series are registered on the day immediately preceding the date of payment of such defaulted interest. Any bond of the Sixth Series issued upon any transfer or exchange subsequent to such close of business and prior to such interest payment date shall bear interest from such interest payment date. In the event there shall be more than one registered owner of bonds of the Sixth Series, then the Company shall not be required to make transfers or exchanges of bonds of said series for a period of fifteen (15) days next preceding any interest payment date of said series.


ARTICLE IV

OTHER PROVISIONS FOR RETIREMENT OF BONDS

Section 4.01.     Redemption at the Option of the Owner upon Consolidation or Merger .





a. The second sentence of subsection (a) of Section 3.04 of the First Supplemental Indenture, as amended, is hereby further amended to insert the following words immediately after the words “Section 4.01(a) of the Second Supplemental Indenture,”:

“shall (as to the New LP&L Bonds being exchanged for bonds of the Fifth Series) be subject to redemption at the option of the Company on terms similar to those provided in the Third Supplemental Indenture, shall (as to the New LP&L Bonds being exchanged for bonds of the Sixth Series) be subject to redemption at the option of the Company on terms similar to those provided in the Third Supplemental Indenture.”
b. The redemption prices for any bonds of the Fifth Series and the Sixth Series redeemed pursuant to subsection (b) of Section 3.04 of the First Supplemental Indenture shall be determined as follows:

(1)      If at the time the Exchange Notice is given the Outstanding bonds secured by the Indenture are rated by at least two nationally recognized statistical rating organizations, and the New LP&L Bonds are, or will be, rated by the same rating organizations higher than, or in the same generic rating categories as, the Outstanding bonds secured by the Indenture (such ratings to be evidenced by an Officers’ Certificate), the redemption price shall be equal to the principal amount of the bonds to be redeemed, together with accrued interest to the date fixed for redemption. The New LP&L Bonds and the Outstanding bonds secured by the Indenture shall be deemed to be rated in the same generic rating category if their respective ratings are both (i) within the same generic rating level ( e.g. , “BBB” or “baa”) and (ii) within one numerical or “plus” or “minus” modifier of each other.
(2)      If at the time the Exchange Notice is given the conditions of clause (1) are not satisfied, the redemption prices shall be the general redemption prices set forth in Section 2.02(a) hereof for bonds of the Fifth Series and in Section 3.02(a) hereof for bonds of the Sixth Series, in each case together with accrued interest to the date fixed for redemption.
c. Subclause (B) of clause (i) of subsection (b) of Section 4.11 of the First Supplemental Indenture is hereby amended to insert the following words immediately after the words “Section 3.04(c)(2),”:

“, at a redemption price, in the case of bonds of the Fifth Series, equal to 100% of the principal amount of the bonds to be redeemed, and at a redemption price, in the case of bonds of the Sixth Series, equal to 100% of the principal amount of the bonds to be redeemed, in each case”

ARTICLE V

COVENANTS

Section 5.01.     Maintenance of Paying Agency . So long as any bonds of the Fifth Series or Sixth Series are Outstanding, the Company covenants that the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, where the principal of or interest on any bonds of the Fifth Series or Sixth Series, as the case may be, shall be payable shall also be an office or agency where any such bonds may be transferred or exchanged and where notices, presentations or demands to or upon the Company in respect of such bonds or in respect of the Indenture may be given or made.




Section 5.02.     Further Assurances . (a) From time to time whenever reasonably requested by the Trustee or the holders of not less than a majority in principal amount of bonds of the Fifth Series then Outstanding, the Company will make, execute and deliver or cause to be made, executed and delivered any and all such further and other instruments and assurances as may be reasonably necessary or proper to carry out the intention of or to facilitate the performance of the terms of the Indenture or to secure the rights and remedies of the holders of such bonds.

b. From time to time whenever reasonably requested by the Trustee or the holders of not less than a majority in principal amount of bonds of the Sixth Series then Outstanding, the Company will make, execute and deliver or cause to be made, executed and delivered any and all such further and other instruments and assurances as may be reasonably necessary or proper to carry out the intention of or to facilitate the performance of the terms of the Indenture or to secure the rights and remedies of the holders of such bonds.

Section 5.03.     Limitation on Restricted Payments . (a) So long as any bonds of the Fifth Series or Sixth Series are Outstanding, the Company covenants that it will not declare any dividends on its common stock (other than (1) a dividend payable solely in shares of its common stock or (2) a dividend payable in cash in cases where, concurrently with the payment of such dividend, an amount in cash equal to such dividend is received by the Company as a capital contribution or as the proceeds of the issue and sale of shares of its common stock) or make any distribution on outstanding shares of its common stock or purchase or otherwise acquire for value any outstanding shares of its common stock (otherwise than in exchange for or out of the proceeds from the sale of other shares of its common stock) unless after such dividend, distribution, purchase or acquisition, the aggregate amount of such dividends, distributions, purchases and acquisitions paid or made subsequent to February 28, 1993 (other than any dividend declared by the Company on or before February 28, 1993) does not exceed (without giving effect to (1) any such dividends, distributions, purchases or acquisitions, or (2) any net transfers from earned surplus to stated capital accounts) the sum of (A) the aggregate amount credited subsequent to February 28, 1993, to earned surplus, (B) $150,000,000 and (C) such additional amounts as shall be authorized or approved, upon application by the Company and, after notice by the SEC under the Holding Company Act.

b. For the purpose of this Section 5.03, the aggregate amount credited subsequent to February 28, 1993, to earned surplus shall be determined in accordance with applicable generally accepted accounting principles and practices (or, if in the opinion of the Company’s independent public accountants (delivered to the Trustee) there is an absence of any such generally accepted accounting principles and practices as to the determination in question, then in accordance with sound accounting practices) and after making provision for dividends upon any preferred stock of the Company, accumulated subsequent to such date, and in addition there shall be deducted from earned surplus all amounts (without duplication) of losses, write-offs, write-downs or amortization of property, whether extraordinary or otherwise, recorded in and applicable to a period or periods subsequent to February 28, 1993.


ARTICLE VI

RESERVATION OF RIGHTS TO AMEND
CERTAIN PROVISIONS OF THE ORIGINAL INDENTURE

Section 6.01.     Reservation of the Right of Amendment - Excepted Encumbrances and Releases . The Company reserves the right, without any consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series, to amend the Indenture as follows:





To amend subdivision (e) of Section 1.06 of the Original Indenture to read as follows:
“(e) easements, servitudes, ground leases, restrictions, exceptions or reservations in any property and/or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communication lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment, and defects, irregularities and deficiencies in titles of any property and/or rights of way which do not materially impair the use of such property and/or rights of way for the purposes for which such property and/or rights of way are held by the Company;”
To amend Section 11.02 of the Original Indenture by deleting the word “and” at the end of subdivision (2), replacing the period at the end of subdivision (3) with a semicolon, immediately followed by the word “and”, and adding the following subdivision (4) at the end of Section 11.02 to read as follows:
“(4) grant, free from the Lien of this Indenture, and/or effect the subordination of the Lien of this Indenture to, easements, servitudes, ground leases or rights of way in, upon, over and across the property or rights of way of the Company for the purpose of roads, pipe lines, transmission lines, transportation lines, distribution lines, communications lines, railways, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment; provided that such grant does not materially impair the use of the property or rights of way for the purposes for which such property or rights of way are held by the Company.”
Section 6.02.     Reservation of the Right of Amendment - Issuance of Rate Recovery Mortgage Bonds . The Company reserves the right, without any consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series to amend the Indenture as follows:
To amend the first paragraph of Section 4.01 of the Original Indenture to read as follows:
“Section 4.01. The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver under this Section 4.01 bonds of one or more series constituting Rate Recovery Mortgage Bonds, with a maturity not later than September 30, 2001, registered as to principal and in an aggregate principal amount not exceeding Two Hundred Eighty Million Dollars ($280,000,000), but only after the Trustee shall have received the following:”
Section 6.03.     Reservation of the Right of Amendment - Officers’ Certificate under Section 5.05(2) of the Original Indenture . The Company reserves the right, without any consent or other action by holders of bonds of the Fifth Series or Sixth Series or any subsequently created series, to amend the Indenture as follows:

To amend subdivision (2) of Section 5.05 of the Original Indenture to read as follows:
“(2) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and stating that to the knowledge of the signers none of the events which itself or with a lapse of time or the giving of notice or both would constitute a Default hereunder has occurred and is continuing;”
Section 6.04.     Reservation of the Right of Amendment - Redemption at the Option of Holders of Bonds . The Company reserves the right, without any consent or other action by holders of bonds of the Fifth Series or Sixth Series or any subsequently created series, to amend the Indenture as follows:




To delete Section 9.13 of the Original Indenture, and all references thereto in the Original Indenture.
Section 6.05.     Reservation of the Right of Amendment - Release of Mortgaged and Pledged Property . The Company reserves the right, without any consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series, to amend the Indenture as follows:

To amend subdivision (2) of Section 11.03 of the Original Indenture by deleting the word “and” at the end of clause (e), adding the word “and” at the end of clause (f) and adding the following clause (g) at the end of subdivision (2) to read as follows:
“(g) the release value of the property to be released, being: as to property owned by the Company on December 31, 1986, the depreciated book value thereof on that date, and as to any other property of the Company, the Cost thereof;”
To amend the first paragraph of subdivision (3) of Section 11.03 of the Original Indenture to read as follows:
“(3) an amount in cash (including any amount in cash deposited with the Trustee pursuant to the requirements of Section 9.12 hereof which the Company elects, as evidenced by an Officers’ Certificate, to be also credited against the cash to be held pursuant to this subdivision (3)) to be held by the Trustee as part of the Mortgaged and Pledged Property, equivalent to the amount, if any, by which the release value of the property to be released, as specified in the Engineer’s Certificate provided for in subdivision (2) above, exceeds the aggregate of the following items:”
To amend Section 11.04 of the Original Indenture by inserting “(I)” before the word “Unless” in the first line thereof, and by adding the following Subsection (II) at the end of Section 11.04:
“(II) Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property that is not Funded Property, except the Municipalization Interest or cash then held by the Trustee (provided, however, that obligations secured by purchase money mortgage deposited with the Trustee shall not be released except as provided in Section 11.05 hereof), and the Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon application of the Company and receipt by the Trustee of the following (in lieu of complying with the requirements of Section 11.03 hereof):
(1)      an Officers’ Certificate complying with the requirements of Section 19.05 hereof and describing in reasonable detail the property to be released and requesting such release, and stating:
(a)      that the Company is not in default in the payment of interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing;
(b)      that the Company has sold, leased, granted an interest in, exchanged, dedicated or disposed of, or intends or has agreed to sell, lease, grant an interest in, exchange, dedicate or dispose of or that a governmental body or agency has exercised a right to order the Company to divest itself of, the property to be released;
(c)      that the property to be released is not Funded Property;




(d)      that (except in any case where a governmental body or agency has exercised a right to order the Company to divest itself of such property) such release is, in the opinion of the signers, desirable in the conduct of the businesses of the Company; and
(e)      the amount of cash and/or principal amount of obligations secured by purchase money mortgage received or to be received for any portion of said property sold to any Federal, State, Parish, County, Municipal or other governmental bodies or agencies or public or semi-public corporations, districts, or authorities;
(2)      an Engineer’s Certificate, made and dated not more than ninety (90) days prior to the date of such application, stating:
(a)      the fair value, in the opinion of the signers, of the property (or securities) to be released;
(b)      that, in the opinion of the signers, such release will not impair the security under this Indenture in contravention of the provisions hereof; and
(c)      that the Company has Property Additions constituting property that is not Funded Property (not including the property then being released) of a Cost or fair value to the Company (whichever is less) of not less than one dollar ($1) (after making any deductions and any additions pursuant to the provisions of Section 1.04 hereof);
(3)      an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating that all conditions precedent provided for in this Indenture relating to the release of the property in question have been complied with; and
(4) in case the Trustee is requested to release any franchise, an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating that in his or their opinion such release will not impair to any material extent the right of the Company to operate any of its remaining properties.”
To amend the twelfth paragraph of Section 1.02 of the Original Indenture to read as follows:
“The term ‘Engineer’s Certificate’ shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and by an Engineer (who may be an employee of the Company) appointed by the Board of Directors of the Company; provided, however, if any property or securities are to be released from the Lien of this Indenture, the Engineer’s Certificate as to the fair value of such property or securities and as to matters referred to in clause (f) of subdivision (2) of Section 11.03 hereof or clause (b) of subdivision (2) of Section 11.04 (II) hereof shall be made by an Independent Engineer, appraiser, or other expert, if the fair value of such property or securities and of all other property or securities released since the commencement of the then current calendar year, as set forth in the certificates required by this Indenture, is ten per centum (10%) or more of the aggregate principal amount of the bonds at the time Outstanding; but such a certificate of an Independent Engineer, appraiser, or other expert shall not be required in the case of any release of property or securities, if the fair value thereof as set forth in the certificates required by this Indenture is less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds at the time Outstanding, as therein defined, under the 1944 Mortgage. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.”




Section 6.06.     Reservation of the Right of Amendment - Release of Property taken by Eminent Domain, etc. The Company reserves the right, without consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series, to amend the Indenture as follows:

The last sentence of Section 11.06 of the Original Indenture shall be amended to read as follows:
“An amount equal to the net proceeds of all property so taken or acquired (which proceeds shall, in either event, be required to be entirely in the form of cash) shall be paid over to the Trustee (except to the extent that such net proceeds (not constituting proceeds of the Municipalization Interest) shall have been paid or delivered to the holder of a lien prior hereto in accordance with the provisions thereof and a certificate of such trustee or other holder to that effect shall have been furnished to the Trustee), and (if paid over to the Trustee hereunder) may, subject to the provisions of Section 9.12 hereof, thereafter be withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 11.05 hereof.”
Section 6.07.     Reservation of the Right of Amendment - Net Earning Certificate . The Company reserves the right, without consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series, to amend the Indenture as follows:

To amend the third line of subdivision (A) of Section 1.07 of the Original Indenture by replacing the phrase “within the fifteen (15) calendar months” with the phrase “within the eighteen (18) calendar months”.
Section 6.08.     Reservation of the Right of Amendment - Defaults . The Company reserves the right, without consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series, to amend the Indenture as follows:

Subdivision (b) of Section 12.01 of the Original Indenture shall be amended to read as follows:
“(b) Failure to pay interest upon any bond hereby secured for a period of thirty (30) days after such interest shall have become due and payable;”
Subdivision (e) of Section 12.01 of the Original Indenture shall be amended to read as follows:
“(e) The expiration of a period of ninety (90) days after the mailing by the Trustee to the Company of a written demand (citing this provision), or by the holders of fifteen per centum (15%) in principal amount of the bonds at the time Outstanding hereunder (determined as provided in Section 12.07 hereof) to the Company and to the Trustee of a written demand, that the Company perform a specified covenant or agreement contained herein or in any indenture supplemental hereto or in any bond secured hereby, which specified covenant or agreement the Company shall have failed to perform prior to such mailing, unless the Company during such period shall have performed such specified covenant or agreement or shall have in good faith commenced efforts to perform the same. The Trustee may, and, if requested in writing so to do by the holders of a majority in principal amount of the bonds then Outstanding, shall, make such demand;”
The first two paragraphs of Section 12.14 of the Original Indenture shall be amended to read as follows:
“Section 12.14. The Company covenants that if default shall be made in the payment of the principal of any bond hereby secured when the same shall become due and payable, whether by the




maturity of said bond or otherwise, or in the case of a default in the payment of the interest on any bond for a period of thirty (30) days after such interest shall have become due and payable, then upon demand of the Trustee, the Company will pay to the Trustees, for the benefit of the holders of the bonds and coupons then secured hereby, the whole amount due and payable on all such bonds and coupons for principal, premium, if any, and interest, with interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.
In the case of a default in payment of the principal of any bond when the same shall become due and payable, or in the case of a default in the payment of the interest on any bond for a period of thirty (30) days after such interest shall have become due and payable, the Trustees, or either of them, may recover judgment, in their own names and as trustees of an express trust, against the Company for the whole amount of such principal, interest and any premium remaining unpaid together with interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.”
Section 6.09.     Reservation of the Right of Amendment - LP&L Merger . The Company reserves the right, without any consent or other action by holders of bonds of the Fifth Series or Sixth Series or of any subsequently created series, to amend the Indenture as follows:

To amend clause (ii) of subsection (b) of Section 3.04 of the First Supplemental Indenture, as amended, to read in its entirety as follows:
“(ii) such event is not a Default set forth in clauses (a), (b), (c), (d) or (g) of Section 12.01 of the Original Indenture, and”
To amend subclause (A) of clause (iii) of subsection (b) of Section 3.04 of the First Supplemental Indenture, as amended to read in its entirety as follows:
“(A) Section 5.03 of the Third Supplemental Indenture, or”


ARTICLE VII

MISCELLANEOUS PROVISIONS

Section 7.01.     Acceptance of Trusts . The Trustees hereby accept the trusts herein declared, provided, created or supplemented and agree to perform the same upon the terms and conditions herein and in the Original Indenture, as heretofore supplemented, set forth and upon the following terms and conditions:

“The Trustees shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Third Supplemental Indenture or for or in respect of the recitals contained herein, all of which recitals are made by the Company solely. In general, each and every term and condition contained in Article XVI of the Original Indenture shall apply to and form part of this Third Supplemental Indenture with the same force and effect as if the same were herein set forth in full with such omissions, variations and insertions, if any, as may be appropriate to make the same conform to the provisions of this Third Supplemental Indenture”.




Section 7.02.     Effect of Third Supplemental Indenture under Louisiana Law . It is the intention and it is hereby agreed that so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana, the general language of conveyance contained in this Third Supplemental Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that so far as the said Louisiana property is concerned, this Third Supplemental Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds issued under the Indenture and any coupons thereto issued hereunder, and are irrevocably appointed special agents and representatives of the holders of such bonds and coupons and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.

Section 7.03.     Record Date . The holders of the bonds of the Fifth Series and the Sixth Series shall be deemed to have consented and agreed that the Company may, but shall not be obligated to, fix a record date for the purpose of determining the holders of the bonds of the Fifth Series or the Sixth Series entitled to consent, if any such consent is required, to any amendment or supplement to the Indenture or the waiver of any provision thereof or any act to be performed thereunder. If a record date is fixed, those persons who were holders at such record date (or their duly designated proxies), and only those persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such persons continue to be holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date.

Section 7.04.     Titles . The titles of the several Articles and Sections of this Third Supplemental Indenture shall not be deemed to be any part hereof.

Section 7.05.     Counterparts . This Third Supplemental Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 7.06.     Governing Law . The laws of the State of New York shall govern this Third Supplemental Indenture and the bonds of the Fifth Series and Sixth Series, except to the extent that the validity or perfection of the Lien of the Indenture, or remedies thereunder, are governed by the laws of a jurisdiction other than the State of New York.



ARTICLE VIII

SPECIFIC DESCRIPTION OF PROPERTY

(Unless otherwise specifically stated, all recordation or registration references set forth hereinafter are references to Conveyance Office Books and Folios thereof in the Conveyance Office of the Parish of Orleans, State of Louisiana.)
PARAGRAPH ONE
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipelines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-ways, permits, privileges,




licenses, poles, wires, machinery, implements, switchyards, electric lines, equipment and appurtenances, forming a part of said plants, sites or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property.
PARAGRAPH TWO
The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations or UHF-VHF installations, or any of them, or used or enjoycd or capable of being used or enjoyed in conjunction with any of them, including all the Company’s right, title and interest in and to the following property situated in the Parish of Orleans, State of Louisiana:
(1)      Additions, improvements and replacements to the Derbigny 230/24 KV Substation, located in the First District of New Orleans situated in part on/and those certain tracts or parcels of land owned by others and described in Article XX, Paragraph Two, Sub-Paragraph (6) of the Original Indenture.
(2)      Additions, improvements and replacements to the Dublin Substation, now the Dublin 230/24 KV Substation, situated in the Seventh District of New Orleans on/and those certain tracts or parcels of land described in Article XX, Paragraph Two, Sub-Paragraph (7) of the Original Indenture.
(3)      Additions, improvements and replacements to the Joliet Substation, now the Joliet 230/24 KV Substation, situated in the Seventh District of New Orleans on/and that certain tract or parcel of land described in Article XX, Paragraph Two, Sub-Paragraph (10) of the Original Indenture.
(4) Additions, improvements and replacements to the Midtown 230/115 KV Substation, situated in the First District of New Orleans on/and those certain tracts or parcels of land described in Article XX, Paragraph Two, Sub-Paragraph (11) of the Original Indenture.
PARAGRAPH THREE
All and singular the Miscellaneous Lands and Real Estate or Rights and Interests therein of the Company, and buildings and improvements thereon, now owned, or, subject to the provisions of Section 15.03 of the Original Indenture, hereafter acquired during the existence of this trust, including the following property situated in the Parish of Orleans, State of Louisiana, described as:
(1)      That certain tract or parcel of land particularly described as follows:
A CERTAIN PIECE OR PORTION OF GROUND, together with all the improvements situated thereon, and all of the rights, ways, privileges, servitudes and advantages thereunto belonging or in anywise appertaining, situated in Section 6, Township 12 South, Range 13 East, Southeast Land District, Orleans Parish, Louisiana, identified as Parcel 2A-1 as shown on a plan of resubdivision prepared by Varisco, Incorporated, Engineers, Planners & Land Surveyors, signed by Joseph F. Varisco, Jr., Professional Land Surveyor and Civil Engineer, dated November 3, 1986, revised March 4 and 19, and April 1, 1987, approved in proceedings No. 14/87 of the City Planning Commission and filed on April 20, 1987, under Notarial Archives No.




702147, and registered in the Conveyance Records of Orleans Parish, Louisiana, at C.O.B. 809, Folio 542, which property is more particularly described as follows:
Commencing from a point on the east right of way line of Paris Road located approximately 250.00 feet to the right of and opposite approximate Highway Survey Station 132+70 of the survey line of State of Louisiana, State Project No. 450-43--47 (Paris Road) I-510; thence proceed from this point on a bearing of South 00 degrees, 42 minutes, 40 seconds East, for a distance of 100.97 feet to a point; thence North 86 degrees, 51 minutes, 09 seconds East, for a distance of 1231.07 feet to a point; thence South 05 degrees, 42 minutes, 27 seconds East, for a distance of 472.71 feet to a point; thence continuing along the bearing of South 05 degrees, 42 minutes, 27 seconds East, for a distance of 838.07 feet to a point, this point being the POINT OF BEGINNING; thence South 70 degrees, 22 minutes, 23 seconds West, for a distance of 1404.74 feet to a point on the east right of way line of Paris Road acquired by State of Louisiana, State Project No. 450-43-47, New Orleans Loop (Gulf Outlet Bridge I-10) Orleans Parish, Louisiana, which said point is located South 00 degrees, 42 minutes, 40 seconds East, a distance of 461.23 feet, South 89 degrees, 17 minutes, 20 seconds West, a distance of 13.00 feet, and along the arc of a curve having a radius of 1740.86 feet (a chord of which bears South 05 degrees, 52 minutes, 40 seconds East, a distance of 313.54 feet) an arc length of 313.97 feet from the intersection of southerly right of way line of Dwyer Road Interchange with the easterly right of way line of Paris Road; thence along the east right of way line of Paris Road along the arc of a curve having a radius of 1740.86 feet (a chord of which bears South 12 degrees, 37 minutes, 20 seconds East, a distance of 96.20 feet) an arc length of 96.22 feet to a point; thence continuing along aforementioned right of way line along the arc of a curve having a radius of 291.00 feet (a chord of which bears South 39 degrees, 07 minutes, 00 seconds East, a distance of 245.09 feet) an arc length of 252.98 feet to a point; thence along the northerly line of a servitude 80 feet in width for power line on a bearing of North 70 degrees, 19 minutes, 15 seconds East, for a distance of 1254.05 feet to a point; thence North 05 degrees, 42 minutes, 27 seconds West, for a distance of 335.23 feet returning to the POINT OF BEGINNING; said parcel of land contains an area of 443,088.40 square feet, which is equal to 10.17 Acres.
The above property description being also in accordance with a plan of survey of J. J. Krebs & Sons, Inc., prepared by Randall W. Brown, Registered Land Surveyor, State of Louisiana, Reg. No. 04586, dated December 19, 1990.
Being the same property acquired by Rebus Realty Co., Inc., from Secor Bank, Federal Savings Bank, by deed effective January 10, 1991, filed in the Notarial Archives of the Parish of Orleans, Louisiana, on January 10, 1991 as Notarial Archives No. 873282 and registered in the Conveyance Records of the Parish of Orleans, Louisiana, on January 10, 1991 as Instrument No. 30864; acquired by the Company from Rebus Realty Co., Inc. by Counterletter acknowledged before Eugene G. Taggart, Notary Public, on January 10, 1991, filed in the Notarial Archives of the Parish of Orleans, Louisiana, on March 6, 1991 as Notarial Archives No. 880535 and registered in the Conveyance Records of Parish of Orleans, Louisiana, on March 6, 1991 as Instrument No. 32875.
(2)      The New Orleans East Service Center building, equipment and furnishings, situated in the Third District of New Orleans on/and that certain tract of land particularly described in Article XX, Paragraph One, Sub-Paragraph (3)(c) of the Original Indenture.




(3)      The East Lake Business Office building, equipment and furnishings, consisting solely of leasehold improvements, situated on land owned by others in the Third District of New Orleans in the East Lake Shopping Center, bearing Municipal No. 9701 I-10 Service Road.
(4)      The Canal Street Business Office building, equipment and furnishings, consisting solely of leasehold improvements, situated on land owned by others in the First District of New Orleans on property bearing Municipal No. 2330 Canal Street.
(5)      The Carrollton Business Office building, equipment and furnishings, consisting solely of leasehold improvements, situated on land owned by others in the Seventh District of New Orleans on property bearing Municipal No. 3801 Cambronne Street.
PARAGRAPH FOUR
The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, insulators, pipes, conduits, electric submarine cables, and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, across, under or upon any public streets or highways or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the Parish of Orleans, State of Louisiana, to-wit:
(1)      Additions, improvements and replacements to Transmission Line No. 71 (formerly designated No. 89), described in Article XX, Paragraph Four, Sub-Paragraph (7) of the Original Indenture, said additions, improvements and replacements including conversion of said line to 230 KV and commencing at the Derbigny Substation and extending thence in a generally northwesterly direction to the Midtown Substation for a distance of approximately 1-1/2 miles and the rerouting of a portion of such line that extends from the Midtown Substation in a generally southwesterly direction for a distance of approximately 3-1/2 miles to a point on the Orleans-Jefferson Parish line located approximately 1-1/4 miles north of the Nine Mile Point Steam Electric Generating Station of Louisiana Power & Light Company.
(2)      That certain 230 KV single circuit, steel pole Transmission Line No. 72, formerly a portion of Transmission Line No. 97 described in Article XX, Paragraph Four, Sub-Paragraph (15) of the Original Indenture, said Transmission Line No. 72 extending from the Market Street Steam Electric Generating Station in a generally northwesterly direction to the Derbigny Substation, a distance of approximately 3 miles.
(3)      Additions, improvements and replacements to Transmission Line No. 95, described in Article XX, Paragraph Four, Sub-Paragraph (13) of the Original Indenture, including conversion of said line to 230 KV.
(4)      Additions, improvements and replacements to Transmission Line No. 97, described in Article XX, Paragraph Four, Sub-Paragraph (15) of the Original Indenture, including the rerouting of a portion of such line so that the portion of the line that extends in a generally northeasterly direction for a distance of approximately 8 miles to a point on the Orleans-St. Bernard Parish line located approximately 3/4 of a mile east of the Tricou Substation commences at the Derbigny Substation.




PARAGRAPH FIVE
The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company’s other property, real, personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all of the Company’s rights-of-way, easements, permits, prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, across, under, or upon any public streets or highways or other lands or property, public or private, all located in the Parish of Orleans, State of Louisiana.
PARAGRAPH SIX
The Gas Distributing Systems of the Company, whether now owned or, subject to the provisions of Section 15.03 of the Original Indenture, hereafter acquired, including gas regulator stations, gas main crossings, odorizing equipment, gas metering stations, shops, service buildings, office buildings, expansion tanks, conduits, gas mains and pipes, mechanical storage sheds, boilers, service pipes, fittings, city gates, pipelines, booster stations, reducer stations, valves, valve platforms, connections, meters and all appurtenances, appliances, devices and equipment and all the Company’s other property, real, personal or mixed forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distributing systems, or any of them, together with all of the Company’s rights-of-way, easements, prescriptions, servitudes, privileges, immunities, permits and franchises, licenses, consents and rights for or relating to the construction, maintenance or operation thereof, in, on, through, across or under any public streets or highways or other lands or property, public or private, including all the Company’s right, title and interest in and to the following situated in the State of Louisiana:
ORLEANS PARISH
(1)      Gas City Gate No. 13, situated in the Third District of New Orleans on land owned by others and located at Municipal Number 6435 St. Claude Avenue at the Orleans-St. Bernard Parish line near Jackson Barracks.
(2)      Gas City Gate No. 14, situated in the Third District of New Orleans on land owned by others and located at Paris Road approximately 150 feet north of Bayou Bienvenue.
(3)      That certain concrete-coated steel 8 inch high pressure gas main transmission pipeline extending from Gas City Gate No. 9, which is located approximately 1/2 mile easterly of Industrial Parkway, in a westerly direction for a distance of approximately 1.6 miles to a 12 inch pipeline owned by others located in the 14000 block of Intracoastal Drive.
(4)      Additions, improvements and replacements to Gas Booster Station No. 115, described in Article XX, Paragraph Six, Sub-Paragraph (43) of the Original Indenture, said additions, improvements and replacements including the relocation of such station to the “neutral ground” or median area of Fontainebleau Drive near S. Lopez Street in the Sixth District of New Orleans on land owned by others.
PARAGRAPH SEVEN
All of the franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric and gas systems in, on and under streets, alleys, highways, roads, public grounds




and rights-of-way and all rights incident thereto which were granted by the governing bodies of the City of New Orleans, State of Louisiana.
Also all other franchises, privileges, permits, grants and consents owned or hereafter acquired by the Company for the construction, operation and maintenance of electric and gas systems in, on or under the streets, alleys, highways, roads, and public grounds, areas and rights‑of-way and/or for the supply and sale of electricity or natural gas and all rights incident thereto, subject, however, to the provisions of Section 15.03 of the Original Indenture.





IN WITNESS WHEREOF, NEW ORLEANS PUBLIC SERVICE INC. has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and BANK OF MONTREAL TRUST COMPANY has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and its corporate seal to be attested by one of its Assistant Vice Presidents or Assistant Secretaries, and Z. GEORGE KLODNICKI has hereunto set his hand and affixed his seal, all as of the day and year first above written.
NEW ORLEANS PUBLIC SERVICE INC.


By:      /s/ Glenn E. Harder             
GLENN E. HARDER
Vice President


Attest:

/s/ Lee W. Randall         
LEE W. RANDALL
Assistant Secretary


Executed, sealed and delivered by
NEW ORLEANS PUBLIC SERVICE INC.
in the presence of:

/s/ Lisa A. Greiner             


/s/ Duane C. Lebl             







BANK OF MONTREAL TRUST COMPANY,
As Trustee

BY:      /s/ Mark F. McLaughlin     
MARK F. MCLAUGHLIN
Vice President and
Trust Officer

Attest:

/s/ Therese Gaballah         
THERESE GABALLAH
Assistant Secretary



/s/ Z. George Klodnicki      [L.S.]
Z. GEORGE KLODNICKI,
As Co-Trustee

Executed, sealed and delivered by
BANK OF MONTREAL TRUST COMPANY
and Z. GEORGE KLODNICKI
in the presence of:

/s/ [illegible]             

/s/ [illegible]             





STATE OF LOUISIANA      )
) SS.:
PARISH OF ORLEANS      )

On this 1st day of March, 1993, before me appeared GLENN E. HARDER, to me personally known, who, being duly sworn, did say that he is a Vice President of NEW ORLEANS PUBLIC SERVICE INC., and that the seal affixed to said instrument is the corporate seal of said corporation and that the foregoing instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said GLENN E. HARDER acknowledged said instrument to be the frcc act and deed of said corporation.
On the 1st day of March, in the year 1993, before me personally came GLENN E. HARDER, to me known, who, being by me duly sworn, did depose and say that he resides at 106 West Ruelle, Mandeville, Louisiana 70448; that he is a Vice President of NEW ORLEANS PUBLIC SERVICE INC., one of the parties described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
/s/ Chris Screen             
Christopher T. Screen
Notary Public
Parish of Jefferson, State of Louisiana
My Commission is Issued for Life







STATE OF NEW YORK      )
) SS.:
COUNTY OF NEW YORK      )

On this 1st day of March, 1993, before me appeared MARK F. MCLAUGHLIN, to me personally known, who, being duly sworn, did say that he is a Vice President and Trust Officer of BANK OF MONTREAL TRUST COMPANY, and that the seal affixed to the foregoing instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said MARK F. MCLAUGHLIN acknowledged said instrument to be the free act and deed of said corporation.
On the 1st day of March, in the year 1993, before me personally came MARK F. MCLAUGHLIN, to me known, who, being by me duly sworn, did depose and say that he resides at 44 Norwood Avenue, Allenhurst, New Jersey 07711; that he is a - Vice President and Trust Officer of BANK OF MONTREAL TRUST COMPANY, one of the parties described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.

/s/ Maureen Radigan             
Maureen Radigan
Notary Public, State of New York
No. 31-4971219
Qualified in New York County
Commission Expires August 27, 1994






STATE OF NEW YORK      )
) SS.:
COUNTY OF NEW YORK      )

On this 1st day of March, 1993, before me personally appeared Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 1st day of March, 1993, before me personally came Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.

/s/ Maureen Radigan             
Maureen Radigan
Notary Public, State of New York
No. 31-4971219
Qualified in New York County
Commission Expires August 27, 1994







EXHIBIT A

[FORM OF BOND OF THE FIFTH SERIES]
(See legend at the end of this bond for
restrictions on transferability and change of form)

GENERAL AND REFUNDING MORTGAGE BOND
7% Series due March 1, 2003

CUSIP No. 647 770 AM 8
No. _____________      $___________

NEW ORLEANS PUBLIC SERVICE INC., a corporation duly organized and existing under the laws of the State of Louisiana (hereinafter called the Company), for value received, hereby promises to pay to __________, or registered assigns, at the office or agency of the Company in New York, New York, the principal sum of $_________ on March 1, 2003, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay in like manner to the registered owner hereof interest thereon from March 1, 1993, if the date of this bond is prior to September 1, 1993, or, if the date of this bond is on or after September 1, 1993, from the March 1 or September 1 next preceding the date of this bond to which interest has been paid (unless the date hereof is an interest payment date to which interest has been paid, in which case from the date hereof), at the rate of seven per centum (7%) per annum in like coin or currency on March 1 and September 1 in each year and at maturity until the principal of this bond shall have become due and been duly paid or provided for, and to pay interest (before and after judgment) on any overdue principal, premium, if any, and (to the extent permitted by law) on any overdue interest at the rate of eight per centum (8%) per annum. Interest on this bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on this bond in respect of a portion of a month shall be calculated based on the actual number of days elapsed.
The interest so payable on any interest payment date will, subject to certain exceptions provided in the Mortgage hereinafter referred to, be paid to the person in whose name this bond is registered at the close of business on the day (whether or not a business day) immediately preceding such interest payment date. At the option of the Company, interest may be paid by check mailed on or prior to such interest payment date to the address of the person entitled thereto as such address shall appear on the register of the Company.
This bond shall not become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its respective successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
This bond is one of a series of bonds of the Company issuable in series and is one of a duly authorized series known as its General and Refunding Mortgage Bonds, 7% Series due March 1, 2003 (herein called bonds of the Fifth Series), all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of May 1, 1987, duly executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the mortgaged and pledged property, assets and rights, the nature and extent of the lien and security, the respective rights, limitations of rights, covenants, obligations, duties and immunities thereunder of the Company, the holders of bonds and the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms herein used, to all of which, by its acceptance of this bond, the holder of this bond agrees.




The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided. The Mortgage provides that in certain circumstances and upon certain conditions, such a declaration and its consequences or certain past defaults and the consequences thereof may be waived by such affirmative vote of holders of bonds as is specified in the Mortgage.
The Mortgage contains provisions permitting the Company and the Trustee to execute supplemental indentures amending the Mortgage for certain specified purposes without the consent of holders of bonds. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds of the Fifth Series and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
Any consent or waiver by the holder of this bond (unless effectively revoked as provided in the Mortgage) shall be conclusive and binding upon such holder and upon all future holders of this bond and of any bonds issued in exchange or substitution herefor, irrespective of whether or not any notation of such consent or waiver is made upon this bond or such other bond.
No reference herein to the Mortgage and no provision of this bond or of the Mortgage shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this bond in the manner, at the respective times, at the rate and in the currency herein prescribed.
The bonds are issuable as registered bonds without coupons in the denominations of $1,000 and integral multiples thereof. At the office or agency to be maintained by the Company in The City of New York, State of New York, and in the manner and subject to the provisions of the Mortgage, bonds may be exchanged for a like aggregate principal amount of bonds of other authorized denominations, without payment of any charge other than a sum sufficient to reimburse the Company for any tax or other governmental charge incident thereto. This bond is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in The City of New York, New York, upon surrender of this bond, and upon payment, if the Company shall require it, of the transfer charges provided for in the Mortgage, and, thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange hereof as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
This bond is redeemable at the option of the Company under certain circumstances in the manner and at such redemption prices as are provided in the Mortgage. This bond is also redeemable at the option of the owner upon the events, in the manner and at such redemption prices as are specified in the Mortgage.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.




As provided in the Mortgage, this bond shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, New Orleans Public Service Inc. caused this bond to be signed in its corporate name by its Chairman of the Board., Chief Executive Officer, President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof.
Dated:

NEW ORLEANS PUBLIC SERVICE INC.


By:                         
Title:

Attest:


                
Title:






[FORM OF TRUSTEE’S
AUTHENTICATION CERTIFICATE]

TRUSTEE’S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned mortgage.
BANK OF MONTREAL TRUST COMPANY,
as Trustee,


By:                             
Authorized Signature



LEGEND
Unless and until this bond is exchanged in whole or in part for certificated bonds registered in the names of the various beneficial holders hereof as then certified to the Trustee by the Depository Trust Company or its successor (the “Depositary”), this bond may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.
Unless this certificate is presented by an authorized representative of the Depositary to the Company or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co., or such other name as requested by an authorized representative of the Depositary and any amount payable thereunder is made payable to Cede & Co., or such other name, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
This bond may be exchanged for certificated bonds registered in the names of the various beneficial owners hereof if (a) the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, or (b) the Company elects to issue certificated bonds to beneficial owners (as certified to the Company by the Depositary).




EXHIBIT B

[FORM OF BOND OF THE SIXTH SERIES]
(See legend at the end of this bond for
restrictions on transferability and change of form)

GENERAL AND REFUNDING MORTGAGE BOND
8% Series due March 1, 2023

CUSIP No. 647 770 AN 6
No. _____________      $___________

NEW ORLEANS PUBLIC SERVICE INC., a corporation duly organized and existing under the laws of the State of Louisiana (hereinafter called the Company), for value received, hereby promises to pay to ______________, or registered assigns, at the office or agency of the Company in New York, New York, the principal sum of $________ on March 1, 2023, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay in like manner to the registered owner hereof interest thereon from March 1, 1993, if the date of this bond is prior to September 1, 1993, or, if the date of this bond is on or after September 1, 1993, from the March 1 or September 1 next preceding the date of this bond to which interest has been paid (unless the date hereof is an interest payment date to which interest has been paid, in which case from the date hereof), at the rate of eight per centum (8%) per annum in like coin or currency on March 1 and September 1 in each year and at maturity until the principal of this bond shall have become due and been duly paid or provided for, and to pay interest (before and after judgment) on any overdue principal, premium, if any, and (to the extent permitted by law) on any overdue interest at the rate of nine per centum (9%) per annum. Interest on this bond shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Interest on this bond in respect of a portion of a month shall be calculated based on the actual number of days elapsed.
The interest so payable on any interest payment date will, subject to certain exceptions provided in the Mortgage hereinafter referred to, be paid to the person in whose name this bond is registered at the close of business on the day (whether or not a business day) immediately preceding such interest payment date. At the option of the Company, interest may be paid by check mailed on or prior to such interest payment date to the address of the person entitled thereto as such address shall appear on the register of the Company.
This bond shall not become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its respective successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
This bond is one of a series of bonds of the Company issuable in series and is one of a duly authorized series known as its General and Refunding Mortgage Bonds, 8% Series due March 1, 2023 (herein called bonds of the Sixth Series), all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of May 1, 1987, duly executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the mortgaged and pledged property, assets and rights, the nature and extent of the lien and security, the respective rights, limitations of rights, covenants, obligations, duties and immunities thereunder of the Company, the holders of bonds and the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms herein used, to all of which, by its acceptance of this bond, the holder of this bond agrees.




The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided. The Mortgage provides that in certain circumstances and upon certain conditions, such a declaration and its consequences or certain past defaults and the consequences thereof may be waived by such affirmative vote of holders of bonds as is specified in the Mortgage.
The Mortgage contains provisions permitting the Company and the Trustee to execute supplemental indentures amending the Mortgage for certain specified purposes without the consent of holders of bonds. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds of the Sixth Series and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
Any consent or waiver by the holder of this bond (unless effectively revoked as provided in the Mortgage) shall be conclusive and binding upon such holder and upon all future holders of this bond and of any bonds issued in exchange or substitution herefor, irrespective of whether or not any notation of such consent or waiver is made upon this bond or such other bond.
No reference herein to the Mortgage and no provision of this bond or of the Mortgage shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this bond in the manner, at the respective times, at the rate and in the currency herein prescribed.
The bonds are issuable as registered bonds without coupons in the denominations of $1,000 and integral multiples thereof. At the office or agency to he maintained by the Company in The City of New York, State of New York, and in the manner and subject to the provisions of the Mortgage, bonds may be exchanged for a like aggregate principal amount of bonds of other authorized denominations, without payment of any charge other than a sum sufficient to reimburse the Company for any tax or other governmental charge incident thereto. This bond is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in The City of New York, New York, upon surrender of this bond, and upon payment, if the Company shall require it, of the transfer charges provided for in the Mortgage, and, thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange hereof as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
This bond is redeemable at the option of the Company under certain circumstances in the manner and at such redemption prices as are provided in the Mortgage. This bond is also redeemable at the option of the owner upon the events, in the manner and at such redemption prices as are specified in the Mortgage.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.




As provided in the Mortgage, this bond shall be governed by and construed in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, New Orleans Public Service Inc. caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof.
Dated:

NEW ORLEANS PUBLIC SERVICE INC.


By:                         
Title:

Attest:


                
Title:







[FORM OF TRUSTEE’S
AUTHENTICATION CERTIFICATE]
TRUSTEE’S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned mortgage.
BANK OF MONTREAL TRUST COMPANY,
as Trustee,


By:                             
Authorized Signature



LEGEND
Unless and until this bond is exchanged in whole or in part for certificated bonds registered in the names of the various beneficial holders hereof as then certified to the Trustee by the Depository Trust Company or its successor (the “Depositary”), this bond may not be transferred except as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary or by the Depositary or any such nominee to a successor Depositary or a nominee of such successor Depositary.
Unless this certificate is presented by an authorized representative of the Depositary to the Company or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co., or such other name as requested by an authorized representative of the Depositary and any amount payable thereunder is made payable to Cede & Co., or such other name, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein.
This bond may be exchanged for certificated bonds registered in the names of the various beneficial owners hereof if (a) the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 days, or (b) the Company elects to issue certificated bonds to beneficial owners (as certified to the Company by the Depositary).





[CONFORMED COPY]

Exhibit 4(f)1

NEW ORLEANS PUBLIC SERVICE INC.

TO

BANK OF MONTREAL TRUST COMPANY

AND

Z. GEORGE KLODNICKI,

AS TRUSTEES
____________
Mortgage and Deed of Trust
____________
Dated as of May 1, 1987
____________







NEW ORLEANS PUBLIC SERVICE INC.

TO

BANK OF MONTREAL TRUST COMPANY

and

Z. GEORGE KLODNICKI, AS TRUSTEES

Mortgage and Deed of Trust


Table of Contents     The Table of Contents was not a part of the Mortgage and Deed of Trust as executed.

Page
Parties      1
Recitals      1
Description of bonds
1
General form of coupon bond
1
General form of coupon
4
General form of fully registered bond
4
General form of fully registered bond
(reverse)
6
Form of trustee’s authentication
certificate on all bonds
7
Compliance with legal requirements
7
Granting clause      7
Agreement as to after-acquired property      9
Properties excepted from Lien of Indenture      9
Habendum      9
Grant in Trust      10
Defeasance clause      10
Covenant clause      10
ARTICLE I
DEFINITIONS
Sec. 1.01
Explanatory statement      10
Construction of accounting terms
11
Evidence of approval of signer
11
Requests and applications to be accompanied by
certificates and opinions
11
Sec. 1.02
“Adjusted Net Earnings” defined in Section 1.07 hereof      11
“affiliate”
11
“Board of Directors”
11
“City”
11
“Company”
11




“Cost” defined in Section 1.04(III) hereof
11
“Co-Trustee”
11
“Daily Newspaper”
11
“Defaults” defined in Section 12.01 hereof
12
“Deferred Grand Gulf I Costs” defined in the Granting Clause hereof
12
“Engineer”
12
“Engineer’s Certificate”
12
“Excepted Encumbrances” defined in Section 1.06 hereof
12
“Federal Bankruptcy Act”
12
“Fuel Transportation Facilities”
12
“Funded Cash” defined in Section 1.05 hereof
12
“Funded Property” defined in Section 1.05 hereof
12
“Grand Gulf I”
12
“Grand Gulf I Costs”
12
“Independent”
13
“Independent Engineer’s Certificate”
13
“Investment Securities”
13
“the Lien hereof”, “the Lien of the Indenture” and
“the Lien of this Indenture”
13
“Mortgage” or “Indenture”
13
Sec. 1.03
“the Mortgaged and Pledged Property”      13
“Municipalization Interest” defined in the granting clause hereof
14
“Net Earning Certificate” defined in Section 1.07 hereof
14
“1944 Mortgage” defined in the granting clause hereof
14
“Officers’ Certificate”
14
“Opinion of Counsel”
14
“Original Trustee” and “Original Co-Trustee”
14
“Outstanding”
14
“prior lien”
14
“Property Additions” defined in Section 1.04 hereof
14
“Rate Agreement” defined in the granting clause hereof
15
“Rate Recovery Mortgage Bonds”, “Rate Recovery General
and Refunding Mortgage Bonds” and
“Rate Recovery First Mortgage Bonds”
15
“Resolution”
15
“Responsible Officers”
15
“Retired Bonds”
15
“Space Satellites”
16
“Trustee”
16
“Trustees”
16
“underwriter” defined in Section 16.12 hereof
16
Sec. 1.04
(I) “Property Additions”      16
(II) Provisions for netting Property Additions
17
(III) “Cost”
18
Sec. 1.05
“Funded Property”      19
“Funded Cash”
20
Sec. 1.06
“Excepted Encumbrances”      20
Sec. 1.07
“Net Earning Certificate”      22
Construction of phrases relating to property retirement
23




Interest payment in foreign coin or currency
24
ARTICLE II
FORMS, EXECUTION, REGISTRATION AND EXCHANGE OF BONDS
Sec. 2.01
Series and form of bonds      24
One or more series may be expressed in one or more
foreign languages-English text shall prevail
25
Form of each series shall specify the descriptive title, designation,
date of bonds, rate or rates of interest, medium of payment,
dates of maturity, dates for payment of interest, and place
for payment of principal and interest
26
May also contain provisions for:
(a)
Additional places for payment, registration and transfer      26
(b)
Reimbursement of taxes      26
Sinking fund, put options, and conversion of bonds into stock      26
(c)
Exchanges of bonds      26
(d)
Redemption      26
(e)
Splitting of interest and principal payments      26
(f)
Complying with laws, rules, regulations or usage      26
(g)
Wire or electronic transfer of funds      26
(h)
Other terms and conditions      26
Sec. 2.02
Kinds and denominations of bonds.      26
Sec. 2.03
Date of and interest on fully registered bonds      26
Dates and designation of coupon bonds
27
Sec. 2.04
Legends on bonds      27
Sec. 2.05
Surrender of bonds upon exchange      27
Authentication and issuance of new bonds
27
Charges for exchanges and transfers of bonds
27
Sec. 2.06
Registration and transfer books      27
Sec. 2.07
Execution of bonds      28
Matured coupons to be detached before authentication of bonds
28
Sec. 2.08
Temporary bonds      28
Sec. 2.09
Replacement of stolen, lost, destroyed or mutilated bonds      29
Indemnity and charges
29
Sec. 2.10
Trustee’s certificate on bonds      29
Sec. 2.11
Bonds may be paid in foreign countries and in foreign currencies      29
ARTICLE III
GENERAL PROVISIONS AS TO ISSUE OF BONDS
Sec. 3.01
Aggregate amount of bonds which may be secured by Indenture      29
Sec. 3.02
Company free to determine price, etc., for bonds      30
ARTICLE IV
ISSUANCE OF RATE RECOVERY MORTGAGE BONDS
Sec. 4.01
Requirements for issuance      30




ARTICLE V
ISSUANCE OF BONDS UPON THE BASIS
OF PROPERTY ADDITIONS
Sec. 5.01
Additional bonds issuable on basis of Property Additions      31
Sec. 5.02
No bonds issuable under Article V on basis of Funded Property      31
Sec. 5.03
Bonds issuable under Article V to specified percentage of Cost
or fair value of Property Additions after making certain
deductions and additions
31
Sec. 5.04
Net Earning requirements for issue on Property Additions      31
Sec. 5.05
Bond application papers for issue on Property Additions      31
Determination of Cost, fair value and fair market value
35
ARTICLE VI
ISSUANCE OF BONDS UPON RETIREMENT OF CERTAIN
BONDS PREVIOUSLY OUTSTANDING HEREUNDER OR
UNDER THE 1944 MORTGAGE
Sec. 6.01
Bond application papers for issues in refunding certain Retired Bonds      35
Net Earning Certificate in certain cases
36
ARTICLE VII
ISSUANCE OF BONDS UPON DEPOSIT OF CASH WITH TRUSTEE
Sec. 7.01
Bond application papers for issues against deposited cash.      36
Sec. 7.02
Withdrawal of cash deposited under Section 7.01      37
Sec. 7.03
Company may direct application of cash deposited
under Section 7.01 to purchase, pay or redeem bonds
37
ARTICLE VIII
COMPLIANCE WITH THE TRUST INDENTURE ACT OF 1939
Sec. 8.01
Reservation of right to comply with the Trust Indenture Act of 1939      38
ARTICLE IX
PARTICULAR COVENANTS OF THE COMPANY
Sec. 9.01
Possession      38
Maintenance of Lien
38
Right to mortgage
38
Sec. 9.02
Payment of principal and interest      38
Cancellation of paid coupons
38
Sec. 9.03
(a)      Appointment of qualified Trustee      38
(b)
Office or agency for presentation of bonds, coupons, notices, etc.      39
Results of failure to maintain such offices      39
(c)
Duty of paying agent other than Trustee      39




(d)
Duty of Company acting as paying agent      39
(e)
Delivery to Trustee of sums held by other paying agent      39
(f)
All sums to be held subject to Section 19.03      40
Sec. 9.04
Payments of taxes, etc.      40
Sec. 9.05
Insurance on property      40
Application of insurance proceeds
41
Deductible provision
42
Sec. 9.06
Maintenance of Mortgaged and Pledged Property      42
Independent Engineer’s Certificate on maintenance
of Mortgaged and Pledged Property
43
Retirement from plant account of property
no longer useful in business
45
Sec. 9.07
Maintenance of corporate existence and franchises      45
Sec. 9.08
Recording, filing, etc.      45
Annual Opinion of Counsel
45
Instruments of further assurance
46
Sec. 9.09
(a)      Company to furnish Trustee information as to names
and addresses of bondholders
46
(b)      Preservation by Trustee of such information      46
(c)      Trustee shall make such information available or mail
communications to bondholders in certain circumstances
46
(d)      Trustee and paying agent not accountable by reason of
disclosing or mailing material pursuant to subdivision (c)
47
Sec. 9.10
(1)      Company agrees to file with Trustee copies of annual reports
which the Company may be required to file
with the Securities and Exchange Commission
47
(2)      Company agrees to file with Trustee and
Securities and Exchange Commission certain
additional information with respect to compliance
with certain conditions and covenants of Indenture
48
(3)      Company agrees to transmit to bondholders summaries
of such information as may be required by
Securities and Exchange Commission
48
Sec. 9.11
Books of record and account      48
Faithful performance of covenants, conditions, etc.
48
Sec. 9.12
Deposit with Trustee of certain property
upon discharge of prior lien
48
Sec. 9.13
Trustee’s Special Notice when Company property or stock
is taken by eminent domain or is purchased by any
governmental authority
49
Holder’s right to have Company purchase bonds,
notice of purchase to the Trustee and right of revocation
49
Sec. 9.14
Annual Certificate of no default.      50
Sec. 9.15
Restriction on issuance of bonds under the 1944 Mortgage      50
Sec. 9.16
Compliance with maintenance and replacement fund
provisions of the 1944 Mortgage
50
Sec. 9.17
Compliance with applicable laws ....      50
Sec. 9.18
Dividend Covenant      50




ARTICLE X
REDEMPTION OR PURCHASE OF BONDS
Sec. 10.01
What bonds redeemable      51
Sec. 10.02
Redemption of a part only of bonds      51
Notice of redemption
51
Mailing notice
51
Sec. 10.03
Bonds due on redemption date if price deposited and notice given      52
Sec. 10.04
Redemption money held in trust until paid to holders on
surrender of bonds
52
When bonds cease to bear interest
52
Partial redemption of registered bonds
52
Sec. 10.05
Purchase of bonds with cash held by Trustee      52
Company may designate series
53
Solicitation of offers to sell
53
Sec. 10.06
Bonds paid, purchased or redeemed hereunder to be cancelled      53
Destruction of bonds and coupons
53
ARTICLE XI
POSSESSION, USE AND RELEASE OF MORTGAGED AND PLEDGED PROPERTY
Sec. 11.01
Company’s possession and enjoyment      53
Sec. 11.02
What Company may do without release or consent by Trustee      54
(1)
Replacement of machinery, equipment, tools, etc.      54
(2)
Cancellation of rights of way      54
(3)
Surrender or assent to modification of franchises, etc.      54
Sec. 11.03
Release of property      54
(1)
Officers’ Certificate      54
(2)
Engineer’s Certificate      54
(3)
Cash equal to amount by which fair value of property
released exceeds the sum of:
(a)
Purchase money obligations received      55
(b)
Cost or fair value of Property Additions made basis
of release
55
(c)
Principal amount of bonds which Company
waives right to issue
56
(d)
Principal amount of obligations secured by
purchase money mortgage
56
(e)
Taxes and expenses      56
(4)
Opinion of Counsel on Property Additions      57
(5)
Opinion of Counsel on purchase money mortgage, etc.      57
(6)
Opinion of Counsel if franchise to be released      57
(7)
Opinion of Counsel on conditions and covenants      57
Assignment, filing and recordation of purchase
money mortgages; Opinion of Counsel
57
Conditions if release based on Property Additions, etc.
58
When Property Additions made basis for release
do not become Funded Property
58
Disposition of consideration received upon release
59




Substituted property to become subject to Lien
59
Sec. 11.04
Release of real estate unimproved for Company’s business      59
Any consideration received by Company to be deposited hereunder
60
Sec. 11.05
Withdrawal or application of moneys received for releases, etc.      60
Such moneys may be:
(1)
Withdrawn on basis of Property Additions      60
(2)
Withdrawn on basis of right to issue bonds      60
(3)
Applied to purchase bonds      61
(4)
Applied to redeem bonds      61
Requirements for withdrawal of moneys
61
When withdrawal does not represent Funded Property
61
Release of purchase money mortgage obligations
62
Principal and interest on purchase money mortgage obligations
63
Disposition of bonds deposited under this Section
63
Sec. 11.06
Release of property taken by eminent domain or
purchased by governmental body
63
Application of proceeds
64
Sec. 11.07
If Mortgaged and Pledged Property in hands of receiver
or trustee, it may exercise powers conferred on Company
64
Notwithstanding default, Trustee may release
Mortgaged and Pledged Property
64
Purchaser in good faith not put on inquiry
64
Sec. 11.08
Alternative method of release of certain
Mortgaged and Pledged Property
64
Sec. 11.09
Quitclaim of property not subject to Lien      65
ARTICLE XII
REMEDIES OF TRUSTEES AND BONDHOLDERS UPON DEFAULT
Sec. 12.01
Definition of “Defaults”      65
Sec. 12.02
Trustees’ issuance of Notice of Default      66
Sec. 12.03
Declaration of principal and accrued interest due upon Default      66
Holders of specified percentage of bonds may annul declaration
67
Sec. 12.04
Trustee or Co-Trustee may take possession of and operate
Mortgaged and Pledged Property on Default
67
When Trustees shall surrender possession to Company
68
Sec. 12.05
Power of Trustees to sell all the Mortgaged and Pledged Property      68
Sec. 12.06
Judicial proceedings by Trustees      68
Remedies cumulative
68
Delay, etc., not a waiver of rights
68
Sec. 12.07
Holders of specified percentage of bonds may
direct judicial proceedings by Trustees
69
Bonds owned by Company or affiliates not included in
determining percentages for certain purposes
69
Sec. 12.08
Appointment of receiver      69
Sec. 12.09
All bonds to become due and payable upon sale of property      69
Sec. 12.10
Purchase by bondholders at sale of property      70
Sec. 12.11
Receipt of Trustees or officer making sale to be discharge to purchaser      70
Effect of sale on rights of Company
70




Sec. 12.12
Disposition of proceeds of sale.
Order of application
70
Sec. 12.13
Waiver by Company of advantage of any appraisement,
valuation, stay, extension or redemption laws,
and of rights to marshal assets
71
Sec. 12.14
Payment of principal and interest to Trustees upon
occurrence of certain defaults
71
Judgment may be taken by Trustees
72
Proofs of claim
72
Lien of Indenture not to be affected by judgment or
levy of execution by Trustees
72
Application of moneys collected by Trustees
73
Sec. 12.15
Possession of bonds unnecessary in action by Trustees      73
Bondholders not necessary parties to action
73
Sec. 12.16
Limitation upon right of bondholders to institute
certain legal proceedings
73
Right of bondholders to receive and enforce payment not impaired
74
Sec. 12.17
Company may waive period of grace      74
If enforcement proceedings abandoned, status quo is established
74
ARTICLE XIII
EVIDENCE OF RIGHTS OF BONDHOLDERS
AND OWNERSHIP OF BONDS
Sec. 13.01
Execution of instruments by bondholders      74
Proof of execution
74
(a)
Acknowledgment      74
(b)
Certificate of trust company, bank, etc.      74
Consent or vote binding on future holder of bond
75
Sec. 13.02
Evidence of ownership of temporary or coupon bonds      75
Evidence of ownership of registered bonds
75
Inspection of bonds
75
ARTICLE XIV
IMMUNITY OF INCORPORATORS, SUBSCRIBERS TO THE
CAPITAL STOCK, STOCKHOLDERS, OFFICERS AND DIRECTORS
Sec. 14.01
Liability of officers, etc., released and waived      75
ARTICLE XV
EFFECT OF MERGER, CONSOLIDATION, ETC.
Sec. 15.01
Company may merge, consolidate, etc., upon certain terms      76
Covenant against impairment of Lien thereby
76
Assumption of obligation by successor
76
Sec. 15.02
Right of successor corporation      76
Execution of Indenture
77




Issuance of bonds, etc., on basis of Property Additions
by successor corporation
77
Sec. 15.03
Extent of Lien of Indenture upon property of successor corporation      78
ARTICLE XVI
CONCERNING THE TRUSTEES
Sec. 16.01
Qualification of Trustee      78
Acceptance of trust -- duties in general
79
Sec. 16.02
Extent of Trustees’ liability -- in general      79
Sec. 16.03
Recitals deemed made by Company      80
Sec. 16.04
Trustees not liable for debts incurred in operating property.
Trustees, etc., may own bonds
80
Sec. 16.05
Trustees may give notices incidental to action by it      80
Sec. 16.06
Notice by Trustees to Company -- mailing      80
Sec. 16.07
Trustees protected in relying on Certificates, etc.      81
Trustees may consult counsel
81
Responsibility in selection of experts
81
Sec. 16.08
Moneys deposited with Trustees to be held in trust      81
Interest on moneys with Trustees
81
Sec. 16.09
Compensation of Trustees -- lien therefor      81
Sec. 16.10
Trustees may rely on facts established by certificate from Company      82
Sec. 16.11
Action to be taken by Trustees and Co-Trustee
who becomes creditor of Company
83
Sec. 16.12
Action to be taken by Trustees and Co-Trustee
acquiring conflicting interest
86
Definition of conflicting interest
87
Sec. 16.13
Trustees and Co-Trustee to transmit certain reports to bondholders      91
Copies of reports to be filed with stock exchanges
and Securities and Exchange Commission
92
Sec. 16.14
Resignation or removal of Trustees and Co-Trustee      93
Sec. 16.15
Appointment of successor Trustee and successor Co-Trustee      93
Sec. 16.16
Appointment of additional trustees or co-trustees      94
Conditions affecting such appointment
95
Notice by bondholders to Trustee, notice to all trustees
95
Contents, filing, etc. of instrument appointing trustee
Incapacity, etc., of separate trustee or co-trustee
96
Sec. 16.17
Acceptance by successor trustee      96
Requirements of predecessor trustee upon retiring
96
Sec. 16.18
Merger or consolidation of Trustee      96
Delivery of bonds authenticated by predecessor Trustee
96
Authentication by successor Trustee
97
Sec. 16.19
Appointment of successor Trustee by Company      97
Sec. 16.20
Estates, rights, etc. of Trustees are in joint tenancy      97
Notice, etc. on behalf of Company delivered to Trustee
deemed delivered to both Trustee and Co-Trustee
97
Sec. 16.21
Necessity for Co-Trustee      97




ARTICLE XVII
DISCHARGE OF MORTGAGE
Sec. 17.01
Execution of requisite deeds and instruments      97
Bonds for payment of which money or obligations
of the United States are deposited are deemed
paid -- proviso
98
ARTICLE XVIII
MEETINGS AND CONSENTS OF BONDHOLDERS
Sec. 18.01
Modifications of Indenture -- in general      98
Sec. 18.02
Call and notice of meeting of bondholders      99
Place when called by Trustee
99
Written notice
99
Publication
99
When notice not required
99
Sec. 18.03
Attendance at meetings      99
Trustee may make regulations as to deposits of bonds
99
Certificate in lieu of production of unregistered bonds
100
Sec. 18.04
Persons entitled to vote at meetings      100
When production of bonds and further proof necessary
100
Proxies -- Acknowledgment
101
Sec. 18.05
Temporary Chairman and Secretary
Permanent Chairman and Secretary
Inspectors of Votes
101
Sec. 18.06
Quorum      101
Notice of adjournment
102
Sec. 18.07
Vote necessary for modification, alteration, etc., of Indenture      102
Limitations on right of modification
102
Bonds owned, held by, or for account of Company not counted
103
Sec. 18.08
Record of meeting      103
Conclusiveness of meeting
103
Copy of resolution to be mailed to bondholders
104
Proof of mailing to be filed with Trustees
104
Effect of failure to mail
104
Approval of resolution by Company
104
Effective date of resolution
104
Sec. 18.09
Notation of action taken may be made on bonds      104
New bonds
104
When supplemental instrument may be executed
104
Sec. 18.10
(A)      Trustee may receive written consent of bondholders
in lieu of holding a meeting      104
(B) Acknowledgment of written consent
104
(C)
Revocation of consent      105




ARTICLE XIX
MISCELLANEOUS
Sec. 19.01
Benefits restricted to parties and to holders of bonds and coupons      106
Sec. 19.02
Investment of cash by Trustee in certain securities      106
Such securities held by Trustee as part of Mortgaged
and Pledged Property
106
Retirement of bonds with funds in excess of specified
amount held by Trustee for specified period
106
Sec. 19.03
Deposits for bonds and coupons not claimed for specified
period to be returned to Company on demand
107
Sec. 19.04
Rights may be waived or surrendered by Company      107
Company may enter into further covenants for benefit
of one or more series of bonds
107
Trustee may join with Company in execution of instruments
107
Sec. 19.05
Formal requirements of certificates and opinions hereunder      107
Sec. 19.06
Concerning court costs and counsel fees in certain suits hereunder      108
Sec. 19.07
Successors and assigns      108
Sec. 19.08
In event of conflict, Trust Indenture Act Provisions herein to control      108
Sec. 19.09
Effect of Indenture under Louisiana law      108
Sec. 19.10
Reference is to Trust Indenture Act in force on the
date of execution hereof-exceptions
109
Sec. 19.11
Titles of Articles of Indenture, marginal sectional,
marginal Article references and
table of contents not part thereof
109
Sec. 19.12
Execution in counterparts      109
Sec. 19.13
Amendment of principal amount of Bonds which
may be issued under the Indenture
109
Sec. 19.14.
Governing law      109
ARTICLE XX
DESCRIPTION OF PROPERTY
Property Description      109
Testimonium      154
Signatures and seals      154
Acknowledgments      156
Summary of recording data      159







INDENTURE, dated as of the 1st day of May, 1987, made and entered into by and among NEW ORLEANS PUBLIC SERVICE INC., a corporation of the State of Louisiana, whose post office address is 317 Baronne Street, New Orleans, Louisiana 70112 (hereinafter sometimes called the Company), party of the first part, and BANK OF MONTREAL TRUST COMPANY, a corporation of the State of New York, whose principal office is located at Two Wall Street, New York, New York 10005 (hereinafter sometimes called the Trustee), and Z. GEORGE KLODNICKI, whose post office address is 87 Prospect Avenue, Westwood, New Jersey 07675 (hereinafter sometimes called the Co-Trustee), parties of the second part (the Trustee and the Co-Trustee being hereinafter collectively sometimes called the Trustees);
WHEREAS, the Company deems it necessary to borrow money for its corporate purposes and to issue its bonds therefor from time to time in one or more series, and to mortgage and pledge its property hereinafter described or mentioned to secure the payment of the same, such bonds to be at the election of the Company coupon bonds (which may be bearer bonds if at the time permitted by law) and/or fully registered bonds, authenticated by the certificate of the Trustee and issuable as in this Indenture hereinafter provided, such coupon bonds, coupons, fully registered bonds and Trustee’s authentication certificate to be substantially in the forms following, respectively, with such insertions, omissions and variations as the Board of Directors of the Company may determine in accordance with the provisions of this Indenture:
[GENERAL FORM OF COUPON BOND]

NEW ORLEANS PUBLIC SERVICE INC.

__________ Bond

__________ Series due __________

No. __________      $__________

NEW ORLEANS PUBLIC SERVICE INC., a corporation of the State of Louisiana (hereinafter called the Company), for value received, hereby promises to pay to the bearer, or, if this bond be registered, to the registered owner hereof, at the office or agency of the Company in __________, __________ dollars on __________, __________, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay interest thereon from the date hereof at the rate of __________ per centum per annum in like coin or currency at such office or agency on __________ and __________ in each year, until the principal of this bond shall have become due and payable, and to pay interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate then borne by this bond plus one per centum (1%) per annum. The interest accrued on the principal hereof prior to such principal becoming due and payable shall be paid only upon presentation and surrender of the interest coupons therefor hereto attached as they severally mature.




This bond is one of a series of bonds of the Company issuable in series and is one of a series known as its __________ Bonds, __________ Series due __________, all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with, any indenture supplemental thereto, called the Mortgage), dated as of May 1, 1987, executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds and of the Trustees in respect thereof, the duties and immunities of the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms hereinafter used. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds and/or coupons and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided.
This bond is negotiable and shall pass by delivery unless registered as to principal at the office or agency of the Company in __________, and such registration noted hereon, after which no valid transfer hereof can be made, except at such office or agency, until after registered transfer to bearer, but after such registered transfer to bearer this bond shall be again transferable by delivery. Such registration, however, shall not affect the negotiability of the coupons, which shall always remain payable to bearer and transferable by delivery. The Company and the Trustees may deem and treat the bearer of this bond if it be not registered as to principal, or, if this bond is registered as herein authorized, the person in whose name the same is registered, as the absolute owner hereof, and the bearer of any coupon hereunto appertaining as the absolute owner hereof, whether or not this bond or such coupon shall be overdue, for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
As provided in the Mortgage, the Company shall not be required to make transfers or exchanges of bonds of any series for a period of fifteen days next preceding any interest payment date for bonds of said series, or next preceding any designation of bonds of said series to be redeemed, and the Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.
No recourse shall be had for the payment of the principal or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers, stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
Neither this bond nor the coupons hereto attached shall become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, NEW ORLEANS PUBLIC SERVICE INC. has caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President




or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof, and interest coupons bearing the facsimile signature of its Treasurer or an Assistant Treasurer to be attached hereto, as of ________, __________.
NEW ORLEANS PUBLIC SERVICE INC.

By     

ATTEST:

__________________





[GENERAL FORM OF COUPON]
No. __________      $__________

On __________, ____, unless the bond hereafter mentioned shall have previously become due and payable, NEW ORLEANS PUBLIC SERVICE INC. will pay to bearer, upon surrender of this coupon, at its office or agency in __________, __________ dollars in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, being __________ months’ interest then due on its _________________ Bond, _____________ Series due _____________, No. __________

__________________

[GENERAL FORM OF FULLY REGISTERED BOND]
________________ BOND

_____________ Series due _____________
No. __________      $__________

NEW ORLEANS PUBLIC SERVICE INC., a corporation of the State of Louisiana (hereinafter called the Company), for value received, hereby promises to pay to __________, or registered assigns, at the office or agency of the Company in __________, __________ dollars on __________, in such coin or currency of the United States of America as at the time of payment is legal tender for public and private debts, and to pay to the registered owner hereof interest thereon from __________, _______, if the date of this bond is prior to ____________, or, if the date of this bond is on or after _________________, from the __________ or __________ next preceding the date of this bond (unless the date hereof is an interest payment date to which interest has been paid, in which case from the date hereof), at the rate of __________ per centum per annum in like coin or currency at such office or agency on __________ and __________ in each year, until the principal of this bond shall have become due and payable, and to pay interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate then borne by this bond plus one per centum (1%) per annum. [The following provision may be included here at the Company’s option: provided, however, if the date hereof is after any record date, as hereinafter provided, with respect to any interest payment date and prior to such interest payment date, then interest shall be payable only from such interest payment date unless the Company shall default in the payment of the interest due on such interest payment date, in which case interest shall be payable from the next preceding interest payment date to which interest has been paid, or, if no such interest has been paid on the bonds, from _________________.
The interest so payable on any interest payment date will, subject to certain exceptions provided in the Mortgage hereinafter referred to, be paid to the person in whose name this bond is registered at the close of business (whether or not a business day) on the __________ or __________ (herein called “record dates”), as the case may be, next preceding such interest payment date.] At the option of the Company, interest may be payable by check mailed on or prior to such interest payment date to the address of the person entitled thereto as such address shall appear on the register of the Company.




[The provisions hereinafter indicated for the reverse of the bond may instead be inserted here. Otherwise, the following statement shall be included here if provisions are continued on the reverse of the bond: ADDITIONAL PROVISIONS OF THIS BOND ARE SET FORTH ON THE REVERSE HEREOF AND SUCH PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT THIS PLACE.]
This bond shall not become obligatory until Bank of Montreal Trust Company, the Trustee under the Mortgage, or its respective successor thereunder, shall have signed the form of authentication certificate endorsed hereon.
IN WITNESS WHEREOF, New Orleans Public Service Inc. has caused this bond to be signed in its corporate name by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents by his signature or a facsimile thereof, and its corporate seal to be impressed or imprinted hereon and attested by its Secretary or one of its Assistant Secretaries by his signature or a facsimile thereof.
Dated:
NEW ORLEANS PUBLIC SERVICE INC.

By:     

ATTEST:

__________________






[General Form of Fully Registered Bond]

(Reverse)

NEW ORLEANS PUBLIC SERVICE INC.
This bond is one of a series of bonds of the Company issuable in series and is one of a series known as its __________ Bonds, __________ Series due __________ , all bonds of all series issued under and equally secured by a Mortgage and Deed of Trust (herein, together with any indenture supplemental thereto, called the Mortgage), dated as of May 1, 1987, executed by the Company to Bank of Montreal Trust Company and Z. George Klodnicki, as Trustees. Reference is made to the Mortgage for a description of the property mortgaged and pledged, the nature and extent of the security, the rights of the holders of the bonds and of the Trustees in respect thereof, the duties and immunities of the Trustees and the terms and conditions upon which the bonds are, and are to be, secured, the circumstances under which additional bonds may be issued and the definition of certain terms hereinafter used. With the consent of the Company and to the extent permitted by and as provided in the Mortgage, the rights and obligations of the Company and/or the rights of the holders of the bonds and/or coupons and/or the terms and provisions of the Mortgage may be modified or altered by such affirmative vote or votes of the holders of bonds then Outstanding as are specified in the Mortgage.
The principal hereof may be declared or may become due prior to the maturity date hereinbefore named on the conditions, in the manner and at the time set forth in the Mortgage, upon the occurrence of a Default as in the Mortgage provided.
This bond is transferable as prescribed in the Mortgage by the registered owner hereof in person, or by his duly authorized attorney, at the office or agency of the Company in _____________________, upon surrender of this bond, and upon payment, if the Company shall require it, of the transfer charges provided for in the Mortgage, and, thereupon, a new fully registered bond of the same series for a like principal amount will be issued to the transferee in exchange herefor as provided in the Mortgage. The Company and the Trustees may deem and treat the person in whose name this bond is registered as the absolute owner hereof for the purpose of receiving payment and for all other purposes and neither the Company nor the Trustees shall be affected by any notice to the contrary.
[The following paragraph may be omitted or modified if a record date is established or if such paragraph is otherwise inapplicable.]
As provided in the Mortgage, the Company shall not be required to make transfers or exchanges of bonds of any series for a period of fifteen days next preceding any interest payment date for bonds of said series, or next preceding any designation of bonds of said series to be redeemed, and the Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.
No recourse shall be had for the payment of the principal of or interest on this bond against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or otherwise, all such liability of incorporators, subscribers,




stockholders, officers and directors being released by the holder or owner hereof by the acceptance of this bond and being likewise waived and released by the terms of the Mortgage.
[FORM OF TRUSTEE’S AUTHENTICATION
CERTIFICATE ON ALL BONDS]

TRUSTEE’S AUTHENTICATION CERTIFICATE
This bond is one of the bonds, of the series herein designated, described or provided for in the within-mentioned mortgage.
BANK OF MONTREAL TRUST COMPANY,
as Trustee,

By     
Authorized Officer

; and

WHEREAS, all things necessary to make this Indenture a valid, binding and legal instrument for the security of said bonds, have been performed, and the issue of said bonds, subject to the terms of this Indenture, has been in all respects duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH: That NEW ORLEANS PUBLIC SERVICE INC., in consideration of the premises and of Ten Dollars ($10) to it duly paid by the Trustees at or before the ensealing and delivery of these presents, the receipt whereof is hereby acknowledged, and in order to secure the payment of both the principal of and interest and premium, if any, on the bonds from time to time issued hereunder, according to their tenor and effect and the performance of all provisions hereof (including any instruments supplemental hereto and any modification made as in this Indenture provided) and of said bonds, hath granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over and confirmed and granted a security interest in, and by these presents doth grant, bargain, sell, release, convey, assign, transfer, mortgage, hypothecate, affect, pledge, set over and confirm and grant a security interest in (subject, however, to Excepted Encumbrances as defined in Section 1.06 hereof), unto Z. George Klodnicki and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, as Trustees, and to their successor or successors in said trust, and to said Trustees and their successors and assigns forever, (1) all rights, legal and equitable, of the Company (whether in accordance with Paragraph 32 of that certain Resolution No. R-86-112, adopted by the Council of the City of New Orleans on March 20, 1986 and accepted by the Company on March 25, 1986 (said Resolution as so adopted and accepted being herein sometimes called the “Rate Agreement”), or pursuant to other regulatory authorization or by operation of law or otherwise), in the event of the purchase and acquisition by the City of New Orleans (the “City”) (or any other governmental authority or instrumentality or designee thereof) of properties and assets of the Company, to recover and receive payment and compensation from the City (or from such other governmental authority or instrumentality or designee thereof or any other person) of an amount equal to the aggregate uncollected balance of (A) the deferrals of Grand Gulf I Costs and the deferred carrying charges accrued thereon (collectively, the “Deferred Grand Gulf I Costs”) that have accumulated prior to the City or such other entity providing official notice to the Company of the City’s or such other entity’s intent to effect such purchase and acquisition and (B) if




and to the extent that the City or such other entity and the Company agree that the City or such other entity is liable for all or a portion of the aggregate uncollected balance of such deferrals accumulating thereafter or a court of final resort so holds, such deferrals that have accumulated subsequent to such notice (said rights of the Company, together with the proceeds and products thereof, herein being sometimes called the “Municipalization Interest”); and (2) all properties of the Company specifically described in Article XX hereof and all other properties of the Company real, personal and mixed, of the kind or nature specifically mentioned herein or of any other kind or nature (except any hereinbefore or hereinafter expressly excepted), now owned or, subject to the provisions of Section 15.03 hereof, hereafter acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) and wheresoever situated, including (without in anywise limiting or impairing by the enumeration of the same, the scope and intent of the foregoing or of any general description contained in this Indenture) all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same; all power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power; all power houses, gas plants, street lighting systems, standards and other equipment incidental thereto; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, electric, gas and water lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generators and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment, and all other fixtures and personalty; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith and (except as hereinbefore or hereinafter expressly excepted) all the right, title and interest of the Company in and to all other property of any kind or nature appertaining to and/or used and/or occupied and/or enjoyed in connection with any property hereinbefore described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions, servitudes and appurtenances belonging or in anywise appertaining to the aforesaid property or any part thereof, with the reversion and reversions, remainder and remainders and (subject to the provisions of Section 11.01 hereof) the tolls, rents, revenues, issues, earnings, income, product and profits thereof, and all the estate, right, title and interest and claim whatsoever, at law as well as in equity, which the Company now has or may hereafter acquire in and to the aforesaid property, rights and franchises and every part and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of Section 15.03 hereof, all the property, rights and franchises acquired by the Company (by purchase, consolidation, merger, donation, construction, erection or in any other way) after the date hereof, except any hereinbefore or hereinafter expressly excepted, shall be and are as fully granted and conveyed hereby and as fully embraced within the Lien hereof as if such property, rights and franchises were now owned by the Company and were specifically described herein and granted and conveyed hereby.




PROVIDED that, except as hereinbefore provided with respect to the Municipalization Interest, the following are not and are not intended to be now or hereafter granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder, nor is a security interest therein hereby granted or intended to be granted, and the same are hereby expressly excepted from the Lien hereof and the operation of this Indenture, viz.: (1) cash, shares of stock, bonds, notes and other obligations and other securities not hereinbefore or hereafter specifically pledged, paid, deposited, delivered or held hereunder or covenanted so to be; (2) merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or part) any rolling stock, buses, motor coaches, automobiles or other vehicles or aircraft or boats, ships, or other vessels and any fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; rolling stock, buses, motor coaches, automobiles and other vehicles and all aircraft; boats, ships and other vessels; all timber, minerals, mineral rights and royalties; (3) bills, notes and other instruments and accounts receivable, judgments, demands, general intangibles and choses in action, and all contracts, leases and operating agreements not specifically pledged hereunder or hereafter covenanted so to be; (4) the last day of the term of any lease or leasehold which may hereafter become subject to the Lien hereof; (5) electric energy, gas, water, steam, ice, and other materials or products generated, manufactured, produced or purchased by the Company for sale, distribution or use in the ordinary course of its business; (6) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system; and (7) the Company’s franchise to be a corporation; provided, however, that the property and rights expressly excepted from the lien and operation of this Indenture in the above subdivisions (2) and (3) shall (to the extent permitted by law) cease to be so excepted in the event and as of the date that either or both of the Trustees or a receiver or trustee shall enter upon and take possession of the Mortgaged and Pledged Property in the manner provided in Article XII hereof by reason of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged, hypothecated, affected, pledged, set over or confirmed or in which a security interest has been granted by the Company as aforesaid, or intended so to be (subject, however, to Excepted Encumbrances as defined in Section 1.06 hereof), unto Z. GEORGE KLODNICKI and (to the extent of its legal capacity to hold the same for the purposes hereof) to BANK OF MONTREAL TRUST COMPANY, and their successors and assigns forever.
IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth, for the equal pro rata benefit and security of all and each of the bonds and coupons issued and to be issued hereunder, or any of them, in accordance with the terms of this Indenture, without preference, priority or distinction as to the lien of any of said bonds and coupons over any others thereof by reason of priority in the time of the issue or negotiation thereof, or otherwise howsoever, subject to the provisions hereinafter set forth in reference to extended, transferred or pledged coupons and claims for interest; it being intended that, subject as aforesaid, the lien and security of all of said bonds and coupons of all series issued or to be issued hereunder shall take effect from the date of the initial issuance of bonds hereunder, and that the lien and security of this Indenture shall take effect from said date as though all of the said bonds of all series were actually authenticated and delivered and issued upon such date.
PROVIDED, HOWEVER, these presents are upon the condition that if the Company, its successors or assigns, shall pay or cause to be paid, the principal of and interest on said bonds, together with the premium, if any, payable on such of said bonds as may have been called for redemption prior to




maturity, or shall provide, as permitted hereby, for the payment thereof by depositing with the Trustee the entire amount due or to become due thereon for principal, interest and premium, if any, and if the Company shall also pay or cause to be paid all other sums payable hereunder by it, then this Indenture and the estate and rights hereby granted shall cease, determine and be void, otherwise to be and remain in full force and effect.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by and between the parties hereto that all such bonds and coupons are to be authenticated, delivered and issued, and that all property subject or to become subject hereto is to be held subject to the further covenants, conditions, uses and trusts hereinafter set forth, and the Company, for itself and its successors and assigns, does hereby covenant and agree to and with the Trustees and their successor or successors in such trust, for the benefit of those who shall hold said bonds and interest coupons, or any of them, as follows:


ARTICLE I

DEFINITIONS

Section 1.01.    The terms defined in the next succeeding six Sections hereof, numbered from 1.02 to 1.07, both inclusive, shall (except as herein otherwise expressly provided) for all purposes of this Indenture, and of any indenture supplemental hereto, have the respective meanings in such Sections specified. Any term defined in Section 303 of the Trust Indenture Act of 1939, as amended, and not defined in this Indenture shall have the meaning assigned to such term in such Section 303 as in force on the date of the execution of this Indenture.

The accounting terms used in this Indenture shall be construed in accordance with sound accounting practices.
The acceptance by the Trustee of any document the signer of which is required by some provision hereof to be approved by the Trustee, shall be sufficient evidence of its approval of the signer within the meaning of this Indenture, unless the Trustee shall object in writing within a reasonable time.
Every request or application by the Company for action by the Trustee under any of the provisions of this Indenture shall be accompanied by the Officers’ Certificate and the Opinion of Counsel provided for in Section 19.05 hereof.
Section 1.02.    The term “Adjusted Net Earnings” is defined in Section 1.07 hereof.
The term “affiliate” means a person directly or indirectly controlling, controlled by, or under direct or indirect common control with, another person.
The term “Board of Directors” means either the board of directors of the Company or any duly authorized committee of said board.
The term “City” shall have the meaning specified in the granting clause.
The term “Company” shall mean the party of the first part hereto, New Orleans Public Service Inc., and subject to the provisions of Article XV hereof, shall also include its successors and assigns. For the purposes of (i) clause (2) of subdivision (c) of Section 9.03 hereof, (ii) the second paragraph of Section 12.07 hereof, (iii) the second and third paragraphs of Section 12.14 hereof, (iv) Section 16.11 hereof, (v) Section 16.12 hereof and (vi) paragraph (3) of subdivision (a) of Section 16.13




hereof, the word “Company” shall be deemed to mean and refer to the Company and any other obligor on the bonds secured hereby.
The term “Cost” with respect to Property Additions is defined in Section 1.04 (III) hereof.
The term “Co-Trustee” shall mean Z. George Klodnicki and shall also include his successors and assigns.
The term “Daily Newspaper” shall mean a newspaper of general circulation in the relevant area, printed in the English language and customarily published on each business day, whether or not published on Saturdays, Sundays or holidays. In the event that successive weekly publications in a Daily Newspaper are required hereunder they may be made (unless otherwise expressly provided herein) on the same or different days of the week and in the same or in different Daily Newspapers. In case, by reason of the suspension of publication of any Daily Newspaper, or by reason of any other cause, it shall be impractical without extraordinary expense to make publication of any notice in a Daily Newspaper as required by this Indenture, then such method of publication or notification as shall be made with the approval of the Trustee shall be deemed the equivalent of the required publication of such notice in a Daily Newspaper.
The term “Defaults” is defined in Section 12.01 hereof.
The term “Deferred Grand Gulf I Costs” shall have the meaning specified in the granting clause.
The term “Engineer” shall mean an individual who is an engineer or a co‑partnership or a corporation engaged in an engineering business, who or which, unless required to be independent, may be employed by the Company.
The term “Engineer’s Certificate” shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and by an Engineer (who may be an employee of the Company) appointed by the Board of Directors of the Company; provided, however, if any property or securities are to be released from the lien of this Indenture, the Engineer’s Certificate as to the fair value of such property or securities and as to matters referred to in clause (f) of subdivision (2) of Section 11.03 hereof shall be made by an Independent Engineer, appraiser, or other expert, if the fair value of such property or securities and of all other property or securities released since the commencement of the then current calendar year, as set forth in the certificates required by this Indenture, is ten per centum (10%) or more of the aggregate principal amount of the bonds at the time Outstanding; but such a certificate of an Independent Engineer, appraiser, or other expert shall not be required in the case of any release of property or securities, if the fair value thereof as set forth in the certificates required by this Indenture is less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds at the time Outstanding, as therein defined, under the 1944 Mortgage. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.
The term “Excepted Encumbrances” is defined in Section 1.06 hereof.
The term “Federal Bankruptcy Act” shall mean the Bankruptcy Reform Act of 1978 and any amendments thereto, or any law substituted therefor.




The term “Fuel Transportation Facilities” shall mean railroad cars, barges and other transportation equipment (other than trucks) used or to be used primarily for the transportation of coal, oil, nuclear fuel or other fuel.
The term “Funded Cash” is defined in Section 1.05 hereof.
The term “Funded Property” is defined in Section 1.05 hereof.
The term “Grand Gulf I” shall mean Unit No. 1 of the Grand Gulf Nuclear Electric Generating Station, a 1,250 megawatt electric generating unit located in Claiborne County, Mississippi.
The term “Grand Gulf I Costs” shall mean the Company’s non-fuel costs associated with the Company’s purchase of capacity and energy from Grand Gulf I.
The term “Independent”, when applied to any accountant, Engineer, appraiser or other expert, shall mean such a person who (a) is in fact independent, (b) does not have any direct material financial interest in the Company or in any other obligor upon the bonds or in any affiliate of the Company or of such other obligor and (c) is not connected with the Company or such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions, appointed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and who is approved by the Trustee in the exercise of reasonable care.
The term “Independent Engineer’s Certificate” shall mean a certificate signed by an Independent Engineer. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.
The term “Investment Securities” shall mean any of the following obligations or securities on which neither the Company nor any affiliate of the Company is the obligor: (a) bonds or other obligations of the United States of America; (b) interest bearing deposit accounts (which may be represented by certificates of deposit) in national or state banks (which may include the Trustee) having a combined capital and surplus of not less than Ten Million Dollars ($10,000,000), or savings and loan or homestead or like associations having total assets of not less than Forty Million Dollars ($40,000,000); (c) bankers’ acceptances drawn on and accepted by commercial banks (which may include the Trustee) having a combined capital and surplus of not less than Ten Million Dollars ($10,000,000); (d) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, any State of the United States of America, the District of Columbia or the Commonwealth of Puerto Rico, or any political subdivision of any of the foregoing, which are rated in any of the three highest rating categories by a nationally recognized rating agency; (e) bonds or other obligations of any agency or instrumentality of the United States of America; (f) commercial or finance company paper which is rated in any of the three highest rating categories by a nationally recognized rating agency; (g) corporate debt securities rated in any of the three highest rating categories by a nationally recognized rating agency; and (h) any other obligations or securities which may lawfully be purchased by the Trustee and which are rated in any of the three highest rating categories by a nationally recognized rating agency.
The terms “the Lien hereof”, “the Lien of the Indenture” and “the Lien of this Indenture” shall mean the lien created by these presents (including the after-acquired property clauses hereof) and the lien created by any subsequent conveyance or delivery to or pledge with the Trustee hereunder or otherwise (whether made by the Company or any other corporation or any individual or copartnership) effectively constituting any property a part of the security held by the Trustee upon the terms and trusts and subject to the covenants, conditions and uses specified in this Indenture.




The terms “Mortgage” (being referred to in the general forms of bonds) or “Indenture” shall mean this instrument and all indentures supplemental hereto.
Section 1.03.    The term “the Mortgaged and Pledged Property” shall mean as of any particular time the property (including the Municipalization Interest, securities and other personal property) which at said time is subject or intended to be subject to the Lien of this Indenture whether such Lien be created by these presents (including the after-acquired property clauses hereof) or by subsequent conveyance or delivery to or pledge with the Trustee hereunder or otherwise (whether made by the Company or any other corporation or any individual or copartnership).

The term “Municipalization Interest” shall have the meaning specified in the granting clause.
The term “Net Earning Certificate” is defined in Section 1.07 hereof.
The term “1944 Mortgage” shall mean the Company’s Mortgage and Deed of Trust, dated as of July 1, 1944, as supplemented, to The Chase National Bank of the City of New York, The Chase Manhattan Bank (National Association), successor, and Carl E. Buckley, Joseph A. Payne, successor.
The term “Officers’ Certificate” shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Company. If and to the extent required by the provisions of Section 19.05 hereof, each such certificate shall include the statements provided for in such Section.
The term “Opinion of Counsel” shall mean an opinion in writing signed by counsel (who may be of counsel to the Company) appointed by the Board of Directors of the Company. If and to the extent required by the provisions of Section 19.05 hereof, each such opinion shall include the statements provided for in such Section.
The term “Original Trustee” shall mean Bank of Montreal Trust Company. The term “Original Co-Trustee” shall mean Z. George Klodnicki.
The term “Outstanding”, subject to the provisions of Sections 12.07 and 18.07 hereof, shall mean as of any particular time with respect to bonds issued or issuable under this Indenture all bonds which theretofore shall have been authenticated and delivered by the Trustee under this Indenture, except (a) bonds theretofore paid, retired, redeemed, discharged or cancelled, or bonds for the purchase, payment or redemption of which money in the necessary amount shall have been deposited with or shall then be held by the Trustee with irrevocable direction so to apply the same, provided that, in the case of redemption, the notice required by Article X hereof shall have been given or have been provided for to the satisfaction of the Trustee, (b) bonds deposited with or held in pledge by the Trustee under any of the provisions of this Indenture, including any so held under any sinking or other fund, and (c) bonds authenticated and delivered hereunder, upon transfer of which or in exchange or substitution for and/or in lieu of which other bonds have been authenticated and delivered under any of the provisions of this Indenture.
The term “prior lien” as used herein shall not include the lien of the 1944 Mortgage.
The term “Property Additions” is defined in Section 1.04 hereof.
The term “Rate Agreement” shall have the meaning specified in the granting clause.




The terms “Rate Recovery Mortgage Bonds”, “Rate Recovery General and Refunding Mortgage Bonds” and “Rate Recovery First Mortgage Bonds” shall mean bonds authenticated and delivered under Article IV hereof.
The term “Resolution” shall mean a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors of the Company and to be in full force and effect on the date certified.
The term “Responsible Officers” of the Trustee shall mean and include the chairman or vice chairman of the board of directors of the Trustee, the chairman or vice chairman of the executive committee of said board, the president, any vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, the cashier, any assistant cashier, any trust officer or assistant trust officer, the controller, any assistant controller or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer of the Trustee to whom such matter is referred because of his knowledge of and familiarity with the particular subject; and the term “Responsible Officer” shall mean and include any of said officers.
The term “Retired Bonds” shall mean: (1) any bonds authenticated and delivered under Article V, VI or VII of this Indenture (and not having been made the basis under any of the provisions of this Indenture of the authentication and delivery of bonds, the withdrawal of cash or the release of property, subject to the provisions of Section 11.03 and Section 11.05 hereof permitting the revocation of the waiver of the right to the authentication and delivery of bonds) that shall have been purchased, paid, retired, redeemed or cancelled or surrendered to the Trustee for cancellation or for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or shall then be held by the Trustee with irrevocable direction so to apply the same (provided that any such purchase, payment, retirement, redemption, cancellation or surrender of bonds shall have been, or is to be, effected otherwise than with cash which, after giving effect to the provisions of Sections 1.05 and 11.05 hereof, is then deemed to be or to have been Funded Cash, and, in the case of redemption, the notice required therefor shall have been given or have been provided for to the satisfaction of the Trustee); and (2) any bonds Outstanding, as therein defined, under the 1944 Mortgage on January 1, 1987 (and not having been made the basis under any of the provisions of this Indenture of the authentication and delivery of bonds, or the withdrawal of cash or the release of property under the 1944 Mortgage, subject to the provisions of Sections 59 and 61 thereof permitting the revocation of the waiver of the right to the authentication and delivery of bonds thereunder), which subsequent thereto shall have been paid, retired, redeemed, discharged or cancelled or surrendered to the Trustee under the 1944 Mortgage for cancellation, or for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or shall then be held by the Corporate Trustee under the 1944 Mortgage with irrevocable direction so to apply the same (provided that any such purchase, payment, retirement, redemption, cancellation or surrender of bonds shall have been, or is to be, effected otherwise than with cash which, after giving effect to the provisions of Sections 5 and 61 of the 1944 Mortgage, is then deemed to be or to have been Funded Cash under subdivision (b), (c) or (d) of the definition of Funded Cash), provided that, in the case of redemption, the notice required by Article X of the 1944 Mortgage shall have been given or have been provided for to the satisfaction of the Corporate Trustee under the 1944 Mortgage as evidenced by an Officers’ Certificate. For purposes of any Officers’ Certificate delivered pursuant to Section 6.01(3) hereof, bonds otherwise conforming to the requirements of this definition, which will, concurrently with the authentication and delivery of the bonds as to which said Officers’ Certificate pertains, be surrendered to the Trustee hereunder or to the Corporate Trustee under the 1944 Mortgage, as the case may be, for




cancellation (otherwise than upon exchanges or transfers of bonds), shall be deemed to be “Retired Bonds”.
The term “Space Satellites” shall mean any form of solar power satellites, space satellites, space stations and other analogous facilities whether or not in the Earth’s atmosphere.
The term “Trustee” shall mean Bank of Montreal Trust Company and shall also include its successors and assigns.
The term “Trustees” shall mean the Trustee and the Co-Trustee.
The term “underwriter” is defined in the last paragraph of Section 16.12 hereof.
Section 1.04.    (I) The term “Property Additions” shall mean all property of the following description acquired by the Company after December 31, 1986: all real estate, lands, easements, servitudes, licenses, permits, franchises, privileges, rights of way and other rights in or relating to real estate or the occupancy of the same; all power sites, flowage rights, water rights, water locations, water appropriations, ditches, flumes, reservoirs, reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and all other rights or means for appropriating, conveying, storing and supplying water; all rights of way and roads; all plants for the generation of electricity by steam, water and/or other power, all distribution systems; all service systems; all supply systems; Fuel Transportation Facilities; all power houses, gas plants, Space Satellites, street lighting systems, standards and other equipment incidental thereto; all telephone, radio and television systems, air-conditioning systems and equipment incidental thereto, water wheels, water works, water systems, steam heat and hot water plants, substations, lines, service and supply systems, bridges, culverts, tracks, ice or refrigeration plants and equipment, offices, buildings and other structures and the equipment thereof; all machinery, engines, boilers, dynamos, turbines, electric, gas and other machines, prime movers, regulators, meters, transformers, generators (including, but not limited to, engine driven generator and turbogenerator units), motors, electrical, gas and mechanical appliances, conduits, cables, water, steam heat, gas or other pipes, and pipe lines (including, but not limited to, gas pipe lines for supplying fuel to the Company’s plants), gas mains and pipes, service pipes, fittings, valves and connections, pole and transmission lines, towers, overhead conductors and devices, underground conduits, underground conductors and devices, wires, cables, tools, implements, apparatus, storage battery equipment and all other fixtures and personalty; all municipal and other franchises, consents or permits; all lines for the transmission and distribution of electric current, gas, steam heat or water for any purpose including towers, poles, wires, cables, pipes, conduits, ducts and all apparatus for use in connection therewith; and other property, real or personal, and improvements, extensions, additions, renewals or replacements, acquired by the Company by purchase, consolidation, merger, donation, construction, erection or in any other way whatsoever, or in the process of construction or erection and used or useful or to be used in or in connection with the business of generating, manufacturing, exploring for and developing, producing, transmitting, transporting, distributing, supplying or managing the use of energy or fuel in any form, including, without limitation, electricity or gas for light, heat, power, refrigeration or other purposes or of generating, manufacturing, producing, transmitting, transporting, distributing or supplying water for drinking, power, heat or other purposes or steam or hot water for power, heat or other purposes. The Term “Property Additions” shall not, however, include (1) any shares of stock, bonds, notes or other obligations or other securities or contracts, leases, or operating agreements, bills, notes and other instruments, accounts receivable, general intangibles or choses in action, or (2) except as herein otherwise specifically provided, going value, good will, franchises or governmental permits or




licenses granted to or acquired by the Company, as such, separate and distinct from the property operated thereunder or in connection therewith or incident thereto, or (3) any merchandise, equipment, apparatus, materials or supplies held for the purpose of sale or other disposition in the usual course of business or for the purpose of repairing or replacing (in whole or in part) any rolling stock, buses, motor coaches, automobiles or other vehicles or aircraft, and fuel, oil and similar materials and supplies consumable in the operation of any of the properties of the Company; or rolling stock, buses, motor coaches, automobiles or other vehicles, or any aircraft (other than Fuel Transportation Facilities and Space Satellites), or (4) any natural gas wells or natural gas leases or natural gas transportation lines or other works or property used primarily and principally in the production of natural gas or its transportation, primarily for the purpose of sale to natural gas customers or to a natural gas distribution or pipeline company, up to the point of connection with any distribution system, or timber, minerals, mineral rights and royalties, or (5) any property, the cost of acquiring, making or constructing which is chargeable to operating expenses.
(I) When any Property Additions are certified to the Trustee in any certificate in any application under any of the provisions of this Indenture as the basis either of the authentication and delivery of bonds or of the release of property or the withdrawal of cash (except in the case of the release of property, or the withdrawal of cash representing the proceeds of insurance on or of the release of property or payment of or on account of obligations secured by purchase money mortgages, in each case on the basis of Property Additions acquired or constructed within ninety (90) days prior to the date of the application for such release, or to the receipt by the Trustee of such cash, or subsequent to such application or receipt of cash),
(A) there shall be deducted from the Cost or fair value thereof to the Company, as the case may be (as of the date so certified), an amount equal to the Cost (or as to Property Additions of which the fair value to the Company at the time the same became Funded Property was less than the Cost as determined pursuant to this Section, then such fair value in lieu of Cost) of all Funded Property of the Company retired subsequent to December 31, 1986 (other than the Funded Property, if any, in connection with the application for the release of which such certificate is filed) and not theretofore deducted from the Cost or fair value to the Company of Property Additions theretofore certified to the Trustee, and
(B) there may, at the option of the Company, be added to such Cost or fair value, as the case may be, the sum of
(a) the principal amount of any obligations secured by purchase money mortgages and any cash (other than proceeds of such purchase money obligations), not theretofore so added and which the Company then elects so to add, received by the Trustee or the trustee or other holder of any prior lien, in either case representing the proceeds of insurance on, or of the release or other disposition of, Funded Property retired;
(b) ten-sevenths (10/7ths) of the principal amount of any bond(s) or fraction of a bond, not theretofore so added and which the Company then elects so to add, the right to the authentication and delivery of which under the provisions of Section 5.01 hereof shall have been waived as the basis of the release of Funded Property retired; and
(c) the Cost to the Company of any Property Additions not theretofore so added and which the Company then elects so to add, to the extent that the same shall have been substituted for Funded Property retired;
provided, however, that the aggregate of the amounts added under clause (B) above shall in no event exceed the amounts deducted under clause (A) above and provided further, that neither any reduction in the Cost or book value of property recorded in the plant account of the Company nor the transfer of any amounts appearing in such account to intangible and/or adjustment accounts otherwise than in connection




with actual retirements of physical property abandoned, destroyed, released or disposed of, or retired from plant account, shall be deemed to be Funded Property retired for the purposes of this Section.
(II) The term “Cost” with respect to Property Additions made the basis under any of the provisions of this Indenture of the authentication and delivery of bonds, or the withdrawal of cash or the release of property shall mean the sum of (i) any cash forming a part of such Cost, (ii) an amount equivalent to the fair market value in cash (as of the date of delivery) of any securities delivered in payment therefor or for the acquisition thereof, (iii) the principal amount of any prior lien bonds secured by prior lien upon such Property Additions, outstanding at the time of their acquisition, and (iv) the principal amount of any other indebtedness incurred or assumed as all or part of the Cost to the Company of such Property Additions; provided, however, that, notwithstanding any other provision of this Indenture, in any case where Property Additions shall have been acquired (otherwise than by construction) by the Company without any consideration consisting of cash, property or securities or the incurring or assumption of indebtedness, no determination of Cost shall be required, and wherever in this Indenture provision is made for Cost or fair value, the Cost, in such case, shall mean an amount equal to the fair value thereof.
In case any Property Additions are shown by the Engineer’s Certificate provided for in subdivision (3) of Section 5.05 hereof to include property which has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company, the Cost thereof may include the amount of cash or the value of any portion of the securities paid or delivered for any rights and intangible property simultaneously acquired for which no separate or distinct consideration shall have been paid or apportioned, and in such case the term Property Additions as defined herein may include such rights and intangible property.
For the purposes of the deductions required by this Section, the Cost and/or the fair value to the Company of Funded Property retired shall be determined as follows: in the case of property which was owned by the Company on December 31, 1986, the Cost thereof shall be the Cost as shown on the books of the Company, or if not so separately shown, the Cost as estimated by the Company; and in the case of Property Additions retired, the Cost or the fair value thereof to the Company shall be the Cost or the fair value thereof to the Company as shown by the Engineer’s Certificate or Independent Engineer’s Certificate furnished to the Trustee at the time such Property Additions became Funded Property, or, if not separately shown in such certificate, shall be such portion of the Cost or the fair value to the Company of Property Additions shown in such certificate as shall be allocated to such Property Additions retired in any Engineer’s Certificate subsequently delivered to the Trustee, and in case such Property Additions shall not have been included in any Engineer’s Certificate or Independent Engineer’s Certificate theretofore furnished to the Trustee, the Cost or the fair value thereof to the Company shall be as shown, as of the time when they become Funded Property, in an Engineer’s Certificate then delivered to the Trustee.
Section. 1.05.    The term “Funded Property” shall mean:
(1) all property, except property expressly excepted from the Lien of this Indenture, owned by New Orleans Public Service Inc. on December 31, 1986;
(2) all Property Additions to the extent that the same shall have been made the basis of the authentication and delivery of bonds under this Indenture;
(3) all Property Additions to the extent that the same shall have been made the basis of the release of property from the Lien of this Indenture, subject, however, to the provisions of Section 11.03 hereof;




(4) all Property Additions to the extent that the same shall have been substituted (otherwise than under the release or cash withdrawal provisions hereof) for Funded Property retired;
(5) all Property Additions to the extent that the same shall have been made the basis of the withdrawal of any Funded Cash, as hereinafter defined, held by the Trustee hereunder subject, however, to the provisions of Section 9.05 hereof and clause (a) of Section 11.05 hereof, and except to the extent that any such Property Additions shall no longer be deemed to be Funded Property in accordance with the provisions of clause (b) of Section 11.05 hereof; and
(6) all Property Additions to the extent that the same shall have been made the basis of the release, or substituted for cash made the basis of the release, from the lien of the 1944 Mortgage of property that had been made the basis of the authentication and delivery of bonds thereunder, or that had been substituted for such property.
In the event that in any certificate filed with the Trustee in connection with any of the transactions referred to in clauses (2), (3), (5) and (6) of this Section only a part of the Cost or fair value of the Property Additions described in such certificate shall be required for the purposes of such certificate, then such Property Additions shall be deemed to be Funded Property only to the extent so required for the purpose of such certificate.
All Funded Property that shall be retired on the books of the Company from plant account (but not including Funded Property removed from plant account on the books of the Company as a result of or reflecting action of any regulatory authority having jurisdiction over the rates and services of the Company requiring or mandating a direct or indirect disallowance of plant costs for ratemaking purposes under circumstances in which the Trustee shall have been furnished, within 180 days subsequent to such action of such regulatory authority, a certificate signed by an Independent Engineer, appraiser or other expert complying with the requirements of Section 19.05 hereof and stating the signer’s opinion to the effect that (i) such Funded Property is used or useful or to be used in or in connection with the business of generating, manufacturing, exploring for and developing, producing, transmitting, transporting, distributing, supplying or managing the use of energy or fuel in any form, including, without limitation, electricity or gas for light, heat, power, refrigeration or other purposes or of generating, manufacturing, producing, transmitting, transporting, distributing or supplying water for drinking, power, heat or other purposes or steam or hot water for power, heat or other purposes and (ii) the fair value of such Funded Property to the Company immediately following such action of such regulatory authority is at least equal to the fair value thereof to the Company immediately prior to such action) or abandoned, destroyed, released or otherwise disposed of shall for the purpose of Section 1.04 hereof be deemed Funded Property retired and for other purposes of this Indenture shall thereupon cease to be Funded Property but as in this Indenture provided may at any time thereafter again become Funded Property.
The term “Funded Cash” shall mean:
(a) cash, held by the Trustee hereunder, to the extent that it represents the proceeds of insurance on or the release of or the taking by eminent domain of property or the proceeds of the release of obligations secured by purchase money mortgage which obligations have been delivered to the Trustee pursuant to Article XI hereof and used as a credit in any application for the release of property hereunder, or the proceeds of payment to the Trustee on account of the principal of obligations secured by purchase money mortgage which obligations have been delivered to it pursuant to Article XI hereof and used as a credit in any application for the release of property hereunder; and
(b) any cash deposited with the Trustee under Section 7.01 and/or 9.12 hereof.




Section 1.06.    The term “Excepted Encumbrances” shall mean as of any particular time any of the following:
(c) liens for taxes, assessments or governmental charges not then delinquent and liens for worker’s compensation awards and similar obligations not then delinquent and undetermined liens or charges incidental to construction or repair work, and liens for taxes, assessments or governmental charges then delinquent but the validity of which is being contested at the time by the Company in good faith as provided in Section 9.04 hereof;
(d) any liens securing indebtedness, neither assumed nor guaranteed by the Company nor on which it customarily pays interest, existing upon real estate or rights in or relating to real estate acquired by the Company for substation, transmission line, transportation line, distribution line or right of way purposes;
(e) rights reserved to or vested in any municipality or public authority by the terms of any right, power, franchise, grant, license or permit, or by any provision of law, to terminate such right, power, franchise, grant, license or permit or to purchase or recapture or to designate a purchaser of any of the property of the Company;
(f) rights reserved to or vested in others to take or receive any part of the power, gas, oil or other minerals or timber generated, developed, manufactured or produced by, or grown on, or acquired with, any property of the Company;
(g) easements, restrictions, exceptions or reservations in any property and/or rights of way of the Company for the purpose of roads, pipe lines, distribution lines, removal of coal or other minerals or timber, and other like purposes, or for the joint or common use of real property, rights of way, facilities and/or equipment, and defects, irregularities and deficiencies in titles of any property and/or rights of way, which do not materially impair the use of such property and/or rights of way for the purposes for which such property and/or rights of way are held by the Company;
(h) rights reserved to or vested in any municipality or public authority to control or regulate any property of the Company, or to use such property in a manner which does not materially impair the use of such property for the purposes for which it is held by the Company;
(i) any obligations or duties, affecting the property of the Company, to any municipality or public authority with respect to any franchise, grant, license or permit;
(j) any controls, liens, restrictions, regulations, easements, exceptions or reservations of any governmental authority applying to the property or facilities of the Company;
(k) any controls, liens, restrictions, regulations, easements, exceptions or reservations of any governmental authority applying particularly to Space Satellites; or
(l) the lien of the 1944 Mortgage.
Notwithstanding the foregoing provisions of this Section 1.06, “Excepted Encumbrances” with respect to the Municipalization Interest shall mean as of any particular time only rights reserved to or vested in any municipality or public authority to control or regulate the rates of the Company with respect to the recovery of Deferred Grand Gulf I Costs or to purchase or otherwise acquire (whether directly or through an agency or designee thereof) the electric properties and assets of the Company.
Section 1.07.    The term “Net Earning Certificate” shall mean a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company and an accountant, who unless required to be independent, may be an officer or employee of the Company, stating:
(A) the Adjusted Net Earnings of the Company for a period of twelve (12) consecutive calendar months within the fifteen (15) calendar months immediately preceding the first day of the month in which the application for the authentication and delivery under this Indenture of bonds then applied for is made, specifying:




(1) its operating revenues, which may include revenues collected by the Company subject to possible refund at a future date, with the principal divisions thereof;
(2) its operating expenses, with the principal divisions thereof, including, without limitation, all expenses and accruals for repairs and maintenance and all appropriations out of income for property retirement in respect of all property owned by the Company;
(3) the amount remaining after deducting the amount required to be stated in such certificate by clause (2) of this Section from the amount required to be stated therein by clause (1) of this Section;
(4) its rental revenues (net) not otherwise included in such certificate;
(5) the sum of the amounts required to be stated in such certificate by clauses (3) and (4) of this Section;
(6) its other income or loss (net);
(7) the amount, if any, by which the amount of other income or loss (net) required to be stated in such certificate by clause (6) of this Section exceeds, without regard to whether such net amount constitutes income or loss, ten per centum (10%) of the amount required to be stated in such certificate by clause (5) of this Section;
(8) the amount remaining after reducing the amount required to be stated in such certificate by clause (6) of this Section by the amount required to be stated therein by clause (7) of this Section; and
(9) the Adjusted Net Earnings of the Company for such period of twelve (12) consecutive calendar months (being the sum of the amounts required to be stated in such certificate by clauses (5) and (8) of this Section);
(B) the Annual Interest Requirements, being the interest requirements, if any, for twelve (12) months upon:
(i) all bonds Outstanding hereunder at the date of such certificate, except any for the payment of which the bonds applied for are to be issued; provided that, if any such series of Outstanding bonds bears interest at a variable rate, then the interest on such series of bonds shall be computed at the average annual rate in effect for such series during the period of twelve (12) consecutive calendar months (or any portion thereof in which bonds of such series are Outstanding) being used for the calculation of Adjusted Net Earnings; and if such Outstanding bonds have been issued after the end of such twelve (12) consecutive calendar months, then computed at the initial rate upon issuance;
(ii) all bonds then applied for in pending applications, including the application in connection with which such certificate is made, computed at the initial rate upon issuance;
(iii) all bonds Outstanding, as therein defined, under the 1944 Mortgage and the principal amount of all other indebtedness (except indebtedness for the payment of which the bonds applied for are to be issued and indebtedness for the purchase, payment or redemption of which moneys in the necessary amount shall have been deposited with or be held by the Trustee or the trustee or other holder of a lien prior to the Lien of this Indenture upon property subject to the Lien of this Indenture with irrevocable direction so to apply the same; provided that, in the case of redemption, the notice required therefor shall have been given or have been provided for to the satisfaction of the Trustee), outstanding in the hands of the public on the date of such certificate and secured by lien prior to the Lien of this Indenture upon property subject to the Lien of this Indenture, if said indebtedness has been assumed by the Company or if the Company customarily pays the interest upon the principal thereof.




In calculating such Adjusted Net Earnings, all the Company’s expenses for taxes (other than income, profits and other taxes measured by, or dependent on, net income), assessments, rentals and insurance shall be included in its operating expenses, or otherwise deducted from its revenues and income; provided, however, that no expenses or provisions for interest on any of its indebtedness or for the amortization of debt discount, premium and expense, or loss on reacquired debt, amortization of property (other than depreciation or other similar provisions for property retirement), or for other amortization, or for any other extraordinary charge to income of whatever kind or nature, or for refunds of revenues previously collected by the Company subject to possible refund, or for any improvement or sinking fund or other device for the retirement of any indebtedness, shall be required to be included in operating expenses to be deducted from, or shall be otherwise required to be deducted from, its revenues or its other income and no extraordinary items of any kind or nature shall be included in calculating such Adjusted Net Earnings.
If any of the property of the Company owned by it at the time of the making of any Net Earning Certificate shall have been acquired during or after any period for which Adjusted Net Earnings of the Company are to be computed, the Adjusted Net Earnings of such property (computed in the manner in this Section provided for the computation of the Adjusted Net Earnings of the Company) during such period or such part of such period as shall have preceded the acquisition thereof, to the extent that the same have not otherwise been included and unless such property shall have been acquired in exchange or substitution for property the earnings of which have been included, may, at the option of the Company, be included in the Adjusted Net Earnings of the Company for all purposes of this Indenture, and shall be included if such property has been operated as a separate unit or if the earnings therefrom are readily ascertainable.
In any case where a Net Earning Certificate is required as a condition precedent to the authentication and delivery of bonds, such certificate shall also be made and signed by an independent public accountant, if the aggregate principal amount of bonds then applied for plus the aggregate principal amount of bonds authenticated and delivered hereunder since the commencement of the then current calendar year (other than those with respect to which a Net Earning Certificate is not required, or with respect to which a Net Earning Certificate made and signed by an independent public accountant has previously been furnished to the Trustee) is ten per centum (10%) or more of the sum of (a) the aggregate principal amount of the bonds at the time Outstanding hereunder and (b) the aggregate principal amount of the bonds at the time Outstanding, as therein defined, under the 1944 Mortgage; but no Net Earning Certificate need be made and signed by any person other than the Chairman of the Board, Chief Executive Officer, President or a Vice President and an accountant, as to dates or periods not covered by annual reports required to be filed by the Company, in the case of conditions precedent which depend upon a state of facts as of a date or dates or for a period or periods different from that required to be covered by such annual reports.
Each such certificate shall include the statements required by Section 19.05 hereof.
The phrase “appropriations out of income for property retirement”, and other phrases of similar import shall be deemed to include not only charges made upon a retirement accounting theory but also charges made on any depreciation or other accounting theory intended to provide for retirement of property.
Unless otherwise specifically provided with respect to a series of bonds, if interest on any bonds Outstanding hereunder is payable solely in the coin or currency of a foreign nation, then the Annual Interest Requirements for such bonds shall be based upon the estimated value (on a date within 10 days prior to the date of the application for the authentication and delivery under this Indenture of bonds in




connection with which such Net Earning Certificate is delivered) of such foreign coin or currency in The City of New York, New York in the written opinion of an independent appraiser or other expert delivered to the Trustee.


ARTICLE II

FORMS, EXECUTION, REGISTRATION AND EXCHANGE OF BONDS

Section 2.01.    So long as any of the bonds issued under the 1944 Mortgage are outstanding, bonds issued hereunder (other than bonds issued pursuant to Article IV hereof) shall be known as “General and Refunding Mortgage Bonds” and thereafter may be entitled “First Mortgage Bonds” upon the discharge of the lien of the 1944 Mortgage. Upon such discharge, holders of General and Refunding Mortgage Bonds shall have the right to exchange their bonds for bonds entitled First Mortgage Bonds. Bonds issued pursuant to Article IV hereof shall be known as “Rate Recovery General and Refunding Mortgage Bonds”, and upon the discharge of the lien of the 1944 Mortgage may thereafter be entitled “Rate Recovery First Mortgage Bonds.” At the option of the Company, the bonds issued hereunder may be issued in one or more series, the bonds of each series maturing on such date or dates and bearing interest at such rate or rates as the Board of Directors of the Company prior to the authentication thereof may determine. The form of each series of bonds issued hereunder and of the coupons to be attached to the coupon bonds of such series shall be established by Resolution of the Board of Directors of the Company. The bonds and coupons of any one or more series may be expressed in one or more foreign languages, if also expressed in the English language. The English text shall govern the construction thereof and both or all texts shall constitute but a single obligation. The English text of the coupon bonds, coupons, fully registered bonds and the Trustee’s authentication certificate shall be respectively of substantially the tenor and purport hereinbefore recited; provided, however, that the form of each series, as established by the Board of Directors, shall specify the descriptive title of the bonds (which, as to bonds authenticated and delivered pursuant to Article V, VI or VII hereof, may contain the words “General and Refunding Mortgage Bond” or when bonds are no longer Outstanding, as therein defined, under the 1944 Mortgage, may contain the words, “First Mortgage Bond”, and, as to bonds authenticated and delivered pursuant to Article IV hereof, shall contain the words “Rate Recovery” and may contain the words “General and Refunding Mortgage Bond” or when bonds are no longer Outstanding, as therein defined, under the 1944 Mortgage, may contain the words “First Mortgage Bond”), the designation of the series, the date of the coupon bonds of that series, the rate or rates of interest to be borne by the bonds of that series, the coin or currency in which payable (which need not be coin or currency of the United States of America), the date or dates of maturity, the dates for the payment of interest, and a place or places for the payment of principal and interest. Any series of bonds to the extent issued in registered form may have provisions providing for record dates for the payment of interest. Any series of bonds may also have such omissions or modifications or contain such other provisions not prohibited by the provisions of this Indenture as the Board of Directors may, in its discretion, cause to be inserted therein, including, but not limited to, the following:
(a) specifying any additional place or places, either in the United States of America or elsewhere, for the payment of principal and/or interest and/or a place or places for the registration of bonds and/or the transfer of bonds;
(b) expressing any obligation of the Company for the payment of the principal of the bonds of that series or the interest thereon, or both, without deduction for taxes and/or for the reimbursement of taxes in case of payment by the bondholders, it being agreed that such obligation may be limited to taxes imposed by any taxing authorities of a specified class and may exclude




from its operation or be limited to any specified tax or taxes or any portion thereof; and/or expressing any obligation of the Company for the creation of a sinking fund or other analogous device for the bonds of that series, and/or expressing an obligation of the Company for the redemption, purchase or other acquisition of the bonds of that series at the election of bondholders upon the occurrence of specified events, and/or expressing any obligation of the Company to permit the conversion of bonds of that series into capital stock of the Company or of any other corporation of any designated class or classes;
(c) permitting the bondholders to make, at a specified place or places, any or all of the following exchanges, viz., exchanges of coupon bonds for fully registered bonds; exchanges of fully registered bonds for coupon bonds; exchanges of coupon bonds for coupon bonds of other authorized denominations; exchanges of fully registered bonds for fully registered bonds of other authorized denominations; exchanges of bonds of one series for bonds of another series; exchanges of bonds containing the words “General and Refunding Mortgage” for bonds containing the words “First Mortgage” when bonds are no longer Outstanding, as therein defined, under the 1944 Mortgage; and exchanges of bonds of one series for bonds of a successor to the Company, whether by merger, consolidation or sale or other disposition of all or substantially all the assets of the Company; and such privilege of exchange may in any case be made subject to such conditions, limitations or restrictions as the Board of Directors may determine and the privilege of exchange may in any case be conferred upon the holders of bonds of one or more denominations and withheld from the holders of bonds of other denominations of the same series and may in any case be conferred on the holders of fully registered bonds and withheld from the holders of coupon bonds or vice versa;
(d) reserving to the Company the right to redeem all or any part of the bonds of that series before maturity at a time or times and at a redemption price or prices to be specified in the form of bond;
(e) reserving to the Company the right to create fully registered bonds that may be registered as to the payment of principal to one holder and to the payment of interest to another holder;
(f) complying with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or conforming to usage;
(g) expressing an obligation of the Company to make payments of principal, premium (if any) and interest on the bonds of that series by wire or other electronic transfer of funds to or for the order of the holder or holders thereof; and/or
(h) in any other respect expressing or referring to the terms and conditions upon which such bonds are to be issued and/or secured under this Indenture.
Section 2.02.    Any series of bonds may be executed, authenticated and delivered originally as coupon bonds and/or as fully registered bonds, of such denomination or denominations as the Board of Directors of the Company may from time to time authorize.

Section 2.03.    Unless otherwise specifically provided with respect to a series of bonds, fully registered bonds shall be dated as of the date of authentication. Unless other provisions (including, but not limited to, provisions establishing record dates for the payment of interest) are specifically provided with respect to a series of bonds, fully registered bonds shall bear interest from the beginning of the current interest period for that series; provided, however, that if any fully registered bond shall be authenticated and delivered upon a transfer of, or in exchange for or in lieu of, any bond or bonds upon which interest is in default, it shall be dated so that such bond shall bear interest from the last preceding date to which interest shall have been paid on the bond or bonds in respect of which such fully registered bond shall have been delivered, unless otherwise specifically provided with respect to a series of bonds. The coupon bonds of




each series of bonds issued hereunder shall be dated as of such date as may be determined by the Board of Directors of the Company and designated in the form established for such series.

Section 2.04.    Any bond may have imprinted thereon or included therein any legend or legends required in order to comply with any law or with any rules or regulations made pursuant thereto or with the rules or regulations of any stock exchange or to conform to usage, and the Board of Directors of the Company by Resolution may at any time amend the form of any legend to be used on bonds then Outstanding so as to comply with any such law, rule or regulation, or so as to conform to usage.

Section 2.05.    Unless otherwise specifically provided with respect to a series of bonds, in all cases in which the privilege of exchanging bonds exists and is exercised, the bonds to be exchanged shall be surrendered at such place or places as shall be designated by the Board of Directors of the Company for the purpose, with all unmatured coupons appertaining thereto (in the case of coupon bonds) and the Trustee shall authenticate and the Company shall deliver in exchange therefor the bond or bonds which the bondholder making the exchange shall be entitled to receive, having attached thereto, in the case of coupon bonds, all unmatured coupons appertaining thereto. In case at the time of any such exchange, interest on the bonds of such series is in default, all coupon bonds of such series surrendered for exchange and delivered in exchange shall have attached thereto all matured coupons in default unless such coupons have heretofore been previously surrendered. All bonds so surrendered for exchange shall be in bearer form, or if registered, accompanied by a written instrument or instruments of transfer wherever required by the Company duly executed by the registered owner or his duly authorized attorney. All bonds so surrendered for exchange and the coupons appertaining thereto shall be cancelled by the Trustee. Upon any transfer of bonds as permitted by the next succeeding Section, and upon any exchange of bonds, the Company may make a charge therefor sufficient to reimburse it for any tax or taxes or other governmental charge and in addition may charge a sum not exceeding a sum, if any, provided as a term of such series of bonds for each bond authenticated and delivered upon any such transfer or exchange, which sum shall be paid by the party requesting such transfer or exchange as a condition precedent to the exercise of the privilege of making such transfer or exchange. The Company shall not be required to make transfers or exchanges of bonds of any series for a period of fifteen (15) days next preceding any interest payment date of said series (unless such series has a record date for the payment of interest), or next preceding any designation of bonds of said series to be redeemed. The Company shall not be required to make transfers or exchanges of any bonds designated in whole or in part for redemption.

Section 2.06.    The Company shall keep, at such place or places as shall be designated for the purpose, books for the registration and transfer of bonds issued hereunder, which, at all reasonable times, shall be open for inspection by the Trustee; and upon presentation for such purpose at any such place or places, the Company will register or cause to be registered therein, and permit to be transferred thereon, under such reasonable regulations as it may prescribe, any bonds issued under this Indenture and entitled to registration or transfer at such office. Upon the registration of any coupon bond as to principal, the fact of such registration shall be noted on such bond. Upon the transfer of any registered bond, the Trustee shall authenticate and the Company shall issue in the name of the transferee or transferees a new registered bond or new registered bonds of the same series for a like principal amount. All registered bonds so surrendered for transfer shall be cancelled by the Trustee.

Section 2.07.    All bonds authenticated and delivered hereunder shall, from time to time, be executed on behalf of the Company by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents, whose signature may be facsimile, and its corporate seal shall be thereon impressed or imprinted and attested by its Secretary or one of its Assistant Secretaries, whose signature may be facsimile. The coupons to be attached to coupon bonds shall bear the facsimile signature of the Treasurer




or any Assistant Treasurer of the Company. In case any of the officers who shall have signed any bonds or attested the seal thereon, or whose facsimile signature appears on any coupon, shall cease to be such officer of the Company before the bonds so signed and/or sealed shall have been actually authenticated and delivered by the Trustee or issued by the Company, such bonds nevertheless may be authenticated, delivered and/or issued with the same force and effect as though the person or persons who signed such bonds and/or attested the seal thereon and/or whose facsimile signature appears on any coupon had not ceased to be such officer or officers of the Company. Before authenticating any coupon bonds, the Trustee shall cut off and cancel all matured coupons thereto attached (except as otherwise provided or permitted in Sections 2.05 and 2.09 hereof).

Section 2.08.    There may be authenticated and delivered and issued from time to time in lieu of (or in exchange for) any definitive bond or bonds issued or issuable under this Indenture one or more temporary bonds substantially of the tenor of the bonds hereinbefore described, with or without one or more coupons, and with or without the privilege of registration as to principal only, or as to both principal and interest, and such temporary bond or bonds may be in such denomination or denominations as the Board of Directors of the Company may determine. Until a definitive bond or bonds secured hereby are delivered in exchange therefor, each such temporary bond or bonds shall be entitled to the Lien and benefit of this Indenture. Upon the exchange by the Company of definitive coupon bonds or definitive fully registered bonds for temporary bonds (which exchange the Company shall make on request of, and without charge to, the holder, when definitive bonds are ready for delivery) such temporary bond or bonds and any unmatured coupons appertaining thereto shall be cancelled by the Trustee. When and as interest is paid upon any unregistered temporary bond without coupons, the fact of such payment shall be noted thereon and interest due on any temporary bond which is represented by a coupon shall be paid only upon presentation and surrender of such coupon for cancellation. Unregistered temporary bonds without coupons of any series shall bear interest from the beginning of the current interest period for bonds of that series in which such unregistered temporary bonds without coupons shall be authenticated. The holder of one or more temporary bonds may exchange the same on the surrender thereof, for cancellation, in bearer form with all unmatured coupons, if any, appertaining thereto, or, if registered, accompanied by a written instrument or instruments of transfer, wherever required by the Company, duly executed by the registered owner or by his duly authorized attorney, at the office or agency of the Company, and shall be entitled to receive a temporary bond or bonds of the same series of like aggregate principal amount of such other denominations as the Board of Directors of the Company may determine to issue in exchange.

Section 2.09.    Upon receipt by the Company and the Trustee of evidence satisfactory to them of the theft, loss, destruction or mutilation of any bond Outstanding hereunder and/or the coupons appertaining thereto, and of indemnity satisfactory to them, and upon payment, if the Company or the Trustee shall require it, of a reasonable charge and upon reimbursement to the Company and the Trustee of all reasonable expense incident thereto, and upon surrender and cancellation of such bond, if mutilated, and the coupons appertaining thereto, if any, the Company may execute, and the Trustee shall thereupon authenticate and deliver, a new bond of like tenor and of the same series with all unpaid coupons, if any, appertaining thereto in lieu of such stolen, lost, destroyed or mutilated bond and coupons, if any, or if any such bond or any coupon shall have matured or be about to mature, instead of issuing a substituted bond or coupon the Company may pay the same without surrender thereof. Any indemnity bond shall name as obligees the Company, the Trustee, and if requested by the Company, any paying agent.

Section 2.10.    No bond shall be secured hereby unless there shall be endorsed thereon the certificate of the Trustee, substantially in the form hereinbefore recited, that it is one of the bonds (or temporary bonds) of the series therein designated, herein described or provided for; and such certificate on any such bond




shall be conclusive evidence that such bond has been duly authenticated and delivered by the Trustee and when delivered by the Company will be secured hereby.

Section 2.11.    The Company may provide for the payment of principal of and/or interest on bonds of any series at one or more places in foreign countries, and/or in the coin or currency of any foreign nation.


ARTICLE III

GENERAL PROVISIONS AS TO ISSUE OF BONDS

Section 3.01.    The issue of bonds secured hereby is limited to Ten Billion Dollars ($10,000,000,000) in aggregate principal amount at any one time Outstanding; provided, however, that the foregoing limitation shall not be construed to prevent the making of further agreements by indenture or indentures supplemental hereto, pursuant to the provisions of Section 19.13 hereof, so that the aggregate principal amount of bonds at any one time Outstanding which may be secured by this Indenture as amended, after the making and recording of any such supplemental indenture, shall be decreased to the amount specified in the last such supplemental indenture.
Whenever under any of the provisions of this Indenture the Company is entitled to make the waiver of the right to the authentication and delivery of bonds the basis of the withdrawal of cash or the release of property at the basis of any credit under this Indenture, such right to the authentication and delivery of bonds shall be determined as though the aggregate principal amount of bonds at any one time Outstanding were not limited by the foregoing provisions of this Section; and the waiver of the right to the authentication and delivery of bonds may, in accordance with the respective provisions of this Indenture, be made the basis of any such withdrawal, release or other credit notwithstanding the fact that at the time bonds shall be Outstanding hereunder to the full aggregate principal amount at the time permitted under the foregoing provisions of this Section.
Section 3.02.    Nothing in this Indenture contained shall limit the power of the Board of Directors of the Company (in conformity with applicable law) to fix the price at which the bonds authenticated and delivered under any of the provisions of this Indenture may be issued, exchanged, sold or disposed of, but any or all of said bonds may be issued, exchanged, sold or disposed of upon such terms and for such consideration as the Board of Directors of the Company may deem fit.



ARTICLE IV

ISSUANCE OF RATE RECOVERY MORTGAGE BONDS

Section 4.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver under this Section 4.01 bonds of one or more series constituting Rate Recovery Mortgage Bonds, with a maturity not later than May 1, 1998, registered as to principal and in an aggregate principal amount not exceeding Two Hundred Eighty Million Dollars ($280,000,000), but only after the Trustee shall have received the following:
(1) the Resolution provided for in subdivision (1) of Section 5.05 hereof;
(2) the Officers’ Certificate provided for in subdivision (2) of Section 5.05 hereof;




(3) an Officers’ Certificate stating that (a) the bonds then applied for are to be authenticated and delivered under this Section 4.01 and are to constitute Rate Recovery Mortgage. Bonds, (b) the aggregate principal amount of all Outstanding bonds authenticated and delivered under this Section 4.01, including the bonds then applied for, will not exceed fifty per centum (50%) of the uncollected balance of the Deferred Grand Gulf I Costs as of the end of the most recent month preceding the authentication and delivery of bonds being applied for as to which financial statements of the Company are available and in any event as of a date not more than fifty-one (51) days prior to the date of such authentication and delivery, (c) the uncollected balance of Deferred Grand Gulf I Costs referred to in clause (b) above is either (i) properly recorded as an asset on the books of the Company in accordance with generally accepted accounting principles and practices in use at the time by companies operating like properties, or (ii) if not so recorded in accordance with such generally accepted accounting principles and practices, is nevertheless recorded as an asset on the books of the Company reflecting the terms of a rate order or authorization then in effect, issued or granted by a regulatory authority having jurisdiction over the retail rates and services of the Company, providing for the recovery of such Deferred Grand Gulf I Costs (in which case, such Officers’ Certificate shall be accompanied by a certificate made and signed by an independent public accountant to such effect), and (d) the Company will apply the net proceeds to be received from the issuance of the bonds then so applied for to finance (or refinance, including by way of reimbursement for expenditures previously made) its Deferred Grand Gulf I Costs;
(4) a Net Earning Certificate showing the Adjusted Net Earnings of the Company to be as required by Section 5.04 hereof;
(5) an Opinion of Counsel as provided for in subdivision (8) of Section 5.05 hereof; and
(6) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in Subdivision (5) of this Section.



ARTICLE V

ISSUANCE OF BONDS UPON THE BASIS OF PROPERTY ADDITIONS

Section 5.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds hereunder of one or more series upon the basis of Property Additions, but only in accordance with and subject to the conditions, provisions and limitations set forth in this Article V.

Section 5.02.    No bonds shall be authenticated and delivered at any time under the provisions of this Article V upon the basis of Funded Property.

Section 5.03.    Bonds of any one or more series may be authenticated and delivered under the provisions of this Article V upon the basis of Property Additions for a principal amount not exceeding seventy per centum (70%) of the balance of the Cost or of the fair value thereof to the Company (whichever shall be less) after making any deductions and any additions pursuant to Section 1.04 hereof.

Section 5.04.    No bonds shall be authenticated and delivered upon the basis of Property Additions or pursuant to Section 4.01 hereof, unless, as shown by a Net Earning Certificate, the Adjusted Net Earnings




of the Company for the period therein referred to shall have been in the aggregate at least equivalent to twice the Annual Interest Requirements as shall be specified, pursuant to the provisions of subdivision (B) of Section 1.07 hereof, in such Net Earning Certificate.

Section 5.05.    No bonds shall be authenticated or delivered hereunder by the Trustee upon the basis of Property Additions until the Trustee shall have received the following:
(7) a Resolution requesting the Trustee to authenticate and deliver bonds, (a) specifying the principal amount of bonds called for, the series thereof and any other matters with respect thereto required by this Indenture, and (b) specifying the officer or officers of the Company to whom, or upon whose written order, such bonds shall be delivered;
(8) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and stating that (a) to the knowledge of the signers none of the events which itself or with a lapse of time or the giving of notice or both would constitute a Default hereunder has occurred and is continuing and (b) the aggregate principal amount of all Outstanding bonds authenticated and delivered under Section 4.01 hereof will not exceed sixty-six and two-thirds per centum (66-2/3%) of the uncollected balance of the Deferred Grand Gulf I Costs recorded as assets on the books of the Company in accordance with the standards set forth in clause (c)(i) or clause (c)(ii) of Subdivision (3) of Section 4.01 (such Officers’ Certificate, in the case of the recording of such Deferred Grand Gulf I Costs in accordance with the standards set forth in such clause (c)(ii), to be accompanied by the certificate of an independent public accountant required thereby) as of the end of the most recent month preceding the authentication and delivery of bonds being applied for as to which financial statements of the Company are available and in any event as of a date not more than fifty-one (51) days prior to the date of such authentication and delivery;
(9) an Engineer’s Certificate made and dated not more than ninety (90) days prior to the date of such application:
(a) describing in reasonable detail the Property Additions made the basis of the application;
(b) stating that all the Property Additions made the basis of the application are Property Additions as defined in Section 1.04 hereof;
(c) stating that such Property Additions are desirable for use in the proper conduct of the business of the Company;
(d) stating that such Property Additions, to the extent of the Cost or fair value thereof (whichever is less) to the Company made the basis of the application, do not consist of Funded Property;
(e) stating, except as to Property Additions acquired, made or constructed wholly through the delivery of securities, that the amount of cash forming all or part of the Cost thereof was equal to or more than an amount to be stated therein;
(f) briefly describing, with respect to any Property Additions acquired, made or constructed in whole or in part through the delivery of securities, the securities so delivered and stating the date of such delivery;
(g) stating what part, if any, of such Property Additions includes property which within six months prior to the date of acquisition thereof by the Company has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and showing whether or not the fair value thereof to the Company is less than Twenty-five Thousand Dollars ($25,000) and whether or not the fair value thereof to the Company is less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds Outstanding, as therein defined, under the 1944 Mortgage;




(h) stating, except as to Property Additions in respect to the fair value to the Company of which a statement is to be made in an Independent Engineer’s Certificate as provided for in subdivision (4) of this Section, that the fair value to the Company as of the date of such certificate of such Property Additions is a specified amount;
(i) stating the amount required to be deducted under the provisions of subdivision (A) of Section 1.04 hereof and the amount elected to be added under the provisions of clauses (a), (b) and (c) of subdivision (B) of Section 1.04 hereof in respect of Funded Property retired of the Company; and
(j) stating that the easements, restrictions, exceptions, reservations or rights, if any, of the character mentioned in clauses (e) and (f) of Section 1.06 hereof, to which any property or rights of way included in such Property Additions are subject, and the defects, irregularities and deficiencies in titles of the character mentioned in said clauses of any property or rights of way included in such Property Additions do not materially impair the use of such property or rights of way for the purposes for which the same are held by the Company;
4. In case any Property Additions are shown by the Engineer’s Certificate provided for in subdivision (3) above to include property which within six months prior to the date of acquisition thereof by the Company has been used or operated by others than the Company in a business similar to that in which it has been or is to be used or operated by the Company and such certificate does not show the fair value thereof to the Company, as of the date of such certificate, to be less than Twenty-five Thousand Dollars ($25,000) or less than one per centum (1%) of the aggregate of (x) the principal amount of the bonds at the time Outstanding hereunder and (y) the principal amount of the bonds Outstanding, as therein defined, under the 1944 Mortgage, a further certificate consisting of an Independent Engineer’s Certificate stating as to such Property Additions which have been so used or operated and (at the option of the Company) as to any other Property Additions included in the Engineer’s Certificate provided for in subdivision (3) of this Section that the then aggregate fair value thereof to the Company, as of the date of such Independent Engineer’s Certificate, in the opinion of the signer is a specified amount; and in the case of the authentication and delivery of bonds, the fair value to the Company in the opinion of the signer of any property so used or operated which has been subjected to the Lien of this Indenture since the commencement of the then current calendar year as the basis for the authentication and delivery of bonds, and as to which an Independent Engineer’s Certificate has not previously been furnished to the Trustee;
5. In case any Property Additions are shown by the Engineer’s Certificate provided for in subdivision (3) above to have been acquired, made or constructed in whole or in part through the delivery of securities, a written appraisal of an engineer, appraiser or other expert person, firm or corporation, stating in the opinion of the signer the fair market value in cash of such securities at the time of delivery thereof in payment for or for the acquisition of such Property Additions;
6. A Net Earning Certificate showing the Adjusted Net Earnings of the Company to be as required by Section 5.04 hereof;
7. an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating the signer’s opinion to the effect that:
(k) (except as to paving, grading and other improvements to, under or upon public highways, bridges, parks or other public property of analogous character) this Indenture is, or upon the delivery of, and/or the filing and/or recording in the proper places and manner of, the instruments of conveyance, assignment or transfer, if any, specified in said opinion, will be, a lien on all the Property Additions made the basis of such application, subject to no lien thereon prior or equal to the Lien of this Indenture except Excepted Encumbrances, and that the Company has the right to remove any such Property




Additions which are located on any leasehold or which are on property as to which the Company has an easement, prior to or upon the termination of such leasehold or easement, without compensation or other remuneration and free of any lien prior or equal to the Lien of this Indenture, except Excepted Encumbrances; and
(l) the Company has corporate authority to operate the Property Additions in respect to which such application is made; and
(1) an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating the signer’s opinion to the effect that:
(m) the issue of the bonds has been duly authorized by the Company;
(n) the issue of the bonds has been duly authorized by any and all governmental authorities the consent of which is requisite to the legal issue of such bonds, specifying any officially authenticated certificates, or other documents, by which such consent is or may be evidenced, or that no consent of any governmental authorities is requisite;
(o) the Company has sold or contracted to sell or to issue for value such bonds, or contracted to pledge such bonds to secure other indebtedness of a principal amount not less than seventy-five per centum (75%) of the principal amount of such bonds; and
(p) the requirements of any tax law applicable to the issuance of the bonds have been complied with;
9. copies of the instruments of conveyance, assignment and transfer, if any, specified in the Opinion of Counsel provided for in subdivision (7) above; and
10. copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in subdivision (8) above.
If, in order to render the Opinion of Counsel provided for in subdivision (7) or subdivision (8) above, the signer thereof shall deem it necessary that additional facts or matters be stated in the Engineer’s Certificate provided for in subdivision (3) above, then in such event the Engineer’s Certificate may state all such additional facts or matters as the signer of such Opinion of Counsel may request.
The amount of the Cost of any Property Additions and the fair value thereof to the Company and the fair market value in cash of any securities so delivered in payment therefor or for the acquisition thereof and the amount of any deductions and any additions made pursuant to Section 1.04 hereof shall be determined for the purposes of this Article V by the appropriate certificate provided for in this Section.


ARTICLE VI

ISSUANCE OF BONDS UPON RETIREMENT OF CERTAIN
BONDS PREVIOUSLY OUTSTANDING HEREUNDER OR
UNDER THE 1944 MORTGAGE

Section 6.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds hereunder of one or more series of a principal amount equal to and on the basis of the principal amount of any Retired Bonds, but only after the Trustee shall have received the following:
(1) the Resolution provided for in subdivision (1) of Section 5.05 hereof;
(2) the Officers’ Certificate provided for in subdivision (2) of Section 5.05 hereof;




(3) an Officers’ Certificate stating that specific Retired Bonds (in principal amount not less than the principal amount of bonds in respect of which such written order or orders for authentication and delivery is or are made under this Section) have theretofore been sold or issued for value or pledged to secure indebtedness of a principal amount not less than seventy-five per centum (75%) of the principal amount of such Retired Bonds and are the basis for such written order or orders;
(4) the Opinion of Counsel provided for in subdivision (8) of Section 5.05 hereof; and
(5) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in subdivision (4) of this Section.
In case (i) an application for the authentication and delivery of bonds under any of the provisions of this Indenture, which shall have contained a Net Earning Certificate, shall have been made to the Trustee subsequent to the delivery to the Trustee hereunder or the Corporate Trustee under the 1944 Mortgage of an irrevocable direction to apply moneys to any such purchase, payment, retirement and/or redemption of, or subsequent to the cancellation or surrender for cancellation of, any bonds previously authenticated and delivered under this Indenture or the 1944 Mortgage on the basis of which other bonds are to be authenticated and delivered pursuant to the provisions of this Article VI, and in such Net Earning Certificate the annual interest requirements on any such bonds to be authenticated and delivered shall not have been included, or (ii) the Retired Bonds on the basis of which other bonds are to be so authenticated and delivered mature by their terms at a date more than one year after the date of authentication and delivery of the bonds applied for and bear a lower interest rate than the bonds applied for, or (iii) the Retired Bonds on the basis of which other bonds are to be so authenticated and delivered were retired pursuant to the provisions of Section 39 of the 1944 Mortgage or pursuant to any sinking or improvement fund provision set forth in the 1944 Mortgage, then the Trustee shall in such a case also receive a Net Earning Certificate showing the Adjusted Net Earnings to be as required by Section 5.04 hereof. For purposes of clause (ii) of the immediately preceding sentence, in the event Retired Bonds on the basis of which other bonds are to be authenticated and delivered bear (or, as to such Retired Bonds no longer Outstanding hereunder, bore) interest at a variable rate, then the interest rate on such Retired Bonds shall be deemed to be the annual interest rate thereon in effect immediately prior to the retirement thereof.
Any and all coupon bonds delivered to the Trustee pursuant to this Article shall have attached thereto all unmatured coupons appertaining thereto.

ARTICLE VII

ISSUANCE OF BONDS UPON DEPOSIT OF CASH WITH TRUSTEE

Section 7.01.    The Trustee shall, from time to time, upon the written order or orders of the Company signed by its Chairman of the Board, Chief Executive Officer, President or a Vice President and its Secretary or an Assistant Secretary or its Treasurer or an Assistant Treasurer, authenticate and deliver bonds hereunder of one or more series upon deposit with the Trustee by the Company of cash equal to the aggregate principal amount of the bonds so requested to be authenticated and delivered but only after the Trustee shall have received:
(6) the Resolution provided for in subdivision (1) of Section 5.05 hereof;
(7) the Officers’ Certificate provided for in subdivision (2) of Section 5.05 hereof;
(8) a Net Earning Certificate showing the Adjusted Net Earnings of the Company to be as required by Section 5.04 hereof;




(9) the Opinion of Counsel provided for in subdivision (8) of Section 5.05 hereof; and
(10) copies of the certificates, or other documents, if any, specified in the Opinion of Counsel provided for in subdivision (4) of this Section.

Section 7.02.    All cash deposited with the Trustee under the provisions of the next preceding Section hereof shall be held by the Trustee as a part of the Mortgaged and Pledged Property, and may be withdrawn from time to time by the Company, upon application of the Company to the Trustee evidenced by a Resolution, in an amount equal to the principal amount of each bond or fraction of a bond to the authentication and delivery of which the Company shall be entitled under Article V or VI of this Indenture by virtue of compliance with all applicable provisions of this Indenture (except as hereinafter in this Section otherwise provided).

Upon any such application for withdrawal the Company shall comply with all applicable provisions of this Indenture relating to the authentication and delivery of such bond(s) or fraction of a bond except that the Company shall not be required to comply with any earning requirement or to deliver to the Trustee any Resolution, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (6) and (8) of Section 5.05 hereof.
Any withdrawal of cash under this Section shall operate as a waiver by the Company of its right to the authentication and delivery of the bond(s) or fraction of a bond on which it is based and such bond(s) or fraction of a bond may not thereafter be authenticated and delivered hereunder, and any Property Additions which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall have the status of Funded Property and shall be deemed to have been made the basis of the withdrawal of such cash, and any bonds which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall be deemed to have been made the basis of the withdrawal of such cash.
Section 7.03.    If at any time the Company shall so direct, any sums deposited with the Trustee under the provisions of Section 7.01 hereof may be used or applied to the purchase, payment or redemption of bonds in the manner and subject to the conditions provided in subdivisions (3) and (4) of Section 11.05 hereof; provided, however, that none of such cash shall be applied to the payment of more than the principal amount of any bonds so purchased, paid or redeemed, except to the extent that the aggregate principal amount of all bonds theretofore, and of all bonds then to be, purchased, paid and/or redeemed with cash deposited under Section 7.01 hereof shall have exceeded the aggregate cost for principal, interest, brokerage and premium, if any, on all bonds theretofore, and on all bonds then to be, purchased, paid and/or redeemed with cash so deposited.


ARTICLE VIII

COMPLIANCE WITH THE TRUST INDENTURE ACT OF 1939

Section 8.01.    The Company reserves the right without any consent or other action by holders of bonds to make such amendments to this Indenture as shall be necessary from time to time in order to qualify this Indenture under the Trust Indenture Act of 1939, as amended, as in force on the date of the making of any such amendment, including, without limitation, the substitution of a separate trustee for any security not applicable to all holders of bonds, provided that no such amendment shall, without the consent of the holder of any bona issued under this Indenture affected thereby, impair or affect the right of such holder to receive payment of the principal of (and premium, if any) and interest on such bond, on or after the




respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, or permit the creation of any lien ranking prior to, or on a parity with, the Lien of this Indenture with respect to any of the property mortgaged and pledged thereunder or permit the deprivation of such bondholder of a lien upon the Mortgaged and Pledged Property for the security of his bonds (subject only to the lien of taxes for the then current year, the lien of taxes, assessments or governmental charges not then due and delinquent and to any mortgage or other liens existing upon said property which are prior to this Indenture at the time of such amendment), and holders of any bonds Outstanding under this Indenture by acceptance of such bonds, agree and consent to the making of any such amendments.

ARTICLE IX

PARTICULAR COVENANTS OF THE COMPANY

Section 9.01.    The Company hereby covenants that it is lawfully possessed of all the Mortgaged and Pledged Property; that it will maintain and preserve the Lien of this Indenture so long as any of the bonds issued hereunder are Outstanding; that (subject to the provisions of Section 15.03 hereof) all property of the Company hereafter acquired, made or constructed and wheresoever situated, except any hereinbefore or hereinafter expressly excepted, shall be subject to the Lien of this Indenture just as though said property was now owned by the Company and described herein; and that it has good right and lawful authority to mortgage and pledge the Mortgaged and Pledged Property, as provided in and by this Indenture.

Section 9.02    The Company hereby covenants that it will duly and punctually pay the principal of and interest and premium, if any, on all bonds Outstanding hereunder, according to the terms thereof; and that as the coupons appertaining to said bonds are paid they will be cancelled

Section 9.03.    (a) The Company hereby covenants that, whenever necessary to avoid or fill a vacancy in the office of Trustee, the Company will in the manner provided in Section 16.15 hereof appoint a Trustee so that there shall be at all times a Trustee hereunder which shall at all times be a bank or trust company having its principal office and place of business in the United States of America, if there be such a bank or trust company willing and able to accept the trust upon reasonable or customary terms, and which shall at all times be a corporation organized and doing business under the laws of the United States or of any State or Territory or of the District of Columbia, with (i) in respect of the Original Trustee, a combined capital and surplus of at least Five Million Dollars ($5,000,000) and (ii) in respect of any successor Trustee appointed hereunder, a combined capital and surplus of at least Fifty Million Dollars ($50,000,000) and, in either such case, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority.
(b)      The Company hereby covenants that it will keep an office or agency, while any of the bonds issued hereunder are Outstanding, at any and all places at which the principal of or interest on any of said bonds and coupons appurtenant thereto shall be payable, where bonds entitled to be registered, transferred, exchanged, or converted may be presented or surrendered for registration, transfer, exchange or conversion, where notices, presentations and demands to or upon the Company in respect of such bonds or coupons as may be payable at such places or in respect of this Indenture may be given or made, and for the payment of the principal thereof and interest and premium, if any, thereon. The Company will from time to time give the Trustee written notice of the location of such office or offices or agency or agencies, and in case the Company shall fail to maintain such office or offices or agency or agencies or to give the Trustee written notice of the location thereof, then in addition to any other remedy or right arising as a result of the violation of the covenants contained in this Section, the Company agrees that any such notice, presentation or demand in respect of said bonds or coupons or of this Indenture may be given or made,




unless other provision is expressly made herein, to or upon the Trustee at its principal office, and the Company hereby authorizes such presentation and demand to be made to and such notice to be served on the Trustee in either of such events and the principal of and interest and premium, if any, on said bonds shall in such event be payable at said office of the Trustee.
(c)      The Company hereby covenants that, if it shall appoint a paying agent other than the Trustee, it will cause such paying agent to execute and deliver to the Trustee an instrument in which such paying agent shall agree with the Trustee, subject to the provisions of this Section, (1) that such paying agent shall hold in trust for the benefit of the bondholders or the Trustee all sums held by such paying agent for the payment of the principal of or interest on the bonds (and premium, if any); and (2) that such paying agent shall give the Trustee notice of any default by the Company in the making of any deposit with it for the payment of the principal of or interest on the bonds (and premium, if any), and of any default by the Company in the making of any such payment. Such paying agent shall not be obligated to segregate such sums from other funds of such paying agent except to the extent required by law.
(d)      The Company hereby covenants that, if the Company acts as its own paying agent, it will, on or before each due date of each installment of principal or interest on the bonds, set aside and segregate and hold in trust for the benefit of the bondholders or the Trustee a sum sufficient to pay such principal or interest so becoming due on the bonds (and premium, if any) and will notify the Trustee of such action, or of any failure to take such action.
(e)      Anything in this Section to the contrary notwithstanding, the Company may at any time, for the purpose of obtaining a release or satisfaction of this Indenture or for any other reason, pay or cause to be paid to the Trustee all sums held in trust by it or any paying agent as required by this Section, such sums to be held by the Trustee upon the trusts in this Indenture contained.
(f)      Anything in this Section to the contrary notwithstanding, the holding of sums in trust as provided in this Section is subject to the provisions of Section 19.03 hereof.
Section 9.04.    The Company hereby covenants that it will pay all taxes and assessments and other governmental charges lawfully levied or assessed upon the Mortgaged and Pledged Property, or upon any part thereof or upon any income therefrom or upon the interest of the Trustee in the Mortgaged and Pledged Property, before the same shall become delinquent, and will duly observe and conform to all valid requirements of any governmental authority relative to any of the Mortgaged and Pledged Property, and all covenants, terms and conditions upon or under which any of the Mortgaged and Pledged Property is held; that it will not suffer any lien to be hereafter created upon the Mortgaged and Pledged Property, or any part thereof, or the income therefrom, prior to the Lien hereof, other than Excepted Encumbrances, and other than, in the case of property hereafter acquired, vendors’ liens, purchase money mortgages and any lien thereon at the time of the acquisition thereof and within four months after any lawful claim or demand for labor, materials, supplies or other objects has become delinquent which if unpaid would or might by law be given precedence over the Lien of this Indenture as a lien or charge upon any of the Mortgaged and Pledged Property, or the income therefrom, it will pay or cause to be discharged or make adequate provisions to satisfy or discharge the same; provided, however, that nothing in this Section contained shall require the Company to observe or conform to any requirement of governmental authority or to cause to be paid or discharged, or to make provision for, any such lien or charge, or to pay any such tax, assessment or governmental charge so long as the validity thereof shall be contested in good faith and by appropriate legal proceedings; and provided that nothing in this Section contained shall require the Company to pay, discharge or make provisions for any tax, assessment or other governmental charge, the validity of which shall not be so




contested if adequate security for the payment of such tax, assessment or other governmental charge and for any damages which may reasonably be anticipated from failure to pay the same shall be given to the Trustee; provided, further, however, that it will not suffer any lien to be hereafter created upon that part of the Mortgaged and Pledged Property constituting the Municipalization Interest, or any part thereof, other than the Lien of this Indenture and Excepted Encumbrances; and that, save as aforesaid, it will not suffer any matter or thing whereby the Lien hereof might or could be impaired in contravention of the provisions hereof.

Section 9.05.    The Company hereby covenants that it will keep or cause to be kept all the property subject to the Lien hereof insured against fire, flood, lightning, windstorm, hail, explosion and other risks to the extent that property of similar character is usually so insured by companies similarly situated and operating like properties (all such risks being hereinafter referred to in this Section as the “Specified Hazards”), to a reasonable amount, by reputable insurance companies, any loss, except as to materials and supplies and except as to any particular loss less than Five Million Dollars ($5,000,000), to be made payable to the Trustee as the interest of the Trustee may appear and/or to the holder of any other lien prior hereto upon property subject to the Lien hereof, if the terms thereof require losses so to be made payable; or that it will, in lieu of or supplementing such insurance in whole or in part, adopt some other method or plan of protection against loss by the Specified Hazards at least equal in protection to the method or plan of protection against loss by the Specified Hazards of companies similarly situated and operating properties subject to similar hazards, and that if it shall adopt such other method or plan, it will, except as to materials and supplies and except as to any particular loss less than Five Million Dollars ($5,000,000), pay to the Trustee on account of any loss sustained by reason of the destruction or damage of such property by any of the Specified Hazards, an amount of cash equal to such loss less any amounts otherwise paid to the Trustee, or to the trustee or other holder of any mortgage or any other lien prior hereto upon property subject to the Lien hereof, if the terms thereof require losses so to be paid. Any amounts of cash so required to be paid by the Company pursuant to any such method or plan shall for the purposes of this Indenture be deemed to be proceeds of insurance. In case of the adoption of such other method or plan of protection, the Company shall also furnish to the Trustee a certificate of an actuary or other qualified person appointed by the Company with respect to the adequacy of such method or plan. There shall be delivered to the Trustee, on or before October 1 of each year and also whenever the Trustee shall make request therefor, a detailed statement, signed by the President, a Vice President, the Treasurer or an Assistant Treasurer of the Company, of any insurance policies covering the Specified Hazards then outstanding and in force upon the aforesaid property, or any part thereof, including, or by reference to former statements including, the names of the insurance companies which have issued the policies and the amounts and expiration dates thereof, together with a detailed statement, signed by the President, a Vice President, the Treasurer or an Assistant Treasurer of the Company, of such other method or plan, if any.

All moneys paid to the Trustee by the Company in accordance with this Section or received by the Trustee as proceeds of any insurance against loss by any of the Specified Hazards shall, subject to the requirements of any other lien prior hereto upon property subject to the Lien hereof, be held by the Trustee and, subject as aforesaid, shall be paid by it to the Company to reimburse the Company for an equal amount spent in the rebuilding or renewal of the property destroyed or damaged, upon receipt by the Trustee of (1) an Officers’ Certificate requesting such reimbursement, (2) an Engineer’s Certificate stating the amounts so expended and the nature of such rebuilding or renewal and the fair value to the Company of the property rebuilt or renewed and if




(A) within six months prior to the date of acquisition thereof by the Company, such property has been used or operated by a person or persons other than the Company, in a business similar to that in which it has been or is to be used or operated by the Company, and
(B) the fair value to the Company of such property as set forth in such Engineer’s Certificate is not less than Twenty-five Thousand Dollars ($25,000) and not less than one per centum (1%) of the aggregate principal amount of the bonds at the time Outstanding under this Indenture,
the Engineer making such certificate shall be an Independent Engineer, and (3) an Opinion of Counsel that the property so rebuilt or renewed is subject to the Lien hereof to the same extent as was the property so destroyed or damaged; provided, however, that to the extent that moneys paid by the Trustee to the Company for reimbursement, as aforesaid, shall represent the proceeds of property that was not Funded Property destroyed or damaged by any of the Specified Hazards, the property so rebuilt or renewed (for which reimbursement is so made), shall not be deemed to be Funded Property.
Any such money not so applied within eighteen (18) months after its receipt by the Trustee, or in respect of which notice in writing of intention to apply the same to the work of rebuilding or renewal then in progress and uncompleted shall not have been given to the Trustee by the Company within such eighteen (18) months, or which the Company shall at any time notify the Trustee is not to be so applied, shall thereafter be withdrawn, used or applied in the manner, to the extent and for the purposes and subject to the conditions provided in Section 11.05 hereof.
Anything in this Indenture to the contrary notwithstanding, the Company may have insurance policies covering any of the Specified Hazards with a deductible provision in a dollar amount per occurrence not exceeding Five Million Dollars ($5,000,000) or, when Rate Recovery Mortgage Bonds are no longer Outstanding, three per centum (3%) of the bonds Outstanding hereunder on the date such policy goes into effect if such three per centum (3%) is in excess of Five Million Dollars ($5,000,000); provided, however, such dollar amount may be exceeded to the extent such dollar amount per occurrence is below the deductible amount in effect as to such insurance on property of similar character insured by companies similarly situated and operating like property.
The Company hereby further covenants that it will procure and maintain public liability insurance against claims for personal injury, death or property damage suffered by others upon or in or about any premises occupied by it or occurring as a result of the operation of its business, and workmen’s compensation or similar insurance as may be required under federal law or the laws of the State of Louisiana, in each case from reputable insurance companies in such amounts and with such terms as are comparable to companies similarly situated and operating like properties.
Section 9.06.    The Company will not, except as herein permitted, do or suffer any act or thing whereby the Mortgaged and Pledged Property might or could be impaired; provided, however, that the Company shall not be deemed, for purposes of this Section, to have suffered the Mortgaged and Pledged Property to be impaired if the plant account on the books of the Company is reduced solely as a result of or to reflect action of any regulatory authority having jurisdiction over the rates and services of the Company mandating or requiring a direct or indirect disallowance of costs for ratemaking purposes. The Company will at all times maintain, preserve and keep the Mortgaged and Pledged Property, as an operating system or systems, in good repair, working order and condition. The Company will from time to time make all needful and proper repairs, replacements, additions, betterments and improvements, so that the operations and business of and pertaining to the Mortgaged and Pledged Property, as an operating system or systems, shall at all




times be conducted properly and advantageously; and whenever any portion of the Mortgaged and Pledged Property shall have been worn out or destroyed or shall have become obsolete or otherwise unfit for use, the Company will procure substitutes of at least equal utility and efficiency, so that at all times the efficiency of the Mortgaged and Pledged Property, as an operating system or systems, shall be fully maintained.

Nothing herein contained, however, shall be held to prevent the Company from permanently discontinuing the operation of or reducing the capacity of any of its plants or properties, if, in the judgment of the Company, any such action which affects the Mortgaged and Pledged Property is necessary or desirable in the conduct of the business of the Company, or if the Company is ordered so to do by regulatory authority having jurisdiction in the premises, or if the Company intends to sell or dispose of the same and within a reasonable time shall endeavor to effectuate such sale; nor shall anything herein contained be construed to prevent the Company from taking such action with respect to the use of its plants and properties as is proper under the circumstances, including the cessation or omission to exercise rights, permits, licenses, privileges or franchises which, in the judgment of the Company, can no longer be profitably exercised or availed of; provided, however, the Company covenants that it will, within sixty (60) days after its determination permanently to discontinue the operation of any of its plants or properties subject to the Lien of this Indenture of a Cost, determined as provided in Section 1.04 hereof, in any one case in excess of Five Million Dollars ($5,000,000) or in the aggregate in any period of twelve (12) consecutive calendar months in excess of Ten Million Dollars ($10,000,000), furnish the Trustee for information purposes with an Officers’ Certificate setting forth the Cost, as so determined, to the Company of the plants, or properties, the operation of which the Company shall have determined so to discontinue.
Whenever (but not more often than once in any period of five (5) years) the holders of at least twenty-five per centum (25%) in principal amount of the bonds Outstanding hereunder shall deliver to the Trustee and to the Company a written statement that they have reasonable grounds to believe that the Mortgaged and Pledged Property has not been adequately maintained, as an operating system or systems, in good repair, working order and condition and request the Company to furnish to the Trustee an Independent Engineer’s Certificate stating whether or not the Mortgaged and Pledged Property, as an operating system or systems, has been maintained in good repair, working order and condition, and whether or not there is any property subject to the Lien of this Indenture which should be retired on the books of the Company as having ceased permanently to be used or useful in the business of the Company and which has not been so retired, the Company shall cause such Independent Engineer’s Certificate to be furnished to the Trustee within a reasonable time after such request. If such Independent Engineer shall report that the Mortgaged and Pledged Property, as an operating system or systems, has not been maintained in good repair, working order and condition, he shall state clearly in his report the character and extent of, and, if longer than one year, the time reasonably necessary to make good such deficiency and, if he shall report that there is property subject to the Lien of this Indenture which should be retired on the books of the Company as having ceased permanently to be used or useful in the business of the Company and which has not been so retired, his report shall briefly describe such property. Said report shall be placed on file by the Trustee and shall be open to inspection by any bondholder at any reasonable time.
If the Company, within thirty (30) days after the filing of the report of such Independent Engineer, objects in writing delivered to the Trustee to the findings of such Independent Engineer as to the character and extent of such maintenance deficiency and/or to the property which should be retired upon the books of the Company, then the character and extent of such maintenance deficiency, if any, and/or the property, if any, so to be retired upon the books of the Company shall be forthwith referred to three




arbitrators selected in the following manner: The Trustee, within ten (10) days after the expiration of said period of thirty (30) days, shall name one arbitrator and give notice of such selection to the Company. Within ten (10) days after receipt of such notice, the Company shall name one arbitrator and give notice of such selection to the Trustee, and failure so to do shall entitle the Trustee to name an arbitrator to represent the Company. The two thus selected shall, within ten (10) days after the appointment of the arbitrator representing the Company, select a third arbitrator, but if said arbitrators are unable, within said ten (10) days, to agree upon such third arbitrator, then, upon the election of either the Company or the Trustee, any District Judge of the United States of America for the District in which the Trustee has its principal place of business may appoint such third arbitrator, upon application to said District Judge by either party after five (5) days’ notice thereof to the other party. The written decision of a majority of such arbitrators shall be filed as soon as practicable with the Trustee and a copy thereof delivered to the Company, and shall be binding upon the Trustee, the Company and the bondholders.
Within one year from the date of the report of such Independent Engineer or the date of such decision of arbitrators, whichever is later, or such longer period as may be reported by such Independent Engineer or the arbitrators, as the case may be, to be reasonably necessary to make good any such deficiency, no statement contained in any report of any Independent Engineer filed with the Trustee, as hereinbefore in this Section provided, shall be deemed to be in any way evidence or proof of a failure to comply with the provisions of this Section.
The Company shall, with all reasonable speed, do or cause to be done such maintenance work as may be necessary to make good any such maintenance deficiency as shall have been determined to exist as hereinabove provided at the time of the report of such Independent Engineer or at the time of such decision of arbitrators, as the case may be, whereupon such Independent Engineer or such arbitrators, as the case may be (or, in case of his or their refusal or inability to act, some other Independent Engineer), shall report in writing to the Trustee whether such deficiency has been made good.
Unless the Trustee shall be so advised in writing by such Independent Engineer or arbitrators, as the case may be, within one year from the date of the report of such Independent Engineer or the date of such decision of arbitrators, as the case may be, or such longer period as may be reported by such Independent Engineer or the arbitrators, as the case may be, to be reasonably necessary for the purpose, that such deficiency has in all material respects been made good, the Company shall be deemed to have defaulted in the due performance of the covenants of this Section, so far as concerns the maintenance of the Mortgaged and Pledged Property.
All expenses incurred pursuant to this Section shall be borne by the Company.
In the event that any regulatory authority having jurisdiction over the Company shall determine that the expenditures for repairs and maintenance necessary to make good any such maintenance deficiency as shall have been so determined would be excessive or shall, by order or regulation, prohibit, in whole or in part, such expenditures for repairs and maintenance, then, upon filing with the Trustee a certified copy of such order or a copy of such regulation, as the case may be, the Company shall, so long as such order or such regulation remains in effect, be relieved from compliance with the covenants contained in this Section, in regard to the maintenance of the Mortgaged and Pledged Property, to the extent that such expenditures for repairs and maintenance shall have been held excessive or shall be prohibited.
The Company covenants that it will promptly retire on its books of account any of the Mortgaged and Pledged Property included in plant account (except real estate held for the purpose of sale or resale) that has, in the opinion of the Company, ceased permanently to be used or useful in its business




or which pursuant to the provisions of this Section any Independent Engineer has reported to the Company more than thirty (30) days prior thereto (without written objection thereto having been delivered to the Trustee by the Company), or any arbitrators have determined, should be retired on the books of the Company as having ceased permanently to be used or useful in the business of the Company.
Notwithstanding the foregoing provisions of this Section 9.06, nothing herein contained shall be held to require the Company to retire, other than solely for purposes of this Indenture, any of the Mortgaged and Pledged Property in the event that the Company is ordered not to retire such Mortgaged and Pledged Property by regulatory authority having jurisdiction in the premises.
Section 9.07.    The Company hereby covenants that it will, subject to the provisions of Article XV hereof, at all times maintain its corporate existence and right to carry on business, and duly procure all renewals and extensions thereof, if and when any shall be necessary and, subject to the provisions of this Indenture, will use its best efforts to maintain, preserve and renew all the rights, powers, privileges and franchises owned by it, affecting the Mortgaged and Pledged Property.

Section 9.08.    The Company hereby covenants that it will cause this Indenture and all indentures and instruments supplemental hereto or notices in respect thereof to be promptly recorded and filed and re-recorded and re-filed in such manner and in such places, as may be required by law in order fully to preserve and protect the security of the bondholders and all rights of the Trustee, and will furnish to the Trustee:
(a) Promptly after the execution and delivery of this Indenture and of each supplemental indenture, an Opinion of Counsel either stating that in the opinion of such counsel this Indenture or such supplemental indenture or notice in respect thereof has been properly recorded and filed, so as to make effective the lien intended to be created thereby, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to make such lien effective. It shall be a compliance with this subdivision (a) if (1) the Opinion of Counsel herein required to be delivered to the Trustee shall state that this Indenture or such supplemental indenture or notice in respect thereof has been received for record or filing in each jurisdiction in which it is required to be recorded or filed and that, in the opinion of counsel (if such is the case), such receipt for record or filing makes effective the lien intended to be created by this Indenture or such supplemental indenture, and (2) such opinion is delivered to the Trustee within such time, following the date of the execution and delivery of this Indenture or such supplemental indenture, as shall be practicable having due regard to the number and distance of the jurisdictions in which this Indenture or such supplemental indenture is required to be recorded or filed.
(b) On or before May 1 of each year, beginning May 1, 1988, an Opinion of Counsel either stating that in the opinion of such counsel such action has been taken, since the date of the most recent Opinion of Counsel furnished pursuant to this subdivision (b) or the first Opinion of Counsel furnished pursuant to subdivision (a) of this Section, with respect to the recording, filing, re-recording, and re-filing of this instrument and each notice with respect thereto and of each indenture supplemental to this instrument, as is necessary to maintain the Lien hereof, and reciting the details of such action, or stating that in the opinion of such counsel no such action is necessary to maintain such lien.
The Company hereby covenants that it will execute and deliver such supplemental indenture or indentures and such further instruments and do such further acts as may be necessary or proper to carry out more effectually the purposes of this Indenture and to make subject to the Lien hereof any property hereafter acquired, made or constructed, intended to be subject to the Lien hereof, and to




transfer to any new trustee or co-trustee or co-trustees, the estate, powers, instruments or funds held in trust hereunder.
Section 9.09.    (a) The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee between May 15 and June 1 and between November 15 and December 1 in each year after June 1, 1987, and at such other times as the Trustee may request in writing, a list in such form as the Trustee may reasonably require containing all the information in the possession or control of the Company or of its paying agents, as to the names and addresses of the holders of bonds obtained since the date as of which the next previous list, if any, was furnished. Any such list may be dated as of a date not more than fifteen (15) days prior to the time such information is furnished or caused to be furnished, and need not include information received after such date; and, provided, that the Company need not furnish or cause to be furnished any such list with respect to bonds with respect to which the Trustee maintains the books for the registration and transfer of bonds as provided for in Section 2.06.
(b)      The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of bonds (1) contained in the most recent list, if any, furnished to it as provided in subdivision (a) of this Section, (2) received by it in the capacity of paying agent hereunder, and (3) filed with it within two preceding years pursuant to the provisions of paragraph (2) of subdivision (c) of Section 16.13 hereof. The Trustee may (1) destroy any list furnished to it as provided in subdivision (a) of this Section upon receipt of a new list so furnished; (2) destroy any information received by it as paying agent upon delivery to itself as Trustee, not earlier than forty-five (45) days after an interest payment date of the bonds, of a list containing the names and addresses of the holders of bonds obtained from such information since the delivery of the next previous list, if any; (3) destroy any list delivered to itself as Trustee which was compiled from information received by it as paying agent upon the receipt of a new list so delivered; and (4) destroy any information received by it pursuant to the provisions of paragraph (2) of subdivision (c) of Section 16.13 hereof, but not until two years after such information has been filed with it.
(c)      In case three or more holders of bonds (hereinafter referred to as “Applicants”) apply in writing to the Trustee, and furnish to the Trustee reasonable proof that each such Applicant has owned a bond for a period of at least six months preceding the date of such application, and such application states that the Applicants desire to communicate with other holders of bonds with respect to their rights under this Indenture or under the bonds, and is accompanied by a copy of the form of proxy or other communication which such Applicants propose to transmit, then the Trustee shall, within five (5) business days after the receipt of such application, at its election either
(1) afford to such Applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subdivision (b) of this Section; or
(2) inform such Applicants as to the approximate number of holders of bonds whose names and addresses appear in the information preserved at the time by the Trustee, in accordance with the provisions of subdivision (b) of this Section, and as to the approximate cost of mailing to such bondholders the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford to such Applicants access to such information, the Trustee shall, upon the written request of such Applicants, mail to each bondholder whose name and address appears in the information preserved at the time by the Trustee in accordance with the provisions of subdivision (b) of this Section, a copy of the form of proxy or other communication which is specified in such request, with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment or provision for the payment of the reasonable expenses of mailing, unless within five (5) days after such tender the Trustee shall mail to such Applicants and file with the Securities and Exchange Commission




together with a copy of the material to be mailed a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of bonds, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections, or if said Commission shall find, after notice and opportunity for a hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such bondholders with reasonable promptness after the entry of such order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such Applicants respecting their application.
(d)      Neither the Trustee nor any paying agent shall be held accountable by reason of the disclosure of information as to names and addresses or the mailing of any material pursuant to any request made under subdivision (c) of this Section.
Section 9.10.    The Company covenants and agrees:
(3) to file with the Trustee within fifteen (15) days after the Company is required to file the same with the Securities and Exchange Commission, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as such Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with such Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended; or, if the Company is not required to file information, documents, or reports pursuant to either of such sections, then to file with the Trustee and the Securities and Exchange Commission, in accordance with rules and regulations prescribed from time to time by said Commission, such of the supplementary and periodic information, documents, and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations;
(4) to file with the Trustee and the Securities and Exchange Commission, in accordance with the rules and regulations prescribed from time to time by said Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants provided for in this Indenture as may be required from time to time by such rules and regulations, including, in the case of annual reports, if required by such rules and regulations, certificates or opinions of independent public accountants, conforming to the requirements of Section 19.05 hereof, as to compliance with conditions or covenants, compliance with which is subject to verification by accountants, but no such certificate or opinion shall be required as to (A) dates or periods not covered by annual reports required to be filed by the Company, in the case of conditions precedent which depend upon a state of facts as of a date or dates or for a period or periods different from that required to be covered by such annual reports, or (B) the amount and value of Property Additions, except as provided in Section 5.05 hereof, or (C) the adequacy of depreciation, maintenance, or repairs; and
(5) to transmit to the holders of bonds, in the manner and to the extent provided in subdivision (c) of Section 16.13 hereof with respect to reports pursuant to subdivision (a) of Section 16.13 hereof, such summaries of any information, documents and reports required to be filed by the Company pursuant to subdivisions (1) and (2) of this Section as may be required by the rules and regulations prescribed from time to time by the Securities and Exchange Commission.





Section 9.11.    The Company hereby covenants that it will, in accordance with sound accounting practices, keep books of record and account of all dealings or transactions of, or in relation to, the plants, properties, business and affairs of the Company.

The Company hereby covenants that it will not issue, or permit to be issued, any bonds hereunder in any manner other than in accordance with the provisions of this Indenture and that it will faithfully observe and perform all the conditions, covenants and requirements of this Indenture and of all indentures supplemental hereto and of the bonds issued hereunder.
Section 9.12.    Subject to the rights of the bondholders under the 1944 Mortgage, the Company hereby covenants that, upon the cancellation and discharge of any lien prior hereto (upon property subject to the Lien hereof), securing indebtedness, the Company will cause all cash, purchase money obligations and other property then held by the trustee or other holder of such lien, which were received by such trustee or other holder by reason of the release of, or the purchase by a governmental authority or its designee of, or which represents the proceeds of the taking by eminent domain of, or insurance on, any of the Mortgaged and Pledged Property (including all proceeds of or substitution for any thereof) to be paid and/or delivered to and/or deposited with the Trustee hereunder, to be held as part of the Mortgaged and Pledged Property, any such cash and/or purchase money obligations constituting a part thereof to be paid over, withdrawn, used or applied in the manner, to the extent, and for the purposes and subject to the conditions provided in Section 11.05 hereof with respect to cash and purchase money obligations deposited under the provisions of Section 11.03 hereof, and any other property constituting a part thereof to be subject to use and release as provided with respect to such property in Article XI hereof. Nothing in this Indenture contained shall be deemed to limit the right of any successor to the Company under the provisions of Article XV hereof which shall not have caused this Indenture or any indenture executed as in Section 15.02 hereof provided to become a lien upon any of the properties or franchises of the successor corporation (except as contemplated by clauses (a), (b) and (c) of Section 15.03 hereof) to increase the indebtedness secured by lien upon any of its, properties or franchises not subject to the Lien of this Indenture or of any such indenture executed as in Section 15.02 hereof provided.

Section 9.13.    Should all or substantially all of the Mortgaged and Pledged Property or common stock constituting a majority of the voting power of the common stock of the Company be taken by the exercise of the power of eminent domain or by the exercise by any governmental authority or instrumentality or designee thereof of the right to purchase or otherwise acquire the same, or should such Mortgaged and Pledged Property or common stock be voluntarily sold, transferred or otherwise conveyed to such governmental authority or instrumentality or designee thereof (in any case whether or not the Lien of the Indenture is released with respect to such Mortgaged and Pledged Property), then, in any such event, the Company shall, upon receipt, deposit the net proceeds of any such taking, sale, transfer or other conveyance with the Trustee and immediately request the Trustee, and upon receipt of such request the Trustee shall take all requisite action, (A) to mail written notice thereof to each registered holder of any Outstanding bond registered as to principal and interest or as to principal only to him at his last address appearing upon the registry books and (B) in the event any Outstanding bond shall be neither registered as to principal and interest nor registered as to principal only, to cause notice thereof to be published, concurrently with such mailing, in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, and in one Daily Newspaper of general circulation in the City of New Orleans, Louisiana, such notice (hereinafter referred to in this Section as the “Trustee’s Special Notice”), whether mailed or published, to state that it is given pursuant to this Section and that the holder of any bond or bonds then Outstanding hereunder shall have the right to require the Company to redeem such bond or bonds on the terms and subject to the conditions hereinafter in this Section set forth.




Upon the mailing and, if required, publication of the Trustee’s Special Notice, the holder of any bond or bonds Outstanding hereunder may, within forty-five (45) days from the date of the Trustee’s Special Notice, give the Trustee written notice of such holder’s intent to have his bond or bonds redeemed by the Company on the sixtieth (60) day following the date of the Trustee’s Special Notice, upon delivery and surrender of such bond or bonds accompanied by such documentation as the Trustee or the Company may require. Unless on or prior to the
forty-fifth (45) day following the date of the Trustee’s Special Notice, such holder shall have, by further written notice to the Trustee, withdrawn or revoked such written notice of intent to have his bond or bonds so redeemed, the Company shall, on the sixtieth (60) day following the date of the Trustee’s Special Notice, redeem any such bond or bonds which are properly delivered and surrendered for that purpose at a price of one hundred per centum (100%) of the principal amount thereof, plus accrued interest thereon to the date of such redemption. Any such net proceeds not required for the redemption of bonds hereunder shall be promptly paid to the Company by the Trustee.
Section 9.14.    (a) The Company hereby covenants that it will deliver to the Trustee, on or before May 1, 1988 and each May 1 thereafter, a written statement signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, stating, as to each signer thereof, that, to the best of his knowledge, the Company has fulfilled all its obligations under this Indenture throughout the preceding calendar year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to him and the nature and status thereof.
(b)      The Company hereby covenants that within five (5) business days after any of the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company having responsibility for financial or accounting matters becomes aware of the occurrence of any event which itself or with a lapse of time or the giving of notice or both would constitute a Default hereunder (except any such event relating to default by the Company in the performance of its obligations pursuant to clause (1) or clause (2) of Section 9.10 hereof), it will give notice of such event to the Trustee specifying the nature and status thereof.
Section 9.15.    The Company hereby covenants that it will not issue any additional bonds under the 1944 Mortgage, and that upon the payment in full of all indebtedness secured thereby the Company will promptly take all necessary action to obtain and effect the release and cancellation of the lien of the 1944 Mortgage upon any of the Mortgaged and Pledged Property and the discharge and satisfaction of the 1944 Mortgage.

Section 9.16.    The Company hereby covenants that, so long as the 1944 Mortgage has not been discharged or satisfied, it will duly and punctually comply with the provisions of Sections 38 and 39(I) of the 1944 Mortgage.

Section 9.17.    To the extent that lack of compliance could reasonably be expected to have a material adverse effect on its business, prospects, profits, properties or condition (financial or otherwise) (except to the extent that the Company is contesting the same in good faith by timely and appropriate legal action diligently pursued), the Company will comply with applicable statutes, regulations, orders and restrictions of the United States of America, foreign countries, states and municipalities, and agencies and instrumentalities of the foregoing, in respect of the conduct of its business and the ownership of its property





Section 9.18.    The Company covenants that it will comply with the limitation on dividends to which it is subject under the Statement of Policy regarding First Mortgage Bonds subject to the Public Utility Holding Company Act of 1935, as in effect at the time, in connection with each issuance of bonds under the Indenture and subject to such Act.


ARTICLE X

REDEMPTION OR PURCHASE OF BONDS

Section 10.01.    Such of the bonds of any series issued hereunder as are, by their terms, redeemable before maturity, may, at the option of the Company or pursuant to the requirements of this Indenture, be redeemed at such times, in such amounts and at such prices as may be specified therein and in accordance with the provisions of the three next succeeding Sections numbered from 10.02 to 10.04, both inclusive.

Section 10.02.    If less than all the Outstanding bonds of any series are to be redeemed, the particular bonds to be redeemed shall be selected by the Trustee from the Outstanding bonds of such series which have not previously been called for redemption by such method as the Trustee shall deem fair and appropriate. Notwithstanding the foregoing, special provisions for the selection of the particular bonds to be redeemed within a particular series may be provided by a supplemental indenture to this Indenture.

Unless otherwise provided as to a particular series of bonds, notice of intention to redeem to owners and/or holders of any bonds which are not registered as to principal and interest or principal only shall be given, by or on behalf of the Company, by publication in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, and in one Daily Newspaper of general circulation in the City of New Orleans, Louisiana, once before the date fixed for redemption, the publication to be at least thirty (30) days prior to the date fixed for redemption. If less than all bonds of any particular series are to be redeemed, unless otherwise provided as to a particular series of bonds, the numbers of any bonds to be redeemed which are not so registered shall be included in such notice and may be stated as follows: individually; in groups from one number to another number, both inclusive, except such as shall have been previously called for redemption or otherwise retired; or in any other way satisfactory to the Trustee.
Unless otherwise provided as to a particular series of bonds, notice of intention to redeem to the registered owner of any bond registered as to principal and interest or as to principal only which is to be redeemed in whole or part shall be mailed by or on behalf of the Company, not less than thirty (30) days before the date fixed for redemption, to him at his last address appearing upon the registry books.
Failure duly to give such notice by publication and/or by mailing to the owner or holder of any bond designated for redemption in whole or part shall not affect the validity of the proceedings for the redemption of any other bond.
Unless otherwise provided as to a particular series of bonds, if at the time of publication or mailing of any notice of redemption the Company shall not have deposited with the Trustee and/or irrevocably directed the Trustee to apply, from money held by it available to be used for the redemption of bonds, an amount in cash sufficient to redeem all of the bonds called for redemption, including accrued interest to such date fixed for redemption, such notice shall state that it is subject to the receipt of the redemption moneys by the Trustee before the date fixed for redemption (unless such redemption is mandatory) and such notice shall be of no effect unless such moneys are so received before such date.




The Trustee, upon the request of the Company evidenced by a Resolution delivered to the Trustee at least ten (10) days prior to the date on which notice of redemption must first be published or mailed (unless a shorter notice shall be accepted by the Trustee as sufficient) shall, for and on behalf of and in the name of the Company, call for redemption bonds secured hereby (whether or not the Trustee shall hold at the time of such call cash sufficient for such redemption) provided that, if cash sufficient for such purpose is not so held and such redemption is not mandatory, the notice shall state that it is subject to the receipt of the redemption moneys by the Trustee before the date fixed for redemption and such notice shall be of no effect unless such moneys are so received before such date.
Section 10.03.    Publication of the notice of redemption, if required, having been completed as above provided, or if mailing is required, notice of redemption having been mailed, as in Section 10.02 hereof provided, and the Company having before the redemption date specified in the notice of redemption deposited with the Trustee (and/or having irrevocably directed the Trustee to apply, from money held by it available to be used for the redemption of bonds) an amount in cash sufficient to redeem all of the bonds called for redemption, including accrued interest, the bonds called for redemption shall become due and payable on such redemption date. The foregoing conditions for such bonds so becoming due and payable shall not apply to any redemption of bonds which is mandatory pursuant to other provisions of this Indenture.

Section 10.04    All moneys held by the Trustee for the redemption of bonds shall, subject to the provisions of Section 19.03 hereof, be held in trust for account of the holders of the bonds so to be redeemed, and shall be paid to them, respectively, upon presentation and surrender of said bonds, with (if required by the Company) all unmatured coupons, if any, appertaining thereto. Coupons maturing on or prior to the date fixed for redemption shall remain payable in accordance with their terms. On and after such date fixed for redemption, if the moneys for the redemption of the bonds to be redeemed shall be held by the Trustee for the purpose, such bonds shall cease to bear interest (except such bonds as shall have been properly presented for payment on, or within one year after, the date fixed for redemption and shall not have been paid) and shall cease to be entitled to the Lien of this Indenture and the coupons for interest, if any, maturing subsequent to the date fixed for redemption shall be void.

If any fully registered bond shall be called for redemption in part only, the notice of redemption shall specify the principal amount thereof to be redeemed, and such fully registered bond shall be presented for cancellation properly endorsed for transfer at or after the date fixed for the redemption of said bonds so called for redemption, and thereupon the payment with respect to said bond shall be made upon surrender of said bond so endorsed, and coupon bonds or fully registered bonds for the unpaid balance of the principal amount of the fully registered bond so presented and surrendered shall be executed by the Company and authenticated and delivered by the Trustee without charge therefor to the holder thereof.
Section 10.05.    Except as may be otherwise provided in any indenture supplemental hereto, at any time, upon the request of the Company, expressed by an Officers’ Certificate, the Trustee shall, to the extent that such bonds are available for such purchase, apply all or any part of the cash held by it under any provision of this Indenture, subject to the provisions of Sections 7.03, 9.12, and 10.04 hereof, or any cash deposited with it by the Company for the purpose, to the purchase (including a purchase from the Company) of bonds then Outstanding hereunder of such series as the Company may designate. Before making any such purchase the Trustee may, and upon request of the Company shall, by notice published once in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, and in one Daily Newspaper of general circulation in the City of New Orleans, Louisiana, advertise for written proposals (to be received by it on or




before a specified date) to sell to it on or before a subsequent specified date bonds of the series designated by the Company then Outstanding hereunder, and the Trustee, to the extent, as nearly as is possible, of such funds then in its hands and requested by the Company to be so applied, shall purchase the bonds so offered at the price or prices most favorable to the Company, and reasonable notice shall be mailed by the Trustee to the holder or holders of the bonds whose proposals shall have been accepted. The Trustee shall, upon request of the Company, invite offers of bonds for sale to it in any other usual manner. The Trustee in its discretion may reject any or all proposals in whole or in part, and shall reject any or all proposals in whole or in part if on the same day after opening said proposals it has actual knowledge that it can purchase the requisite amount of such bonds or any part thereof at a price more favorable to the Company than it could by accepting said proposals. All offers by holders shall be subject to acceptance of a portion thereof unless otherwise expressed in the offers and all advertisements for written proposals shall so state.

Section 10.06.    All bonds issued hereunder paid, retired or redeemed under any of the provisions of this Indenture or purchased by the Trustee as provided in Section 10.05 hereof and all appurtenant coupons, if any, shall forthwith be cancelled by the Trustee, and the Trustee may periodically destroy any such cancelled coupon bonds and deliver to the Company a certificate of such destruction and deliver any such cancelled fully registered bonds to the Company.


ARTICLE XI

POSSESSION, USE AND RELEASE OF MORTGAGED
AND PLEDGED PROPERTY

Section 11.01.    Unless one or more Defaults shall have occurred and be continuing, the Company shall be suffered and permitted to possess, use and enjoy the Mortgaged and Pledged Property (except: (a) such cash as is expressly required to be deposited with the Trustee; (b) to the extent not herein otherwise provided, such securities as are expressly required to be deposited with the Trustee; and (c) such payment and compensation, including cash, as may be received by or on behalf of the Company in respect of the Municipalization Interest), and to receive, use and dispose of the tolls, rents, revenues, issues, earnings, income, products and profits thereof, with power in the ordinary course of business, freely and without let or hindrance on the part of the Trustee or of the bondholders, except as herein otherwise expressly provided to the contrary, to exercise any and all rights under choses in action, contracts, franchises and claims.

Section 11.02.    Unless the Company is in default in the payment of the interest on any of the bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may at any time and from time to time, without any release or consent by, or report to, the Trustee:
(6) sell or otherwise dispose of, free from the Lien of this Indenture, any machinery, apparatus, equipment, frames, towers, poles, wire, pipe, tools, implements, or furniture, or any other fixtures or personalty, then subject to the Lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable, undesirable or unnecessary for use in the operations of the Company upon replacing the same by, or substituting for the same, machinery, apparatus, equipment, frames, towers, poles, wire, pipe, tools, implements, or furniture, or any other fixtures or personalty, of at least equal value to that of the property sold or otherwise disposed of and subject to the Lien hereof, subject to no liens prior hereto except liens to which the property sold or otherwise disposed of was subject;




(7) cancel or make changes or alterations in or substitutions of any and all right of way grants; and
(8) surrender or assent to the modification or replacement of any right, power, franchise, license, governmental consent or permit under which it may be operating (except any such right, power, franchise, license, governmental consent or permit, the surrender or assent to the modification or replacement of which might impair the Lien of this Indenture upon the Municipalization Interest), provided that, in the opinion of the Board of Directors of the Company (such opinion to be stated in a Resolution to be filed with the Trustee), any such surrender, modification or replacement which affects the Mortgaged and Pledged Property is necessary or desirable in the conduct of the business of the Company.

Section 11.03.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may obtain the release of any of the Mortgaged and Pledged Property (except the Municipalization Interest or cash then held by the Trustee) (provided, however, that obligations secured by purchase money mortgage deposited with the Trustee shall not be released except as provided in Section 11.04 hereof), and the Trustee shall release all its right, title and interest in and to the same from the Lien hereof upon the application of the Company and receipt by the Trustee of the following:
(9) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and describing in reasonable detail the property to be released and requesting such release, and stating that the Company is not in default in the payment of the interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing;
(10) an Engineer’s Certificate, made and dated not more than ninety (90) days prior to the date of such application, stating:
(q) that the Company has sold, leased, granted an undivided interest in, exchanged, dedicated or disposed of, or intends or has agreed to sell, lease, grant an undivided interest in, exchange, dedicate or dispose of, or that a governmental body or agency has exercised a right to order the Company to divest itself of, the property to be released;
(r) the fair value, in the opinion of the signers, of the property (or securities) to be released;
(s) the fair value, in the opinion of the signers, of any portion thereof that is Funded Property;
(t) that (except in any case where a governmental body or agency has exercised a right to order the Company to divest itself of such property) such release is in the opinion of the signers desirable in the conduct of the business of the Company;
(u) the amount of cash and/or principal amount of obligations secured by purchase money mortgage received or to be received for any portion of said property sold to any Federal, State, County, Municipal or other governmental bodies or agencies or public corporations, districts or authorities; and
(v) that in the opinion of the signers such release will not impair, the security under this Indenture in contravention of the provisions hereof;
(1) an amount in cash (including any amount in cash deposited with the Trustee pursuant to the requirements of Section 9.12 hereof which the Company elects, as evidenced by an Officers’ Certificate, to be also credited against the cash to be held pursuant to this subdivision (3)), to be held by the Trustee as part of the Mortgaged and Pledged Property, equivalent to the amount, if any, by which the fair value of the property to be released, as specified in the Engineer’s Certificate provided for in subdivision (2) above, exceeds the aggregate of the following items:




(w) the principal amount, subject to the limitations stated below in this subdivision (3), of any obligations delivered to the Trustee, to be held as part of the Mortgaged and Pledged Property, consisting of obligations secured by purchase money mortgage upon the property released;
(x) the Cost or fair value to the Company (whichever is less) of any Property Additions made the basis of the application which are not then Funded Property (after making any deductions and any additions pursuant to the provisions of Section 1.04 hereof) as shown by a further Engineer’s Certificate (made and dated no more than ninety (90) days prior to the date of such application) delivered to the Trustee; provided, however, that Property Additions acquired, made or constructed within ninety (90) days prior to the date of such application for release, or subsequently thereto, may, at the option of the Company, not have deducted therefrom the deductions nor added thereto the additions pursuant to Section 1.04 hereof;
(y) the principal amount of each bond or fraction of a bond to the authentication and delivery of which the Company shall be entitled under the provisions of Section 6.01 hereof, by virtue of compliance with all applicable provisions of Section 6.01 (except as hereinafter in this Section otherwise provided); provided, however, that (except as hereinafter in this Section otherwise provided) the application for such release shall operate as a waiver by the Company of such right to the authentication and delivery of each such bond or fraction thereof on the basis of which right such property is released and to such extent no such bond or fraction thereof may thereafter be authenticated and delivered hereunder, and any bonds which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall be deemed to have been made the basis of the release of such property;
(z) the principal amount, subject to the limitations stated below in this subdivision (3), of any obligations secured by purchase money mortgage upon the property to be released and/or any amount in cash, that is evidenced to the Trustee by a certificate of the holder of a lien prior hereto, as the case may be, to have been received by it in accordance with the provisions of such lien prior hereto in consideration for the release of such property or any part thereof from such lien prior hereto; and
(aa) any taxes and expenses incidental to such sale, exchange, dedication or disposal;
provided, however, that (i) no obligations secured by purchase money mortgage upon any property being released from the Lien hereof shall be used as a credit in any application for such release unless all obligations secured by such purchase money mortgage shall be delivered to the Trustee or to the trustee or other holder of a lien prior hereto; (ii) in case the total principal amount of obligations secured by purchase money mortgage upon property being released shall exceed seventy-five per centum (75%) of the fair value of such property, as specified in the Engineer’s Certificate provided for in subdivision (2) above, the aggregate credit which may be used pursuant to clause (a) and clause (d) of this subdivision (3) in respect of such obligations shall not exceed seventy-five per centum (75%) of the fair value of the property to be released, as specified in such Engineer’s Certificate; and (iii) no obligations secured by purchase money mortgage shall be used as a credit in any application for the release of property hereunder, if the aggregate credit in respect of such obligations to be used by the Company pursuant to clause (a) and clause (d) of this subdivision (3) plus the aggregate credits used by the Company pursuant to said clause (a) and clause (d) in all applications for the release of property theretofore released from the Lien hereof on the basis of purchase money obligations theretofore delivered to and then held by the Trustee or the trustee or other holder of a lien prior hereto shall, immediately after the release then being applied for, exceed fifteen per centum (15%) of the




aggregate of (x) the principal amount of the bonds at such time Outstanding under this Indenture and (y) the principal amount of the bonds Outstanding, as therein defined, under the 1944 Mortgage;
(1) in the case where the release is on the basis of Property Additions, an Opinion of Counsel as required by Section 5.05(7) hereof;
(2) in case any obligations secured by purchase money mortgage upon the property to be released are included in the consideration for such release and are delivered to the Trustee or to the holder of a lien prior hereto in connection with any release of such property, an Opinion of Counsel stating that, in his or their opinion, such obligations are valid obligations enforceable in accordance with their terms, except as limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of mortgagees’ and other creditors’ rights and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law), and that the purchase money mortgage securing the same is sufficient to afford a valid purchase money lien upon the property to be released, subject to no lien prior thereto except Excepted Encumbrances and such liens, if any, as shall have existed thereon just prior to such release as liens prior to the Lien of this Indenture;
(3) in case the Trustee is requested to release any franchise, an Opinion of Counsel stating that in his or their opinion such release will not impair to any material extent the right of the Company to operate any of its remaining properties or the rights of the Company in respect of the Municipalization Interest; and
(4) an Opinion of Counsel complying with the requirements of Section 19.05 hereof.
All purchase money obligations and the mortgages securing the same delivered to the Trustee pursuant to this Section shall be duly assigned to the Trustee. The Company shall cause any such purchase money mortgage and the assignment thereof to be promptly recorded and filed in such place or places as shall be required by law in order fully to preserve and protect the security afforded thereby and shall furnish to the Trustee an Opinion of Counsel stating that in the opinion of such counsel such purchase money mortgage and the assignment thereof have been properly recorded and filed so as to make effective the lien intended to be created thereby. Should any re-recording or re-filing be necessary at any time or from time to time, the Company shall likewise cause the same to be duly effected and shall, in each case, furnish to the Trustee an Opinion of Counsel similar to the foregoing. The Trustee shall deliver to the Company any purchase money mortgage and/or assignment thereof whenever required for the purpose of recording or filing or re-recording or re-filing, as evidenced by an Opinion of Counsel.
In case the release of property is, in whole or in part, based upon Property Additions (as permitted under the provisions of clause (b) of subdivision (3) of this Section), the Company shall, subject to the provisions of said clause (b), comply with all applicable provisions of this Indenture (including but not limited to the furnishing of the Engineer’s Certificate provided for in subdivision (3) of Section 5.05 hereof and, in case the provisions of subdivision (4) of Section 5.05 hereof are applicable, the Independent Engineer’s Certificate provided for in said subdivision (4) of Section 5.05 hereof) as if such Property Additions were made the basis of an application for the authentication and delivery of bonds thereon (equivalent in principal amount to seventy per centum (70%) of the fair value of that portion of the property to be released which is to be released on the basis of such Property Additions, as shown by the Engineer’s Certificate in subdivision (2) of this Section provided for), and in case the release of property is in whole or in part based upon the right to the authentication and delivery of bonds (as permitted under the provisions of clause (c) of subdivision (3) of this Section) the Company shall comply with all applicable provisions of Section 6.01 hereof, as the case may be, relating to such authentication and delivery, except that in no such case shall the Company be required to comply with any earnings requirement or to deliver to the Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel provided for in subdivisions (1), (2), (6) and (8) of Section 5.05 hereof; provided,




however, that the Cost of any Property Additions received or to be received by the Company in whole or in part as consideration in exchange for the property to be released shall for all purposes of this Indenture be deemed to be the amount stated in the Engineer’s Certificate provided for in subdivision (2) of this Section to be the fair value of the property to be released (a) plus the amount of any cash and the fair value of any other consideration, further to be stated in such Engineer’s Certificate, paid and/or delivered or to be paid and/or delivered by, and the amount of any obligations assumed or to be assumed by, the Company in connection with such exchange as additional consideration for such Property Additions or (b) less the amount of any cash and the fair value to the Company of any other consideration, which shall also be stated in such Engineer’s Certificate, received or to be received by the Company in connection with such exchange in addition to such Property Additions.
For all purposes of this Article XI, the fair value of property subject to a lien prior to the Lien hereof shall be the fair value thereof less the principal amount of any obligations secured by such lien thereon if it will thereafter cease to be a lien on any property subject to the Lien hereof.
Notwithstanding any of the other provisions of this Indenture,
(C) to the extent that any property to be released is not Funded Property and the Property Additions made the basis of such release shall (as evidenced by a statement to such effect in an Engineer’s Certificate) have been acquired in exchange or consideration for, or acquired, made or constructed in anticipation of, the release of property (and shall never previously have been used as the basis of the release of property under the provisions of clause (b) of subdivision (3) of this Section or as the basis of the withdrawal of cash under subdivision (1) of Section 11.05) said Property Additions shall not have the status of Funded Property except to the extent of any amount which shall, at the time such Property Additions were made the basis of such release, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04, and
(D) to the extent that any property released shall not have been Funded Property just prior to its release,
(i) any Property Additions made the basis of such release of property shall not be deemed to be Funded Property except to the extent of any amount which shall, at the time such Property Additions were made the basis of such release, have been deducted from the Cost or fair value of such Property Additions. pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04, and
(ii) any waiver of the right to the authentication and delivery of bonds made the basis of such release of property shall be revoked and cease to be effective and shall no longer be deemed to have been made, if the Company shall within two years after the release of such property file with the Trustee such Officers’ Certificates, Engineers Certificates, Independent Engineer’s Certificates, Opinions of Counsel and other papers (other than any Resolution, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (6) and (8) of Section 5.05 hereof) as under the provisions of Article V hereof would entitle the Company, on the basis of Property Additions acquired, made or constructed subsequent to the application for the release of such property, to the authentication and delivery of bonds (equal in principal amount to seventy per centum (70%) of the fair value of such property so released), and the inclusion of such subsequently acquired Property Additions in any such Officers’ Certificate, Engineer’s




Certificate, Independent Engineer’s Certificate, Opinion of Counsel or other papers shall not make such subsequently acquired Property Additions Funded Property.

Any bonds Outstanding under this Indenture deposited with the Trustee, pursuant to the provisions of this Section, shall forthwith be cancelled by the Trustee, and any moneys and/or obligations secured by purchase money mortgage and/or other property and/or the proceeds of any thereof and/or substitutes therefor received by the Trustee under this Section shall be held as part of the Mortgaged and Pledged Property and such moneys and/or obligations secured by purchase money mortgage shall be paid over, withdrawn, used or applied, in the manner, to the extent, and for the purposes and subject to the conditions provided in Section 11.05 hereof.
Any property acquired by the Company by exchange or purchase to take the place of any property released under any provisions of this Article shall forthwith and without further conveyance become subject to the Lien of and be covered by this Indenture as a part of the Mortgaged and Pledged Property, subject to no lien except Excepted Encumbrances and any liens existing thereon just prior to the acquisition thereof.
Section 11.04.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Trustee shall whenever from time to time requested by the Company (such request to be evidenced by an Officers’ Certificate) and without requiring compliance with any of the provisions of Section 11.03 hereof, release from the Lien hereof all the right, title and interest of the Trustee in and to any real estate unimproved for use in the conduct of the business of the Company, provided the Company has sold, exchanged, dedicated or disposed of such real estate, or has agreed to sell, exchange, dedicate or dispose of such real estate, or, as evidenced by a Resolution, has authorized its officers to endeavor to sell such real estate, and provided the aggregate value of the interest of the Company in such real estate so released without such compliance in any period of twelve (12) consecutive calendar months shall not exceed the greater of One Million Dollars ($1,000,000) or three per centum (3%) of the bonds Outstanding hereunder on the date of such release. Prior to the granting of any such release, there shall be delivered to the Trustee an Engineer’s Certificate stating the fair value of the property to be released and that in the opinion of the signers the release thereof will not impair the security under this Indenture in contravention of the provisions hereof and setting forth any other facts required to be known by it as a condition precedent to any act by it under this Section. The Company covenants that it will deposit with the Trustee, to be dealt with in the manner provided in Section 11.05 hereof, the net consideration, if any, received by it upon the sale or other disposition of any such real estate so released (to the extent that the same shall not have been paid or delivered to the holder of another lien prior to the Lien of this Indenture in accordance with the provisions thereof and an Officers’ Certificate to that effect shall have been furnished to the Trustee), or if no consideration be received therefor or results therefrom to the Mortgaged and Pledged Property the Company will so deposit the fair value thereof.

Section 11.05.    Unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, any Funded Cash received by the Trustee shall be held by the Trustee and, subject to the provisions of Section 9.12 hereof, such cash and any cash which may be applied as in this Section provided,
(1) may be withdrawn from time to time by the Company to the extent of the Cost or the fair value to the Company (whichever is less) of Property Additions not then Funded Property (after making any deductions and additions pursuant to the provisions of Section 1.04 hereof);




provided, however, that no such withdrawal of cash representing the proceeds of insurance on or the release of property or securities or payment of or on account of obligations secured by purchase money mortgages may be based in whole or in part upon Property Additions acquired, made or constructed more than five years prior to the last day of the calendar month immediately preceding the receipt by the Trustee of such cash; and provided further, that Property Additions acquired, made or constructed within ninety (90) days prior to the date of the receipt by the Trustee of such cash representing the proceeds of insurance on or the release of property (including securities and other personal property, if any), or payment of or on account of obligations secured by purchase money mortgages, or subsequent to such receipt of cash, may, at the option of the Company, not have deducted therefrom the deductions nor added thereto the additions pursuant to Section 1.04 hereof;
(2) may be withdrawn from time to time by the Company in an amount equal to the principal amount of each bond or fraction of a bond to the authentication and delivery of which the Company shall be entitled under the provisions of Section 6.01 hereof, by virtue of compliance with all applicable provisions of said Section 6.01 (except as hereinafter in this Section otherwise provided); provided, however, that (except as hereinafter in this Section otherwise provided) the application for such withdrawal of cash shall operate as a waiver by the Company of such right to the authentication and delivery of each such bond or fraction thereof, on the basis of which right such cash is withdrawn, and any bonds which have been made the basis of any such right to the authentication and delivery of bond(s) or fraction of a bond so waived shall be deemed to have been made the basis of the withdrawal of such cash;
(3) may, upon the request of the Company, be used by the Trustee for the purchase of bonds issued hereunder in accordance with the provisions of Section 10.05; or
(4) may, upon the request of the Company, be applied by the Trustee to the payment at maturity of any bonds issued hereunder or to the redemption of any bonds issued hereunder which are, by their terms, redeemable, of such series as may be designated by the Company, such redemption to be in the manner and as provided in Article X hereof.
Such moneys shall, from time to time, be paid out or used or applied by the Trustee, as aforesaid, upon the request of the Company evidenced by a Resolution, and upon receipt by the Trustee of an Officers’ Certificate stating that the Company is not in default in the payment of the interest on any bonds then Outstanding hereunder and that no Default has occurred and is continuing. In case the withdrawal of cash is, in whole or in part, based upon Property Additions (as permitted under the provisions of clause (1) of this Section), the Company shall, subject to the provisions of said clause (1), comply with all applicable provisions of this Indenture (including but not limited to the furnishing of the Engineer’s Certificate provided for in subdivision (3) of Section 5.05 hereof and, in case the provisions of subdivision (4) of Section 5.05 hereof are applicable, the Independent Engineer’s Certificate provided for in said subdivision (4) of Section 5.05 hereof) as if such Property Additions were made the basis of an application for the authentication and delivery of bonds thereon equivalent in principal amount to seventy per centum (70%) of the cash to be withdrawn on such basis; or in case the withdrawal of cash is, in whole or in part, based upon the right to the authentication and delivery of bonds (as permitted under the provisions of clause (2) of this Section) the Company shall comply with all applicable provisions of Section 6.01 hereof, as the case may be, relating to such authentication and delivery; except that in no such case shall the Company be required to comply with any earnings requirement or to deliver to the Trustee any Resolution, Officers’ Certificate, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (2), (6) and (8) of Section 5.05 hereof.
Notwithstanding any of the other provisions of this Indenture,




(a)      to the extent that any cash to be withdrawn under the provisions of this Section represents the proceeds of property that was not Funded Property released, taken by eminent domain or damaged or destroyed by fire or represents payment on account of principal of, or consideration for the release of, obligations secured by purchase money mortgage which shall have been deposited with the Trustee as the basis of the release of property that was not Funded Property, and the application for the withdrawal of such cash is based upon Property Additions (which shall never previously have been used as the basis of the withdrawal of cash under subdivision (1) of this Section or as the basis of the release of property under the provisions of clause (b) of subdivision (3) of Section 11.03 hereof) acquired, made or constructed or to be acquired, made or constructed with such cash, or acquired, made or constructed in anticipation of the release of property or the withdrawal of cash (as evidenced by a statement to such effect in an Engineer’s Certificate), then such Property Additions shall not have the status of Funded Property, except to the extent of any amount which shall, at the time such Property Additions were made the basis of such withdrawal of cash, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04, and
(b)      to the extent that any cash withdrawn, used or applied under the provisions of this Section shall have represented the proceeds of property that was not Funded Property released, taken by eminent domain or damaged or destroyed by fire or shall have represented payment on account of principal of, or consideration for the release of, obligations secured by purchase money mortgage which shall have been deposited with the Trustee as the basis of the release of property that was not Funded Property,
(i)      such cash shall no longer be deemed to be, or to have been at the time of such withdrawal, use or application, Funded Cash;
(ii)      any Property Additions made the basis of such withdrawal of cash shall not be deemed to be Funded Property except to the extent of any amount which shall, at the time such Property Additions were made the basis of such withdrawal of cash, have been deducted from the Cost or fair value of such Property Additions pursuant to the provisions of clause (A) of Section 1.04 hereof less any amount which shall then have been added thereto pursuant to the provisions of clause (B) of said Section 1.04; and
(iii)      any waiver of the right to the authentication and delivery of bonds, made the basis of such withdrawal of cash, shall be revoked and cease to be effective and shall no longer be deemed to have been made, if the Company shall, within two years after the withdrawal, use or application of such cash, file with the Trustee such Officers’ Certificates, Engineer’s Certificates, Independent Engineer’s Certificates, Opinions of Counsel and other papers (other than any Resolution, Net Earning Certificate or Opinion of Counsel such as is described in subdivisions (1), (6) and (8) of Section 5.05 hereof) as, under the provisions of Article V hereof, would entitle the Company, on the basis of Property Additions acquired, made or constructed subsequent to the receipt by the Trustee of such cash, to the authentication and delivery of bonds equal in principal amount to seventy per centum (70%) of such cash so withdrawn, used or applied, and the inclusion of such subsequently acquired Property Additions in any such Officers’ Certificate, Engineer’s Certificate, Independent Engineer’s Certificate, Opinion of Counsel or other papers shall not make such subsequently acquired Property Additions Funded Property.




Any obligation secured by purchase money mortgage received or to be received by the Trustee under any of the provisions of this Indenture in consideration of the release of any property may be released at any time upon payment by the Company to the Trustee of all or the unpaid portion of the principal of such obligation; provided, however, at any time after the Trustee shall have received on account of the principal of any obligations secured by purchase money mortgage on a specified property (from the Company, the obligor or otherwise), an amount in cash equal to the aggregate principal amount of such obligations to the extent made the basis of a credit in the application for the release from the Lien hereof of such property, the Trustee shall deliver to the Company on the written request of the Chairman of the Board, Chief Executive Officer, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the Company, the purchase money mortgage on such property and all obligations secured thereby then held by the Trustee including, but not limited to, any such obligations delivered to the Trustee as required by subdivision (3) of Section 11.03 hereof but not used as a credit thereunder.
The principal of and interest on any such obligations secured by purchase money mortgage held by the Trustee shall be collected by the Trustee as and when the same become payable. Unless the Company is in default in the payment of the interest on any of the bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the interest received by the Trustee on any such obligations shall be paid over to the Company, and any payments received by the Trustee on account of the principal of any such obligations in excess of the amount of credit used by the Company in respect of such obligations upon the release of any property from the Lien hereof shall also be paid over to the Company.
The Trustee shall have and may exercise all the rights and powers of an owner of such obligations and of all substitutions therefor and, without limiting the generality of the foregoing, may collect and receive all insurance moneys payable to it under any of the provisions thereof and apply the same in accordance with the provisions thereof, may consent to extensions thereof at a higher or lower rate of interest, may join in any plan or plans of voluntary or involuntary reorganization or readjustment or rearrangement and may accept and hold hereunder new obligations, stocks or other securities issued in exchange therefor under any such plan. Any discretionary action which the Trustee may be entitled to take in connection with any such obligations or substitutions therefor shall be taken, so long as no Default shall exist, in accordance with the request of the Company, evidenced by a Resolution, and during the existence of a Default in its own discretion.
Any bonds issued under this Indenture received by the Trustee pursuant to the provisions of this Section shall forthwith be cancelled by the Trustee.
Section 11.06.    Should any of the Mortgaged and Pledged Property be taken by exercise of the power of eminent domain or by the exercise by any governmental authority or instrumentality or designee thereof of the right to purchase or otherwise acquire any of the Mortgaged and Pledged Property and should the Company not elect to release such property pursuant to other provisions of this Article XI, the Trustee shall, upon request of the Company, evidenced by an Officers’ Certificate, and upon receipt of the net proceeds referred to below, release from the Lien hereof, all its right, title and interest in and to the property so taken, purchased or otherwise acquired upon being furnished with an Opinion of Counsel to the effect that such property has been taken by exercise of the power of eminent domain or by the exercise by any governmental authority or instrumentality or designee thereof of the right to purchase or otherwise acquire the same. Such Opinion of Counsel shall state the amount of net proceeds received for such property so taken or acquired and the amount so stated shall be deemed to be the fair value of such property for the purpose of subdivision (b) of Section 16.13 hereof. An amount equal to the net proceeds of all




property so taken or acquired (which proceeds shall, in either event, be required to be entirely in the form of cash) shall be paid over to the Trustee (except to the extent that such net proceeds (not constituting proceeds of the Municipalization Interest) shall have been paid or delivered to the holder of a lien prior hereto in accordance with the provisions thereof and a certificate of such trustee or other holder to that effect shall have been furnished to the Trustee), and (if paid over to the Trustee hereunder) may, subject to the provisions of Section 9.12 hereof, thereafter be withdrawn, used or applied in the manner, to the extent, for the purposes and subject to the conditions provided in Section 11.05 hereof; provided, that if the Mortgaged and Pledged Property so taken, purchased or otherwise acquired constitutes all or substantially all of the Mortgaged and Pledged Property, then the provisions of Section 9.13 hereof shall govern.

Section 11.07.    In case the Mortgaged and Pledged Property shall be in the possession of a receiver or trustee, lawfully appointed, the powers hereinbefore conferred upon the Company with respect to the sale or other disposition of the Mortgaged and Pledged Property or the withdrawal of cash may be exercised, with the approval of the Trustee, by such receiver or trustee, notwithstanding the Company may be in default and any request, certificate, appointment or approval made or signed by such receiver or trustee for such purposes shall be as effective as if made by the Company or its Board of Directors or any of its officers or appointees in the manner herein provided; and if the Trustee shall be in possession of the Mortgaged and Pledged Property under any provision of this Indenture, then such powers may be exercised by the Trustee in its discretion notwithstanding that the Company may be in default.
Notwithstanding the existence of a default in the payment of interest on any bonds Outstanding hereunder or the existence of a Default, the Trustee, in its discretion, may release from the Lien hereof any part of the Mortgaged and Pledged Property or permit the withdrawal of cash, upon compliance with the other conditions specified in this Article in respect thereof.
No purchaser in good faith of property purporting to have been released hereunder shall be bound to ascertain the authority of the Trustee to execute the release, or to inquire as to any facts required by the provisions hereof for the exercise of this authority; nor shall any purchaser or grantee of any property or rights permitted by this Article to be sold, granted, exchanged, dedicated or otherwise disposed of, be under obligation to ascertain or inquire into the authority of the Company to make any such sale, grant, exchange, dedication or other disposition.
Section 11.08.    In addition to the other provisions for the release of Mortgaged and Pledged Property provided in this Indenture, unless the Company is in default in the payment of the interest on any bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, the Company may in the alternative also obtain the release of any of the Mortgaged and Pledged Property (except the Municipalization Interest or cash or obligations secured by purchase money mortgage or all or substantially all of the Mortgaged and Pledged Property) by delivery to the Trustee of the Officers’ Certificate provided for in subdivision (1) of Section 11.03 hereof, the Engineer’s Certificate provided for in subdivision (2) of Section 11.03 hereof, the Opinion of Counsel provided for in subdivision (7) of Section 11.03 hereof and a copy of a release of such Mortgaged and Pledged Property from the lien of the 1944 Mortgage executed by the Corporate Trustee thereunder.

Section 11.09.    In case the Company has sold, exchanged, dedicated or disposed of, or intends or has agreed to sell, exchange, dedicate or dispose of, or a governmental body or agency has exercised a right to order the Company to divest itself of, any property of a character excepted from the Lien hereof, or the Company desires to disclaim or quitclaim title to property to which the Company does not purport to have




title, the Trustee shall, from time to time, execute such instruments of disclaimer or quitclaim as may be appropriate upon receipt by the Trustee of the following:
(5) an Officers’ Certificate complying with the requirements of Section 19.05 hereof and describing in reasonable detail the property to be disclaimed or quitclaimed; and
(6) an Opinion of Counsel complying with the requirements of Section 19.05 hereof and stating the signer’s opinion that such property is not subject to the Lien hereof or required to be subject thereto by any of the provisions hereof; and stating that the execution of such disclaimer or quitclaim is appropriate.


ARTICLE XII

REMEDIES OF TRUSTEES AND BONDHOLDERS UPON DEFAULT

Section 12.01.    The following events are hereby defined for all purposes of this Indenture (except where the term is otherwise defined for specific purposes) as “Defaults”:
(a) Failure to pay the principal of any bond hereby secured when the same shall become due and payable, whether at maturity, as therein expressed, or upon redemption or by declaration or otherwise;
(b) Failure to pay interest upon any bond hereby secured for a period of ten (10) days after such interest shall have become due and payable;
(c) The expiration of a period of sixty (60) days following the entry of a decree or order by a court having jurisdiction in the premises for relief in respect of the Company under the Federal Bankruptcy Act or any other applicable Federal or State law of a similar nature, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of or for the Company or any substantial part of its property, or ordering the winding up or liquidation of its affairs unless during such period such decree, order or appointment of a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official shall be vacated or shall be stayed on appeal or otherwise or shall have otherwise ceased to continue in effect;
(d) The commencement by the Company of a voluntary case, or the institution by it of proceedings, to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization, arrangement or relief under the Federal Bankruptcy Act or any other applicable Federal or State law of a similar nature, or the consent or acquiescence by it to the filing of any such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action;
(e) The expiration of a period of thirty (30) days after the mailing by the Trustee to the Company of a written demand (citing this provision), or by the holders of fifteen per centum (15%) in principal amount of the bonds at the time Outstanding hereunder (determined as provided in Section 12.07 hereof) to the Company and to the Trustee of a written demand, that the Company perform a specified covenant or agreement contained herein or in any indenture supplemental hereto or in any bond secured hereby, which specified covenant or agreement the Company shall have failed to perform prior to such mailing, unless the Company during such period shall have performed such specified covenant or agreement or shall have in good faith commenced efforts to




perform the same. The Trustee may, and, if requested in writing so to do by the holders of a majority in principal amount of the bonds then Outstanding, shall, make such demand;
(f) The existence of any “Default”, as therein defined, in any indenture supplemental hereto; and
(g) The existence of any “Default”, as therein defined, under the 1944 Mortgage.

Section 12.02.    The Trustees shall, within thirty (30) days after the occurrence thereof, give to the bondholders in the manner and to the extent provided in subdivision (c) of Section 16.13 hereof, notice of all defaults known to the Trustees, unless such defaults shall have been cured before the giving of such notice (the term “defaults” for the purposes of this Section being hereby defined to be the events specified in subdivisions (a), (b), (c), (d), (e), (f) and (g) of Section 12.01 hereof, not including any periods of grace provided for in said subdivisions) but in the case of any default as specified in subdivision (e) of Section 12.01 hereof, no such notice shall be given until at least twenty (20) days after the occurrence thereof; provided that, except in the case of default in the payment of the principal of or interest on any of the bonds hereby secured, or in the payment of any installment of any fund required to be applied to the purchase or redemption of any of the bonds hereby secured, the Trustee shall be protected in withholding such notice if and so long as the board of directors, executive committee, or a trust committee of directors and/or Responsible Officers, of the Trustee in good faith determine that the withholding of such notice is in the interests of the bondholders and the Co-Trustee shall be protected in withholding such notice if and so long as the Co-Trustee in good faith determines that the withholding of such notice is in the interests of the bondholders.

Section 12.03.    Upon the occurrence of a Default, the Trustee may, and upon the written request of the holders of twenty-five per centum (25%) in principal amount of the bonds then Outstanding (determined as provided in Section 12.07 hereof) shall, and the holders of twenty-five per centum (25%) in principal amount of the bonds at the time Outstanding hereunder may, (unless the holders of bonds of any series have annulled a declaration of such Default relating to such series of bonds pursuant to the provisions of the supplemental indenture creating such series of bonds), by notice in writing given to the Company (and to the Trustee if such notice be given by bondholders) unless prior to such declaration all covenants with respect to which Default shall have occurred, shall have been fully performed or made good, and all indebtedness secured hereby (including interest on overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on any overdue interest at the rate specified in Section 12.14 hereof), (other than expenses and charges of the Trustees), except the principal of any bonds not then due by their terms (other than by such declaration) and except interest accrued on such bonds since the last interest payment date, shall be paid, or the amount thereof shall be paid to the Trustee for the benefit of those entitled thereto, declare the principal of all of the bonds hereby secured and the interest accrued thereon immediately due and payable, and such principal and interest shall thereupon become and be immediately due and payable; subject, however, to the right of the holders of a majority in principal amount of all Outstanding bonds, by written notice to the Company and to the Trustees, thereafter to annul such declaration and destroy its effect at any time before any sale hereunder, if, before any such sale, all covenants with respect to which a Default shall have occurred shall be fully performed or made good, and the reasonable expenses and charges of the Trustees, their agents and attorneys, and all other indebtedness secured hereby (including interest on overdue principal and, to the extent that payment of such interest is enforceable under applicable law, on any overdue interest, at the rate specified in Section 12.14 hereof), except the principal of any bonds not then due by their terms (other than by such declaration) and except interest accrued on such bonds since the last interest payment date, shall be paid, or the amount thereof shall be paid to the Trustee for the benefit of those entitled thereto.





Section 12.04.    Upon the occurrence of one or more Defaults, the Company, upon demand of the Trustees, or either of them, shall (if at the time such action shall be lawful) forthwith surrender to the Trustee or to both the Trustee and the Co-Trustee, or to the Co-Trustee to the extent that the Trustee is not legally qualified to take possession as it or they may demand, the actual possession of, and (if at the time such action shall be lawful) the Trustee, or the Trustee and the Co-Trustee, or the Co-Trustee to the extent that the Trustee is not legally qualified to act in the premises, as shall be specified in such demand, by such officer or agent as it or they may appoint, may take possession of, all the Mortgaged and Pledged Property (with the books, papers and accounts of the Company) and hold, operate and manage the same, and from time to time make all needful repairs and such extensions, additions and improvements as to the Trustee or the Trustee and the Co-Trustee, or the Co-Trustee to the extent the Trustee is not legally qualified to act in the premises, shall seem wise; and receive the tolls, rents, revenues, issues, earnings, income, products and profits thereof, and out of the same pay all proper costs and expenses of so taking, holding, managing and operating the same, including reasonable compensation to the Trustees, their agents and counsel, and any charges of the Trustees hereunder, and any taxes and assessments and other charges prior to the Lien of this Indenture which the Trustee or trustee in possession may deem it wise to pay, and all expenses of such repairs, extensions, additions and improvements, and apply the remainder of the moneys so received by the Trustee, or the Trustee and the Co-Trustee, or the Co-Trustee to the extent the Trustee is not legally qualified to act in the premises, subject to the provisions of Section 12.12 hereof with respect to extended, transferred or pledged coupons or claims for interest, first to the payment of the installments of interest which are due and unpaid (including, to the extent that payment thereof is enforceable under applicable law, interest on overdue interest at the rate specified in Section 12.14 hereof), in the order of their maturity, and next, if the principal of any of said bonds is due, to the payment of the principal and accrued interest thereon (including interest on overdue principal and, to the extent that payment thereof is enforceable under applicable law, interest on overdue interest, at the rate specified in Section 12.14 hereof) pro rata without any preference or priority whatever, except as aforesaid. Whenever all that is due upon such bonds and installments of interest and under any of the terms of this Indenture shall have been paid and all Defaults made good, the Trustees or trustee in possession shall surrender possession to the Company, its successors or assigns; the same right of entry, however, to exist upon any subsequent Default.

Section 12.05.    Upon the occurrence of one or more Defaults, the Trustees, by such officer or agent as they may appoint, with or without entry, may, if at the time such action shall be lawful, sell all the Mortgaged and Pledged Property as an entirety, or in such parcels as the holders of a majority in principal amount of the bonds Outstanding hereunder (determined as provided in Section 12.07 hereof) shall in writing request, or in the absence of such request, as the Trustees may determine, at public auction, at some convenient place in the City of New Orleans, Louisiana, or such other place or places as may be required by law, having first given notice of such sale by publication in at least one Daily Newspaper of general circulation in the City of New Orleans, Louisiana (if there be such a Daily Newspaper), once preceding such sale, the first publication to be made not less than twenty (20) days prior to the date of such sale, and by like publication in at least one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, and any other notice which may be required by law, and from time to time may (to the extent permitted by law) adjourn such sale in their discretion by announcement at the time and place fixed for such sale without further notice, and upon such sale may make and deliver to the purchaser or purchasers a good and sufficient instrument or instruments of conveyance, assignment or transfer for the same, which sale shall to the extent then permitted by law, be a perpetual bar, both at law and in equity, against the Company and all persons, firms and corporations lawfully claiming or who may claim by, through or under it.





Section 12.06.    In case of the breach of any of the covenants or conditions of this Indenture, the Trustees shall have the right and power to take appropriate judicial proceedings for the enforcement of their rights and the rights of the bondholders hereunder. In case of a Default the Trustees may either after entry, or without entry, proceed by suit or suits at law or in equity to enforce payment of the bonds then Outstanding hereunder and to foreclose this Indenture and to sell the Mortgaged and Pledged Property under the judgment or decree of a court or courts of competent jurisdiction.
No remedy by the terms of this Indenture conferred upon or reserved to the Trustees, or either of them (or to the bondholders), is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity or by statute.
No delay or omission to exercise any right or power accruing upon any Default shall impair any such right or power or shall be construed to be a waiver of any such Default or acquiescence therein; and every such right and power may be exercised from time to time and as often as may be deemed expedient.
No waiver of any Default, whether by the Trustee or by the bondholders, shall extend to or shall affect any subsequent Default or shall impair any rights or remedies consequent thereon.
Section 12.07.    The holders of not less than a majority in principal amount of the bonds at the time Outstanding hereunder may direct the time, method, and place of conducting any proceeding for any remedy available to the Trustees, or either of them, exercising any trust or power conferred upon the Trustees, or either of them, provided, however, that such direction shall not be otherwise than in accordance with the provisions of law and this Indenture and that, subject to the provisions of Sections 16.01 and 16.02 hereof, the Trustees shall have the right to decline to follow any such direction if the Trustee in good faith shall by Responsible Officers determine that the action or proceeding so directed would involve the Trustees, or either of them, in personal liability or be unjustifiably prejudicial to nonassenting bondholders or that it will not be sufficiently indemnified for any expenditures in any action or proceeding so directed.
For the purposes of this Section and of Sections 9.06, 12.01, 12.03, 12.05, 16.02, 16.14, 16.15, 18.02, 18.06, 18.10 and 19.06 hereof, and for the purpose of waiving, in accordance with any of the provisions of Section 18.07 hereof, any past Default of the Company and the consequences thereof, in determining whether the holders of the required percentage of the principal amount of bonds have concurred or participated in any direction or consent, (a) bonds for the purchase of which money in the necessary amount shall have been deposited with or shall then be held by the Trustee with irrevocable direction to apply the same to the purchase thereof shall be deemed Outstanding and (b) bonds owned by the Company or by any affiliate of the Company (unless all bonds at the time Outstanding hereunder are then so owned) shall be disregarded, except that for the purpose of determining whether the Trustees, or either of them, shall be protected in relying on any such direction or consent, only bonds which the Trustees, or either of them, know are so owned, shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this paragraph, if the pledgee shall establish to the satisfaction of the Trustees or the Trustee the pledgee’s right to vote such bonds and that the pledgee is not an affiliate of the Company. In case of a dispute as to such right, any decision by the Trustees, or either of them, taken upon the advice of counsel shall be full protection to the Trustees.
Section 12.08.    In case of a Default and upon the filing of a bill in equity or other commencement of judicial proceedings to enforce the rights of the Trustees and of the bondholders under this Indenture, the Trustees shall be entitled, as a matter of right (to the extent that such right is enforceable under applicable law), to the appointment of a receiver or receivers of the Mortgaged




and Pledged Property, and of the tolls, rents, revenues, issues, earnings, income, products and profits thereof, pending such proceedings, with such powers as the court making such appointment shall confer, whether or not the Mortgaged and Pledged Property shall be adequate to satisfy the bonds then Outstanding.

Section 12.09.    Upon any sale being made either under the power of sale hereby given or under judgment or decree in any judicial proceedings, for the foreclosure or otherwise for the enforcement of this Indenture, the principal of all bonds then secured hereby, if not previously due, shall become and be immediately due and payable.

Section 12.10.    Upon any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for foreclosure or otherwise for the enforcement of this Indenture, any bondholder or bondholders may bid for and purchase the Mortgaged and Pledged Property or any part thereof and upon compliance with the terms of sale may hold, retain and possess and dispose of such property in his, their or its own absolute right without further accountability, and any purchasers at any such sale may, in paying the purchase money, turn in any of the bonds Outstanding hereunder and coupons or claims for interest outstanding hereunder in lieu of cash to the amount which shall, upon distribution of the net proceeds of such sale, be payable thereon, subject, however, to the provisions of Section 12.12 hereof with respect to extended, transferred, or pledged coupons or claims for interest. Said bonds and coupons, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the holders thereof after being appropriately stamped to show partial payment.

Section 12.11.    Upon any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for the foreclosure or otherwise for the enforcement of this Indenture, the receipt of the Trustees, or either of them, or of the officer making such sale shall be a sufficient discharge to the purchaser or purchasers at any sale for his or their purchase money and such purchaser or purchasers, his or their assigns or personal representatives shall not, after paying such purchase money and receiving such receipt of the Trustees, or either of them, or of such officer therefor, be obliged to see to the application of such purchase money, or be in anywise answerable for any loss, misapplication or
non-application thereof.
Any sale made either under the power of sale hereby given or under judgment or decree in any judicial proceedings for the foreclosure or otherwise for the enforcement of this Indenture shall, if and to the extent then permitted by law, operate to divest all right, title, interest, claim and demand whatsoever, either at law or in equity, of the Company of, in and to the property so sold, and be a perpetual bar both at law and in equity against the Company, its successors and assigns and against any and all persons, firms or corporations claiming or who may claim the property sold, or any part thereof, from, through or under the Company, its successors or assigns.
Section 12.12.    The proceeds of any sale made either under the power of sale hereby given, or under judgment or decree in any judicial proceedings for the foreclosure or otherwise for the enforcement of this Indenture, together with any other amounts of cash which may then be held by the Trustees, or either of them, as part of the Mortgaged and Pledged Property, shall be applied, as follows:
First .--To the payment of all taxes, assessments, governmental charges and liens prior to the Lien of this Indenture, except those subject to which such sale shall have been made, and of all the costs and expenses of such sale, including reasonable compensation to the Trustees, their agents and (to the extent permitted by law) their attorneys, and of all other sums payable to the Trustees hereunder by reason of any expenses or liability incurred (in good faith and without




negligence by the Trustees) or advances made in connection with the management or administration of the trusts hereby created;
Second .--To the payment in full of the amounts then due and unpaid for principal, premium and interest upon the bonds then secured hereby; and in case such proceeds shall be insufficient to pay in full the amounts so due and unpaid, then to the payment thereof ratably, without preference or priority as to principal, premium or interest, or of any amount of interest over any other amount of interest; provided, however, that if the time for the payment of any coupon or claim for interest upon any of the bonds secured hereby shall have been extended (except pursuant to action taken under Article XVIII hereof) by or with the consent of the Company, or if any thereof at or after maturity shall have been transferred or pledged separate from the bond to which they relate, such coupons or claims for interest shall not be entitled in case of Default hereunder to the benefit or security of this Indenture except after the prior payment in full of the principal and premium, if any, of all bonds issued hereunder and then secured hereby and of all coupons and claims for interest on such bonds the payment of which has not been so extended, or not so transferred or pledged; but the foregoing provisions of this paragraph Second shall not be applicable to any coupon or claim for interest the time for the payment of which shall have been extended, if such extension be pursuant to a plan proposed by the Company to all holders of any one or more series of bonds then Outstanding and accepted by and binding upon the holder of such coupon or claim for interest; and
Third .--Any surplus thereof remaining to the Company, its successors or assigns or to it, him or them whosoever may be lawfully entitled to receive the same.
Section 12.13.    In case of a Default, to the extent that such rights may then lawfully be waived, neither the Company nor anyone claiming through or under it shall or will set up, claim, or seek to take advantage of any appraisement, valuation, stay, extension or redemption laws now or hereafter in force in any locality where any of the Mortgaged and Pledged Property may be situated, in order to prevent or hinder the enforcement or foreclosure of this Indenture, or the absolute sale of the Mortgaged and Pledged Property, or the final and absolute putting into possession thereof, immediately after such sale, of the purchaser or purchasers thereat, but the Company, for itself and all who may claim through or under it, hereby waives, to the extent that it lawfully may so do; the benefit of all such laws and all right of appraisement and redemption to which it may be entitled under the laws of any State where any of the Mortgaged and Pledged Property may be situated. The Company, for itself and all who may claim through or under it, waives, to the extent that it lawfully may do so, any and all right to have the estates comprised in the security intended to be created hereby marshalled upon any foreclosure of the Lien hereof, and agrees that any court having jurisdiction to foreclose such Lien may sell the Mortgaged and Pledged Property as an entirety.

Section 12.14.    The Company covenants that if default shall be made in the payment of the principal of any bond hereby secured when the same shall become due and payable, whether by the maturity of said bond or otherwise, or in the case of a default in the payment of the interest on any bond for a period of ten (10) days after such interest shall have become due and payable, then upon demand of the Trustee, the Company will pay to the Trustees, for the benefit of the holders of the bonds and coupons then secured hereby, the whole amount due and payable on all such bonds and coupons for principal, premium, if any, and interest, with interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.




In the case of a default in payment of the principal of any bond when the same shall become due and payable, or in the case of a default in the payment of the interest on any bond for a period of ten (10) days after such interest shall have become due and payable, the Trustees, or either of them, may recover judgment, in their own names and as trustees of an express trust, against the Company for the whole amount of such principal, interest and any premium remaining unpaid together with interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum.
The Trustees, or either of them, may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustees, or either of them, and of the bondholders allowed in any judicial proceedings relative to the Company or its creditors, or its property. In case of any receivership, insolvency, bankruptcy, reorganization or other similar proceedings affecting the Company or its property, the Trustee, irrespective of whether the principal of the bonds shall then be due and payable and irrespective of whether the Trustee shall have made any demand for such payment, shall be entitled and empowered either in its own name or as trustee of an express trust or as attorney in fact for the holders of the bonds and coupons, or in any one or more of such capacities, to file a proof of claim for the whole amount of principal and interest (with interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum) which may be or become owing and unpaid in respect of the bonds and for any additional amount which may be or become payable by the Company hereunder, without regard to or deduction for any amount which may have been or which may thereafter be received, collected or realized by the Trustees from or out of the Mortgaged and Pledged Property or any part thereof or from or out of the proceeds thereof or any part thereof; but nothing in this Indenture contained shall authorize the Trustees to accept or consent to any composition or plan of reorganization on behalf of any bondholder.
The Trustees, to the extent permitted by law, shall be entitled to sue and recover judgment and/or to file and prove such claim as aforesaid either before or after or during the pendency of any proceedings for the enforcement of the Lien of this Indenture upon the Mortgaged and Pledged Property, and in case of a sale of any of the Mortgaged and Pledged Property and of the application of the proceeds of sale to the payment of the debt hereby secured, the Trustees, in their own name and as trustees of an express trust, shall be entitled to enforce payment of and to receive all amounts then remaining due and unpaid upon any and all the bonds and coupons then Outstanding hereunder, for the benefit of the holders thereof, and the Trustees shall be entitled to recover judgment for any portion of the debt remaining unpaid, with interest. No recovery on any such judgment by the Trustees and no levy of any execution upon any such judgment upon any of the Mortgaged and Pledged Property or upon any other property shall in any manner or to any extent affect the Lien of this Indenture upon the Mortgaged and Pledged Property or any part thereof, or any rights, powers or remedies of the Trustees hereunder, or any lien, rights, powers or remedies of the holders of the said bonds, but such lien, rights, powers and remedies of the Trustees and of the bondholders shall continue unimpaired as before.
Any moneys thus collected or received by the Trustees under this Section shall be applied by them first, to the payment of their expenses, disbursements and compensation and the expenses, disbursements and compensation of their agents and attorneys, and, second, toward payment of the amounts then due and unpaid upon such bonds and coupons in respect of which such moneys shall have been collected, ratably and without preference or priority of any kind (subject to the provisions of Section 12.12 hereof with respect to extended, transferred or pledged coupons and claims for interest), according to the amounts due and payable upon such bonds and coupons, respectively, at the date fixed by the




Trustees for the distribution of such moneys, with interest on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on any overdue interest at the rate borne by the bonds with respect to which any such amount or amounts are overdue plus one per centum (1%) per annum, upon presentation of the several bonds and coupons and upon stamping such payment thereon, if partly paid, and upon surrender thereof, if fully paid.
Section 12.15.    All rights of action (including the right to file proofs of claim) under this Indenture or under any of the bonds or coupons may be enforced by the Trustees, or either of them, without the possession of any of the bonds or coupons or the production thereof in any trial or other proceeding relating thereto, and any such suit or proceeding instituted by the Trustees, or either of them, shall be brought in their names as Trustees, or in its or his name as Trustee or Co-Trustee, and any recovery of judgment shall be for the equal benefit of the holders of the Outstanding bonds and coupons, subject to the provisions of Section 12.12 hereof with respect to extended, transferred or pledged coupons and claims for interest.
In any proceeding brought by the Trustees, or either of them (including also any proceeding involving the interpretation of any provision of this Indenture to which the Trustees, or either of them, shall be a party), the Trustee or Trustees shall be held to represent all the holders of the bonds and coupons secured by this Indenture and it shall not be necessary to make such holders of the bonds and coupons parties to any such proceedings.
Section 12.16.    No holder of any bond or coupon shall have any right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Indenture or for the execution of any trust hereof or for the appointment of a receiver or any other remedy hereunder unless such holder shall have previously given to the Trustees written notice of a Default, nor unless also the holders of twenty-five per centum (25%) in principal amount of the bonds then Outstanding hereunder shall have made written request to the Trustees and shall have offered them reasonable opportunity either to proceed to exercise the powers hereinbefore granted or to institute such suit, action or proceeding in their own name and shall have offered to the Trustees security and indemnity satisfactory to the Trustees against the costs, expenses and liabilities to be incurred thereby without negligence or bad faith, and the Trustees shall have declined to take such action or shall have failed so to do within sixty (60) days thereafter; it being understood and intended that no one or more holders of the bonds or coupons shall have any right in any manner whatsoever to affect, disturb or prejudice the Lien of this Indenture by his or their action to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all holders of Outstanding bonds and coupons. Such notification, request and offer of indemnity are hereby declared, at the option of the Trustees, but subject to the provisions of Sections 16.01 and 16.02 hereof, to be conditions precedent to the execution by them of the powers and trusts of this Indenture and to the exercise by them of any action or cause of action or remedy hereunder.
Notwithstanding any other provision of this Indenture, the right of any holder of any bond to receive payment of the principal of and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such holder.
Section 12.17.    The Company may waive any period of grace provided for in this Article.
In case the Trustees shall have proceeded to enforce any right under this Indenture by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustees, then and in every such case the Company and the Trustees shall be restored to their former positions and rights hereunder with respect to the




Mortgaged and Pledged Property, and all rights, remedies and powers of the Trustees shall continue as if no such proceedings had been taken.


ARTICLE XIII

EVIDENCE OF RIGHTS OF BONDHOLDERS AND OWNERSHIP OF BONDS

Section 13.01.    Any request, declaration or other instrument, which this Indenture may require or permit to be signed and executed by the bondholders, may be in any number of concurrent instruments of similar tenor, and shall be signed or executed by such bondholders in person or by attorney appointed in writing. Proof of the execution of any such request or other instrument, or of a writing appointing any such attorney, or of the holding by any person of the bonds or coupons appertaining thereto, shall be sufficient (subject, insofar as the Trustees are concerned, to the provisions of Section 16.01 and Section 16.02 hereof) for any purpose of this Indenture (except as otherwise herein expressly provided) if made in the following manner:
(a) The fact and date of the execution by any person of such request or other instrument or writing may be proved by a witness or by a certificate acknowledged before a Notary Public or other officer authorized to take acknowledgments;
(b) The amount of bonds transferable by delivery held by any person executing such request or other instrument as a bondholder, and the series and serial numbers thereof, held by such person, and the date of his holding the same, may be proved by a certificate executed by any trust company, bank, banker or other depositary wherever situated, if such certificate shall be deemed by the Trustee to be satisfactory, showing that at the date therein mentioned such person had on deposit with such depositary the bonds described in such certificate. The Trustees, or either of them, may nevertheless in their discretion require further proof in cases where they deem further proof desirable. The ownership of registered bonds shall be proved by the registry books.
Any request, consent or vote of the owner of any bond shall bind all future holders and owners of said bond issued in exchange or substitution for said bond in respect of anything done or suffered by the Company or the Trustees in pursuance thereof.
Section 13.02.    The Company and the Trustees may deem and treat the bearer of any temporary or coupon bond Outstanding hereunder, which shall not at the time be registered as to principal as hereinbefore authorized, and the bearer of any coupon for interest on any such bond, whether such bond shall be registered or not, as the absolute owner of such bond or coupon, as the case may be, whether or not such bond or coupon shall be overdue, for the purpose of receiving payment thereof or on account thereof and for all other purposes, and neither the Company nor the Trustees shall be affected by any notice to the contrary.
The Company and the Trustees may, subject to the provisions of this Indenture providing for the use of a record date in certain cases, deem and treat the person in whose name any fully registered bond Outstanding hereunder shall be registered upon the books of the Company, as herein authorized, as the absolute owner of such bond for the purpose of receiving payment of or on account of the principal of and interest on such bond and for all other purposes, and they may deem and treat the person in whose name any coupon bond shall be so registered as to principal as the absolute owner thereof for the purpose of receiving payment of or on account of the principal thereof and for all other purposes, except to receive payment of interest represented by outstanding coupons; and all such payments so made to any such registered owner, or upon his order, shall be valid and effectual to satisfy and discharge the liability upon




such bond to the extent of the sum or sums so paid, and neither the Company nor the Trustees shall be affected by any notice to the contrary.
Neither the Company nor the Trustees shall be bound to recognize any person as the holder of a bond Outstanding under this Indenture unless and until his bond is submitted for inspection, if required, except as may otherwise be provided by regulations made under Section 18.03 hereof, and his title thereto satisfactorily established, if disputed.

ARTICLE XIV

IMMUNITY OF INCORPORATORS, SUBSCRIBERS TO THE
CAPITAL STOCK, STOCKHOLDERS, OFFICERS AND DIRECTORS

Section 14.01.    No recourse under or upon any obligation, covenant or agreement contained in this Indenture (including any indenture supplemental hereto) or in any bond or coupon hereby secured, or because of the creation of any indebtedness hereby secured, shall be had against any incorporator or any past, present or future subscriber to the capital stock, stockholder, officer or director of the Company or of any predecessor or successor corporation, as such, either directly or through the Company or any predecessor or successor corporation, under any rule of law, statute or constitution or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise; it being expressly agreed and understood that this Indenture and the obligations hereby secured are solely corporate obligations, and that no such personal liability shall attach to, or be incurred by, such incorporators, subscribers to the capital stock, stockholders, officers or directors of the Company or of any predecessor or successor corporation, or any of them, as such, because of the incurring of the indebtedness hereby authorized, or under or by reason of any of the obligations, covenants or agreements contained in this Indenture or in any of the bonds or coupons hereby secured, or implied therefrom, and that any and all such personal liability of every name and nature, and any and all such rights and claims against every such incorporator, subscriber to the capital stock, stockholder, officer or director, as such, whether arising at common law or in equity, or created by rule of law, statute, constitution or otherwise, are expressly released and waived as a condition of, and as part of the consideration for, the execution of this Indenture and the issue of the bonds and interest obligations secured hereby.


ARTICLE XV

EFFECT OF MERGER, CONSOLIDATION, ETC.

Section 15.01.    The Company may consolidate with, or merge into, any corporation having corporate authority to carry on any of the businesses mentioned in the first sentence of Section 1.04 of this Indenture, or may convey, transfer or lease, subject to the Lien of this Indenture, all or substantially all of the Mortgaged and Pledged Property as an entirety to any corporation lawfully entitled to acquire or lease or operate the same; provided, however, and the Company covenants and agrees, that such consolidation, merger, conveyance, transfer or lease shall be upon such terms as fully to preserve and in no respect to impair the Lien or security of this Indenture, or any of the rights or powers of the Trustees or the bondholders hereunder; and provided, further, that immediately after giving effect to such transaction, no Default shall have occurred and be continuing hereunder; and provided, further, that any such lease shall be made expressly subject to immediate termination by the Company or by the Trustees, or either of them, at any time during the continuance of a Default hereunder, and also by the purchaser of the property so leased at any sale thereof hereunder, whether such sale be made under the power of sale hereby conferred




or under judicial proceedings; and provided, further, that, upon any such consolidation, merger, conveyance or transfer, or upon any such lease the term of which extends beyond the date of maturity of any of the bonds secured hereby, the due and punctual payment of the principal and interest of all bonds secured hereby according to their tenor and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company shall be expressly assumed by an instrument in writing executed and delivered to the Trustees by the corporation formed by such consolidation or into which such merger shall have been made, or acquiring all or substantially all the Mortgaged and Pledged Property as an entirety, as aforesaid, or by the lessee under any such lease the term of which extends beyond the date of maturity of any of the bonds secured hereby. No such conveyance, transfer or lease of all or substantially all of the Mortgaged and Pledged Property as an entirety shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section from its liability as obligor and maker on any of the bonds secured hereby.

Section 15.02.    In case the Company, as permitted by Section 15.01 hereof, shall be consolidated with or merged into any other corporation or shall convey or transfer, subject to the Lien of this Indenture, all or substantially all the Mortgaged and Pledged Property as an entirety, the successor corporation formed by such consolidation, or into which the Company shall have been merged, or which shall have received a conveyance or transfer as aforesaid, upon executing with the Trustees and causing to be recorded an indenture whereby such successor corporation shall assume and agree to pay, duly and punctually, the principal of and interest on the bonds issued hereunder in accordance with the provisions of said bonds and coupons and this Indenture, and shall agree to perform and fulfill all the covenants and conditions of this Indenture to be kept or performed by the Company, shall succeed to and be substituted for the Company with the same effect as if it had been named herein, and shall have and may exercise under this Indenture the same powers and rights as the Company, and (without in anywise limiting or impairing by the enumeration of the same the scope and intent of the foregoing general powers and rights) such successor corporation thereafter may cause to be executed, authenticated and delivered, either in its own name or in the name of New Orleans Public Service Inc., as its name is now or shall then exist, in respect of property of the character defined in Section 1.04 hereof as Property Additions, such bonds as could or might have been executed, issued and delivered by the Company had it acquired such property of such character by purchase on or after the date of such consolidation, merger, conveyance or transfer, and had such consolidation, merger, conveyance or transfer not occurred, and upon the order of such successor corporation in lieu of the Company, and subject to all the terms, conditions and restrictions in this Indenture prescribed concerning the authentication and delivery of bonds, the Trustee shall authenticate and deliver any bonds delivered to it for authentication which shall have been previously signed by the proper officers of the Company, and such bonds as the successor corporation shall thereafter, in accordance with the provisions of this Indenture cause to be executed and delivered to the Trustee for such purpose, and such successor corporation shall also have and may exercise in respect of the property of such character, and subject to all the terms, conditions and restrictions in this Indenture prescribed applicable thereto, whether as to withdrawal of cash, release of property, or otherwise, the same powers and rights which the Company might or could exercise had it acquired the property of such character by purchase on or after the date of such consolidation, merger, conveyance or transfer, and had such consolidation, merger, conveyance or transfer not occurred. All the bonds so issued or delivered by the Company shall in all respects have the same legal right and security as the bonds theretofore issued or delivered in accordance with the terms of this Indenture as though all of said bonds had been authenticated and delivered at the date of the execution hereof. As a condition precedent to the execution by such successor corporation and the authentication and delivery by the Trustee of any such additional bonds or the withdrawal of cash or release of property, under any of the provisions of this Indenture, on the basis of property of the character defined in this Indenture as Property Additions acquired, made or




constructed by the successor corporation or by any corporation with which the Company or any successor corporation may be so consolidated or into which the Company or any successor corporation may be so merged or to which the Company ox any successor corporation may make any such conveyance, the indenture with the Trustees to be executed and caused to be recorded by the successor corporation as in this Section provided, or a subsequent indenture, shall contain a conveyance or transfer and mortgage in terms sufficient to subject such property to the Lien hereof; and provided, further, that the lien created thereby and the lien thereon shall have similar force, effect and standing as the Lien of this Indenture would have if the Company should not be consolidated with or merged into such other corporation or should not convey or transfer, subject to this Indenture, all or substantially all the Mortgaged and Pledged Property as an entirety, as aforesaid, to such successor corporation, and should itself on or after the date of such consolidation, merger, conveyance or transfer, acquire or construct such property, and in respect thereof should request the authentication and delivery of bonds or the withdrawal of cash or the release of property under the provisions of this Indenture.

Section 15.03.    In case the Company, as permitted by Section 15.01 of this Indenture, shall be consolidated with or merged into any other corporation, or shall convey or transfer, subject to the Lien of this Indenture, all or substantially all the Mortgaged and Pledged Property as an entirety as aforesaid, neither this Indenture nor the indenture with the Trustees to be executed and caused to be recorded by the successor corporation as in Section 15.02 hereof provided, shall, unless such indenture shall otherwise provide, become or be or be required to become or be a lien upon any of the properties, rights or franchises then owned or thereafter acquired by the successor corporation (by purchase, consolidation, merger, donation, construction, erection or in any other way) except (a) those acquired by it from the Company, and improvements, extensions and additions thereto and renewals and replacements thereof, (b) the property made and used by the successor corporation as the basis under any of the provisions of this Indenture for the authentication and delivery of additional bonds or the withdrawal of cash or the release of property, and (c) such franchises, repairs and additional property as may be acquired, made or constructed by the successor corporation (1) to maintain, renew and preserve the franchises covered by this Indenture, or (2) to maintain the property mortgaged and intended to be mortgaged hereunder as an operating system or systems in good repair, working order and condition, or (3) in rebuilding or renewal of property, subject to the Lien hereof, damaged or destroyed, or (4) in replacement of or substitution for machinery, apparatus, equipment, frames, towers, poles, wire, pipe, rails, ties, switches, tools, implements and furniture, subject to the Lien hereof, which shall have become old, inadequate, obsolete, worn out, unfit, unadapted, unserviceable, undesirable or unnecessary for use in the operation of the property mortgaged, and intended to be mortgaged hereunder.


ARTICLE XVI

CONCERNING THE TRUSTEES

Section 16.01.    The Trustee shall at all times be a bank or trust company eligible under Section 9.03 hereof and have (i) in respect of the Original Trustee, a combined capital and surplus of not less than Five Million Dollars ($5,000,000) and (ii) in respect of any successor Trustee appointed hereunder, a combined capital and surplus of at least Fifty Million Dollars ($50,000,000). If the Trustee publishes reports of condition at least annually, pursuant to law or to the requirement of any supervising or examining authority referred to in Section 9.03 hereof, then for the purposes of this Section the combined capital and surplus of the Trustee shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.




Any Co-Trustee appointed in succession to the Original Co-Trustee shall always be an individual who shall be a citizen of the United States of America, or a bank or trust company having combined capital and surplus of not less than One Hundred and Fifty Thousand Dollars ($150,000), organized and doing business under the laws of the United States or of one of the States thereof or the District of Columbia which is authorized under such laws to exercise corporate trust powers, unless otherwise required by law.
The Trustees hereby accept the trust hereby created. The Trustees undertake, prior to Default, and after the curing of all such Defaults which may have occurred, to perform such duties and only such duties as are specifically set forth in this Indenture, and in case of such Default (which has not been cured) to exercise such of the rights and powers vested in them by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. For the purposes of this Section 16.01 and of Section 16.02 hereof a Default shall be deemed cured when the act or omission or other event giving rise to such Default shall have been cured, remedied or terminated.
The Trustee, upon receipt of evidence furnished to it by or on behalf of the Company pursuant to any provision of this Indenture, will examine the same to determine whether or not such evidence conforms to the requirements of this Indenture.
Section 16.02.    No provision of this Indenture shall be construed to relieve the Trustees, or either of them, from liability for their, its or his own negligent action, negligent failure to act, or willful misconduct, except that
(c) prior to Default, and after the curing of all such Defaults which may have occurred, the Trustees, or either of them, shall not be liable except for the performance of such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustees, or either of them, but the duties and obligations of the Trustees, or either of them, prior to Default, and after the curing of all such Defaults which may have occurred, shall be determined solely by the express provisions of this Indenture; and
(d) prior to Default, and after the curing of all such Defaults which may have occurred, and in the absence of bad faith on the part of the Trustee, the Trustees, or either of them, may conclusively rely as to the truth of the statements and the correctness of opinions expressed therein, upon certificates or opinions conforming to the requirements of this Indenture; and
(e) no Trustee which is a corporation shall be personally liable for any error of judgment made in good faith by a Responsible Officer or Responsible Officers of such Trustee unless it shall be proved that such Trustee was negligent in ascertaining the pertinent facts and no Co-Trustee who is an individual shall be personally liable for any error of judgment made in good faith by him unless it shall be proved that he was negligent in ascertaining the pertinent facts; and
(f) the Trustees, or either of them, shall not be personally liable with respect to any action taken or omitted to be taken by them, or either of them, in good faith in accordance with the direction of the holders of not less than a majority in principal amount of the bonds at the time Outstanding (determined as provided in Section 12.07 hereof) relating to the time, method and place of conducting any proceeding for any remedy available to the Trustees, or either of them, or exercising any trust or power conferred upon the Trustees, or either of them, under this Indenture; and




(g) the Trustees may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustees shall not be responsible for any misconduct or negligence on the part of any agent or attorney who is not, in either case, an employee of the Trustees, appointed with due care by them or either of them hereunder.

Section 16.03.    The recitals contained herein and in the bonds shall be taken as the statements of the Company and the Trustees, or either of them, assume no responsibility for the correctness of the same. The Trustees, or either of them, make no representations as to the conditions, genuineness, validity or value of the Mortgaged and Pledged Property or any part thereof, or as to the title of the Company thereto, or as to the validity or adequacy of the security afforded thereby and hereby, or as to the validity of this Indenture or of the bonds or coupons issued hereunder. The Trustees, or either of them shall be under no responsibility or duty with respect to the disposition of any bonds authenticated and delivered hereunder or the application of the proceeds thereof or the application of any moneys paid to the Company under any of the provisions hereof.

Section 16.04.    The Trustees, or either of them, shall not be personally liable in case of entry by them, or either of them, upon the Mortgaged and Pledged Property for debts contracted or liability or damages incurred in the management or operation of said property.
The Trustee, Co-Trustee, any paying agent, bond registrar, or authenticating agent, in its individual or any other capacity, may become the holder, owner or pledgee of bonds or coupons secured hereby and, subject to Sections 19.11 and 16.12 hereof, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Co-Trustee, paying agent, bond registrar or authenticating agent.
Section 16.05.    Whenever it is provided in this Indenture that the Trustees, or either of them, shall take any action upon the happening of a specified event or upon the fulfillment of any condition or upon the request of the Company or of bondholders, the Trustees, or either of them, taking such action shall have full power to give any and all notices and to do any and all acts and things incidental to such action.

Section 16.06.    Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustees, or either of them, on the Company shall be deemed to have been sufficiently given or served, for all purposes, by being deposited postage prepaid in a post office letter box addressed (until another address is filed by the Company with the Trustee for the purpose of this Section) to the Company at the address given in the first paragraph of this Indenture.

Section 16.07.    To the extent permitted by Sections 16.01 and 16.02 hereof:
(1)
The Trustees, or either of them, may rely and shall be protected in acting upon any Resolution, Officers’ Certificate, Engineer’s Certificate, Independent Engineer’s Certificate, Net Earning Certificate, Opinion of Counsel, resolution, certificate, opinion, notice, request, consent, order, appraisal, report, bond or other paper or document believed by them, it or him to be genuine and to have been signed or presented by the proper party or parties; and any request or direction of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate, Resolution or written order; and
(2)
The Trustees, or either of them, may consult with counsel, who may be of counsel to the Company, and the opinion of such counsel shall be full and complete




authorization and protection in respect of any action taken or suffered by them, it or him hereunder in good faith and in accordance with the opinion of such counsel.

The Trustees, or either of them, shall not be under any responsibility for the selection, appointment or approval of any expert for any of the purposes expressed in this Indenture, except that nothing in this Section contained shall relieve the Trustees, or either of them, of their, its or his obligation to exercise reasonable care with respect to such selection, appointment or approval of independent experts who may furnish opinions or certificates to the Trustees, or either of them, pursuant to any provision of this Indenture.
Nothing contained in this Section shall be deemed to modify the obligation of the Trustees, or either of them, to exercise during the continuance of a Default the rights and powers vested in them, it or him by this Indenture with the degree of care and skill specified in Section 16.01 hereof.
Section 16.08.    Subject to the provisions of Section 19.03 hereof, all moneys received by the Trustees, or either of them, whether as Trustee, Co-Trustee, or paying agent shall, until used or applied as herein provided, be held in trust for the purposes for which they were paid, but need not be segregated from other funds except to the extent required by law. The Trustee may allow and credit to the Company interest on any moneys received by it hereunder at such rate, if any, and upon such terms as may be agreed upon with the Company from time to time and as may be permitted by law.
None of the provisions contained in this Indenture shall require the Trustees, or either of them, to expend or risk their, its or his own funds or otherwise incur personal financial liability in the performance of any of their, its or his duties or in the exercise of any of their, its or his rights or powers, if there is reasonable ground for believing that the repayment of such funds or liability is not reasonably assured to them, it, or him.
Section 16.09.    The Company covenants and agrees to pay to the Trustees from time to time, and the Trustees shall be entitled to, reasonable compensation for all services rendered by them in the execution of the trusts hereby created and in the exercise and performance of any of the powers and duties hereunder of the Trustees, which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust, and the Company will reimburse the Trustees for all appropriate advances made by the Trustees, or either of them, pursuant to this Indenture and in performance of its or their duties, and will pay to the Trustees from time to time their expenses and disbursements (including the reasonable compensation and the expenses and disbursements of all persons not regularly in its employ and, to the extent permitted by law, of its counsel) incurred without negligence or bad faith. The Company also covenants to indemnify the Trustees and each of them for, and to hold them and each of them harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Trustees or such Trustee, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending against any claim of liability in the premises. To secure the performance of the obligations of the Company under this Section, the Trustees and each of them shall have (in addition to any other rights under this Indenture) a lien prior to that of the bonds upon the trust estate, including all property and funds held or collected by the Trustees.
If, and to the extent that, the Trustees, and either of them, and their counsel and other persons not regularly in their, its or his employ do not receive compensation for services rendered, reimbursement of its, their or his advances, expenses and disbursements, or indemnity, as herein provided, as the result of allowances made in any reorganization, bankruptcy, receivership, liquidation or other proceeding or by any plan of reorganization or readjustment of obligations of the Company, the Trustees,




or either of them, shall be entitled, in priority to the holders of the bonds, to receive any distribution of any securities, dividends or other disbursements which would otherwise be made to the holders of bonds in any such proceeding or proceedings and the Trustees, or either of them, are hereby constituted and appointed, irrevocably, the attorneys-in-fact for the holders of the bonds and each of them to collect and receive, in their name, place and stead, such distributions, dividends or other disbursements, to deduct therefrom the amounts due to the Trustees, or either of them, their, its or his counsel and other persons not regularly in their, its or his employ on account of services rendered, advances, expenses, and disbursements made or incurred, or indemnity, and to pay and distribute the balance, pro rata, to the holders of the bonds. The Trustees shall have a lien upon any securities or other considerations to which the holders of bonds may become entitled pursuant to any such plan of reorganization or readjustment of obligations, or in any such proceeding or proceedings; and the court or judge in any such proceeding or proceedings may determine the terms and conditions under which any such lien shall exist and be enforced.
Section 16.10.    Whenever in the administration of the trusts of this Indenture, prior to a Default and after the curing of any such Default, the Trustees, or either of them, shall deem it necessary or desirable that a matter be proved or established prior to taking or suffering any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may to the extent permitted by Sections 16.01 and 16.02 hereof be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, of the Company and delivered to the Trustees, or either of them, and such certificate shall be full warrant to the Trustees, or either of them, for any action taken or suffered by them, it or him under the provisions of this Indenture upon the faith thereof.

Section 16.11.    [This Section shall not be operative as a part of this Indenture until this Indenture is qualified under the Trust Indenture Act, and, until such qualification, this Indenture shall be construed as if this Section were not contained herein.]
(h) Subject to the provisions of subdivision (b) of this Section, if the Trustee or Co-Trustee shall be or shall become a creditor, directly or indirectly, secured or unsecured, of the Company within four months prior to a default (as defined in the last paragraph of this subdivision), or subsequent to such a default, then, unless and until such default shall be cured, the Trustee or Co-Trustee shall set apart and hold in a special account for the benefit of the Trustee or Co-Trustee individually, the holders of the bonds, and the holders of other indenture securities (as defined in the last paragraph of this subdivision (a))
(1)
an amount equal to any and all reductions in the amount due and owing upon any claim as such creditor in respect of principal or interest effected after the beginning of such four months’ period and valid as against the Company and its other creditors, except any such reduction resulting from the receipt or disposition of any property described in paragraph (2) of this subdivision (a) or from the exercise of any right of set-off which the Trustee or Co-Trustee could have exercised if a petition in bankruptcy had been filed by or against the Company upon the date of such default; and
(2)
all property received in respect of any claim as such creditor, either as security therefor, or in satisfaction or composition thereof, or otherwise, after the beginning of such four months’ period, or an amount equal to the proceeds of any such property, if disposed of, subject, however, to the rights, if any, of the Company and its other creditors in such property or such proceeds.




Nothing herein contained, however, shall affect the right of the Trustee or Co-Trustee
(A)      to retain for its or his own account (i) payments made on account of any such claim by any person (other than the Company) who is liable thereon, and (ii) the proceeds of the bona fide sale of any such claim by the Trustee or Co-Trustee to a third person, and (iii) distributions made in cash, securities, or other property in respect of claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law;
(B)      to realize for its or his own account, upon any property held by it as security for any such claim, if such property was so held prior to the beginning of such four months’ period;
(C)      to realize, for its or his own account, but only to the extent of the claim hereinafter mentioned, upon any property held by it as security for any such claim, if such claim was created after the beginning of such four months’ period and such property was received as security therefor simultaneously with the creation thereof, and if the Trustee or Co-Trustee shall sustain the burden of proving that at the time such property was so received the Trustee or Co-Trustee had no reasonable cause to believe that a default as defined in the last paragraph of this subdivision (a) would occur within four months; or
(D)      to receive payment on any claim referred to in paragraph (B) or (C), against the release of any property held as security for such claim as provided in paragraph (B) or (C), as the case may be, to the extent of the fair value of such property.
For the purposes of paragraphs (B), (C), and (D), property substituted after the beginning of such four months’ period for property held as security at the time of such substitution shall, to the extent of the fair value of the property released, have the same status as the property released, and, to the extent that any claim referred to in any of such paragraphs is created in renewal of or in substitution for or for the purpose of repaying or refunding any pre-existing claim of the Trustee or Co-Trustee as such creditor, such claim shall have the same status as such pre-existing claim.
If the Trustee or Co-Trustee shall be required to account, the funds and property held in such special account and the proceeds thereof shall be apportioned between the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities in such manner that the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities realize, as a result of payments from such special account and payments of dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, the same percentage of their respective claims, figured before crediting to the claim of the Trustee or Co-Trustee anything on account of the receipt by it from the Company of the funds and property in such special account and before crediting to the respective claims of the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities dividends on claims filed against the Company in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, but after crediting thereon receipts on account of the indebtedness represented by their respective claims from all sources other than from such dividends and from the funds and property so held in such special account. As used in this paragraph, with respect to any claim, the term “dividends” shall include any distribution with respect to such claim, in bankruptcy or receivership or in proceedings for reorganization pursuant to the Federal Bankruptcy Act or applicable State law, whether such distribution is made in cash, securities, or other property, but shall not include any such distribution with respect to the secured portion, if any, of such claim. The court in which such bankruptcy, receivership or proceeding for reorganization is pending shall have jurisdiction (i) to apportion between




the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities, in accordance with the provisions of this paragraph, the funds and property held in such special account and the proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to give to the provisions of this paragraph due consideration in determining the fairness of the distributions to be made to the Trustee or Co-Trustee, the bondholders, and the holders of other indenture securities, with respect to their respective claims, in which event it shall not be necessary to liquidate or to appraise the value of any securities or other property held in such special account or as security for any such claim, or to make a specific allocation of such distributions as between the secured and unsecured portions of such claims, or otherwise to apply the provisions of this paragraph as a mathematical formula.
Any Trustee or Co-Trustee who has resigned or been removed after the beginning of such four months’ period shall be subject to the provisions of this subdivision (a) as though such resignation or removal had not occurred. If any Trustee or Co-Trustee has resigned or been removed prior to the beginning of such four months’ period, it shall be subject to the provisions of this subdivision (a) if and only if the following conditions exist--
(i)      the receipt of property or reduction of claim which would have given rise to the obligation to account, if such Trustee or Co-Trustee had continued as Trustee or Co-Trustee, occurred after the beginning of such four months’ period; and
(ii)      such receipt of property or reduction of claim occurred within four months after such resignation or removal.
As used in this Section, the term “default” means any failure to make payment in full of the principal of or interest upon the bonds or upon the other indenture securities when and as such principal or interest becomes due and payable; and the term “other indenture securities” means securities upon which the Company is an obligor (as defined in the Trust Indenture Act of 1939, as amended) outstanding under any other indenture (a) under which such Trustee or Co-Trustee is also trustee, (b) which contains provisions substantially similar to the provisions of this subdivision (a), and (c) under which a default exists at the time of the apportionment of the funds and property held in said special account.
(b) There shall be excluded from the operation of subdivision (a) of this Section a creditor relationship arising from--
(1)      the ownership or acquisition of securities issued under any indenture, or any security or securities having a maturity of one (1) year or more at the time of acquisition by such Trustee or Co-Trustee;
(2)      advances authorized by a receivership or bankruptcy court of competent jurisdiction or by this Indenture for the purpose of preserving the property subject to the Lien of this Indenture or of discharging tax liens or other prior liens or encumbrances on the trust estate, if notice of such advance and of the circumstances surrounding the making thereof is given to the bondholders as provided in subdivisions (a), (b) and (c) of Section 16.13 hereof with respect to advances by the Trustee or Co-Trustee as such;
(3)      disbursements made in the ordinary course of business in the capacity of trustee under an indenture, transfer agent, registrar, custodian, paying agent, fiscal agent or depositary, or other similar capacity;




(4)      an indebtedness created as a result of services rendered or premises rented; or an indebtedness created as a result of goods or securities sold in a cash transaction as defined in the last paragraph of this subdivision (b);
(5)      the ownership of stock or of other securities of a corporation organized under the provisions of Section 25(a) of the Federal Reserve Act, as amended, which is directly or indirectly a creditor of the Company; or
(6)      the acquisition, ownership, acceptance or negotiation of any drafts, bills of exchange, acceptances or obligations which fall within the classification of self-liquidating paper as defined in the last paragraph of this subdivision (b).
As used in this Section, the term “security” shall have the meaning assigned to such term in the Securities Act of 1933, as amended and in force on the date of the execution of this Indenture; the term “cash transaction” shall mean any transaction in which full payment for goods or securities sold is made within seven days after delivery of the goods or securities in currency or in checks or other orders drawn upon banks or bankers and payable upon demand; the term “self-liquidating paper” shall mean any draft, bill of exchange, acceptance or obligation which is made, drawn, negotiated or incurred by the Company for the purpose of financing the purchase, processing, manufacture, shipment, storage or sale of goods, wares or merchandise and which is secured by documents evidencing title to, possession of, or a lien upon, the goods, wares or merchandise or the receivables or proceeds arising from the sale of the goods, wares or merchandise previously constituting the security, provided the security is received by the Trustee or Co-Trustee simultaneously with the creation of the creditor relationship with the Company arising from the making, drawing, negotiating or incurring of the draft, bill of exchange, acceptance or obligation; and the term “Trustee” shall include the Trustee or Co-Trustee, and any separate trustee or co-trustee appointed pursuant to Section 16.16 hereof.
Section 16.12.    [This Section shall not be operative as a part of this Indenture until this Indenture is qualified under the Trust Indenture Act, and, until such qualification, this Indenture shall be construed as if this Section were not contained herein.]
(i) If the Trustee or Co-Trustee has or acquires any conflicting interest, as defined by subdivision (d) of this Section, the Trustee or Co-Trustee shall within ninety (90) days after ascertaining that it or he has such conflicting interest, either eliminate such conflicting interest or resign by giving written notice to the Company, but such resignation shall not become effective until the appointment of a successor trustee or co-trustee and such successor’s acceptance of such appointment. The Company covenants to take prompt steps to have a successor appointed in the manner hereinafter provided in Section 16.15 hereof. Upon giving such notice of resignation, the resigning Trustee or Co-Trustee shall publish notice thereof in a Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, and in a Daily Newspaper of general circulation in the City of New Orleans, Louisiana, once, provided, however, that if all bonds then Outstanding shall be registered as to principal, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. If the resigning Trustee or Co‑Trustee fails to publish such notice within ten (10) days after giving written notice of resignation to the Company, the Company shall publish such notice.
(j) In the event that the Trustee or Co-Trustee shall fail to comply with the provisions of the preceding subdivision (a) of this Section, the Trustee or Co-Trustee shall within ten (10) days after the expiration of such ninety (90) day period transmit notice of such failure to the bondholders in the manner and to the extent provided in subdivision (c)




of Section 16.13 hereof with respect to reports pursuant to subdivision (a) of Section 16.13 hereof.
(k) Subject to the provisions of Section 19.06 hereof, any bondholder who has been a bona fide holder of a bond or bonds for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee or Co‑Trustee and the appointment of a successor if the Trustee or Co-Trustee fails, after written request therefor by such holder, to comply with the provisions of subdivision (a) of this Section.
(l) The Trustee or Co-Trustee shall be deemed to have a conflicting interest if--
(1) the Trustee or Co-Trustee is trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the Company, are outstanding unless such other indenture is a collateral trust indenture under which the only collateral consists of bonds issued under this Indenture; provided that there shall be excluded from the operation of this paragraph (1) another indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the Company shall have sustained the burden of proving, on application to the Securities and Exchange Commission and after opportunity for hearing thereon, that trusteeship under this Indenture and such other indenture is not so likely to involve a material conflict of interest as to make it necessary in the public interest or for the protection of investors to disqualify the Trustee or Co-Trustee from acting as such under one of such indentures;
(2) the Trustee or Co-Trustee or any of its directors or executive officers is an obligor upon the bonds or an underwriter for the Company;
(3) the Trustee or Co-Trustee directly or indirectly controls or is directly or indirectly controlled by or is under direct or indirect common control with the Company or an underwriter for the Company;
(4) the Trustee or Co-Trustee or any of its directors or executive officers is a director, officer, partner, employee, appointee or representative of the Company, or of an underwriter (other than the Trustee or Co-Trustee itself or himself) for the Company who is currently engaged in the business of underwriting, except that (A) one individual may be a director and/or an executive officer of the Trustee or Co-Trustee and a director and/or an executive officer of the Company, but may not be at the same time an executive officer of both the Trustee or Co-Trustee and the Company; (B) if and so long as the number of directors of the Trustee or Co-Trustee in office is more than nine, one additional individual may be a director and/or an executive officer of the Trustee or Co-Trustee and a director of the Company; and (C) the Trustee or Co-Trustee may be designated by the Company or by any underwriter for the Company to act in the capacity of transfer agent, registrar, custodian, paying agent, fiscal agent, escrow agent or depositary or in any other similar capacity or, subject to the provisions of paragraph (1) of this subdivision (d), to act as trustee, whether under an indenture or otherwise;
(5) ten per centum (10%) or more of the voting securities of the Trustee or Co-Trustee is beneficially owned either by the Company or by any director, partner or executive officer thereof, or twenty per centum (20%) or more of such voting securities is beneficially owned, collectively, by any two or more of such persons; or ten per centum (10%) or more of the voting securities of the Trustee or Co-Trustee is beneficially owned either by an underwriter for the Company or by any director, partner or executive officer thereof, or is beneficially owned, collectively, by any two or more such persons;
(6) the Trustee or Co-Trustee is the beneficial owner of or holds as collateral security for an obligation which is in default, (A) five per centum (5%) or more of the




voting securities or ten per centum (10%) or more of any other class of security of the Company, not including the bonds issued under this Indenture and securities issued under any other indenture under which the Trustee or Co-Trustee is also trustee, or (B) ten per centum (10%) or more of any class of security of an underwriter for the Company;
(7) the Trustee or Co-Trustee is the beneficial owner of, or holds as collateral security for an obligation which is in default, five per centum (5%) or more of the voting securities of any person who, to the knowledge of the Trustee or Co-Trustee, owns ten per centum (10%) or more of the voting securities of, or controls directly or indirectly or is under direct or indirect common control with, the Company;
(8) the Trustee or Co-Trustee is the beneficial owner of or holds as collateral security for an obligation which is in default, ten per centum (10%) or more of any class of security of any person who, to the knowledge of the Trustee or Co-Trustee, owns fifty per centum (50%) or more of the voting securities of the Company; or
(9) the Trustee or Co-Trustee owns on May 15 in any calendar year in the capacity of executor, administrator, testamentary or inter vivos trustee, guardian, committee or conservator, or in any other similar capacity, an aggregate of twenty-five per centum (25%) or more of the voting securities or of any class of security, of any person, the beneficial ownership of a specified percentage of which would have constituted a conflicting interest under paragraph (6), (7), or (8) of this subdivision (d). As to any such securities of which such Trustee or Co‑Trustee acquired ownership through becoming executor, administrator or testamentary trustee of an estate which included them, the provisions of the preceding sentence shall not apply for a period of two years from the date of such acquisition, to the extent that such securities included in such estate do not exceed twenty-five per centum (25%) of such voting securities or twenty-five per centum (25%) of any such class of security. Promptly after May 15 in each calendar year, the Trustee or Co-Trustee shall make a check of its or his holdings of such securities in any of the above-mentioned capacities as of May 15. If the Company fails to make payment in full of principal or interest upon the bonds when and as the same becomes due and payable, and such failure continues for thirty (30) days thereafter, the Trustee or Co-Trustee shall make a prompt check of its holdings of such securities in any of the above-mentioned capacities as of the date of the expiration of such thirty (30) day period and after such date, notwithstanding the foregoing provisions of this paragraph, all such securities so held by the Trustee or Co-Trustee with sole or joint control over such securities vested in it, shall, but only so long as such failure shall continue, be considered as though beneficially owned by the Trustee or Co-Trustee for the purposes of paragraphs (6), (7), and (8) of this subdivision (d).
The specifications of percentages in paragraphs (5) to (9), inclusive, of this subdivision (d) shall not be construed as indicating that the ownership of such percentages of the securities of a person is or is not necessary or sufficient to constitute direct or indirect control for the purposes of paragraph (3) or (7) of this subdivision (d).
For the purposes of paragraphs (6), (7), (8) and (9) of this subdivision (d) only, (A) the terms “security” and “securities” shall include only such securities as are generally known as corporate securities, but shall not include any, note or other evidence of indebtedness issued to evidence an obligation to repay moneys lent to a person by one or more banks, trust companies or banking firms or any certificate of interest or participation in any such note or evidence of indebtedness; (B) an obligation shall be deemed to be in default when a default in payment of principal shall have continued for thirty (30) days or more and shall not have been cured; and (C) the Trustee or Co-Trustee shall not be deemed to be the owner or holder of (i) any security which it or he holds as collateral security (as trustee or




otherwise) for an obligation which is not in default as above defined, or (ii) any security which it or he holds as collateral security under this Indenture, irrespective of any default hereunder, or (iii) any security which it or he holds as agent for collection, or as custodian, escrow agent or depositary, or in any similarly representative capacity.
The percentages of voting securities and other securities specified in this Section shall be calculated in accordance with the following provisions:
(aa)      A specified percentage of the voting securities of the Trustee or Co-Trustee, the Company or any other person referred to in this Section (each of whom is referred to as a “person” in this paragraph) means such amount of the outstanding voting securities of such person as entitles the holder or holders thereof to cast such specified percentage of the aggregate votes which the holders of all the outstanding voting securities of such person are entitled to cast in the direction or management of the affairs of such person.
(bb)      A specified percentage of a class of securities of a person means such percentage of the aggregate amount of securities of the class outstanding.
(cc)      The term “amount”, when used in regard to securities, means the principal amount if relating to evidences of indebtedness, the number of shares if relating to capital shares, and the number of units if relating to any other kind of security.
(dd)      The term “outstanding” means issued and not held by or for the account of the issuer. The following securities shall not be deemed outstanding within the meaning of this definition:
(1)      Securities of an issuer held in a sinking fund relating to securities of the issuer of the same class;
(2)      Securities of an issuer held in a sinking fund relating to another class of securities of the issuer, if the obligation evidenced by such other class of securities is not in default as to principal or interest or otherwise;
(3)      Securities pledged by the issuer thereof as security for any obligation of the issuer not in default as to principal or interest or otherwise;
(4)      Securities held in escrow if placed in escrow by the issuer thereof;
provided, however, that any voting securities of an issuer shall be deemed outstanding if any person other than the issuer is entitled to exercise the voting rights thereof.
(ee)      A security shall be deemed to be of the same class as another security if both securities confer upon the holder or holders thereof substantially the same rights and privileges, provided, however, that, in the case of secured evidences of indebtedness, all of which are issued under a single indenture, differences in the interest rates or maturity dates of various series thereof shall not be deemed sufficient to constitute such series different classes, and provided, further, that, in the case of unsecured evidences of indebtedness, differences in the interest rates or maturity dates thereof shall not be deemed sufficient to constitute them securities of different classes, whether or not they are issued under a single indenture.




The provisions of this Section which have been made specifically applicable to the Trustee shall apply to the Trustee, the Co-Trustee and, if a separate or co-trustee is appointed pursuant to Section 16.16 hereof, to any separate or co-trustee, except that in case of the resignation of the Co-Trustee or a separate or co-trustee, such resignation and the appointment of a successor shall (subject to the provisions of subdivision (c) of this Section) be governed by the provisions of Section 16.15 and paragraph (3) of Section 16.16 hereof.
The term “underwriter” when used with reference to the Company means every person, who, within three years prior to the time as of which the determination is made, has purchased from the Company with a view to, or has offered or sold for the Company in connection with, the distribution of any security of the Company outstanding at such time, or has participated or has had a direct or indirect participation in any such undertaking, or has participated or has had a participation in the direct or indirect underwriting of any such undertaking, but such term shall not include a person whose interest was limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors’ or sellers’ commission.
Section 16.13.    (a) The Trustee and Co-Trustee shall transmit, either jointly or severally as they may determine, within sixty (60) days after May 31 in each year, beginning with the year 1988, to the bondholders as hereinafter in this Section provided, a brief report dated as of such May 31 with respect to
(1) its or his eligibility and its or his qualifications under Sections 9.03, 16.01 and 16.12 hereof, or in lieu thereof, if to the best of its or his knowledge the Trustee or Co-Trustee has continued to be eligible and qualified under such Sections, a written statement to such effect;
(2) the character and amount of any advances (and if such Trustee or Co-Trustee elects so to state, the circumstances surrounding the making thereof) made by such Trustee or Co-Trustee as such which remain unpaid on the date of such report, and for the reimbursement of which such Trustee or Co-Trustee claims or may claim a lien or charge prior to that of the bonds on the trust estate or on property or funds held or collected by it or him as Trustee or Co-Trustee, provided that such Trustee or Co-Trustee shall not be required (but may elect) to state such advances, if such advances so remaining unpaid aggregate not more than one-half of one per centum (1/2 of 1%) of the principal amount of the bonds Outstanding on the date of such report;
(3) the amount, interest rate, and maturity date of all other indebtedness owing by the Company to such Trustee or Co-Trustee in its or his individual capacity on the date of such report, with a brief description of any property held as collateral security therefor, except an indebtedness based upon a creditor relationship arising in any manner described in paragraphs (2), (3), (4) or (6) of subdivision (b) of Section 16.11 hereof;
(4) the property and funds physically in the possession of such Trustee or Co‑Trustee on the date of such report;
(5) any release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) which has not been previously reported, provided, however, that to the extent that the aggregate value as shown by the release papers of any or all of such released properties does not exceed an amount equal to one per centum (1%) of the principal amount of bonds then Outstanding, the report need only indicate the number of such releases, the total value of property released as shown by the release papers, the aggregate amount of cash received and the aggregate value of property received in substitution therefor as shown by the release papers;
(6) any additional issue of bonds which has not been previously reported; and
(7) any action taken by the Trustee or Co-Trustee in the performance of its or his duties under this Indenture which it or he has not previously reported and which in its or his opinion




materially affects the bonds or the trust estate, except in respect of a Default, notice of which has been or is to be withheld by the Trustee in accordance with the provisions of Section 12.02 hereof.
(b)      The Trustee and Co-Trustee shall transmit to the bondholders as hereinafter provided a brief report with respect to--
(1)      the release, or release and substitution, of property subject to the Lien of this Indenture (and the consideration therefor, if any) unless the fair value of such property, as set forth in the certificate or opinion required by Section 9.05, 11.03, 11.04, 11.05 or 11.06 hereof, is less than ten per centum (10%) of the principal amount of bonds Outstanding at the time of such release, or such release and substitution, such report to be so transmitted within ninety (90) days after such time, provided that, if any such report is transmitted by the Trustee, no report covering the same transaction need be made by the Co-Trustee; and
(2)      the character and amount of any advances (and if the Trustee or Co-Trustee elects so to state, the circumstances surrounding the making thereof) made by the Trustee or Co-Trustee as such since the date of the last report transmitted pursuant to the provisions of subdivision (a) of this Section (or if no such report has yet been so transmitted, since the date of execution of this Indenture), for the reimbursement of which it or he claims or may claim a lien or charge prior to that of the bonds on the trust estate or on property or funds held or collected by it or him as Trustee or Co-Trustee, and which it or he has not previously reported pursuant to this paragraph, provided that the Trustee or Co-Trustee shall not be required (but may elect) to state such advances, if such advances remaining unpaid at any time aggregate not more than ten per centum (10%) of the principal amount of bonds Outstanding at such time, such report to be transmitted within ninety (90) days after such time.
(c)      Reports pursuant to this Section shall be transmitted by mail--
(1)      to all registered holders of bonds, as the names and addresses of such holders appear upon the registration books of the Company;
(2)      to such holders of bonds as have, within two years preceding such transmission, filed their names and addresses with the Trustee for that purpose; and
(3)      except in the case of reports pursuant to subdivision (b) of this Section, to each bondholder whose name and address is preserved at the time by the Trustee, as provided in subdivision (b) of Section 9.09 hereof.
(d)      A copy of each such report shall, at the time of such transmission to bondholders, be filed by the Trustee and Co-Trustee with each stock exchange upon which the bonds are listed and also with the Securities and Exchange Commission. The Company will notify the Trustee of the name and address of each stock exchange on which the bonds are listed.
(e)      Notwithstanding any of the provisions of this Section which require the Co-Trustee to transmit reports to the bondholders and to file such reports with each stock exchange upon which the bonds are listed and also with the Securities and Exchange Commission, such Co-Trustee may, if it or he so elects, furnish to the Trustee all information concerning such Co-Trustee which such Co-Trustee is required to report, and the Trustee shall transmit and file such information, in accordance with the provisions of this Section, on behalf of such Co-Trustee.




Section 16.14.    The Trustee or Co-Trustee may at any time resign and be discharged of the trusts hereby created by giving written notice to the Company specifying the day upon which such resignation shall take effect and thereafter publishing notice thereof, in one Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, and in one Daily Newspaper of general circulation in the City of New Orleans, Louisiana, once and such resignation shall take effect upon the day specified in such notice unless previously a successor trustee shall have been appointed by the bondholders or the Company in the manner hereinafter provided in Section 16.15 and in such event such resignation shall take effect immediately on the appointment of such successor trustee, provided, however, that if all bonds then Outstanding shall be registered, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. This Section shall not be applicable to resignations pursuant to Section 16.12 hereof.
Any Trustee or Co-Trustee may be removed at any time by an instrument or concurrent instruments in writing filed with such Trustee or Co-Trustee and signed and acknowledged by the holders of a majority in principal amount of the bonds then Outstanding hereunder (determined as provided in Section 12.07 hereof) or by their attorneys in fact duly authorized.
In case at any time the Trustee or Co-Trustee shall cease to be eligible in accordance with the provisions of Section 9.03 or Section 16.01 hereof, then the Trustee or Co-Trustee so ceasing to be eligible shall resign immediately in the manner and with the effect in this Section provided; and, in the event that it or he does not resign immediately in such case, then it or he may be removed forthwith by an instrument or concurrent instruments in writing filed with the Trustee or Co-Trustee so ceasing to be eligible and either (a) signed by the Chairman of the Board, Chief Executive Officer, President or a Vice President of the Company with its corporate seal attested by the Secretary or an Assistant Secretary of the Company or (b) signed and acknowledged by the holders of a majority in principal amount of the bonds then Outstanding hereunder (determined as provided in Section 12.07 hereof) or by their attorneys in fact duly authorized.
Section 16.15.    In case at any time the Trustee or Co-Trustee shall resign or shall be removed (unless such Trustee or Co-Trustee shall be removed as provided in subdivision (c) of Section 16.12 hereof in which event the vacancy shall be filled as provided in said subdivision) or shall become incapable of acting, or shall be adjudged a bankrupt or insolvent, or if a receiver of the Trustee or Co-Trustee or of its or his property shall be appointed, or if any public officer shall take charge or control of the Trustee or Co-Trustee, or of its or his property or affairs for the purpose of rehabilitation, conservation or liquidation, a vacancy shall be deemed to exist in the office of the Trustee or Co-Trustee, and a successor or successors may be appointed by the holders of a majority in principal amount of the bonds then Outstanding hereunder (determined as provided in Section 12.07 hereof) by an instrument or concurrent instruments in writing signed and acknowledged by such bondholders or by their attorneys in fact duly authorized, and delivered to such new Trustee or Co-Trustee, notification thereof being given to the Company and the retiring Trustee or Co-Trustee; provided, nevertheless, that until a new Trustee or Co-Trustee shall be appointed by the bondholders as aforesaid, the Company, by instrument executed by order of its Board of Directors and duly acknowledged by its Chairman of the Board, Chief Executive Officer, President or a Vice President, may appoint a Trustee or Co-Trustee to fill such vacancy until a new Trustee or Co-Trustee shall be appointed by the bondholders as herein authorized. The Company shall publish notice of any such appointment made by it in the manner provided in Section 16.14 hereof. Any new Trustee or Co-Trustee appointed by the Company shall, immediately and without further act, be superseded by a Trustee or Co-Trustee appointed by the bondholders as above provided, if such appointment by the bondholders be made prior to the expiration of one year after




the first publication of notice of the appointment of the new Trustee or Co-Trustee by the Company.
If in a proper case no appointment of a successor Trustee or Co-Trustee shall be made pursuant to the foregoing provisions of this Section within six months after a vacancy shall have occurred in the office of Trustee or Co-Trustee, the holder of any bond Outstanding hereunder or any retiring Trustee or Co-Trustee may apply to any court of competent jurisdiction to appoint a successor Trustee, or Co-Trustee. Said court may thereupon after such notice, if any, as such court may deem proper and prescribe, appoint a successor Trustee or successor Co-Trustee.
If any Trustee or Co-Trustee resigns because of a conflict of interest as provided in subdivision (a) of Section 16.12 hereof and a successor has not been appointed by the Company or the bondholders, or, if appointed, has not accepted the appointment, within thirty (30) days after the date of such resignation, the resigning Trustee or Co-Trustee may apply to any court of competent jurisdiction for the appointment of a successor Trustee or successor Co-Trustee.
Any Trustee appointed under the provisions of this Section in succession to the Original Trustee shall be a bank or trust company eligible under Sections 9.03 and 16.01 hereof and qualified under Section 16.12 hereof.
Any Trustee or Co-Trustee which or who has resigned or been removed shall nevertheless retain the lien afforded to it or him by Section 16.09 hereof upon the trust estate, including all property or funds held or collected by such Trustee or Co-Trustee, as such, to secure the amounts due to such Trustee or Co-Trustee as compensation, reimbursement, expenses and indemnity, and shall retain the rights afforded to it or him by said Section 16.09 hereof.
Section 16.16.    At any time or times, for the purpose of conforming to any legal requirements, restrictions or conditions in any State or jurisdiction in which any part of the Mortgaged and Pledged Property then or to become subject to the Lien of this Indenture may be located, the Company and the Trustees or the Trustee shall have the power to appoint, and, upon the request of the Trustees or the Trustee the Company shall for such purpose join with the Trustees or the Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint, another corporation or one or more persons approved by the Trustees or the Trustee, either to act as separate trustee or trustees, or co-trustee or co-trustees jointly with the Trustee or Co-Trustee, of all or any of the property subject to the Lien hereof. In the event that the Company shall not have joined in such appointment within fifteen (15) days after the receipt by it of a request so to do, the Trustees or Trustee alone shall have power to make such appointment.
Every separate trustee, every co-trustee and every successor trustee, other than any trustee which may be appointed as successor to the Original Trustee or the Original Co-Trustee, shall, to the extent permitted by law, but to such extent only, be appointed subject to the following provisions and conditions, namely:
(1)      The rights, powers, duties and obligations conferred or imposed upon trustees hereunder or any of them shall be conferred or imposed upon and exercised or performed by the Trustee or Trustees and such separate trustee or separate trustees or co-trustee or co-trustees jointly, as shall be provided in the instruments and agreements appointing such separate trustee or separate trustees or co-trustee or co-trustees, except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and




obligations shall be exercised and performed by the Co-Trustee or by such separate trustee or separate trustees or co-trustee or co-trustees;
(2)      The bonds secured hereby shall be authenticated and delivered, and all powers, duties, obligations and rights, conferred upon the Trustees or Trustee in respect of the custody of all bonds and other securities and of all cash pledged or deposited hereunder, shall be exercised solely by the Original Trustee or its successors in the trust hereunder; and
(3)      The Company and the Trustee and the Co-Trustee, at any time by an instrument in writing executed by them jointly, may accept the resignation of or remove any separate trustee or co-trustee appointed under this Section or otherwise, and, upon the request of the Trustee, the Company shall, for such purpose, join with the Trustee and the Co-Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to make effective such resignation or removal. In the event that the Company shall not have joined in such action within fifteen (15) days after the receipt by it of a request so to do, the Trustee and the Co-Trustee alone shall have power to accept such resignation or to remove any such separate trustee or co-trustee. A successor to a separate trustee or co-trustee so resigned or removed may be appointed in the manner provided in this Section.
No trustee or co-trustee hereunder shall be personally liable by reason of any act or omission of any other trustee or co-trustee hereunder.
Any notice, request or other writing, by or on behalf of the holders of the bonds delivered to the Original Trustee, or its successor in the trust hereunder, shall be deemed to have been delivered to all of the then trustees or co-trustees as effectually as if delivered to each of them. Every instrument appointing any trustee or trustees other than a successor to the Original Trustee shall refer to this Indenture and the conditions in this Article expressed, and upon the acceptance in writing by such trustee or trustees or co-trustee or co-trustees, he, they or it shall be vested with the estates or property specified in such instrument, either jointly with the Original Trustee, or its successor, or separately, as may be provided therein, subject to all the trusts, conditions, and provisions of this Indenture; and every such instrument shall be filed with the Original Trustee or its successor in the trust hereunder. Any separate trustee or trustees, or any co-trustee or co-trustees, may at any time by an instrument in writing constitute the Original Trustee or its successor in the trust hereunder his, their or its agent or attorney in fact, with full power and authority, to the extent which may be permitted by law, to do any and all acts and things and exercise any and all discretion authorized or permitted by him, them or it, for and in behalf of him, them or it, and in his, their or its name. In case any separate trustee or trustees or co-trustee or co-trustees, or a successor to any of them, shall die, become incapable of acting, resign or be removed, all the estates, property, rights, powers, trusts, duties and obligations of said separate trustee or co-trustee, so far as permitted by law, shall vest in and be exercised by the Original Trustee or its successor in the trust hereunder, without the appointment of a new trustee as successor to such separate trustee or co-trustee.
Section 16.17.    Any successor trustee appointed hereunder shall execute, acknowledge and deliver to his or its predecessor trustee, and also to the Company, an instrument accepting such appointment hereunder, and thereupon such successor trustee, without any further act, deed or conveyance, shall become fully vested with all the estates, properties, rights, powers, trusts, duties and obligations of his or its predecessor in trust hereunder, with like effect as if originally named as trustee herein; but the trustee ceasing to act shall nevertheless, on the written request of the Company, or of the successor trustee, or of the holders of ten per centum (10%) in principal amount of the bonds then Outstanding hereunder, execute, acknowledge and deliver such instruments of conveyance and further assurance and do such other things as may reasonably be




required for more fully and certainly vesting and confirming in such successor trustee all the right, title and interest of the trustee to which he or it succeeds, in and to the Mortgaged and Pledged Property and such rights, powers, trusts, duties and obligations, and the trustee ceasing to act shall also, upon like request pay over, assign and deliver to the successor trustee any money or other property subject to the Lien of this Indenture, including any pledged securities which may then be in his or its possession. Should any deed, conveyance or instrument in writing from the Company be required by the new trustee for more fully and certainly vesting in and confirming to such new trustee such estates, properties, rights, powers, trusts and duties, any and all such deeds, conveyances and instruments in writing shall, on request be executed, acknowledged and delivered by the Company.

Section 16.18.    Any corporation into which the Trustee may be merged or with which it may be consolidated or any corporation resulting from any merger or consolidation in which the Trustee shall be a party or any corporation to which substantially all the business and assets of the Trustee may be transferred, provided such corporation shall be eligible under the provisions of Section 9.03 and 16.01 hereof and qualified under Section 16.12 hereof, shall be the successor trustee under this Indenture, without the execution or filing of any paper or the performance of any further act on the part of any other parties hereto, anything herein to the contrary notwithstanding. In case any of the bonds contemplated to be issued hereunder shall have been authenticated but not delivered, any such successor to the Trustee may, subject to the same terms and conditions as though such successor had itself authenticated such bonds, adopt the certificate of authentication of the Original Trustee or of any successor to it, as trustee hereunder, and deliver the said bonds so authenticated; and in case any of said bonds shall not have been authenticated, any successor to the Trustee may authenticate such bonds either in the name of any predecessor hereunder or in the name of the successor trustee, and in all such cases such certificate shall have the full force which it is anywhere in said bonds or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to authenticate bonds in the name of the Original Trustee shall apply only to its successor or successors by merger or consolidation or sale as aforesaid.

Section 16.19.    Notwithstanding any other provisions hereof, the Company, by instrument executed by order of its Board of Directors and duly acknowledged by its proper officers, may, within the period beginning January 1, 1993, and ending December 31, 1993, and the comparable period in each succeeding decade, appoint any corporation eligible under the provisions of Section 16.15 hereof, and doing business in the United States of America, as Trustee in succession to the Trustee in office as of the date of such appointment and the corporation so appointed Trustee shall thereupon become successor Trustee hereunder until a new Trustee shall be appointed by the bondholders as authorized herein.

Section 16.20.    All the estates, rights, titles and interest by this Indenture conveyed or assigned or transferred to the Trustee and the Co-Trustee are conveyed, assigned and transferred to them as joint tenants and not as tenants in common.
Except as herein expressly provided to the contrary, any notice, request, or other writing by or on behalf of the Company delivered solely to the Trustee shall be deemed to have been delivered to both the Trustee ‘and the Co-Trustee hereunder as effectually as if delivered to each of them.
Section 16.21.    The Co-Trustee has been joined as trustee in order to comply with any legal requirements respecting trustees under mortgages or deeds of trust of property in the states, or some of them, in which the mortgaged premises or part thereof are or may be situate, and shall as such trustee possess such powers, and such powers only, as may be necessary to comply with such requirements. If by reason of the repeal of such requirements, or for any other reason, it shall not be necessary, in the opinion of counsel, that there shall be a Co-Trustee and the Company shall file




with the Trustee, and also with the Co-Trustee, an Opinion of Counsel to that effect and a written request for the resignation or removal of the Co-Trustee, the Original Co-Trustee, or any successor, will thereupon resign or shall forthwith cease to be a Trustee hereunder, and all powers of the Co-Trustee shall forthwith terminate, as shall his right, title or interest in and to the trust estate; and, unless and until there shall be appointed a new Trustee or successor to the Co-Trustee, all the right, title and powers of the Trustees shall devolve upon the Trustee and its successors alone.


ARTICLE XVII

DISCHARGE OF MORTGAGE

Section 17.01.    The Trustees (and any trustee or trustees or co-trustee or co-trustees appointed pursuant to the provisions of this Indenture) may, and upon request of the Company shall, cancel and discharge the Lien hereof and execute and deliver to the Company such deeds and instruments as shall be requisite to satisfy the Lien hereof and reconvey and transfer to the Company the Mortgaged and Pledged Property, whenever all indebtedness secured hereby shall have been paid, including all proper charges of the Trustees hereunder.
Notwithstanding the satisfaction and discharge of this Indenture, the Trustees shall have man unsecured right to charge and be reimbursed for any expenditures and liabilities (incurred in good faith and without negligence by the Trustees) which they or either of them may thereafter incur.
Bonds and interest obligations for the payment of which and bonds for the redemption of which either
(i)      moneys in the necessary amount or
(ii)
obligations of the United States of America which shall not contain provisions permitting the redemption thereof at the option of the issuer, the principal of and the interest on which when due, and without any regard to reinvestment thereof, will, in the opinion of an Independent accountant, provide moneys which, together with the moneys, if any, deposited with or held by the Trustee, shall be sufficient to pay when due and to become due on said bonds or portions thereof on the redemption date or maturity date thereof, as the case may be, shall have been set apart by or deposited with the Trustee, with irrevocable direction so to apply the same, subject to the provisions of Section 19.03 hereof (with or without any additional right given to the holders to surrender their bonds or obtain therefrom payment therefor prior to the redemption date) shall for all purposes under this Indenture, including satisfying the Lien of this Indenture, be deemed to have been paid; provided that in case of redemption the notice requisite to the validity of such redemption shall have been given or arrangements shall have been made assuring to the satisfaction of the Trustee that the same will be given, and provided further that the Trustee shall receive an Opinion of Counsel to the effect that such setting apart by, or deposit with, the Trustee does not require registration on behalf of any such obligations of the United States of America by the Company or by the Trustee under the Investment Company Act of 1940, does not violate any applicable laws, and does not result in a taxable event with respect to the holders of the bonds prior to the time of their right to receive payment.






ARTICLE XVIII

MEETINGS AND CONSENTS OF BONDHOLDERS

Section 18.01.    Modifications and alterations of this Indenture and/or of any indenture supplemental hereto and/or of the rights and obligations of the Company and/or of the rights of the holders of bonds and coupons issued hereunder may be made as provided in this Article XVIII.

Section 18.02.    The Trustee may at any time call a meeting of the bondholders and it shall call such a meeting on written request of the holders of not less than a majority in principal amount of the bonds Outstanding hereunder at the time of such request. The Company, pursuant to a Resolution of its Board of Directors, may also call a meeting of the bondholders at any time. In each such case the purpose or purposes of such meeting shall be set forth in reasonable detail in the notice of the meeting provided for herein. In the event of the Trustee’s failing for ten (10) days to call a meeting after being thereunto requested by the bondholders as above set forth, holders of Outstanding bonds in the amount above specified in this Section or the Company, pursuant to Resolution of its Board of Directors, may call such meeting. Every such meeting called by and at the instance of the Trustee shall be held in the City of New Orleans, Louisiana, or the Borough of Manhattan, The City of New York, New York, or with the written approval of the Company, at any other place in the United States of America, and notice thereof, stating the place and time thereof and in reasonable detail the business to be submitted, shall be mailed by the Trustee not less than thirty (30) days before such meeting (a) to all holders of bonds the names and addresses of whom are then preserved as required by Section 9.09 hereof, and (b) to the Company addressed to it at the address given in the first paragraph of this Indenture (or at such other address as may be designated by the Company from time to time), and, unless all bonds Outstanding hereunder are at the time registered as to principal, shall be published by the Trustee once preceding the meeting, in a Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, the publication to be not less than twenty (20) days prior to the date of such meeting; provided, however, that the mailing of such notice to any bondholders shall in no case be a condition precedent to the validity of any action taken at such meeting, and provided further, however, that if all bonds then Outstanding shall be registered, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. If such meeting is called by or at the instance either of the Company or of the bondholders, it shall be held at such place in the United States of America as may be specified in the notice calling such meeting and notice thereof shall be sufficient for all purposes hereof if given by newspaper publication as aforesaid stating the place and time of the meeting and in reasonable detail the business to be submitted. Any meeting of bondholders shall be valid without notice if the holders of all bonds then Outstanding hereunder are present in person or by proxy and if the Company and the Trustee are present by duly authorized representatives, or if notice is waived in writing before or after the meeting by the Company, the holders of all bonds Outstanding hereunder and by the Trustee, or by such of them as are not present in person or by proxy.

Section 18.03.    Officers and nominees of the Trustee, of the Co-Trustee and of the Company or their or its nominees may attend such meeting, but shall not as such be entitled to vote thereat. Attendance by bondholders may be in person or by proxy and, unless specifically prohibited by law, any such proxy shall remain in effect unless specifically revoked and shall be binding on any subsequent holder of the bonds represented by such proxy, unless specifically revoked by any such subsequent holder before being voted. In order that the holder of any bond payable to bearer and his proxy may attend and vote without producing his bond, the Trustee, with respect to any such meeting, may make and from time to time vary such regulations as it shall think fit for deposit of bonds with, or the stamping of bonds by, (i) any banks,




bankers or trust or insurance companies having a capital of not less than Five Hundred Thousand Dollars ($500,000) or (ii) any trustee of any pension, welfare, hospitalization or similar fund or funds having an aggregate corpus in excess of Five Million Dollars ($5,000,000), or (iii) the United States of America, any Territory thereof, the District of Columbia, any State of the United States, any municipality in any State of the United States or any public instrumentality of the United States, any State or Territory, or (iv) by any other person or corporation satisfactory to the Trustee, and for the issue to the persons depositing the same of certificates by such depositaries entitling the holders thereof to be present and vote at any such meeting and to appoint proxies to represent them and vote for them at any such meeting as if the persons so present and voting, either personally or by proxy, were the actual bearers of the bonds in respect of which such certificates shall have been issued and any regulations so made shall be binding and effective. A bondholder in any of the foregoing categories may sign such certificate in his own behalf. In lieu of or in addition to providing for such deposit, the Trustee may, in its discretion, permit such institutions to issue certificates stating that bonds were exhibited to them, which certificates shall entitle the holders thereof to vote at any meeting only if the bonds with respect to which they are issued are not produced at the meeting by any other person and are not at the time of the meeting registered in the name of any other person. Each such certificate shall state the date on which the bond or bonds in respect of which such certificate shall have been issued were deposited with or submitted to such institution and the series, maturities and serial numbers of such bonds. In the event that two or more such certificates shall be issued with respect to any bond or bonds, the certificate bearing the latest date shall be recognized and be deemed to supersede any certificate or certificates previously issued with respect to such bond or bonds. If any such meeting shall have been called under the provisions of Section 18.02 hereof, by bondholders or by the Company, and the Trustee shall fail to make regulations as above authorized, then regulations to like effect for such deposit, stamping or exhibition of bonds and the issue of certificates by (i) any bank, banker or trust or insurance company organized under the laws of the United States of America or of any State thereof, having a capital of not less than Five Hundred Thousand Dollars ($500,000), or (ii) any trustee or any pension, welfare, hospitalization, or similar fund or funds having, an aggregate corpus in excess of Five Million Dollars ($5,000,000), or (iii) by the United States of America, any Territory thereof, the District of Columbia, any State of the United States, any municipality in any State of the United States or any public instrumentality of the United States, any State or Territory shall be similarly binding and effective for all purposes hereof if adopted or approved by the bondholders calling such meeting or by the Board of Directors of the Company, if such meeting shall have been called by the Company, provided that in either such case copies of such regulations shall be filed with the Trustee. A bondholder in any of the foregoing categories may sign such a certificate in his own behalf.

Section 18.04.    Subject to the restrictions specified in Sections 18.03 and 18.07 hereof, any registered holder of bonds Outstanding hereunder and any holder of a certificate (not superseded) provided for in Section 18.03 hereof, shall be entitled in person or by proxy to attend and vote at such meeting as holder of the bonds registered or certified in the name of such holder without producing such bonds. All others seeking to attend or vote at such meeting in person or by proxy must, if required by an authorized representative of the Trustee or the Company or by any other bondholder, produce the bonds claimed to be owned or represented at such meeting, and everyone seeking to attend or vote shall, if required as aforesaid, produce such further proof of bond ownership or personal identity as shall be satisfactory to the authorized representative of the Trustee, or if none be present then to the Inspectors of Votes hereinafter provided for. Proxies shall be witnessed or in the alternative may (a) have the signature guaranteed by a bank or trust company or a registered dealer in securities, (b) be acknowledged before a Notary Public or other officer authorized to take acknowledgments, or (c) have their genuineness otherwise established to the satisfaction of the Inspectors of Votes. All proxies and certificates presented at any meeting shall be delivered to said Inspectors of Votes and filed with the Trustee.




Section 18.05.    Persons named by the Trustee, if it is represented at the meeting, shall act as temporary Chairman and Secretary of the meeting, but if the Trustee shall not be represented or shall fail to nominate such persons or if any person so nominated shall not be present, the bondholders represented shall by a majority vote, irrespective of the amount of their holdings, elect another person or other persons from those present to act as temporary Chairman and/or Secretary. A permanent Chairman and a permanent Secretary of such meeting shall be elected from those present by the bondholders represented by a majority vote of bonds represented. The Trustee, if represented at the meeting, shall appoint two Inspectors of Votes who shall decide as to the right of anyone to vote and shall count all votes cast at such meeting, except votes on the election of a Chairman and Secretary, both temporary and permanent, as aforesaid and who shall make and file with the permanent Secretary of the meeting their verified written report in duplicate of all such votes so cast at said meeting. If the Trustee shall not be represented at the meeting or shall fail to nominate such Inspectors of Votes or if either Inspector of Votes fails to attend the meeting, the vacancy shall be filled by appointment by the permanent Chairman of the meeting.

Section 18.06.    The holders of:
(a) not less than a majority in principal amount of the bonds Outstanding hereunder when such meeting is held; or
(b) if the action proposed at said meeting adversely affects solely the rights of the holders of one or more, but less than all, series of bonds then Outstanding, then at least a majority in principal amount of those bonds then Outstanding so to be adversely affected and of the holders of a majority in principal amount of the bonds then Outstanding hereunder; or
(c) if the action proposed at said meeting relates to the express provisions of Section 1.07 or 4.01 hereof, then at least sixty-six and two-thirds per centum (66-2/3%) in principal amount of all series of Rate Recovery Mortgage Bonds then Outstanding hereunder, considered as a single class, and of the holders of a majority in principal amount of the bonds then Outstanding hereunder; or
(d) if the action proposed at said meeting relates to provisions in effect only so long as any Rate Recovery Mortgage Bonds are Outstanding, not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount of each series of Rate Recovery Mortgage Bonds affected then Outstanding hereunder (and no other bondholders)
(excluding in any case bonds disqualified from voting by reason of the Company’s interest therein) must be present at such meeting in person or by proxy in order to constitute a quorum for the transaction of business, less than a quorum, however, having power to adjourn; provided, however, that if such meeting is adjourned by less than a quorum for more than thirty (30) days, notice thereof shall be mailed as soon as practicable by the Trustee if such meeting shall have been called by the Trustee (a) to the Company addressed to it at the address given in the first paragraph of this Indenture (or at such other address as may be designated by the Company in writing from time to time), and (b) to all holders of bonds then Outstanding hereunder, the names and addresses of whom are then preserved by the Trustee as required by the provisions of Section 9.09 hereof, and, unless all bonds Outstanding hereunder are at the time of such mailing registered as to principal, shall be published at least once in each thirty (30) day period of such adjournment in a Daily Newspaper of general circulation in the Borough of Manhattan, The City of New York, New York, provided, however, that if all bonds then Outstanding shall be registered, no notice need be given except by mail in accordance with subdivision (c) of Section 16.13 hereof. Notwithstanding the foregoing, if a meeting is first adjourned by less than a quorum for less than thirty (30) days, and is again adjourned, no such notice need be mailed or published during the period of the first adjournment but such notice shall be mailed as soon as practicable by the Trustee after the second adjournment and, unless all bonds Outstanding hereunder are at the time of such mailing registered as to principal, shall be published as aforesaid at least once in each thirty (30) day period of the second adjournment and of any subsequent adjournments. The failure to mail such notice to any such bondholder as aforesaid shall in no case affect




the validity of any action taken at any meeting held pursuant to such adjournment. If such meeting shall have been called, under the provisions of Section 18.02 hereof, by bondholders or by the Company, notice of such adjournment shall be given by the permanent Chairman and permanent Secretary of the meeting in the newspaper and for the number of times above specified in this Section and shall be sufficient if so given.
Section 18.07.    Subject to the provisions of Section 12.16 hereof, any modification or alteration of this Indenture (including any indenture supplemental hereto) and/or of the rights and obligations of the Company and/or the rights of the holders of bonds and/or coupons issued hereunder in any particular and/or the waiver of any Default under the Indenture may be made or given at a meeting of bondholders duly convened and held in accordance with the provisions of this Article, but only by resolution duly adopted by the affirmative vote of at least a majority in principal amount of the bonds Outstanding hereunder, and, if the rights of one or more, but less than all, series of bonds then Outstanding are to be adversely affected by action taken at such meeting, then by affirmative vote of the holders of at least a majority in principal amount of those bonds so to be adversely affected and Outstanding hereunder, when such meeting is held, and of the holders of at least a majority in principal amount of the bonds then Outstanding hereunder, and, if any such amendment or alteration is in respect of the express provisions of Section 1.07 or 4.01 hereof, then by the affirmative vote of the holders of at least sixty-six and two-thirds per centum (66-2/3%) in principal amount of all series of Rate Recovery Mortgage bonds, voting together as a single class, Outstanding hereunder, and of the holders of at least a majority in principal amount of the bonds Outstanding hereunder, and in every case approved by Resolution of the Board of Directors of the Company as hereinafter specified; provided that any modification or alteration or waiver of Default relating to provisions in effect only so long as any Rate Recovery Mortgage Bonds are Outstanding shall require the affirmative vote of the holders of at least sixty-six and two-thirds per centum (66 2/3%) in principal amount Outstanding of each series of Outstanding Rate Recovery Mortgage Bonds affected and no other vote of the holders of bonds shall be required; provided further that, no such modification or alteration shall, without the consent of the holder of any bond issued hereunder affected thereby, (1) impair or affect the right of such holder to receive payment of the principal of (and premium, if any) and interest on such bond, on or after the respective due dates expressed in such bond, or to institute suit for the enforcement of any such payment on or after such respective dates, or (2) permit the creation of any lien ranking prior to, or on a parity with, the Lien of this Indenture with respect to any of the Mortgaged and Pledged Property, or (3) permit the deprivation of any nonassenting bondholder of the benefit of a lien upon the Mortgaged and Pledged Property for the security of his bonds (subject only to the lien of taxes, assessments or governmental charges not then delinquent and to any mortgage or other liens existing upon such property which are prior hereto at the date of the calling of any such bondholders’ meeting) or (4) permit the reduction of the percentage required by the provisions of this Section for the taking of any action under this Section with respect to any bond Outstanding hereunder.
Except for the purpose of waiving any past Default of the Company and the consequences thereof, in which event the provisions of Section 12.07 hereof shall be applied, bonds owned and/or held by and/or for the account of and/or for the benefit or interest of the Company or any affiliate of the Company shall not be deemed Outstanding for the purpose of any vote or of any calculation of bonds Outstanding in this Article XVIII provided for, except that, subject to the provisions of Sections 16.01 and 16.02 hereof, for the purpose of determining whether the Trustees, or either of them, shall be protected in relying on any such vote or calculation, only bonds which the Trustees, or either of them, know are so owned and/or held, shall be so excluded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding for the purposes of this paragraph, if the pledgee shall establish to the satisfaction of the Trustees, or either of them, the pledgee’s right to vote such bonds and that the pledgee is not an




affiliate of the Company. In case of a dispute as to such right, any decision by the Trustees, or either of them, taken upon the advice of counsel shall be full protection to the Trustees.
Section 18.08.    A record in duplicate of the proceedings of each meeting of bondholders shall be prepared by the permanent Secretary of the meeting and shall have attached thereto the original reports of the Inspectors of Votes, and affidavits by one or more persons having knowledge of the facts showing a copy of the notice of the meeting and a copy of the notice of adjournment thereof, if required under the provisions of Section 18.06 hereof, and showing that said notices were mailed and published as provided in Section 18.02 hereof and, in a proper case, as provided in Section 18.06 hereof. Such record shall be signed and verified by the affidavits of the permanent Chairman and the permanent Secretary of the meeting, and one duplicate thereof shall be delivered to the Company and the other to the Trustee for preservation by the Trustee. Any record so signed and verified shall be proof of the matters therein stated, and if such record shall also be signed and verified by the affidavit of a duly authorized representative of the Trustee, such meeting shall be deemed conclusively to have been duly convened and held and such record shall be conclusive, and any resolution or proceeding stated in such record to have been adopted or taken, shall be deemed conclusively to have been duly adopted or taken by such meeting. A true copy of any resolution adopted by such meeting shall be mailed by the Trustee to all holders of bonds Outstanding hereunder, the names and addresses of whom are then preserved by the Trustee pursuant to the provisions of Section 9.09 hereof, and proof of such mailing by the affidavit of some person having knowledge of the fact shall be filed with the Trustee, but failure to mail copies of such resolution as aforesaid shall not affect the validity thereof. No such resolution shall be binding until and unless such resolution is approved by Resolution. It shall be the duty of the Company to file a copy of any such Resolution of approval with the Trustee, but if such Resolution is adopted and a certified copy thereof is filed with the Trustee, the resolution so adopted by such meeting shall (to the extent permitted by law) be deemed conclusively to be binding upon the Company, the Trustees and the holders of all bonds and coupons issued hereunder, at the expiration of sixty (60) days after such filing, except in the event of a final decree of a court of competent jurisdiction setting aside such resolution, or annulling the action taken thereby in a legal action or equitable proceeding for such purposes commenced within such sixty (60) day period; provided, however, that no such resolution of the bondholders or Resolution shall in any manner change or modify or be so construed as to change or modify any of the rights, immunities, or obligations of the Trustees without their written assent thereto.

Section 18.09.    Bonds authenticated and delivered after the date of any bondholders’ meeting may bear a notation in form approved by the Trustee as to the action taken at meetings of bondholders theretofore held, and upon demand of the holder of any bond Outstanding at the date of any such meeting and presentation of his bond for the purpose at the principal office of the Trustee, the Company shall cause suitable notation to be made on such bond by endorsement or otherwise as to any action taken at any meeting of bondholders theretofore held. If the Company or the Trustee shall so determine, new bonds so modified as, in the opinion of the Trustee and the Board of Directors of the Company, to conform to such bondholders’ resolution shall be prepared, authenticated and delivered, and upon demand of the holder of any bond then Outstanding and affected thereby shall be exchanged without cost to such bondholder for bonds then Outstanding hereunder upon surrender of such bonds with all unmatured coupons( if any, appertaining thereto. The Company or the Trustee may require bonds Outstanding to be presented for notation or exchange as aforesaid if either shall see fit to do so. Instruments supplemental to this Indenture embodying any modification or alteration of this Indenture (including any indenture supplemental hereto) made at any bondholders’ meeting and approved, by Resolution of the Board of Directors of the Company, as aforesaid, may be executed by the Trustees and the Company and upon demand of the Trustee, or if so specified in any resolution adopted by any such bondholders’ meeting, shall be executed by the Company and the Trustees.




Any instrument supplemental to this Indenture executed pursuant to the provisions of this Section shall comply with all applicable provisions of the Trust Indenture Act of 1939, as amended and in force on the date of the execution of such supplemental indenture.
Section 18.10.    (A) Anything in this Article contained to the contrary notwithstanding, the Trustee shall receive the written consent (in any number of instruments of similar tenor executed by bondholders or by their attorneys appointed in writing) of the holders of bonds Outstanding hereunder, the affirmative vote or votes of which would otherwise be required by Section 18.07 hereof (in all cases, at the time the last such needed consent is delivered to the Trustee), in lieu of the holding of a meeting pursuant to this Article and in lieu of all action at such a meeting and with the same force and effect as a resolution duly adopted in accordance with the provisions of Section 18.07 hereof.
(B)      Instruments of consent shall be witnessed or in the alternative may (a) have the signature guaranteed by a bank or trust company or a registered dealer in securities, (b) be acknowledged before a notary public or other officer authorized to take acknowledgments, or (c) have their genuineness otherwise established to the satisfaction of the Trustee.
The amount of bonds payable to bearer, and the series and serial numbers thereof, held by a person executing an instrument of consent (or whose attorney has executed an instrument of consent in his behalf), and the date of his holding the same, may be proved either by exhibiting the bonds themselves to the Trustee or by a certificate executed (i) by any bank, banker or trust or insurance company organized under the laws of the United States of America or of any State thereof, having a capital of not less than Five Hundred Thousand Dollars ($500,000), (ii) by any trustee of any pension, welfare, hospitalization or similar fund having an aggregate corpus in excess of Five Million Dollars ($5,000,000), (iii) by the United States of America, any Territory thereof, the District of Columbia, any State of the United States, any municipality in any State of the United States or any public instrumentality of the United States, any State or Territory, or (iv) by any other person or corporation satisfactory to the Trustee. A bondholder in any of the foregoing categories may sign a certificate in his or its own behalf.
Each such certificate, shall be dated and shall state in effect that, as of the date thereof, a coupon bond or bonds bearing a specified serial number or numbers was deposited with or exhibited to the signer of such certificate. The holding by the person named in any such certificate of any bond specified therein shall be presumed to continue unless (1) any certificate bearing a later date issued in respect of the same bond shall be produced, (2) the bond specified in such certificate (or any bond or bonds issued in exchange or substitution for such bond) shall be produced by another holder, or (3) the bond specified in such certificate shall be registered as to principal in the name of another holder or shall have been surrendered in exchange for a fully registered bond registered in the name of another holder. The Trustee may, in its discretion, require further proof in cases where it deems further proof desirable. The ownership of registered bonds shall be proved by the registry books.
(C)      Until such time as the Trustee shall receive the written consent of the necessary per centum in principal amount of the bonds required by the provisions of subsection (A) above for action contemplated by such consent, any holder of a bond, the serial number of which is shown by the evidence to be included in the bonds the holders of which have consented to such action, may, by filing written notice with the Trustee at its principal office and upon proof of holding as provided in subsection (B) above, revoke such consent so far as it concerns such bond. Except as aforesaid, any such consent shall be conclusive and binding upon such holder and upon all future holders of such bond (and any bond issued in lieu thereof or exchanged therefor), irrespective of whether or not any notation of such consent is made upon such bond, and in any event any action taken by the holders of the percentage in aggregate principal amount of the bonds specified in subsection (A) above in connection with such action shall,




subject to the provisions of the last sentence of Section 18.08 hereof, be conclusively binding upon the Company, the Trustees and holders of all the bonds.


ARTICLE XIX

MISCELLANEOUS

Section 19.01.    Nothing in this Indenture, expressed or implied, is intended, or shall be construed, to confer upon, or to give to, any person, firm or corporation, other than the parties hereto and the holders of the bonds and coupons Outstanding hereunder, any right, remedy, or claim under or by reason of this Indenture or any covenant, condition, stipulation, promise or agreement hereof, and all the covenants, conditions, stipulations, promises and agreements in this Indenture contained by and on behalf of the Company shall be for the sole and exclusive benefit of the parties hereto, and of the holders of the bonds and of the coupons Outstanding hereunder.

Section 19.02.    Any money which is held by the Trustee (other than money which is held by it for the purpose of effecting the purchase, payment or redemption of any bonds issued hereunder or the payment of any coupons or interest claims appertaining to bonds issued hereunder or which it has been directed to apply to any such purchase, payment or redemption which may only be invested in any bonds or other obligations of the United States of America designated by the Company) shall, at the request of the Company evidenced by an Officers’ Certificate, be invested or reinvested by the Trustee in any Investment Securities designated by the Company, and, unless the Company is in default in the payment of interest on any of the bonds then Outstanding hereunder or one or more Defaults shall have occurred and be continuing, any interest on such bonds or other obligations which may be received by the Trustee shall be forthwith paid to the Company. Such bonds or other obligations (other than those held for the purpose of effecting the purchase, payment or redemption of any bonds issued hereunder or the payment of any coupons or interest claims appertaining to bonds issued hereunder) shall be held by the Trustee as a part of the Mortgaged and Pledged Property and subject to the same provisions hereof as the cash used to purchase the same, but upon a like request of the Company, the Trustee shall sell all or any designated part of the same and the proceeds of such sale shall be held by the Trustee subject to the same provisions hereof as the cash used by it to purchase the bonds or other obligations so sold. If such sale shall produce a net sum less than the cost of the bonds or other obligations so sold, the Company covenants that it will pay promptly to the Trustee such amount of cash as with the net proceeds from such sale will equal the costs of the bonds or other obligations so sold, and if such sale shall produce a net sum greater than the costs of the bonds or other obligations so sold, the Trustee shall promptly pay to the Company an amount in cash equal to such excess.
Unless the Company is in Default, any money in excess of the sum of Fifty Thousand Dollars ($50,000) which shall have been held by the Trustee for a period of five (5) years, invested or uninvested (other than money which is held by it for the purpose of effecting the purchase, payment or redemption of any bonds issued hereunder or the payment of any coupons or interest claims appertaining to bonds issued hereunder or which it has been directed to apply to any such purchase, payment or redemption), shall be applied by the Trustee to the redemption of bonds to the extent any bonds then Outstanding are, by their terms, redeemable, selected as provided in Section 10.02 hereof from the bonds of all series then redeemable. Any moneys not so applied to redemption of bonds shall be held, applied or withdrawn in accordance with the other provisions of this Indenture. In the case of any such redemption, the Trustee shall have power to give any and all redemption notices for or on behalf of the Company.




Section 19.03.    In the event that any bond issued hereunder shall not be presented for payment when the principal thereof becomes due, either at maturity or otherwise, or at the date fixed for the redemption thereof, or in the event that any coupon shall not be presented for payment at the due date thereof and the Company shall have deposited with the Trustee or any paying agent for the purpose or left with either of them if previously so deposited, money sufficient to pay the principal of such bond (and premium, if any), together with all interest due thereon to the date of the maturity of such bond or to the date fixed for the redemption thereof, or to pay such coupon, as the case may be, for the use and benefit of the holder thereof, the Trustee or such paying agent shall, in case the holder of any such bond or coupon shall not, within two (2) years after the maturity of any such bond or coupon or the date fixed for the redemption of any such bond, claim the amount deposited as above stated for the payment thereof, pay over to the Company such amount so deposited, if the Company is not at the time in default hereunder; and the Trustee or such paying agent shall thereupon be relieved from all responsibility to the holder thereof, and in the event of such payment to the Company the holder of any such bond or coupon shall (subject to any applicable statute of limitations) be deemed to be an unsecured creditor of the Company for an amount equivalent to the amount deposited as above stated for the payment thereof and so paid over to the Company.

Section 19.04.    Any power, privilege or right expressly or impliedly reserved to or in any way conferred upon the Company by any provision of this Indenture, whether such power, privilege or right is in any way restricted or is unrestricted, may be in whole or in part waived or surrendered or subjected to any restriction if at the time unrestricted or to additional restriction if already restricted, and the Company may enter into any further covenants, limitations, restrictions or provisions for the benefit of any one or more series of bonds issued hereunder and provide that a breach thereof shall be equivalent to a Default under this Indenture, or the Company may cure any ambiguity contained herein, or in any supplemental indenture, or may (in lieu of establishment by Resolution as provided in Section 2.01 hereof) establish the terms and provisions of any series of bonds by an instrument in writing executed and acknowledged by the Company in such manner as would be necessary to entitle a conveyance of real estate to be recorded in all of the states in which any property at the time subject to the Lien hereof shall be situated. Alternative provisions relating to redemption of a particular series may be provided for in the relevant supplemental indenture, as approved by the Trustee, in lieu of the provisions of Section 10.04. The Trustee is hereby authorized to join with the Company in the execution of any such instrument or instruments. Such instrument, executed and acknowledged as aforesaid, shall be delivered to the Trustee and thereupon any modification of the provisions of these presents therein set forth, authorized by this Section, shall be binding upon the parties hereto, their successors and assigns, and the holders of the bonds and coupons hereby secured. Anything herein contained to the contrary notwithstanding, this Section shall not be construed to permit any act, waiver, surrender or restriction adversely affecting any bonds then Outstanding hereunder.

Section 19.05.    Each certificate or opinion which is specifically required by the provisions of this Indenture to be delivered to the Trustee with respect to compliance with a condition or covenant herein contained shall include (1) a statement that the person making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not in the opinion of such person such condition or covenant has been complied with.




Every request or application by the Company for action by the Trustee shall be accompanied by an Officers’ Certificate and an Opinion of Counsel stating in each case that in the opinion of the person making such certificate or opinion the conditions precedent, if any, to such action, provided for in this Indenture (including any covenants compliance with which constitutes a condition precedent), have been complied with.
The same officer or officers of the Company, or the same engineer or counsel or other person, as the case may be, need not certify to all the matters required to be certified under the provisions of any Article, Section, subsection, subdivision, paragraph or clause hereof, but different officers, engineers, counsel or other persons may certify to different facts respectively.
Section 19.06.    All parties to this Indenture agree, and each holder or owner of any bond by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorney’s fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this section shall not apply to any suit instituted by the Trustee, to any suit instituted by any bondholder, or group of bondholders, holding in the aggregate more than ten per centum (10%) in principal amount of the bonds Outstanding (determined as provided in Section 12.07 hereof), or to any suit instituted by any bondholder for the enforcement of the payment of the principal of or interest on any bond, on or after the respective due dates expressed in such bond.

Section 19.07.    Subject to the provisions of Article XV and Article XVI hereof, whenever in this Indenture any of the parties hereto is named or referred to (except in subdivision (1) of Section 1.05 hereof), this shall be deemed to include the successors or assigns of such party, and all the covenants and agreements in this Indenture contained by or on behalf of the Company or by or on behalf of the Trustee shall bind and inure to the benefit of the respective successors and assigns of such parties whether so expressed or not.

Section 19.08.    If any provision of this Indenture limits, qualifies, or conflicts with another provision of this Indenture which has been required to be included pursuant to any requirements of Sections 310 to 317, inclusive, of the Trust Indenture Act of 1939, as amended, such required provision shall control.

Section 19.09.    It is the intention and it is hereby agreed that so far as concerns that portion of the Mortgaged and Pledged Property situated within the State of Louisiana the general language of conveyance contained in this Indenture is intended and shall be construed as words of hypothecation and not of conveyance, and that so far as the said Louisiana property is concerned, this Indenture shall be considered as an act of mortgage and pledge under the laws of the State of Louisiana, and the Trustees herein named are named as mortgagee and pledgee in trust for the benefit of themselves and of all present and future holders of bonds and coupons issued and to be issued hereunder, and are irrevocably appointed special agents and representatives of the holders of the bonds and coupons issued and to be issued hereunder and vested with full power in their behalf to effect and enforce the mortgage and pledge hereby constituted for their benefit, or otherwise to act as herein provided for.





Section 19.10.    Wherever reference is made in this Indenture to the Trust Indenture Act of 1939, as amended (except in Section 18.09 hereof), reference is made to such Act as it was in force on the date of the execution of this Indenture.

Section 19.11.    The titles of the several Articles of this Indenture, the marginal sectional and marginal Article references and the table of contents shall not be deemed to be any part of this Indenture.

Section 19.12.    This Indenture may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 19.13.    Notwithstanding any other provisions of this Indenture, the Company may, at any time and from time to time, amend this Indenture so as to decrease (but not below the amount of bonds at the time Outstanding hereunder) the aggregate principal amount of bonds at any one time Outstanding which may be secured hereby by executing and delivering to the Trustees, and thereafter appropriately recording or causing to be recorded in all places where this Indenture is recorded, a supplemental indenture specifying the aggregate principal amount of bonds at any one time Outstanding which may thereafter be secured hereby. Unless and until this Indenture shall have been so amended, the aggregate principal amount of bonds at any one time Outstanding which may be secured hereby shall be and remain Ten Billion Dollars ($10,000,000,000) as stated in Section 3.01 hereof. Any such amendment of this Indenture and the execution and delivery of any such supplemental indenture as provided in this Section may be authorized by a Resolution and no other or further authorization or consent shall be required.

Section 19.14.    The laws of the State of New York shall govern this Indenture and the bonds issued hereunder, except to the extent that the validity or perfection of the Lien of the Indenture, or remedies thereunder, are governed by the laws of a jurisdiction other than the State of New York.


ARTICLE XX

SPECIFIC DESCRIPTION OF PROPERTY

(Unless otherwise specifically stated, all recordation or registration references set forth hereinafter are references to Conveyance Books and Folios thereof in the Conveyance Office of the Parish of Orleans, State of Louisiana. Descriptions of land hereinafter set forth are derived from or are based upon or are by reference to the original acquisitions thereof by the Company or its predecessors.)
PARAGRAPH ONE
The Electric Generating Plants, Plant Sites and Stations of the Company, including all electric works, power houses, buildings, pipelines and structures owned by the Company and all land of the Company on which the same are situated and all of the Company’s lands, together with the buildings and improvements thereon, and all rights, ways, servitudes, prescriptions, and easements, rights-of-way, permits, privileges, licenses, poles, wires, machinery, implements, switchyards, electric lines, equipment and appurtenances, forming a part of said plants, sites or stations, or any of them, or used or enjoyed, or capable of being used or enjoyed in conjunction with any of said power plants, sites, stations, lands and property, including all the Company’s right, title and interest in and to the following property situated in the Parish of Orleans, State of Louisiana:




(1)      The Market Street Steam Electric Generating Station, and the 13.8/115 KV and 230 KV Substations in connection therewith, situated in the First District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A square of ground known as Square 22-B, bounded by Market, South Peters, Richard and Water Streets, being the same property acquired in part by New Orleans Power House Co., Ltd. on February 18, 1901, from Louis T. Romaine, by deed registered in C.O.B. 183, Folio 204; in part by New Orleans Traction Co. on February 25, 1897, from American Loan and Trust Co., by deed registered in C.O.B. 164, Folio 359; and in part by Edison Electric Co. on February 27, 1897, from American Loan and Trust Co., by deed registered in C.O.B. 165, Folio 357.
(b)      A square of ground known as Square 21-B, bounded by Richard, South Peters, Orange and Water Streets, acquired by the Company on August 6, 1926, from the Board of Commissioners of the Port of New Orleans, by deed registered in C.O.B. 423, Folio 15.
(c)      The continuation or projection of Richard Street, extending from Water to South Peters Streets, acquired by the Company on May 5, 1930, from the City of New Orleans, under and by virtue of Ordinance No. 9492 C.C.S., registered in C.O.B. 455, Folio 244.
(d)      A square of ground known as Square 20-B, bounded by Orange, South Peters, Race and Water Streets, being the same property acquired in part by New Orleans Gas Light Co. on August 2, 1876, from Factors and Traders Insurance Co., by deed registered in C.O.B. 106, Folio 621; in part by New Orleans Gas Light Co. on July 10, 1879, from John M. Steptoe, et als., by deed registered in C.O.B. 111, Folio 903; and in part by New Orleans Gas Light Co. on February 11, 1880, from Alexander P. Gray, et als., by deed registered in C.O.B. 112, Folio 242.
(e)      A square of ground known as Square 23-B, bounded by St. James, South Peters, Market and Water Streets, being the same property acquired in part by the Company on July 7, 1926, from Felix J. Puig, by deed registered in C.O.B. 411, Folio 480; and in part by New Orleans Railway and Light Co. on July 18, 1905, from M. N. Buckner, by deed registered in C.O.B. 201, Folio 742.
(f)      A triangle of ground known as Square 24-B, bounded by St. James, South Peters and Water Streets, acquired by the Company on July 7, 1926, from Felix J. Puig, by deed registered in C.O.B. 411, Folio 480.
(g)      Two certain lots of ground in Square No. 37-A, also known as
Square 37, bounded by South Peters, St. James, Tchoupitoulas and Market Streets, designated by the Nos. 1 and 2 on a survey by Guy J. Seghers, Surveyor, dated January 20, 1966, according to which said lots adjoin each other and measure each 29 feet 4 inches 4 lines front on South Peters Street, same width in the rear, by a depth between equal and parallel lines of 116 feet 10 inches, Lot No. 1 forming the corner of Market and South Peters Streets; acquired by the Company on March 9, 1966, from Mrs. Marjorie Burke, widow of Clement P. Binnings, by deed registered in C.O.B. 673, Folio 402.
(h)      Certain portions of Squares 35, 36 and 37, described as follows:
(A)      Old Lots 1 through 7 fronting on So. Peters Street and old Lots 1, 2 and 8 fronting on St. James Street in Square 35 bounded by So. Peters, St. James, Celeste and Tchoupitoulas Streets;




(B)      All of Square 36 bounded by So. Peters, St. James, Tchoupitoulas and Market Streets and Market Place, except two small triangular areas forming part of the right-of-way of the Public Belt Railroad, one located at the corner of Market Street and Market Place and the other located at the corner of Market Place and So. Peters Street; and
(C)      Two certain pieces of ground in Square 37, bounded by Market and South Peters Streets and Market Place, more fully described as follows:
(i)      A piece or portion of ground, triangular in shape, forming the corner of Market Place and bounded by Market Place and the right of way of the New Orleans Public Belt Railroad, and measuring 90’9”3’” on the east side of Market Place, 75’7”4’’’ on the north side of Market Place, and 108’8”4’’’ on the right of way of the New Orleans Public Belt Railroad; and
(ii)      A piece or portion of ground bounded and measuring as follows: commencing at the corner of Market Place and South Peters Street and running thence 45’5”2’’’ on the north side of Market Place to the right of way of the New Orleans Public Belt Railroad, thence running 158’8”3”’ along the right of way of the New Orleans Public Belt Railroad to Market Place, thence running 24’10”4’’’ on the east side of Market Place to Market Street, thence running 30’3”0’” along Market Street in the direction of South Peters Street, thence running 58’9”0’’’ parallel to South Peters Street in the direction of St. James Street, thence running 116’10”0’’’ parallel to Market Street to South Peters Street, and thence running 88’1”5’” along South Peters Street to the point of beginning;
all as shown on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated July 29, 1954; acquired by the Company on November 25, 1955, from A. Marx and Sons Co., Inc., by deed registered in C.O.B. 607, Folio 391; LESS AND EXCEPTING THEREFROM a certain portion of ground situated in Square 37 bounded by Market and South Peters Streets and Market Place, composed of parts of Lots 1, 2, 3, 4, 5 and 6, which said portion of ground according to a plan of resubdivision by Guy J. Seghers, Jr., Surveyor, dated July 17, 1968, registered in C.O.B. 684, Folio 404, is more particularly described as follows: commencing at the intersection of the northern property line of Market Place and the western boundary line of South Peters Street; thence in a northerly direction along the western property line of South Peters Street a distance of 17’1”3’’’ to the point of beginning; thence in a northwesterly direction along the arc of a curve to the left having a radius of 277.939 feet a distance of 178’2”5’’’ to the southern property line of Market Street; thence in an easterly direction along the southern property line of Market Street a distance of 37’1”5’’’ to a point; thence in a southeasterly direction along the arc of a curve to the right having a radius of 297.939 feet a distance of 119’3”2’’’ to the western property line of South Peters Street; thence in a southerly direction along the western property line of South Peters Street a distance of 42’11”2’’’ to the point of beginning, said portion containing 2,950.4 square feet and being designated as Parcel “F-F”.
(i)      Three certain parcels of ground designated as Parcels “E-E”, “C-C” and “A-A” in Squares Nos. 36 and 37 bounded by Market, Tchoupitoulas, St. James and South Peters Streets, composed of parts of Lots 1, 2 and I in Square No. 36 and parts of Lots 3, 4, 5 and 6 in Square No. 37, according to a plan of resubdivision by Guy J. Seghers, Jr., Surveyor, dated July 17, 1968; acquired by the Company on September 26, 1968 from the Public Belt Railroad Commission for the City of New Orleans, by deed registered in C.O.B. 688C, Folio 140; and further described as follows:
(A)      Commencing at the intersection of the western property line of South Peters Street and the Northern property line of St. James Street; thence in a northerly direction along the western property line of South Peters Street a distance of 77’2”2’’’ to the point of beginning;




thence continuing in a northerly direction along the western property line of South Peters Street a distance of 51’1”6’’’ to the southern property line of Market Place; thence 90°4’25” left along the southern property line of Market Place a distance of 34’0”7’’’ to a point; thence 123°33’37” left a distance of 61’4”7’’’ to the point of beginning, said parcel containing 869.4 square feet and designated as Parcel “E‑E”.
(B)      Commencing at the intersection of the southern property line of Market Street and the western property line of South Peters Street; thence in a southerly direction along the western property line of South Peters Street a distance of 146’10”5’’’ to the northern property line of that portion of Market Place which extends in an east-west direction; thence 89°55’35” right along the northern property line of Market Place a distance of 45’5”2’’’ to the point of beginning; thence 50°13’10” right a distance of 135’7”0’’’ to a point; thence continuing in a northwesterly direction along the arc of a curve to the left having a radius of 284.37 feet a distance of 22’10”7’’’ to the eastern property line of that portion of Market Place which extends in a north-south direction; thence in a westerly direction along the eastern property line of Market Place a distance of 29’9”4’’’ to a point; thence 39°51’15” left a distance of 118’1”0’’’ to the northern property line of that portion of Market Place which extends in an east-west direction; thence 50°13’10” left along the northern property line of Market Place a distance of 26’0”2’’’ to the point of beginning, said parcel containing 2,765.7 square feet and designated as Parcel “C-C”.
(C)      Commencing at the intersection of the eastern property line of Tchoupitoulas Street and the southern property line of Market Street; thence in an easterly direction along the southern property line of Market Street a distance of 171’9”6’” to the point of beginning; thence continuing in an easterly direction along the southern property line of Market Street a distance of 20’0”3”’ to the western property line of Market Place; thence 90°4’25” right along the western property line of Market Place a distance of 13’7”3”’ to a point; thence in a northwesterly direction along the arc of the curve to the left having a radius of 264.37 feet a distance of 24’2”4”’ to the point of beginning, said parcel containing 136.3 square feet and designated as Parcel “A-A”.
(j)      The continuation or projection of Market Street extending from Water Street to South Peters Street; acquired by the Company on February 25, 1946, from Charles J. Tessier, by deed registered in C.O.B. 539, Folio 543.
(2)      The Michoud Steam Electric Generating Station, and the 230/115 KV Substation and Gas Reducing Station No. 222 in connection therewith, situated in the Third District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A certain tract of land, approximately 141 acres in area, situated in Lot 2 of Section 42 of Township 12 South, Range 13 East, bounded by Gentilly Boulevard and a lot now or formerly belonging to George W. McHugh, the former Michoud tract, the northern bank line of the Intracoastal Waterway Canal and Paris Road or Route 61. Said tract is designated by the letters “D” and “D-1” on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated August 21, 1952, and was acquired by the Company on August  22, 1952, from Mrs. Lurline Linden, widow of Arthur O’Shaughnessy and wife of/and Lawrence P. Smith and Mrs. Almeda Otto, wife of/and Leon A. Britsch, by deed registered in C.O.B. 584, Folio 234.
(b)      A certain tract of land totaling approximately 225 acres in area, situated in Lot 1 of Section 42 of Township 12 South, Range 13 East, designated by the letter “B” on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated August 4, 1952, and is bounded by Gentilly Boulevard (Old Spanish Trail), Paris Road, the south line of the Louisville and Nashville Railroad right-of-way,




and the west line of the former Michoud tract; acquired by the Company on August 12, 1952, from Albert M. Pratt, Walter F. Marcus, George Danziger and Willis W. Shofner, by deed registered in C.O.B. 583, Folio 240.
(3)      The A. B. Paterson Steam Electric Generating Station and the 115/13.8 KV Substation in connection therewith, situated in the Third District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A portion of ground, bounded by Dwyer Road, Downman Road, Chef Menteur Highway, and the Industrial Canal Reservation, acquired by the Company on December 17, 1945, from Gentilly Development Company, Inc., by deed registered in C.O.B. 539, Folio 397; LESS AND EXCEPTING THEREFROM a certain portion of land designated as Tract “X” on a plan of survey by E. L. Eustis, Civil Engineer, dated February 18, 1957, and commencing at a point on the easterly boundary of the property of the Board of Commissioners of the Port of New Orleans 1,811.2 feet south of the intersection of said easterly boundary and the southerly boundary of Dwyer Road, which point is designated by the letter “A” on said plan and is the point of beginning, thence in an easterly direction with a left interior angle of 92°16’51” a distance of 590.622 feet to a point designated by the letter “B”, thence to the left with an interior angle of 98°28’39” in a northerly direction a distance of 707.176 feet to a point designated by the letter “C”, thence to the left with an interior angle of 81°31’21” in a westerly direction a distance of 722.77 feet to a point designated by the letter “D”, and thence to the left with an interior angle of 87°43’09” in a southerly direction and along the easterly boundary of the property of the Board of Commissioners of the Port of New Orleans a distance of 700 feet to the point of beginning, containing 459,326 square feet, and bounded on the north, east and south by property of the Company and on the west by property of the Board of Commissioners of the Port of New Orleans.
(b)      A portion of ground bounded by Downman Road, Old Gentilly Road, the Industrial Canal Reservation, and Chef Menteur Highway, acquired by the Company on December 17, 1945, from Gentilly Development Company, Inc., by deed registered in C.O.B. 539, Folio 397; LESS AND EXCEPTING THEREFROM a parcel (Parcel No. 4-1) of ground beginning at a point located on the Company’s property at a co-existent point on the southerly existing right of way line of La.-U.S. Highway 90 and the eastern right of way line of the existing right of way of Jordan Road, said point being the southeast corner of said intersection and being located approximately 40.00 feet North 16°12’37” West of Highway Survey Station 138+09.10 to the left of the centerline of State Project No. 6-90-32; thence from said point of beginning proceed North 73044’03” East a distance of 387.67 feet; thence proceed North 75°58’57” East along a chord measuring a distance of 291.00 feet with an arc measuring a distance of 291.03 feet with a radius measuring a distance of 3,764.72 feet; thence proceed South 5°25’53” East a distance of 110.72 feet; thence proceed South 73°44’03” West a distance of 616.78 feet; thence proceed South 47°43’50” West a distance of 45.62 feet; thence proceed North 16°12’37” West a distance of 140.00 feet to the point of beginning; containing an area of 79,603.2 square feet.
(c)      A certain portion of ground, bounded by Dwyer Road, Industrial Canal Reservation, Lewis Road, and Downman Road, comprising Groves 24 through 34 of Section 18 of the New Orleans Lake Shore Land Company, measuring 156.51’ on Dwyer Road, 1536.43’ on Downman Road, 1562.96’ on Lewis Road, and 1535.46’ on the Industrial Canal Reservation, as-shown on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated March 25, 1957, acquired by the Company on April 8, 1957, from Dorothy Dorsett, wife of/and Joe W. Brown, by deed registered in C.O.B. 615, Folio 182; LESS AND EXCEPTING THEREFROM a certain parcel of ground located at the northwest intersection of Downman and Dwyer Roads, which parcel is part of former Groves 33




and 34 of Section 18 of the New Orleans Lakeshore Land Company Subdivision and measures 200 feet front on Downman Road by 200 feet depth and second front on Dwyer Road, between equal and parallel lines; and according to a survey by F. C. Gandolfo, Jr., Surveyor, dated August 20, 1963, said parcel is designated as Lot T, and bears the same designation, location, and measurements as hereinabove; and FURTHER LESS AND EXCEPTING THEREFROM a portion of ground comprising a part of the property designated as Parcel S, which Parcel S is now or formerly referred to as Groves 24 through 34 of Section 18, New Orleans Lakeshore Land Company Subdivision, and which said Parcel S is bounded by Lewis Road, Downman Road, Dwyer Road, and the Industrial Canal Reservation; and which said portion of ground located within the above described Parcel S is more particularly described as commencing at the intersection of the western property line of Downman Road and the southern property line of Lewis Road; thence south 76°04’08” west along the southern property line of Lewis Road a distance of 300 feet to the point of beginning; thence continuing south 76°04’08” west along the southern property line of Lewis Road a distance of 360 feet to a point; thence south 18°08’20” east a distance of 420 feet to a point; thence north 76°04’08” east a distance of 360 feet to a point; thence north 18°08’20” west a distance of 420 feet to the southern property line of Lewis Road, the point of beginning, which said area includes a total of 150,792 square feet and is shown as a crosshatched area and identified by the letters C, B, A and F on Company Drawing No. M-66-195, dated and revised December 20, 1966, and revised again on January 19, 1968; and FURTHER LESS AND EXCEPTING THEREFROM a parcel of ground commencing at the intersection of the western property line of Downman Road and the southern property line of Lewis Road; thence along the southern property line of Lewis Road south 76°04’08” west a distance of 660.00 feet to the point of beginning; thence south 18°08’20” east a distance of 420.00 feet to a point; thence south 76°04’08” west a distance of 70.00 feet to a point; thence north 18°08’20” west a distance of 420.00 feet to the southern property line of Lewis Road; thence along the southern property line of Lewis Road north 76°04’08” east a distance of 70.00 feet to the point of beginning.
PARAGRAPH TWO
The Electric Substations, Switching Stations, Microwave installations and UHF-VHF installations of the Company, and the Sites therefor, including all buildings, structures, towers, poles, all equipment, appliances and devices for transforming, converting, switching, transmitting and distributing electric energy, and for communications, and the lands of the Company on which the same are situated, and all of the Company’s lands, rights, ways, servitudes, prescriptions, easements, rights-of-way, machinery, equipment, appliances, devices, licenses and appurtenances forming a part of said substations, switching stations, microwave installations of UHF-VHF installations, or any of them, or use or enjoyed or capable of being used or enjoyed in conjunction with any of them, including all the Company’s right, title and interest in and to the following property situated in the Parish of Orleans, State of Louisiana:
(1)      The Almonaster 230/24 KV Substation, situated in the Third District on/and those certain tracts or parcels of land particularly described as follows:
A certain triangular portion of ground, bounded by Peoples Avenue, widened Almonaster Avenue and the south property line of the Hopkins-Dennis Sheen tract; acquired by the Company in part from Don L. Peterson and Raymond F. Twickler, on May 17, 1956, by deed registered in C.O.B. 610, Folio 181, and amended by Correction Deed, dated May 16, 1957, registered in C.O.B. 616, Folio 355, and in part from the City of New Orleans, on March 8, 1957, by act of exchange registered in C.O.B. 616, Folio 167, described, as shown on a plan of survey by F. C. Gandolfo, Jr., Surveyor, revised on February 21, 1957, as follows:




Square or a portion of Square 1911, bounded by Almonaster Avenue, Peoples Avenue and Treasure Street, and measures 98.38’ on Treasure Street, 302.22’ on Almonaster Avenue and 285.87’ on Peoples Avenue or the Peoples Avenue side.
Square or a portion of Square 1984, bounded by Madmen Street, Almonaster Avenue, Treasure Street, Peoples Avenue and Benefit Street, and measures 125.56’ on Benefit Street, 291.02’ on Madmen Street, 30.54’ on Almonaster Avenue, 115.25’ on Treasure Street and 319.90’ on Peoples Avenue or the Peoples Avenue side.
Square or a portion of Square 1985, bounded by Benefit Street, Almonaster Avenue and Madmen Street, and measures 50.76’ on Benefit Street, 156.51’ on Almonaster Avenue and 148.05’ on Madmen Street.
Square or a portion of Square 2090, bounded by the south line of the Hopkins‑Dennis Sheen tract, Almonaster Avenue, Benefit Street and Madmen Street, and measures 184.56’ on Almonaster Avenue, 67.57’ on Benefit Street, 182.88’ on Madmen Street, and 127.7’ on the south line of the Hopkins-Dennis Sheen tract.
Square or a portion of Square 2091, bounded by the south line of the Hopkins-Dennis Sheen tract, Madmen Street, Benefit Street and Peoples Avenue, and measures 186.08’ on Madmen Street, 125.62’ on Benefit Street, 194.29’ on Peoples Avenue or the Peoples Avenue side and 126.14’ on the south line of the Hopkins-Dennis Sheen tract.
(2)      The Avenue C 115/13.8 KV Substation, situated in the Seventh District on and those certain tracts or parcels of land particularly described as follows:
Five certain portions of ground in Square No. 63-B, bounded by Thirty-sixth Street, Avenue B, Portland Street, and Fleur de Lis, all as shown on a plat of survey by Guy J. Seghers, Surveyor, dated April 29, 1959, and further described as follows:
(a)      Lots Nos. 7 and 8, both fronting on Portland Street, and measuring a total of 40’ on Portland Street by a depth of 80’ towards Thirty-sixth Street between equal and parallel lines, acquired by the Company on May 7, 1959, from Harry Jerolleman, by deed registered in C.O.B. 632, Folio 117.
(b)      Lots Nos. 9 and 10, both fronting on Portland Street, and measuring a total of 40’ on Portland Street by a depth of 80’ towards Thirty-sixth Street between equal and parallel lines, acquired by the Company on May 7, 1959, from St. Vincent’s Infant Asylum, by deed registered in C.O.B. 628, Folio 100.
(c)      Lots Nos. 25, 26, 27, and 28, all fronting on Fleur de Lis, and with Lot No. 25 comprising the corner of Fleur de Lis and Thirty-sixth Street, and measuring a total of 100’ on Fleur de Lis by a depth of 120’ towards Avenue B between equal and parallel lines, acquired by the Company on May 7, 1959, from Rose Lora, wife of/and Anthony E. Guichard, by deed registered in C.O.B. 631, Folio 105.
(d)      Lots Nos. 29 and 30, both fronting on Fleur de Lis, and measuring a total of 50’ on Fleur de Lis by a depth of 120’ towards Avenue B between equal and parallel lines, acquired by the Company on May 7, 1959, from Louis C. Hughes, by deed registered in C.O.B. 630, Folio 77.




(e)      Lots Nos. 31 and 32, both fronting on Fleur de Lis, and measuring a total of 50’ on Fleur de Lis by a depth of 120’ towards Avenue B between equal and parallel lines, acquired by the Company on May 7, 1959, from Ernest W. Drackett, by deed registered in C.O.B. 629, Folio 87.
(3)      The Claiborne 115/13.8 KV Substation, situated in the Third District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A certain portion of ground known as Lots 1, 2, 3, 4, 5, 6, 15, 16, 17 and 18 in Square 8, bounded by Elysian Fields Ave., Decatur, Marigny and North Peters Streets, acquired in part by New Orleans and Carrollton Railroad Co. on May 30, 1901, from Theodore J. Thompson, by deed registered in C.O.B. 183, Folio 414, in part by New Orleans and Carrollton Railroad Co. on March 5, 1900, from Miss Katie Reider, et als., by deed registered in C.O.B. 178, Folio 239, in part by Canal and Claiborne Railroad Co. on April 4, 1896, from Henry Rooney, by deed registered in C.O.B. 159, Folio 382, in part by Canal and Claiborne Railroad Co. on April 7, 1896, from Mrs. Elizabeth Eichenlaub, wife of Joseph Chretien, et als., by deed registered in C.O.B. 159, Folio 384, in part by Canal and Claiborne Railroad Co. on April 6, 1896, from Edgar H. Farrar, by deed registered in C.O.B. 160, Folio 431, and in part by New Orleans and Carrollton Railroad co. on March 5, 1900, from Mrs. Anna Maria Werner, widow of Gottlieb Bohnet, by deed registered in C.O.B. 176, Folio 219.
(b)      A certain portion of ground known as Lots A, B, C, D, E, F, G, H and I in Square 8, bounded by Elysian Fields Ave., Decatur, Marigny and North Peters Streets, acquired by the Company on December 18, 1941, from Emile Weil, et als., by deed registered in C.O.B. 517, Folio 671.
(c)      Those areas designated by the letter “a” on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated May 29, 1948, formerly comprising certain alleys and containing approximately 4390 square feet, acquired by the Company on November 2, 1948, from the City of New Orleans, by instrument registered in C.O.B. 558, Folio 502.
(d)      That area designated by the letter “x” on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated May 29, 1948, being a portion of Lots 12, 13, and 14, and containing approximately 1210 square feet, acquired by the Company on November 2, 1948, from the Public Belt Railroad Commission for the City of New Orleans, by deed registered in C.O.B. 562, Folio 418.
(e)      That area designated by the letter “y” on a plat of survey by Gandolfo, Kuhn, Luecke & Associates, Surveyors, dated July 31, 1985, being a portion of Lots 12, 13, 14, 16, 17, 18, 6, 7, 8, 9 and 4, and containing approximately 8471.6 square feet, acquired by the Company on May 31, 1984 from the Public Belt Railroad Commission for the City of New Orleans, by instrument registered in C.O.B. 793D, Folio 610.
(4)      The Curran 230/24 KV Substation, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground in former Square 147, now known as Grove 21, Section 4, and part of former Square 146, now known as Grove 20, Section 4, and measuring 322.52’ front on Curran Road, 554.89’ front on Jahncke Road, 322.53’ on Zenith Street and 553.90’ along the east boundary, per plat of survey by Guy J. Seghers, Engineer, dated April 25, 1965; acquired by the Company on May 20, 1965 from the La Kratt Corporation, by deed registered in C.O.B. 668, Folio 287.




(5)      The Delta 115/13.8 KV Substation, situated in the Second District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A certain irregular shaped portion of ground situated in the area bounded by Canal, Delta and Bienville Streets and the Mississippi River, said portion fronting 103.92 feet on Canal Street, measuring approximately 769 feet along its west side extending from Canal Street to Bienville Street, and containing 49,213.8 square feet, designated by the letters A and B on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated December 20, 1955, acquired by the Company on April 13, 1956, from the Louisville and Nashville Railroad Company, by deed registered in C.O.B. 609, Folio 115; LESS AND EXCEPTING THEREFROM a portion of ground, designated as Parcel Y on a plan of survey by Gandolfo, Kuhn and Associates, Civil Engineers-Surveyors, dated February 17, 1969, Commencing at the intersection of the south line of Bienville Street with the east line of North Front Street, thence south 52°51’53” east along the south line of Bienville Street a distance of 131.03 feet to the point of beginning, thence south 8°17’09” west a distance of 114.39 feet to a point, thence south 6°10’36” east a distance of 238.05 feet to a point, thence north 8°17’09” east a distance of 79.79 feet to a point, thence north 7°08’02” west a distance of 68.05 feet to a point, thence north 0°33’39” east a distance of 152.79 feet to a point, thence north 5°15’08” west a distance of 43.44 feet to a point, thence north 52°51’53” west a distance of 12.16 feet to the point of beginning, containing 6,601.14 square feet; and FURTHER LESS AND EXCEPTING THEREFROM that portion of ground, in an area bounded by Canal Street, Bienville Street, N. Peters Street, and New Orleans Public Belt Railroad, designated as Parcel 27B on a survey by Gandolfo, Kuhn and Associates, dated December 14, 1973 (Tracing 359‑37; E-64-8), commencing at the intersection of the projected northern property line of Iberville Street and the eastern property line of Delta Street; thence south 52°43’58” east a distance 22.86 feet to the point of beginning; thence north 8°17’9” east a distance of 225.09 feet to a point; thence south 6°10’36” east a distance of 232.46 feet to a point; thence north 81°42’51” west a distance of 58.05 feet to the point of beginning, containing 6,533.8 square feet; and FURTHER LESS AND EXCEPTING THEREFROM a portion of ground designated as Lot A-6 on a plan by the office of Gandolfo, Kuhn, Luecke & Assoc., dated March 15, 1982 (Dwg. No. E-170-12), and more particularly described as follows in accord with said plan: commence at the intersection of the northerly line of Canal Street and the division line between Parcel S-1 and Lot A-5, said point being 664.87 feet east of the intersection of the northerly line of Canal Street and the easterly line of N. Peters St. measured along the northerly line of Canal Street and being designated by the letters “AA”; thence along the division line between Parcel S-1 and Lot A-5, N 8°17’09” E, 310.74 feet to the point of beginning; thence along the division line between Parcel S-1 and Lot A‑6, N 8°17’09” E, 115.58 feet to the northerly line of Lot A-6; thence along said northerly line S 52°43’30” E, 11.43 feet to point “T”; thence along said northerly line S 81°42’51” E, 58.05 feet to point “S”; thence along the easterly line of Lot A‑6, S 6°10’39” E, 135.10 feet; thence along the division line between Lots A-5 and A‑6 in the northwesterly direction along a curve to the left, having a radius of 50 feet, a distance of 68.24 feet to a point on tangent; thence continue along said line N 84°22’28” W, 36.77 feet to a point of curve; thence continue along said line in a southwesterly direction along a curve to the left, having a radius of 15 feet, a distance of 22.87 feet to the point of beginning, containing 7,894 square feet; and FURTHER LESS AND EXCEPTING THEREFROM that certain portion of former Square 1C and now a portion of Lot CP-2B which property is shown shaded in red on Drawing No. 426-29,
E-170-11 by Gandolfo, Kuhn, Lueke and Associates dated October 12, 1981, more particularly described as commencing at a point formed by the intersection of the eastern property line of N. Peters Street and the northern property line of Canal Street; thence S 52°44’02” East a




distance of 549.36 feet to a point; thence N 21°13’02” East a distance of 26.01 feet to the point of beginning; thence continuing North 21°13’02” East a distance of 108.83 feet to a point; thence South 52°44’02” East a distance of 44.33 feet to a point; thence South 08°10’59” West a distance of 119.69 feet to a point; thence North 52°44’02” West a distance of 72.42 feet to the point of beginning.
(b)      A certain portion of ground, designated as Parcel “X” on a plan of a survey by Gandolfo, Kuhn and Associates, Civil Engineers-Surveyors, dated February 17, 19.69, and further described as follows:
Commencing at the intersection of the north line of Canal Street with the west line of Delta Street, thence south 52°43’58” east along the north line of Canal Street a distance of 158.72 feet to the point of beginning, thence north 8°17’09” east a distance of 276.61 feet to a point, thence north 81°42’51” west a distance of 37.48 feet to a point, thence north 8°17’09” east a distance of 48.17 feet to a point, thence south 81°42’51” east a distance of 38.64 feet to a point, thence south 6°10’36” east a distance of 59.44 feet to a point, thence south 8°17’09” west a distance of 155.22 feet to a point, thence south 16°24’57” west a distance of 113.14 feet to the point of beginning, said area containing 5,680.14 square feet; acquired by the Company by exchange with the City of New Orleans on March 16, 1970, by instrument registered in C.O.B. 698, Folio 267.
(c)      A certain parcel of land, being a portion of Parcel “D”, bounded by Canal, Delta and Crossman Streets, as shown on a survey by Gandolfo, Kuhn and Associates, dated July 15, 1971; acquired by the Company on January 25, 1972 from the Louisville and Nashville Railroad, by deed registered in C.O.B. 708E, Folio 51; and further described as follows:
To find the point of beginning commence at the intersection of the east line of Delta Street with the north line of Canal Street; thence south 52°43’58” east along the north line of said Canal Street, seventeen and thirty‑two hundredth’s (17.32) feet to the point of beginning of this description thence north 8°17’09” east, ninety-nine and seventy-nine hundredths (99.79) feet to a point in the east property line of Parcel “D”, thence south 7°15’13” west, along said east property line of Parcel “D”, aforesaid, thence the following courses and distances; twenty-one and sixty‑three hundredths (21.63) feet to a point, thence south 6°3’21” west, twenty-two and eighteen hundredths (22.18) feet to a point, then south 4°45’11” west twenty-two and fifty-two hundredths (22.52) feet to a point; then south 3°3’11” west, thirty-seven (37) feet to a point in the north line of Canal Street, thence north 52°43’58” west, along the north line of Canal Street, six and eighty-seven hundredths (6.87) feet to the point of beginning:
(d)      Certain parcels of land in an area bounded by Canal Street, Bienville Street, N. Peters Street, and the New Orleans Public Belt Railroad designated as Parcels 28A and 27A on a survey made by Gandolfo, Kuhn and Associates, dated December 14, 1973 (Tracing 359-37; E-64-8), described as follows:
(A)      Parcel 28A commences at the intersection of the northern property line of Canal Street and the eastern property line of Delta Street; thence south 52°43’58” east along the northern property line of Canal Street a distance of 142.56 feet to the point of beginning; thence north 16°24’57” east a distance of 119.24 feet to a point; thence north 8°17’9” east a distance of 103.84 feet to a point; thence north 6°10’36” west a distance of 54.06 feet to a point; thence south 8°17’9” west a distance of 155.22 feet to a point; thence south 16°24’57” west a distance of 113.14 feet to a point on the northern property line of Canal Street; thence south 52°43’58” east along the




northern property line of Canal Street a distance of 14.45 feet to the point of beginning; containing 3,317.2 square feet.
(B)      Parcel 27A commences at the intersection of the projected northern property line of Iberville Street and the eastern property line of Delta Street; thence south 52°43’58” east a distance of 22.86 feet to a point; thence south 81°42’51” east a distance of 58.05 feet to a point; thence south 6°10’36” east a distance of 5.59 feet to the point of beginning; thence south 8°17’9” west a distance of 149.82 feet to a point; thence south 81°42’51” east a distance of 38.64 feet to a point; thence north 6°10’36” west a distance of 154.72 feet to the point of beginning; containing 2,894.5 square feet.
Acquired by the Company by exchange with the City of New Orleans on April 1, 1974, by instrument registered in C.O.B. 723, Folio 571.
(e)      A portion of former Lot D-1 and now part of Lot A-4, which property is shown shaded in green on Drawing No. 426-29; E-170-11 by Gandolfo, Kuhn, Lueke and Associates, dated October 12, 1981, more particularly described as follows:
Commencing at a point formed by the intersection of the east property line of N. Peters Street and the north property line of Canal Street; thence S 52°44’02” E a distance of 664.87 feet to the point of beginning; thence N 08°17’09” E a distance of 426.32 feet to a point; thence S 52°43’30” E a distance of 11.43 feet to a point; thence S 08°17’09” W a distance of 426.32 feet more or less to a point on the northerly line of the Canal Street right of way; thence N 52°44’02” W along such right of way line a distance of 11.43 feet to the point of beginning.
Acquired by the Company by exchange with Canal Place Venture 2000 on July 12, 1982, by instrument registered in C.O.B. 783A, Folio 290.
(6)      The Derbigny 230/24 KV Substation, situated in the First District on certain tracts or parcels of land in Square No. 492, bounded by Julia, S. Prieur, Cypress and S. Roman Streets, and in Square No. 493, bounded by Lafayette, S. Roman, Cypress and S. Prieur Streets, owned by others, and on/and those certain tracts or parcels of land particularly described as follows:
(a)      A portion of ground located in Square 479, designated as “Parcel A,” bounded by Cypress, S. Derbigny, Julia and S. Roman Streets as shown on a plat of survey by Guy J. Seghers, Civil Engineer, dated September 23, 1964; acquired by the Company on October 23, 1964 from Marine Properties, Inc., 137 deed registered in C.O.B. 660, Folio 579.
(b)      A certain portion of ground, situated in Square 479, bounded by Cypress, South Derbigny, and South Roman Streets and the Greater New Orleans Expressway (formerly Julia Street), and designated as Parcel “B” on a plan of survey by Guy J. Seghers, Sr., Civil Engineer, dated October 21, 1970, said Parcel “B” beginning at the corner of South Derbigny and Cypress Streets, measuring 147 feet, 6 inches, 0 lines front on Cypress Street in the direction of South Roman Street, thence on a line in the direction of the Greater New Orleans Expressway, dividing Parcel “B” from Parcel “A”, a distance of 224 feet, 8 inches, 1 line to a point on the right-of-way of the Greater New Orleans Expressway, thence along said right-of-way in the direction of South Derbigny Street a distance of 47 feet, 4 inches, 7 lines along an arc of a curve to the right having a radius of 1,842 feet to a point of curve, thence continuing 100 feet, 2 inches, 6 lines along said right-of-way to the corner formed by the Greater New Orleans Expressway and South Derbigny




Street, and thence 228 feet, 3 inches, 1 line front on South Derbigny Street in the direction of Cypress Street to the point of beginning; acquired by the Company from the Causeway Development Corp., November 2, 1970, by deed registered in C.O.B. 700, Folio 72; LESS AND EXCEPTING THEREFROM two certain tracts or parcels of ground, described as Parcel 4-7 as shown on the map hereinafter more fully described, which begins at the intersection of Julia and S. Derbigny Streets, and measures thence along and front. on Julia Street in the direction of S. Roman Street, a distance of 38 feet, 9 inches, 5 lines; thence in the direction of Cypress Street along an arc of a curve to the right having a radius of 556 feet, 3 inches and 4 lines, an arc distance of 241 feet, 1 inch, 3 lines (the chord distance of which is 239 feet, 3 inches, 5 lines on a direction of N 20°22’42” E) to the line of Cypress Street; thence along and front on Cypress Street in the direction of S. Derbigny Street, a distance of 62 feet, 2 inches, 4 lines; thence in the direction of S. Derbigny Street along an arc of a curve to the left having a radius of 494 feet, 5 inches, 3 lines, an arc distance of 174 feet, 10 inches, 4 lines (the chord distance of which is 173 feet, 11 inches, 5 lines on a direction of S 21°55’28” W) to the line of S. Derbigny Street; thence along and front on S. Derbigny Street in the direction of Julia Street, a distance 61 feet, 7 inches, 2 lines, to the point of beginning, containing in area 14,061.6 square feet; and an Unnumbered Parcel, which begins at the intersection of S. Derbigny and Cypress Streets and measures thence along and front on Cypress Street in the direction of S. Roman Street, a distance of 45 feet, 11 inches, 4 lines; thence in the direction of S. Derbigny Street along the arc of a curve to the left having a radius of 494 feet, 5 inches, 3 lines, an arc distance of 174 feet, 10 inches, 4 lines (the chord distance of which is 173 feet, 11 inches, 5 lines on a direction of S 21°55’28” W) to the line of S. Derbigny Street; thence along and front on S. Derbigny Street in the direction of Cypress Street, a distance of 166 feet, 7 inches, 6 lines, to the point of beginning, containing in area 4,724.2 square feet; all as more fully shown on a plan entitled Right of Way Map, State Project No. 283-08-49, Greater New Orleans Mississippi River Bridge Approaches, originally made by John D. Luecke, Reg. Land Surveyor, under date of March 16, 1981, as revised by the Department of Transportation under dates of August 4, 1982, September 6, 1983, May 1, 1984, July 15, 1984, July 18, 1984, September 10, 1986 and September 18, 1986 and now being numbered as Sheet No. 4A of 9.
(7)      The Dublin 115/13.8 KV Substation, situated in the Seventh District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A certain portion of ground in Square 181, designated as Lot 24 and part of Lot 25 on plat of survey by Guy J. Seghers, Surveyor, dated September 7, 1962; acquired by the Company on October 31, 1962 from Norman A. Aronson, by deed registered in C.O.B. 651, Folio 292.
(b)      A certain portion of ground known as Lots 19-23 inclusive in Square 181, bounded by Jeannette Street, Carrollton Avenue, Willow and Dublin Streets, acquired by New Orleans and Carrollton Railroad Co. on April 8, 1901, from Charles L. Hatry, by deed registered in C.O.B. 180, Folio 393.
(8)      The Florida Avenue 115/13.8 KV Substation, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground known as Lots M, N, O, P, Q, R, S, T and Z in Square 1471, bounded by Florida Walk, Mazant, Law, and Bartholomew Streets; acquired in part by the Company on November 28, 1941, from Mrs. Louise Troyani, widow of Edward Koch, by deed registered in C.O.B. 518, Folio 602; in part by the Company on December 23, 1941, from Mrs. Eva C. Gleber, wife of/and Michael P. Wagner, by deed registered in C.O.B. 519, Folio 677; and in




part by the Company on November 26, 1941, from Lawrence M. Labat, and his wife Mrs. Lena Saltalamacchia Labat, by deed registered in C.O.B. 517, Folio 610.
(9)      The Gulf Outlet 115/69/24 KV Substation, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground located in the New Orleans East Heavy Industrial District, in Section 37, Township 12 South, Range 13 East, Southeast District of Louisiana East of the Mississippi River and measuring 210.00’ on the northern boundary, 420:00’ on the western boundary, 365.67’ on the southern boundary, and 469.55’ along a curve on its eastern boundary as per plat of survey dated October 18, 1963 by Guy J. Seghers; acquired by the Company on December 13, 1963 from New Orleans East, Inc., by deed registered in C.O.B. 654, Folio 541.
(10)      The Joliet 115/24 KV Substation, situated in the Seventh District on/and that certain tract or parcel of land particularly described as follows:
A certain square of ground, designated by the Number 470, bounded by Joliet, Leonidas, Colapissa and Oleander Streets, measuring 300 feet front on each of said streets; acquired by the Company from Edmund R. Vales and Associates, Inc. on August 14, 1970, by deed registered in C.O.B. 695, Folio 505.
(11)      The Midtown 230/115 KV Substation, situated in the First District on/and those certain tracts or parcels of land particularly described as follows:
(a)      One half of a square of ground known as Square 716, bounded by Gravier, Telemachus, Julia and Genois Streets, acquired by Merchants Electric Co., Ltd. on January 19, 1901, from Charles Mendelson, by deed registered in C.O.B. 179, Folio 193.
(b)      The continuation or projection of Telemachus Street, extending from City owned property adjacent to the Pontchartrain Expressway right-of-way to a line approximately 149 feet toward Gravier Street, acquired by the Company on February 25, 1946, from Charles J. Tessier, by deed registered in C.O.B. 539, Folio 543.
(c)      The remaining northeasterly one-half of Square 716 bounded by Gravier, Telemachus, Julia and Genois Streets, designated by the letter “A” on a plat of survey by C. J. Christina, Assistant Engineer in the New Orleans City Engineer’s Office, dated October 31, 1950, acquired by the Company on December 7, 1950, from Charles J. Tessier, by deed registered in C.O.B. 575, Folio 191.
(d)      The continuation or projection of Telemachus Street extending from Gravier Street a distance of approximately 145 feet to Company-owned property between Gravier and Julia Streets, as shown on a plat of survey by C. J. Christina, Assistant Engineer in the New Orleans City Engineer’s Office, dated October 31, 1950, acquired by the Company on December 7, 1950, from Charles J. Tessier, by deed registered in C.O.B. 575, Folio 191.
(12)      The Napoleon 230/24 KV Substation, situated in the Sixth District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A square of ground known as Square 86, bounded by Napoleon Avenue, Tchoupitoulas, General Pershing and Water Streets, acquired by New Orleans and Carrollton Railroad Co, on July 14, 1892, from Raymond A. and Raymond D. Pochelu, by deed registered in




C.O.B. 143, Folio 219; LESS AND EXCEPTING THEREFROM that certain portion of ground, Square No. 86A (formerly Square 86), bounded by Tchoupitoulas Street, General Pershing Street (formerly Berlin, title), and Leake (formerly Water Street) and Napoleon Avenues, which said portion of ground is identified as Lot “R” according to the Plan of Resubdivision by Gandolfo, Kuhn, Luecke & Associates, Civil Engineers & Land Surveyors, dated March 7, 1983, registered at C.O.B. 785, Folio 29, and measures as follows: commencing at a point forming the intersection of the southerly line of Tchoupitoulas Street and the easterly line of Napoleon Avenue; thence two hundred forty-five feet (245’) along the southerly line of Tchoupitoulas Street to a point and corner; thence two hundred fifty-two feet (252’), one inch (1”), six lines (6’’’) to a point and corner on the northerly line of Leake Avenue; thence two hundred forty-five feet (245’) three inches (3”) along the northerly line of Leake Avenue to a point and corner forming the intersection of the northerly line of Leake Avenue and the easterly line of Napoleon Avenue; thence two hundred sixty-two feet (262’), one inch (1”), four lines (4’’’) along the easterly line of Napoleon Avenue (262’0”2’’’ title), containing previous Lots 1-9, 16-24 and portions of Lots 10 and 15, title, all according to the survey of Gandolfo, Kuhn, Luecke & Associates, Civil Engineers & Land Surveyors, dated March 16, 1983.
(b)      The continuation or projection of General Pershing Street, extending from Water to Tchoupitoulas Streets, acquired by the Company on October 19, 1939, from the City of New Orleans, under Ordinance No. 14,930 C.C.S., registered in C.O.B. 507, Folio 542.
(c)      A square of ground known as Square 87, bounded by General Pershing, Tchoupitoulas, Milan and Water Streets, acquired in part by the Company on June 10, 1929, from Ullrich Realty Inc., by deed registered in C.O.B. 444, Folio 255; in part by the Company on September 16, 1929, from Mrs. Emily Eiermann, widow of George Eiermann, and wife of Henry J. Otnott et als., by deed registered in C.O.B. 453, Folio 582; in part by the Company on September 16, 1929, from Mrs. Lena Reatz Eiermann, widow of Frederick Eiermann, et als., by deed registered in C.O.B. 446, Folio 338; in part by the Company on February 28, 1931, from Home Ice Co., Ltd., by deed registered in C.O.B. 459, Folio 567; in part by the Company on November 25, 1931, from Albert F. Stentz, et als., by (feed registered in C.O.B. 465, Folio 267; and in part by the Company on December 28, 1931, from Mrs. Catherine Ullrich Dupuy, wife of John Dupuy, by deed registered in C.O.B. 464, Folio 293.
(13)      The Notre Dame 115/13.8 KV Substation, situated in the First District on/and that certain tract or parcel of land particularly described as follows:
Square 19, bounded by Julia, S. Peters, Notre Dame, and S. Fulton Streets and measuring 123’37”5’’’ on Julia Street, 223’1”3’’’ on S. Peters Street, 122’5”6’’’ on Notre Dame Street and 223’7”1’’’ on S. Fulton Street, as per plat of survey by Guy J. Seghers, Engineer, dated January 28, 1956; acquired by the Company on December 1, 1964 by Act of Exchange from Standard Supply and Hardware Company Inc., registered in C.O.B. 660, Folio 677.
(14)      The Pauger 115/24 KV Substation, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground in Square No. 2887, bounded by Touro, Senate, Pauger, and Pelopidas Streets, measuring 120’ on Touro Street, 200’ on Pelopidas Street, 200’ on the other side line towards Senate Street, and having a width in the rear of 120’, designated as Lot “A” on a plat of survey by Guy J. Seghers, Surveyor, dated April 25, 1957, revised June 10, 1957, acquired by




the Company on June 26, 1957, from Shepard M. Latter and Shirley Latter, widow of Dr. Lee C. Schlesinger, by deed registered in C.O.B. 616, Folio 472.
(15)      The Pontchartrain Park 115/13.8 KV Substation, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground in Square No. 24 of Section 3-A of the Pontchartrain Park Subdivision, bounded by Dwyer Road, Providence Place, Mithra Street, and Southern Railroad, and designated as Lot No. 16 on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated October 15, 1957, measuring 116.46’ on the north side, 106.20’ on a curve forming the junction of Mithra Street and Providence Place, 120.00’ on the east side, 202.50’ on Dwyer Road, and 198.45’ on the Southern Railroad side, acquired by the Company on June 17, 1958, from Pontchartrain Park Homes, Inc., by deed registered in C.O.B. 619, Folio 671.
(16)      The Sherwood Forest 115/24 KV Substation, situated in the Third District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A certain portion of ground in Gentilly Oaks Subdivision lying west of the Sherwood Forest Subdivision along Dwyer Road, known as Lot 13, Section 1, and Lot 4, Section 12, Township 12 South, Range 12 East, and measuring 495.39’ front on Dwyer Road, 250.36’ along the west boundary, 517.81’ along the south boundary, and 367.07’ along the east boundary, as per plat of survey by Guy J. Seghers, Engineer, dated May 3, 1965; acquired by the Company on May 20, 1965, from the La Kratt Corporation, by deed registered in C.O.B. 668, Folio 287.
(b)      One certain lot of ground in that part known as Oak Manor Subdivision in accordance with a plan of subdivision by Universal Land Surveyors, Inc., dated August 25, 1980, revised May 4, 1981, approved by the City Planning Commission of the City of New Orleans under docket No. 18/79 on June 21, 1982, registered in C.O.B. 779, Folio 7, and according to which said lot is designated and described as Lot 23 in Square C, bounded by Dwyer Road, Papania Drive, Merlie Manor Subdivision and the east boundary of the subdivision (Wright Road side). Lot 23 measures 50 feet front on Papania Drive, 60 feet in width in the rear, by a depth on the side line of Lot 22 of 161.70 feet and a depth on the opposite side line of 160.15 feet, and begins 60.01 feet from the corner of Dwyer Road and Papnia Drive; subject to servitude of 5 feet across the rear of said lot for utilities as per plan of subdivision, and restrictions and mineral reservation (with waiver of surface drilling rights) contained in act of sale by Lake Forest Inc. to Lama & Couvillion, Inc. before Joseph N. Naccari, Notary Public, dated March 31, 1980, registered in C.O.B. 765, Folio 281.
Acquired by the Company on July 19, 1982 from T. R. Henning, Inc., a Louisiana partnership, by deed registered in C.O.B. 780, Folio 76.
(17)      The Tricou 230/24 KV Substation, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
Lots R, Q, P, O, M, N, F, G, H, J, K, L and S in Square 1444, bounded by St. Maurice Avenue, Florida Avenue, Tricou Street and Law Street, acquired in part by the Company on May 7, 1980, from Audrey Demesne, wife of/and Leonard Theyard, Jr., by deed registered in C.O.B. 766, Folio 368; in part by the Company on July 16, 1979, from Roslyn Ison, wife of/and William John Tessier, Sr., by deed registered in C.O.B. 767, Folio 429; in part by the Company on September 6, 1979, from Roslyn Ison, wife of/and William John Tessier, Sr., by deed registered in C.O.B. 766,




Folio 437; in part by the Company on January 4, 1980, from Roslyn Ison, wife of/and William John Tessier, Sr., by deed registered in. C.O.B. 765, Folio 394; in part by the Company on February 19, 1979, from Roslyn Ison, wife of/and William John Tessier, Sr., by deed registered in C.O.B. 768, Folio 394; in part by the Company on January 30, 1979, from Roslyn Ison, wife of/and William John Tessier, Sr., by deed registered in C.O.B. 768, Folio 414; and in part by the Company on December 20, 1978, from Roslyn Ison, wife of/and William John Tessier, Sr., by deed registered in C.O.B. 764, Folio 397.
(18)      The Valence 115/13.8 KV Substation, the 600 volt DC Rectifier Station, and Gas Regulator Station No. 15, situated in the Sixth District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground in Square 525, bounded by Valence, Saratoga, Bordeaux and Loyola Streets, acquired by New Orleans Gaslight Co. on March 30, 1899, from the Jefferson City Gas Light Co., in liquidation, by deed registered in C.O.B. 174, Folio 275.
(19)      The Gentilly Road 115 KV Switching Station, situated in the Third District on land owned by others and located on Old Gentilly Road midway between Paris Road and Chef Menteur Highway.
PARAGRAPH THREE
All and Singular the Miscellaneous Lands and Real Estate or Rights and Interests Therein of the Company, and buildings and improvements thereon, now owned, or, subject to the provisions of Section 15.03 of the Mortgage, hereafter acquired during the existence of this trust, including the following property situated in the Parish of Orleans, State of Louisiana; described as:
(1)      The Main Office Building, situated in the First District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A portion of ground, known as Lots 3, 4, 13, 14, 15 and 16 in Square 264, bounded by Baronne, Union, O’Keefe and Gravier Streets, acquired in part by Edison Electric Co. on February 24, 1897, from General Electric Co., by deed registered in C.O.B. 165, Folio 350; and in part by the Company on January 26, 1926 from Eastman Kodak Stores Inc., by deed registered in C.O.B. 399, Folio 589.
(b)      Lots 11 and 12 in Square 264, bounded by Baronne, Union, O’Keefe and Gravier Streets, acquired in part by New Orleans Railway and Light Co., on November 21, 1905, from Bertrand Beer and Theodore Walter Danziger, agents of Henry Beer, by deed registered in C.O.B. 206, Folio 223; and in part by Edison Electric Co. on September 21, 1897, from Paul A. Bacas, agent of Philippe A. Legoaster, by deed registered in C.O.B. 167, Folio 72.
(2)      The Tulane Avenue Service Center, situated in the First District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A square of ground known as Square 725, bounded by Tulane, Cortez, Gravier and Telemachus Streets, acquired by the Company on April 23, 1924, from the Community Realty Co. Inc., by deed registered in C.O.B. 381, Folio 243.
(b)      A square of ground known as Square 724, bounded by Gravier, Cortez, Julia, and Telemachus Streets, acquired by the Company on April 23, 1924, from the Community Realty Co. Inc., by deed registered in C.O.B. 381, Folio 243.




(c)      A square of ground bearing the No. 740, bounded by Cortez, Gravier, Scott and Julia Streets, as shown on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated January 28, 1954, acquired by the Company on February 17, 1954, from Adolph Diefenthal, by deed registered in C.O.B. 594, Folio 262.
(d)      A certain vacated portion of S. Cortez Street, extending from the south property line of Gravier Street projected to the north property line of the Union Passenger Terminal right-of-way, as shown on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated January 28, 1954, acquired by the Company on July 2, 1956, from Charles J. Tessier, by deed registered in C.O.B. 608, Folio 345.
(e)      Approximately one-half of Square 715, bounded by Tulane Avenue, Genois, Gravier, and S. Telemachus Streets, measuring approximately 140 feet on Tulane Avenue and Gravier Street and 426 feet on S. Telemachus Street as shown on plat of survey by F. G. Gandolfo, Jr., Surveyor, dated June 19, 1961; acquired by the Company from Jefferson Standard Life Insurance Company on December 28, 1962, by deed registered in C.O.B. 650, Folio 356.
(f)      A certain vacant portion of South Scott Street, lying between Squares 740 and 747; acquired by the Company from the City of New Orleans on May 2, 1977, by instrument registered in C.O.B. 746, Folio 108, and further described as follows:
Commencing at the intersection of the eastern property line of South Scott Street and the southern property line of Gravier Street, thence in a westerly direction along said southern property line of Gravier Street a distance of 27’1”1’’’ to a point; thence turning 79°45’45” in a southerly direction a distance of 149’5”6’’’ to a point; thence turning 88°32’30” in an easterly direction a distance of 26’7”7’’’ to a point on the westerly property line of Square 740; thence turning 91°27’30” in a northerly direction along the western property line of Square 740 a distance of 154’11”5’’’ to a point on the southern property line of Gravier Street, the point of beginning.
(g)      A certain vacant portion of South Telemachus Street, lying between Squares 715 and 725 and running from Gravier Street to Tulane Avenue; acquired by the Company from the City of New Orleans on October 21, 1977, by instrument registered in C.O.B. 751, Folio 26, and further described as follows:
Commencing at the intersection of the southern property line of Tulane Avenue and the eastern property line of South Cortez Street thence in an easterly direction along the southern property line of Tulane Avenue a distance of 281 feet, 6 inches, 7 lines to a point along the eastern property line of Square 725, the point of beginning; then turning 100°14’15” in a southerly direction along the eastern property line of Square 725 a distance of 425 feet, 9 inches to a point; thence turning 100°14’15” in an easterly direction a distance of 54 feet, 1 inch, 6 lines to a point along the western property line of Square 715; thence turning 79°45’45” in a northerly direction along the western property line of Square 715 a distance of 425 feet, 9 inches to a point; thence turning 100°45’15” in a westerly direction a distance of 54 feet, 1 inch, 6 lines to a point on the southern property line of Tulane Avenue, the point of beginning, as shown on a plat of survey by Walker and Avery, Surveyors, dated January 19, 1977.
(3)      The Polymnia Storage Building, situated in the First District on/and that certain tract or parcel of land particularly described as follows:




A certain portion of ground known as Lots 1 and 2 in Square 247, bounded by Baronne, Polymnia, Dryades and Euterpe Streets, acquired by the Company on April 14, 1923, from William S. Delaney, by deed registered in C.O.B. 363, Folio 175.
(4)      A certain portion of ground, situated in the Third District in the New Orleans East Industrial Center, in Section 37, Township 12 South, Range 13 East, Southeast District of Louisiana, East of the Mississippi River, measuring 330 feet on its eastern and western boundaries and 400 feet on its northern and southern boundaries as per plat of survey, dated August 23, 1963, by Guy J. Seghers; acquired by the Company on September 27, 1963 from Union Carbide Corporation, by deed registered in C.O.B. 658-A, Folio 280.
(5)      A certain portion of ground, situated in the Third District, New Orleans East Tract, containing 3.1 acres, and further described as follows:
Commencing at the intersection of the northern property line of Chef Menteur Highway (U.S. Highway 90) and the western property line of Lot 211, thence south 49 degrees, 1 minute, 41 seconds west along the northern property line of Chef Menteur Highway a distance of 232.84 feet to a point; thence north 40 degrees, 58 minutes, 19 seconds west a distance of 2,883.87 feet to the point of beginning, said point being located on the northern boundary of a 9-foot servitude granted in favor of the Company, thence north 45 degrees, 25 minutes, 41 seconds east along the northern boundary of the above mentioned 9-foot servitude a distance of 400.00 feet to a point; thence south 44 degrees, 34 minutes, 19 seconds east a distance of 337.60 feet to a point; thence south 45 degrees, 25 minutes, 41 seconds west a distance of 400.00 feet to a point; thence north 44 degrees, 34 minutes, 19 seconds west a distance of 337.60 feet to the point of beginning, as delineated on a survey by Guy J. Seghers and Associates, dated December 18, 1969; acquired by the Company from New Orleans East Inc. on December 30, 1969, by deed registered in C.O.B. 695, Folio 79.
(6) A certain portion of ground, situated in the Third District in the Holy Cross Tract, being a part of Lot 9 in Square 422-461 bounded by St. Claude Ave., Tennessee Street, Urquhart Street, and the line of the Holy Cross Tract nearer Deslonde Street, and part of Lots 8 and 20 in Square 423-460 bounded by St. Claude Ave., Reynes, Tennessee, and Urquhart Streets, measuring 16’6” in width by a total length of approximately 357’ as shown on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated May 4, 1949, acquired by the Company on May 10, 1949 from C. J. Tessier, Inc., by deed registered in C.O.B. 566, Folio 169.
PARAGRAPH FOUR
The Electric Transmission Lines of the Company, including the structures, towers, poles, wires, cables, switch racks, conductors, transformers, insulators, pipes, conduits, electric submarine cables, and all appliances, devices and equipment used or useful in connection with said transmission lines and systems, and all other property, real, personal or mixed, forming a part thereof or appertaining thereto, together with all rights-of-way, easements, prescriptions, servitudes, permits, privileges, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, across, under or upon any public streets or highways or other lands, public or private, including all of the Company’s right, title and interest in and to the following property situated in the Parish of Orleans, State of Louisiana, to-wit:
(1)      The 230 KV single circuit, steel tower and steel pole transmission line No. 83, commencing at a point in the Mississippi River located on the Orleans-Jefferson Parish line approximately one-half mile northeasterly of the Nine Mile Point Steam Electric Generating Station in Jefferson Parish,




Louisiana, owned by others, and thence extending in a northeasterly direction for a distance of approximately six-tenths of a mile to a point on the Orleans-Jefferson Parish line located approximately 5-1/2 miles southeasterly of the Snake Farm Substation in Jefferson Parish, Louisiana, owned by others. Also the following described property used and useful in connection with said 230 KV transmission line and upon which is located the guy stub for East Bank Tower No. 2002 for the crossing of the Mississippi River, to-wit:
Two portions of ground situated in the Seventh District, in Square 140, bounded by Monroe, Oak, and Eagle Streets, and Leake Avenue, and further described as follows:
(A)      A triangular portion of ground designated by the letters “A” and “B” on a plat of survey by Guy J. Seghers, Engineer, dated June 7, 1961, and measuring 112’0”0’’’ front on Monroe Street, 171’2”5”’ front on Leake Avenue and 129’6”0” along the third side; acquired by the Company on April 12, 1962 from Joseph D. Hyland, Jr., et al by judgment of the Civil District Court for the Parish of Orleans, registered in C.O.B. 647, Folio 429; LESS AND EXCEPTING THEREFROM that portion thereof, being a portion of Lots 20, 21 and 40, commencing at the north intersection of Monroe Street and Leake Avenue, along a line fronting Leake Avenue and measuring a distance of one hundred seventy-one feet, two inches, and five lines to a point on a line dividing Part Lot 40 and Part Lots 20 and 21, thence along said line in the direction of Monroe Street a distance of nineteen feet, six inches, zero lines to a point on a line dividing Part Lot 40 from balance of Lot 40, thence along said line in the direction of Oak Street a distance of zero feet, three inches and 7 lines to a point on the proposed right-of-way line of Leake Avenue, being approximately thirteen feet distance and parallel to the existing property line of Leake Avenue, thence measures along said line a distance of one hundred forty-five feet, five inches and two lines to a point on the upper property line of Monroe Street, thence measures along said line a distance of seventeen feet, two inches, and two lines to the point of beginning, all as more fully shown on print of survey by Guy J. Seghers, Civil Engineer, File No. 95,105.62.7, as revised and dated August 8, 1962.
(B)      A certain portion of ground designated by the letter “X” on a plat of survey by Guy J. Seghers, Engineer, dated February 13, 1962, and measuring 26’0”0’” on Monroe Street by a depth of 110’0”0”’ between equal and parallel lines; acquired by the Company on March 28, 1962 from George C. Stewart, by deed registered in C.O.B. 646, Folio 375.
(2)      The 230 KV single circuit, steel tower and guyed aluminum tower, steel pole transmission line No. 84 extending from the Michoud Steam Electric Generating Station in a generally northeasterly direction for a distance of approximately 14 miles to a point on the Orleans-St. Tammany Parish line located approximately 8 miles southwesterly of the Slidell Substation in St. Tammany Parish, Louisiana, owned by others. Also the following described property used and useful in connection with said 230 KV transmission line and upon which are located the following towers thereof, to-wit:
(a)      Towers Nos. 1601 and 1602
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(a) hereof.
(b)      Towers Nos. 1603 through 1611
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(b) hereof.
(c)      Tower No. 1612




A certain portion of ground, situated in the Third District in Lot 1 of Section 42, Township 12 South, Range 13 East, Southeastern District of Louisiana, bounded on the south by the right-of-way of the Louisville and Nashville Railroad, on the east by the east line of said Section 42 (also known as the Michoud line), on the north by the north line of said Section 42, and on the west by a line parallel to and 300 feet west of the east line of said Section 42, as shown on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated June 14, 1955; acquired by the Company on September 22, 1955, from Mr. and Mrs. Joe W. Brown, by deed registered in C.O.B. 606, Folio 269.
(d)      Towers Nos. 1613 through 1618
Two certain portions of ground, situated in the Third District in Section 6, Township 12 South, Range 13 East, Southeastern District of Louisiana, and further described as follows:
(A)      A portion of ground in said Section 6, bounded on the north by the north line of said Section 6, on the south by the right-of-way of the New Orleans Chef Menteur Highway, U.S. Highway 90, on the east by the east line of said Section 6 (also known as the Michoud line), and on the west by a line parallel to and 150 feet west of the east line of said Section 6; and
(B)      A portion of ground in said Section 6, bounded on the north by the right-of-way of the New Orleans Chef Menteur Highway, U.S. Highway 90, on the south by the south line of said Section 6, on the east by the east line of said Section 6 (also known as the Michoud line), and on the west by a line parallel to and 300 feet west of the east line of said Section 6.
Said two portions of ground consist of all of the property acquired by the Company on July 5, 1955, from Caswell Ellis Henican, Thomas Milton Hynes and Murray F. Cleveland, by deed registered in C.O.B. 607, Folio 78 and shown on a plat of survey by F. C. Gandolfo, Jr., dated June 11, 1955; LESS AND EXCEPTING THEREFROM a portion of ground, triangular in shape, bounded on the north by the south line of the Chef Menteur Highway, on the south by the south line of Section 6, and on the east by a line parallel to and 300 feet west of the Michoud line, measuring 45.17 feet along the south line of the Chef Menteur Highway, 43.33 feet along the south line of Section 6 and 9.82 feet along the line parallel to and 300 feet west of the Michoud line; containing an area of approximately .005 acre.
(e)      Towers Nos. 1619 through 1630
Two portions of ground, both trapezoidal in shape, situated in the Third District in the New’ Orleans Lakeshore Land Company Tract, and further described as follows:
(A)      Part of Tract B, commencing at the intersection of the Michoud West Line and the township line between Township 11 South, Range 13 East and Township 12 South, Range 13 East, thence along the Michoud West Line, North 5 degrees, 42 minutes, 27 seconds West, 6636.50 feet to the right-of-way of the New Orleans Expressway-Interstate I-10, thence along said right-of-way South 30 degrees, 5 minutes, 6 seconds West 131.87 feet to a point, thence along said-right-of-way South 12 degrees, 20 minutes, 50 seconds West 331.94 feet to a point, thence South 5 degrees, 42 minutes, 27 seconds East 6,199.94 feet to a point on the township line between Township 11 South, Range 13 East and Township 12 South, Range 13 East, thence along said township line North 88 degrees, 44 minutes, 25 seconds East, 180.54 feet to the point of commencement.




(B)      Part of Tract A, commencing at the intersection of the Michoud West Line and the right-of-way of the New Orleans Expressway-Interstate I-10, thence along the Michoud West Line North 5 degrees, 42 minutes, 27 seconds West, 3681.43 feet to a point, thence South 86 degrees, 46 minutes, 37 seconds West, 180.17 feet to a point, thence South 5 degrees, 42 minutes, 27 seconds East, 50 feet to a point, thence south 86 degrees, 46 minutes, 37 seconds West, 544.25 feet to the east line of Paris Road, thence along Paris Road South 46 degrees, 23 minutes, 51 seconds East, 8.10 feet to a point, thence along Paris Road South 10 degrees, 47 minutes, 39 seconds West, 55.75 feet to a point, thence North 86 degrees, 46 minutes, 37 seconds East 554.82 feet to a point, thence South 5 degrees, 42 minutes, 27 seconds East, 3593.83 feet to a point in the right-of-way of the New Orleans Expressway-Interstate I-10, thence along the said right-of-way North 79 degrees, 00 minutes, 31 seconds East, 180.77 feet to the point of commencement.
All as shown by a survey by Guy J. Seghers, Engineer, dated May 14, 1965; acquired by the Company from La Kratt Corporation on May 20, 1965, by deed registered in C.O.B. 668, Folio 287.
(3)      The 115 KV single circuit, steel pole and steel tower transmission line No. 85, extending from A. B. Paterson Steam Electric Generating Station in an easterly then southerly direction to the Michoud Steam Electric Generating Station, a distance of approximately 7 miles. Also the following described property used and useful in connection with said 115 KV transmission line and upon which are located the following towers thereof, to-wit:
(a)      Tower No. 103
That certain tract of land described in Paragraph One, Sub-Paragraph (3)(a) hereof.
(b)      Towers Nos. 195 and 196
That certain tract of land described in Paragraph Four, Sub-Paragraph (2)(d) hereof.
(c)      Tower No. 913
That certain tract of land described in Paragraph Four, Sub-Paragraph (2)(c) hereof.
(d)      Towers Nos. 904 through 912
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(b) hereof.
(e)      Towers Nos. 901 through 903
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(a) hereof.
(f)      A certain portion of ground, situated in the Third District, forming part of Section 6, Township 12 South, Range 13 East, along Paris Road; acquired by the Company on June 2, 1942, from Samuel Zemurray, by deed registered in C.O.B. 523, Folio 375.
(4)      The 115 KV single circuit, steel pole and wood-pole H-frame transmission line No. 86, extending from the Midtown Substation in a generally northerly direction to the A. B. Paterson Steam Electric Generating Station, a distance of approximately 9 miles.




(5)      The 230 KV single circuit, steel tower and steel pole transmission line No. 87, extending from the Market Street Steam Electric Generating Station in a generally westerly then northerly direction for a distance of approximately 7 miles to the Orleans-Jefferson Parish line at a point in the Mississippi River located approximately one-half of a mile northeasterly of the Nine Mile Point Steam Electric Generating Station in Jefferson Parish, Louisiana, owned by others. Also the following described property used and useful in connection with said 230 KV transmission line and upon which is located the guy stub for East Bank Tower No. 2002 for the crossing of the Mississippi River, to-wit:
That certain tract of land described in Paragraph Four, Sub-Paragraph (1) hereof.
(6)      The 115 KV single circuit, steel pole transmission line No. 88, extending from the Avenue C Substation in a generally westerly direction for a distance of approximately one-fourth of a mile to a point on the Orleans-Jefferson Parish line located approximately 2-1/4 miles easterly of the Lakeshore Substation in Jefferson Parish, Louisiana, owned by others.
(7)      The 115 KV single circuit, steel pole transmission line No. 89, extending from the Midtown Substation in a generally southwesterly direction for a distance of approximately 3-1/2 miles to a point on the Orleans-Jefferson Parish line located approximately 3-1/4 miles south of the Paris Substation in Jefferson Parish, Louisiana, owned by others. Also the following described property used and useful in connection with said 115 KV transmission line and upon which is located Tower No. 2080, to-wit:
That certain tract of land described in Paragraph Two, Sub-Paragraph 11(b) hereof.
(8)      The 115 KV single circuit, steel tower and steel pole transmission line No. 90, extending from the Avenue C Substation in a generally southerly direction to the Midtown Substation, a distance of approximately 5 miles. Also the following described property used and useful in connection with said 115 KV transmission line and upon which is located Tower No. 401, to-wit:
That certain tract of land described in Paragraph Two, Sub-Paragraph (11)(d) hereof.
(9)      The 115 KV single circuit, steel tower and steel pole transmission line No. 91, extending from the A. B. Paterson Steam Electric Generating Station in a generally southerly direction to the Market Street Steam Electric Generating Station, a distance of approximately 9 miles. Also the following described property used and useful in connection with said 115 KV transmission line and upon which are located the following towers thereof, to-wit:
(a)      Towers Nos. 44 through 46
That certain tract of land described in Paragraph One, Sub-Paragraph (3)(a) hereof.
(b)      Tower No. 43
That certain tract of land described in Paragraph One, Sub-Paragraph (3)(b) hereof.
(c)      Tower No. 42-A
Two certain portions of ground, situated in the Third District, more particularly described as follows: (A) a part of Lot 64 of St. Geme Plantation, bounded by Gentilly Road, McKain Street, the L. & N. Railroad right-of-way and the East Highland Subdivision, acquired by the Company on November 10, 1941, from Albert Reel, by deed registered in C.O.B. 517, Folio 653; and (B) a




portion of ground, acquired by the Company on April 1, 1953, from Albert Reel, by deed registered in C.O.B. 591, Folio 169, and more particularly described as follows: a portion of ground, designated by the letters B + C on plan of survey by F. C. Gandolfo, Jr., Surveyor, dated February 20, 1953, according to which survey said lot commences at the point of intersection of the south line of Gentilly Road with the division line between arpent lots 63 and 64 and running thence in a southerly direction along said division line between arpent lots 63 and 64 Four Hundred Fifty Nine and 96/100 (459.96) feet to a point on the north line of the right of way of the Louisville & Nashville Railroad, running thence in a westerly direction along the north line of the right of way of the Louisville & Nashville Railroad Two Hundred Eleven and 94/100 (211.94) feet to a point on the eastern line of the Industrial Canal property, running thence in a northerly direction along the eastern line of the Industrial Canal property One Hundred Twenty-Five (125) feet to a point, running thence easterly and parallel to the north line of the right of way of the Louisville & Nashville Railroad One Hundred Eighty-Six and 83/100 (186.83) feet to a point, and running thence in a northerly direction Three Hundred Forty-Four and 62/100 (344.62) feet to the point of beginning; LESS AND EXCEPTING FROM SAID TWO PORTIONS OF GROUND a parcel of ground, known as Parcel No. 11-2, described as: beginning at a point which marks the junction of the common property line between the Albert Reel property and the Inner Harbor Navigation Canal Reservation with the northerly right of way of the Louisville and Nashville Railroad, said point being South 16°10’47” East a distance of 521.11 feet from a concrete monument on the easterly right of way of the said canal reservation, thence North 16°10’47” West along the common property line between the Albert Reel property and the Inner Harbor Navigation Canal Reservation, crossing the centerline of the proposed New Orleans-Paris Road Highway, State Project No. 740-00-46, at Station 1536+70.69, a distance of 125 feet to a point which marks the junction of the common property line between the Albert Reel property and property formerly owned by Ervin Bradley Breazeale with the easterly right of way of the Inner Harbor Navigation Canal Reservation; thence North 75°13’21” East along the said common property line, a distance of 186.83 feet to a point which marks the southeast corner of the former Ervin Bradley Breazeale property; thence North 1°44’02” East along the common property line between the Albert Reel property and Ervin Bradley Breazeale, a distance of 32.94 feet to a point; thence North 74°21’15” East, parallel to and approximately 70 feet distance in a northerly direction from the centerline of said highway, a distance of 237.85 feet to a point on the westerly boundary of the East Highland Subdivision; thence South 6°06’09” East along the said westerly boundary of the said subdivision, crossing the centerline of the said highway at Station 1540+93.04, a distance of 162.00 feet to a point which marks the junction of the common property line between the Albert Reel property and the said western boundary of the said subdivision with the northerly right of way of the Louisville and Nashville Railroad; thence South 75°13’21” West along the northerly right of way of the said railroad a distance of 406.53 feet to the point of beginning and containing 1.381 acres, identified as Parcel 11-2, as shown on the Right of Way Map for the New Orleans-Paris Road Highway, Franklin Avenue-Joffre Road Section, State Project No. 740-00-46, Federal Aid Interstate Project No. 1-10-5(32)241, Orleans Parish, prepared by Palmer and Baker Engineers, Inc., dated May 19, 1961, said map being on file in the office of the Department of Highways in the City of Baton Rouge, Louisiana, bearings herein referred to being grid bearings based on Louisiana Coordinate System (South Zone).
(d)      Towers Nos. 33 and 34
A certain portion of ground situated in the Third District, bounded by Industry Street, Jourdan Avenue, Treasure and Deslonde Streets, and Florida Walk, acquired in part by the Company on June 9, 1942, from Harry Lee Risher, et als., known as the Wright-Risher Property,




by deed registered in C.O.B. 523, Folio 388; in part by the Company on January 5, 1943, from Kathryn Nell Walker, et als., by deed registered in C.O.B. 526, Folio 172; in part by the Company on January 5, 1943, from John Shearer Barker, by deed registered in C.O.B. 525, Folio 169; and in part by the Company on April 28, 1949, from Edgar F. Viala and Emile Peterson, by deed registered in C.O.B. 565, Folio 191; LESS AND EXCEPTING THEREFROM that certain parcel of ground beginning at the point of intersection of the lake side property line of Florida Walk and the upper or east property line of Deslonde Street, projected, which point is located 350 feet east of the northeast corner of Florida Walk and Jourdan Avenue projected; thence in a northerly direction along said east property line of Deslonde Street projected a distance of 731.78 feet; thence in an easterly direction along the south or riverside property line of Agriculture Street projected to the west line of the Holy Cross College property a distance of 136.64 feet; thence in a southerly direction along the west property line of said Holy Cross College property, which line is also parallel to Deslonde Street projected to the north or lakeside property line of Florida Walk, a distance of 731.78 feet; thence in an easterly direction along the north or lake side property line of Florida Walk projected a distance of 136.58 feet to the point of beginning, said parcel comprising all of Squares 1627 and 1674 lying between Agriculture and Florida Walk and Deslonde Street and the west property line of the Holy Cross College property; all as more fully shown on photostat of sketch of the Company, #8-14410-3, dated February 11, 1942.
(e)      Tower No. 22
A certain portion of ground situated in the Third District, known as Lot A in Square 1011, bounded by North Johnson, Montegut, North Galvez and Feliciana Streets; acquired by the Company or January 7, 1942, from Mrs. Madeline Robertson, wife of/and Sterling Hayward, by deed registered in C.O.B. 520, Folio 25.
(f)      Tower No. 20
A certain portion of ground situated in the Third District, known as Lot 7 in Square 522, bounded by Press, Villere, Montegut and Urquhart Streets; acquired by the Company on February 14, 1942, from Anna M. Krener, widow of Thomas G. Pugh, and Audrey Anna Miller, by deed registered in C.O.B. 520, Folio 114; LESS AND EXCEPTING THEREFROM certain portions of ground in Square No. 522, bounded by Press, Montegut, N. Urquhart and N. Villere Streets, being those middle and rear portions of Lot No. 7 of former Square No. 14 on plan drawn by A. deArmas, Surveyor, dated May 1, 1876, deposited in the office of Macon, Allison & Co., auctioneers of New Orleans, a copy whereof, drawn by Edgar Pilie, Architect, on July 25, 1876, is annexed to an act passed before James Fahey, late Notary, on August 3, 1876, said excepted middle and rear portions of said Lot No. 7 being designated by the letters “Y” and “Z”, respectively, on sketch of F. C. Gandolfo, Jr., Surveyor, dated August 21, 1952, revised August 26, 1952, and being described as follows: (MIDDLE PARCEL “Y”) commencing at a point in the side line of Lot No. 7 nearest N. Urquhart Street, which said side line is situated at a distance of 186 feet, 2 inches and 6 lines from the corner of Press and N. Urquhart Streets, which said point in said side line is located at a distance of 32 feet, 11 inches and 4 lines from the front property line of said Lot No. 7 along Press Street, and measuring thence from said point along said side line, in the direction of Montegut Street, a distance of 25 feet, 3 inches and 7 lines to a point in said side line, and from said latter point thence on an oblique chord and tangent line across the width of said Lot No. 7, in the direction of N. Villere Street, a first distance of zero feet, 2 inches and 7 lines on a tangent forming an exterior angle to the left of 80 degrees, 49 minutes and 11 seconds, with the side line of Lots Nos. 6 and 7, and thence continuing on a chord having a radius of 970.37 feet, a distance of 31 feet, 1 inch and zero lines to a point in the side line of Lot No. 7 nearest N. Villere




Street, which point is situated at a distance of 62 feet, 6 inches and 7 lines from the front property line of said Lot No. 7 along Press Street, and from said point, measuring thence along said side line nearest Villere Street, in the direction of Press Street, a distance of 25 feet, 2 inches and 3 lines to another point in said side line, located at a distance of 37 feet, 4 inches and 4 lines from the front property line of Lot No. 7 along Press Street, and from this latter point thence on an oblique chord and tangent line across the width of said Lot No. 7, in the direction of N. Urquhart Street, a first distance of 27 feet, zero inches and 6 lines on a chord having a radius of 945.37 feet, and thence continuing on a tangent forming an exterior angle of 99 degrees, 10 minutes and 49 seconds with the side line of Lots Nos. 6 and 7, a distance of 4 feet 3 inches and 3 lines to the place of commencement; and (REAR PARCEL “Z”) commencing at a point in the side line of Lot No. 7 nearest N. Urquhart Street, which said side line is situated at a distance of 186 feet, 2 inches and 6 lines from the corner of Press and N. Urquhart Streets, which said point in said side line is located at a distance of 58 feet, 3 inches and 3 lines from the front property line of said Lot No. 7 along Press Street, and measuring thence from said point along said side line, in the direction of Montegut Street, a distance of 61 feet, 8 inches and 5 lines to the rear line of Lot No. 7, thence at right angles, along the rear line of Lot No. 7, in the direction of N. Villere Street, a distance of 31 feet to the side line of Lot No. 7 nearest N. Villere Street, and thence at right angles, along said side line, in the direction of Press Street, a distance of 57 feet, 5 inches and I line to a point on said side line of Lot No. 7 nearest Villere Street, which point is situated at a distance of 62 feet, 6 inches and 7 lines from the front property line of said Lot No. 7 along Press Street, and from said point, thence on an oblique chord and tangent line across the width of said Lot No. 7, in the direction of N. Urquhart Street, on a chord having a radius of 970.37 feet, a distance of 31 feet, 1 inch and zero lines, and continuing thence for a second distance of zero feet, 2 inches and 7 lines on a tangent forming an interior angle to the left of 80 degrees, 49 minutes and 11 seconds with the side line of Lots Nos. 6 and 7 to the place of commencement.
(g)      Tower No. 19
A certain portion of ground situated in the Third District, known as Lot A in Square 484, bounded by Press, Marais, Urquhart and Montegut Streets; acquired by the Company on June 12, 1942, from Charles J. Tessier, by deed registered in C.O.B. 521, Folio 437.
(h)      Tower No. 12
A certain portion of ground situated in the Second District, designated as Lot 1 of Square 3B, bounded by Clay Street, St. Louis Street, Conti Street, N. Front Street, and former Delta Street and measures as follows: commencing at the corner of Clay Street and St. Louis Street, and measures 57.80 feet along St. Louis Street, 60.41 feet width in the rear by a depth and front on Clay Street of 82 feet, 0 inches and a depth along a curved line of 66.61 feet on the opposite side nearer Delta Street, containing 4,245 square feet, all as shown on a plan by Gandolfo, Kuhn, Luecke and Associates, dated July 25, 1979 revised August 27, 1979; acquired by the Company on January 15, 1981, from the City of New Orleans, by deed registered in C.O.B. 769, Folio 348.
(10)      The 115 KV single circuit, underground transmission line No. 92, extending from the Midtown Substation in a generally southerly direction to the Market Street Substation, a distance of approximately 6.25 miles.
(11)      The 115 KV single circuit, steel tower and wood pole transmission line No. 93, extending from the A. B. Paterson Steam Electric Generating Station in a generally southerly then easterly direction for a distance of approximately 4-1/2 miles to a point on the Orleans-St. Bernard Parish Line located




approximately 3 miles northwesterly of the Chalmette Substation in St. Bernard Parish, Louisiana, owned by others. Also the following described property used and useful in connection with said 115 KV transmission line and upon which are located the following towers thereof, to-wit:
(a)      Towers Nos. 44 through 46
That certain tract of land described in Paragraph One, Sub-Paragraph (3)(a) hereof.
(b)      Tower No. 43
That certain tract of land described in Paragraph One, Sub-Paragraph (3)(b) hereof.
(c)      Tower No. 42-A
That certain tract of land described in Paragraph Four, Sub-Paragraph (9)(c) hereof.
(d)      Towers Nos. 33 and 34
That certain tract of land described in Paragraph Four, Sub-Paragraph 9(d) hereof.
(12)      The 115 KV single circuit, steel tower and steel pole and wood pole H-frame transmission line No. 94, extending from the Michoud Steam Electric Generating Station in a generally easterly direction and then looping in a general southwesterly direction back to the Michoud Steam Electric Generating Station, a distance of approximately 11 miles. Also the following described property used and useful in connection with said 115 KV transmission line and upon which are located the following towers and H-frame structures thereof, to-wit:
(a)
Towers Nos. 2301 and 2302 and 1401 through 1405, and H-frame structures M 2303, H 2304 through 2306, M 2306 and 2307, H 905, H 2308 through 2310, M 2311 and 2312, H 2499, and M 2500 and 2501
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(a) hereof.
(b)
Tower No. 2485 and H-frame structures M 2498, H 2487 through
2497, M 2492 and M 2486     
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(b) hereof.
(c)
Tower No. 2484
That certain tract of land described in Paragraph Four, Sub-Paragraph (2)(c) hereof.
(d)
Towers Nos. 2482 and 2483
That certain tract of land described in Paragraph Four, Sub-Paragraph (2)(d) hereof.
(13)      The 115 KV single circuit, steel tower and steel pole transmission line No. 95, extending from the Midtown Substation in a generally northwesterly direction for a distance of approximately 2-1/2 miles to the Orleans-Jefferson Parish line at a point located approximately 1-1/2 miles easterly of the LaBarre Road Substation in Jefferson Parish, Louisiana, owned by others. Also the following described




property used and useful in connection with said 115 KV transmission line and upon which are located the following towers thereof, to-wit:
(a)      Tower No. 308
That certain tract of land described in Paragraph Two, Sub-Paragraph (11)(b) hereof.
(b)      Tower No. 310
That certain tract of land described in Paragraph Three, Sub-Paragraph (2)(c) hereof.
(14)      The 230 KV single circuit, guyed aluminum tower and steel tower and steel pole transmission line No. 96, extending from the Midtown Substation in a generally northeasterly then southerly direction to the Michoud Steam Electric Generating Station, a distance of approximately 20.5 miles. Also the following described property used and useful in connection with said 230 KV transmission line and upon which are located the following towers thereof, to‑wit:
(a)      Tower No. 411
That certain tract of land described in Paragraph Two, Sub-Paragraph (11)(c) hereof.
(b)      Towers Nos. 2104 through 2110
That certain tract of land described in Paragraph Four, Sub-Paragraph (2)(e) hereof.
(c)      Towers Nos. 1601 through 1630
Those certain tracts of land described in Paragraph Four, Sub-Paragraphs (2)(a) through (2)(e) hereof.
(d)      Towers Nos. 622
A certain portion of ground, situated in the Third District in a square bounded by Gentilly Road, McKain Street, Louisville and Nashville Railroad right-of-way and the Inner Harbor Navigation Canal Reservation, and designated by the letter A on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated February 20, 1953, redated September 14, 1961, measuring 298.93’ along the south line of Gentilly Road, 344.62’ along the side toward McKain Street, 186.83’ along the side toward the Louisville and Nashville Railroad right-of-way, and 348.44’ along the eastern boundary of the Inner Harbor Navigation Canal Reservation; acquired by the Company on September 21, 1961, from Mrs. Ongel Robert, widow of Albert Reel, by deed registered in C.O.B. 640, Folio 696; LESS AND EXCEPTING THEREFROM that certain parcel of ground (Parcel No. 11-1), more particularly described as beginning at a point on the easterly right of way line of the Inner Harbor Navigation Canal Reservation, said point being South 16°10’47” East a distance of 396.11 feet from a concrete monument located approximately at Station 180+00 of the Inner Harbor Navigation Canal on the easterly right of way line of the said canal reservation; thence North 16°10’47” West along the easterly right of way line of the said canal reservation, a distance of 28.60 feet to a point; thence North 74°21’15” East, parallel to and approximately 70 feet distant in a northerly direction from the centerline of the proposed New Orleans-Paris Road Highway, State Project No. 740-00-46, a distance of 196.91 feet to a point; thence South 1°44’02” West, a distance of 32.94 feet to a point; thence South 75°13’21” West, a distance of 186.83 feet to the point of beginning and containing 0.132 acres, identified as Parcel 11-1, as shown on the Right of




Way Map for the New Orleans-Paris Road Highway, Franklin Avenue-Joffre Road Section, State Project No. 740-00-046, Federal Aid Interstate Project No. 1-10-5(32) 241, Orleans Parish, prepared by Palmer and Baker Engineers, Inc., dated May 19, 1961, said map being on file in the office of the Department of Highways in the City of Baton Rouge, Louisiana, bearings herein referred to being grid bearings based on Louisiana Coordinate System (South Zone); and FURTHER LESS AND EXCEPTING THEREFROM THAT CERTAIN PARCEL OF GROUND shown as Lot A-2 on plat of survey by Coleman Kuhn, C. E. (Gandolfo, Kuhn & Associates, Civil Engineers-Surveyors), dated October 1, 1968, said Lot A-2 being situated at the intersection of the Southerly line of Gentilly Road and the Easterly line of the Industrial Canal property, and measures thence 288.64 feet front on the Southerly line of Gentilly Road, having a course of North 78°57’ East to a point; thence on a course South 2°36’30” West a distance of 196.74 feet to a point; thence on a course South 74°20’54” West, a distance of 224.15 feet to a point situated on the Easterly line of the Industrial Canal Property, on a course North 16°10’30” West a distance of 210 feet to the point of beginning, that is, the interesection of the Easterly line of the Industrial Canal property and the Southerly line of Gentilly Road.
(e)      Tower No. 623
That certain tract of land described in Paragraph Four, Sub-Paragraph (9)(c) hereof.
(15)      The 230 KV single circuit, steel tower and steel pole transmission line No. 97, extending from the Market Street Steam Electric Generating Station in a generally northwesterly direction to steel pole No. S2557, a distance of approximately 3 miles; thence extending from steel pole No. S2557, (A) in a generally northwesterly direction to the Midtown Substation, a distance of approximately 1.5 miles, and also (B) in a generally northeasterly direction a distance of approximately 8 miles to a point on the Orleans-St. Bernard Parish line located approximately 3/4 of a mile east of the Tricou Substation; thereafter re-commencing at another point on the Orleans-St. Bernard Parish line located approximately 5 miles northeast of the Arabi Substation in St. Bernard Parish, Louisiana, owned by others and extending in a generally northwesterly direction for a distance of approximately 1-3/4 miles to the Michoud Steam Electric Generating Station. Also the following described property used and useful in connection with said 230 KV transmission line and upon which are located the following towers thereof, to-wit:
(a)      Tower No. 33
That certain tract of land described in Paragraph Four, Sub-Paragraph (9)(d) hereof.
(b)      Tower No. 837
That certain tract of land described in Paragraph Two, Sub-Paragraph (11)(c) hereof.
(c)      Tower No. 2501
That certain tract of land described in Paragraph One, Sub-Paragraph (1)(h)(B) hereof.
(d)      Towers Nos. 1405 through 1408 and 2730
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(a) hereof.
(e)      Towers Nos. 1412 through 1415




A right-of-way or servitude (not owned in fee by the Company) 150 feet wide situated in the Third District, extending from the north line of the South 1/2 of the Southeast 1/4, Section 18, Township 12 South, Range 13 East, to Bayou Bienvenu across the South 1/2 of the Southeast 1/4, Section 18 and the East 1/2 of Section 19, Township 12 South, Range 13 East, located as shown on the print of survey made by F. C. Gandolfo, Jr., under date of July 6, 1959, the centerline of said right-of-way being described according to said survey as commencing at a point designated by the letter b with coordinates X = 2,443,864/87 and Y = 488,399.92, and running thence South 16°18’13” East a distance of 4658 feet, more or less, to Bayou Bienvenu; acquired by the Company on August 3, 1959, from Arthur C. Waters, et als., by instrument registered in C.O.B. 630, Folio 389.
(16)      The 115 KV single circuit, steel tower and steel pole and wood pole transmission line No. 98, extending from the Market Street Steam Electric Generating Station in a generally northeasterly direction to the Michoud Steam Electric Generating Station, a distance of approximately 15 miles. Also the following described property used and useful in connection with said 115 KV transmission line and upon which are located the following towers thereof, to‑wit:
(a)      Tower No. 12
That certain tract of land described in Paragraph Four, Sub-Paragraph (9)(h) hereof.
(b)      Tower No. 622
That certain tract of land described in Paragraph Four, Sub-Paragraph (14)(d) hereof.
(c)      Tower No. 623
That certain tract of land described in Paragraph Four, Sub-Paragraph (14)(e) hereof.
(d)      Tower No. 913
That certain tract of land described in Paragraph Four, Sub-Paragraph (2)(c).
(e)      Towers Nos. 904 through 912
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(b) hereof.
(f)      Towers Nos. 901 through 903
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(a) hereof.
(17)      The 230 KV single circuit, steel tower transmission line No. 99, extending from the Michoud Steam Electric Generating Station in a generally southerly direction for a distance of approximately 1-3/4 miles to the Orleans-St. Bernard Parish line at a point located approximately 4-1/2 miles northeasterly of the Kaiser Substation in St. Bernard Parish, Louisiana, owned by others. Also the following described property used and useful in connection with said 230 KV transmission line and upon which are located the following towers thereof, to‑wit:
(a)      Towers Nos. 1405 through 1408 and 2730
That certain tract of land described in Paragraph One, Sub-Paragraph (2)(a) hereof.




(b)      Towers Nos. 1412 through 1415
That certain tract of land described in Paragraph Four, Sub-Paragraph (15)(e) hereof.
PARAGRAPH FIVE
The Electric Distribution Lines and Systems of the Company, including the structures, towers, poles, wires, insulators and appurtenances, appliances, conductors, conduits, cables, transformers, meters, regulator stations and regulators, accessories, devices and equipment and all of the Company’s other property, real, personal or mixed, forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distribution lines and systems, together with all of the Company’s rights-of-way, easements, permits prescriptions, privileges, municipal or other franchises, licenses, consents, immunities and rights for or relating to the construction, maintenance or operation thereof, through, over, across, under, or upon any public streets or highways or other lands or property, public or private, all located in the Parish of Orleans, State of Louisiana.
PARAGRAPH SIX
The Gas Distributing Systems of the Company, whether now owned or, subject to the provisions of Section 15.03 hereof, hereafter acquired, including gas regulator stations, gas main crossings, odorizing equipment, gas metering stations, shops, service buildings, office buildings, expansion tanks, conduits, gas mains and pipes, mechanical storage sheds, boilers, service pipes, fittings, city gates, pipelines, booster stations, reducer stations, valves, valve platforms, connections, meters and all appurtenances, appliances, devices and equipment and all the Company’s other property, real, personal or mixed forming a part of or used, occupied or enjoyed in connection with or in anywise appertaining to said distributing systems, or any of them, together with all of the Company’s rights-of-way, easements, prescriptions, servitudes, privileges, immunities, permits and franchises, licenses, consents and rights for or relating to the construction, maintenance or operation thereof, in, on, through, across or under any public streets or highways or other lands or property, public or private, including all the Company’s right, title and interest in and to the following situated in the State of Louisiana:
ORLEANS PARISH
(1)      The Gas Service Center and Gas Regulator Station No. 14, situated in the First District on/and those certain tracts or parcels of land particularly described as follows:
(a)      A square of ground known as Square 407, bounded by Magnolia, Perdido, Clara and Poydras Streets, acquired by New Orleans Gas Light Co. on April 21, 1859, from Phoenia N. Wood, by deed registered in C.O.B. 77, Folio 683.
(b)      The continuation or projection of Magnolia Street, extending from Poydras to Perdido Streets, acquired by the Company on July 9, 1947 from George D. Tessier, by deed registered in C.O.B. 548, Folio 638.
(c)      A certain portion of ground designated by the letter “A” on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated October 9, 1946, comprising the greater portion (approximately 40,280 square feet) of the West half of Square No. 400, bounded by Poydras, Magnolia, Perdido, and South Robertson Streets, acquired by the Company on December 6, 1946, from the Illinois Central Railroad Company, by deed registered in C.O.B. 550, Folio 38; LESS AND EXCEPTING THEREFROM a certain irregular portion of ground designated as “Portion of Lot A to be acquired from N.O.P.S.I.” on a plan of resubdivision by the office of Gandolfo, Kuhn, Luecke and




Associates, dated July 6, 1981 (Dwg. No. T-163-14), and more particularly described as follows in accord with said plan: begin at a point on the northerly line of Poydras Street at the division line between Lots A and B; said point lying 202 feet 8 inches 1 line to the westerly line of S. Robertson Street measured westerly along the northerly line of Poydras Street; thence go along said line of Poydras Street westerly 10 feet 8 inches 3 lines to the division line of proposed Lots A-1 and W; thence go northerly along said line at 90° to Poydras Street a distance of 62 feet 8 inches 5 lines; thence continue along said line northeasterly, having an interior angle of 141°11’10”, a distance of 58 feet 9 inches 7 lines to the curved division line between Lots A and B; thence go southwesterly along said line along the arc of a curve to the right having a radius of 197 feet 1 inch 2 lines, a distance of 92 feet 6 inches 4 lines; thence go southerly along the division line between Lots A and B 22 feet 9 inches 2 lines to the northerly line of Poydras Street and the point of beginning, containing 1515.4 square feet.
(2)      Gas Regulator Station No. 1, situated in the Fourth District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground in Square 204, bounded by Coliseum, Josephine, Prytania and St. Andrew Streets; acquired in part by the Company on December 2, 1929, from Charles A. Tessier, Jr., by deed registered in C.O.B. 450, Folio 526; and in part by the Company by counter-letter from Edwin T. Colton on August 23, 1932, registered in C.O.B. 489, Folio 425.
(3)      Gas Regulator Station No. 2, situated in the Fourth District on land owned by others and located at the intersection of Camp and Harmony Streets.
(4)      Gas Regulator Station No. 3, situated in the Sixth District on land owned by others and located at the intersection of Napoleon and Chestnut Streets.
(5)      Gas Regulator Station No. 4, situated in the Sixth District on land owned by others and located at the intersection of Nashville and Eleanor Streets.
(6)      Gas Regulator Station No. 5, situated in the Sixth District on land owned by others and located at the intersection of St. Charles Avenue and Dominican Street.
(7)      Gas Regulator Station No. 6, situated in the Seventh District on land owned by others and located at the intersection of South Claiborne Avenue and Fern St feet.
(8)      Gas Regulator Station No. 7, situated in the Seventh District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground in Square 581, bounded by Carrollton Avenue, Stroelitz, Short and Palm Streets, acquired by the Company on August 6, 1931, from William J. Bentley, by deed registered in C.O.B. 461, Folio 517.
(9)      Gas Regulator Station No. 8, situated in the First District on land owned by others and located at the intersection of Canal Street and Carrollton Avenue.
(10)      Gas Regulator Station No. 9, situated in the Third District on land owned by others and located on Columbus Street between North Rocheblave and North Dorgenois Streets.
(11)      Gas Regulator Station No. 11, situated in the Third District on land owned by others and located at the intersection of North Miro Street and London Avenue.




(12)      Gas Regulator Station No. 12, situated in the Third District on land owned by others and located at the intersection of Franklin Avenue and North Roman Street.
(13)      Gas Regulator Station No. 13, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground known as Lot C in Square 476, bounded by Marais, Congress, Urquhart and Independence Streets, acquired by counter-letter by Charles A. Tessier, Jr., on July 13, 1931, in favor of the Company, registered in C.O.B. 477, Folio 130; and by the Company on July 13, 1931, from Charles A. Tessier, Jr., by deed registered in C.O.B. 463, Folio 286.
(14)      Gas Regulator Station No. 16, situated in the Fifth District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground known as Lots 2 through 13 inclusive in Square 216, bounded by Brooklyn, DeArmas, Front and Lamarque Streets, acquired in part by New Orleans Lighting Co. on March 10, 1906, from Frank Sancho, by deed registered in C.O.B. 204, Folio 488; in part by New Orleans Gaslight Co. on June 5, 1908, from Sam Rasberry, by deed registered in C.O.B. 217, Folio 754; in part by New Orleans Gas Light Co. on August 14, 1909, from Philip Johnson, by deed registered in C.O.B. 228, Folio 604; in part by New Orleans Gas Light Co. on June 21, 1911, from Benjamin Miller, et als., by deed registered in C.O.B. 240, Folio 343; and in part by New Orleans Gas Light Co. on January 18, 1915 from Hudson Johnson, by deed registered in C.O.B. 271, Folio 272; LESS AND EXCEPTING THEREFROM a certain portion of Lot 8 in Square 216, comprising an area of approximately 3,125 square feet, described as commencing at the point formed by the intersection of the south property line of DeArmas Street and the east property line of River Street, thence in an easterly direction along the south property line of DeArmas Street approximately 162.5 feet to a point, the point of beginning; thence continuing in an easterly direction along the south property line of DeArmas Street approximately 31.25 feet to a point, thence right 90° along the west property line of Lot 9 of Square 216 approximately 100.00 feet to a point, thence right 90° along the north property line of Lot 13 of Square 216 approximately 31.25 feet to a point, thence right 90° along the eastern property line of Lot 7 of Square 216 approximately 100.00 feet to the point of beginning; and FURTHER LESS AND EXCEPTING THEREFROM seven certain portions of ground in Square No. 216 bounded by River Street, DeArmas Street, Brooklyn Street and Lamarque Street, which lots are designated as Lots 2, 3, 4, 5, 6, 7 and 13 on a survey of R. P. Fontcuberta, Jr., Surveyor, dated October 18, 1982, and revised on November 8, 1982 and December 15, 1982, which lots collectively commence at the point formed by the intersection of the south property line of DeArmas Street and the east property line of River Street and measures in a southerly direction along the east property line of River Street 129’11”3’’’ to a point forming the southwest corner of Lot 2; thence in an easterly direction along the south property line of Lots 2 and 13 a distance of 319’8”6’’’ to a point forming the southeast corner of Lot 13 and the property line of Brooklyn Street; thence in a northerly direction along the western property line of Brooklyn Street a distance of 29’11”3’’’ to a point forming the northeast corner of Lot 13; thence in a westerly direction along the north property line of Lot 13 a distance of 157’2”7’’’ to the southeastern corner of Lot 7; thence in a northerly direction along the eastern property line of Lot 7 100 to the point forming the northeast corner of Lot 7 and DeArmas Street; thence in a westerly direction along the southern line of DeArmas Street a distance of 162’6”0’’’ to the point of commencement.
(15)      Gas Regulator Station No. 18, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:




A certain portion of ground known as Lot 23 in Square 218, bounded by Gordon, Burgundy, Tupelo and Dauphine Streets, acquired by the Company on July 18, 1932, from Jacob Faust, by deed registered in C.O.D. 469, Folio 357.
(16)      Gas Regulator Station No. 19, situated in the Second District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground known as Lot C in Square 272, bounded by Canal Boulevard, Harrison Avenue, Louis XIV and French Streets, acquired by the Company on June 30, 1936, from Morris Caplan, by deed registered in C.O.B. 489, Folio 67.
(17)      Gas Regulator Station No. 20, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground known as Lot 3 in Square 43, bounded by Gentilly Boulevard, Peoples Avenue, Wisteria and Aster Streets, acquired by the Company on June 30, 1936, from East End Realty Co., Inc., by deed registered in C.O.B. 490, Folio 13.
(18)      Gas Regulator Station No. 21, situated in the Third District on land owned by others and located at the intersection of Lake Vista Avenue and Spanish Fort Circle.
(19)      Gas Regulator Station No. 22, situated in the Seventh District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground known as Lots 1 and 2 in Square 539, bounded by Olive, Fern, Edinburgh and Short Streets, acquired by the Company on October 8, 1940, from Henry J. Bruning, by deed registered in C.O.B. 514, Folio 91.
(20)      Gas Regulator Station No. 23, situated in the Third District on land owned by others and located at the intersection of Elysian Fields Avenue and Timolean Street.
(21)      Gas Regulator Station No. 24, situated in the Fifth District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground designated by the letter “B” on a plat of survey by F. C. Gandolfo, Jr., Surveyor, dated February 12, 1946, being the rear portion of original Lot 11 in Square No. 202, bounded by Hendee, DeArmas, Sumner and Lamarque Streets, acquired by the Company on April 5, 1946, from Charles J. Tessier, by deed registered in C.O.B. 539, Folio 680.
(22)      Gas City Gate No. 1, situated in the Seventh District on land owned by others and located at the intersection of Airline Highway and Cecil Street.
(23)      Gas City Gate No. 3, situated in the Fifth District on land owned by others and located at Patterson Road, south of Blair Street.
(24)      Gas City Gate No. 5, situated in the Fifth District on land owned by others and located at the northwest corner of Lennox Boulevard and Norman Canal.
(25)      Gas City Gate No. 6, situated in the Fifth District on/and that certain tract or parcel of land particularly described as follows:




A certain portion of ground designated as Lots 1 and 2 in Square 51 bounded by Jennifer Street, Mabel Street, East Sixth and East Ninth Streets, which said Lots 1 and 2 measure each 25 feet front on Jennifer Street, same in width in the rear, by a depth of 100 feet between equal and parallel lines, with Lot 1 forming the corner of East Ninth and Jennifer Streets; acquired by the Company from Junia A. Gingry, on January 19, 1970, by deed registered in C.O.B. 697, Folio 174.
(26)      Gas City Gate No. 7, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain portion of ground, bounded in the front by the Chef Menteur Highway (U.S. Highway 90), in the rear by lands of the Louisville and Nashville Railroad Company, situated in Section 28, Township 11 South, Range 14 East; acquired by the Company from the Chef Menteur Land Company, Ltd., on May 7, 1976, by deed registered in C.O.B. 738F, Folio 131, and further described as follows:
Commencing at an iron pipe, marked by coordinates X=2,485,099.528 and Y=513,972.425, which is the point of beginning; thence south 37°53’27” east, a distance of 1,894.85 feet; thence south 56°25’33” west, a distance of 100.28 feet; thence north 37°53’27” west, a distance of 1,887.30 feet; thence north 52°06’33” east, a distance of 100 feet, to the point of beginning, as shown on a plat of survey by R. P. Fontcuberta, Surveyor, dated April 13, 1976
(27)      Gas City Gate No. 8, situated in the Third District on land owned by others and located at the northwest intersection of Paris Road and Bayou Bienvenue.
(28)      Gas City Gates Nos. 9, 11 and 12, situated in the Third District on/and that certain tract or parcel of land particularly described as follows:
A certain piece or portion of ground in that part thereof known as New Orleans East, Inc. Industrial Subdivision, and designated as Lot 31 on a Plan of Subdivision by Gandolfo, Kuhn, Luecke and Associates, Surveyors, dated September 20, 1978, approved by the City Planning Commission on October 5, 1978 and registered in C.O.B. 758, Folio 309, and according to which plan, and a survey of Gandolfo, Kuhn, Luecke and Associates, Surveyors, dated September 29, 1978 (Drawing No. J78), Lot 31 is located and measures as follows:
Commencing at a point formed by the intersection of the eastern property line of Industrial Parkway and the northern property line of Lot 18 of New Orleans East, Inc. Industrial Subdivision, thence N 64°19’11” E a distance of 2469.94 feet to the point of beginning; thence continue N 64°19’11” E a distance of 134.37 feet to a point; thence S 4°09’14” E a distance of 838.15 feet to a point; thence S 25°477’36” E a distance of 1218.27 feet to a point; thence N 64°14’54” E a distance of 125.00 feet to a point; thence N 25°47’36” W a distance of 1194.48 feet to a point; thence N 4°09’14” W a distance of 980.74 feet to a point; thence S 64°19’11” W a distance of 268.75 feet to a point; thence S 4°09’14” E a distance of 117.17 feet to the point of beginning; acquired by the Company subject to certain servitudes on October 6, 1978 from New Orleans East, Inc., by deed registered in C.O.B. 755, Folio 274.
(29)      Gas City Gate No. 15, situated in the Seventh District on land owned by others and located at the intersection of Earhart Expressway and Monticello Street.
(30)      Gas Booster Station No. 101, situated in the First District on land owned by others and located at the intersection of Tulane Avenue and S. Salcedo Street.




(31)      Gas Booster Station No. 102, situated in the Seventh District on land owned by others and located at the intersection of Airline Highway and Palmetto Street.
(32)      Gas Booster Station No. 103, situated in the Fifth District on land owned by others and located at the intersection of Pelican and Bermuda Streets.
(33)      Gas Booster Station No. 104, situated in the Third District on land owned by others and located at the intersection of Iroquois Street and Old Gentilly Road.
(34)      Gas Booster Station No. 105, situated in the Third District on land owned by others and located at the intersection of St. Bernard Avenue and DeSaix Circle.
(35)      Gas Booster Station No. 107, situated in the Seventh District on land owned by others and located at the intersection of Joliet and Jeannette Streets.
(36)      Gas Booster Station No. 108, situated in the Second District on land owned by others and located at the intersection of Orleans Avenue and N. Lopez Street.
(37)      Gas Booster Station No. 109, situated in the Seventh District on land owned by others and located at the intersection of Fig and Joliet Streets.
(38)      Gas Booster Station No. 110, situated in the Third District on land owned by others and located at the intersection of Chartres and Piety Streets.
(39)      Gas Booster Station No. 111, situated in the Third District on land owned by others and located at the intersection of Esplanade Avenue and Marais Street.
(40)      Gas Booster Station No. 112, situated in the Third District on land owned by others and located at the intersection of Gentilly Boulevard and St. Anthony Avenue.
(41)      Gas Booster Station No. 113, situated in the Second District on land owned by others and located at the intersection of Moss and Dumaine Streets.
(42)      Gas Booster Station No. 114, situated in the First District on land owned by others and located at the intersection of Tchoupitoulas and Diamond Streets.
(43)      Gas Booster Station No. 115, situated in the Sixth District on land owned by others and located at the intersection of Fontainebleau Drive and Napoleon Avenue.
(44)      Gas Booster Station No. 117, situated in the Third District on land owned by others and located at the intersection of Mirabeau and Paris Avenues.
(45)      Gas Booster Station No. 118, situated in the Second District on land owned by others and located at the intersection of Memphis and Walker Streets.
(46)      Gas Booster Station No. 119, situated in the Fourth District on land owned by others and located at the intersection of Josephine and Rousseau Streets.
(47)      Gas Booster Station No. 120, situated in the Third District on land owned by others and located at the intersection of Urquhart Street and Caffin Avenue.




(48)      Gas Booster Station No. 121, situated in the Third District on land owned by others and located on N. Rocheblave Street between Mazant and Piety Streets.
(49)      Gas Booster Station No. 122, situated in the Sixth District on land owned by others and located at the intersection of Louisiana Avenue and S. Saratoga Street.
(50)      Gas Booster Station No. 124, situated in the Second District on land owned by others and located on Toulouse Street near N. Bernadotte Street.
(51)      Gas Booster Station No. 125, situated in the Second District on land owned by others and located on Florida Avenue near Canal Boulevard.
(52)      Gas Booster Station No. 126, situated in the Fourth District on land owned by others and located on S. Saratoga Street between Second and First Streets.
(53)      Gas Booster Station No. 127, situated in the Third District on land owned by others and located on Mendez Street near Lafaye Street.
(54)      Gas Booster Station No. 128, situated in the Seventh District on land owned by others and located on Bellaire Drive at the 17th Street Canal.
(55)      Gas Booster Station No. 129, situated in the Third District on land owned by others and located at the intersection of Dauphine and Mandeville Streets.
(56)      Gas Booster Station No. 131, situated in the Sixth District on land owned by others and located at the intersection of Broadway and Perrier Streets.
(57)      Gas Booster Station No. 132, situated in the Fifth District on land owned by others and located at the intersection of Vallette and Slidell Streets.
(58)      Gas Booster Station No. 133, situated in the Third District on land owned by others and located on Law Street near Feliciana Street.
(59)      Gas Booster Station No. 135, situated in the Third District on land owned by others and located on Sister Street near St. Claude Avenue.
(60)      Gas Booster Station No. 136, situated in the Sixth District on land owned-by others and located on Olive Street near Audubon Street.
(61)      Gas Reducing Station No. 201, situated in the First District on land owned by others and located at the intersection of S. Dorgenois and Thalia Streets.
(62)      Gas Reducing Station No. 203, situated in the Second District on land owned by others and located at the intersection of Harrison Avenue and Memphis Street.
(63) Gas Reducing Station No. 205, situated in the Third District on land owned by others and located at the intersection of Robert E. Lee Boulevard and Begonia Lane.
(64)      Gas Reducing Station No. 206, situated in the Third District on land owned by others and located at the intersection of Beauregard Avenue and Zinnia Lane.




(65)      Gas Reducing Station No. 208, situated in the Third District on land owned by others and located at the intersection of St. Maurice Avenue and Marais Street.
(66)      Gas Reducing Station No. 209, situated in the Third District on land owned by others and located at the intersection of Reynes Street and St. Claude Avenue.
(67)      Gas Reducing Station No. 211, situated in the First District on land owned by others and located on Clio Street between S. Broad Avenue and S. White Street.
(68)      Gas Reducing Station No. 212, situated in the Second District on land owned by others and located at the intersection of Canal Boulevard and Robert E. Lee Boulevard.
(69)      Gas Reducing Station No. 213, situated in the First District on land owned by others and located on S. Salcedo Street between Erato and Thalia Streets.
(70)      Gas Reducing Station No. 215, situated in the Third District on land owned by others and located at the intersection of Gentilly Road and the Vincent Tract.
(71)      Gas Reducing Station No. 216, situated in the Third District on land owned by others and located at the intersection of Lakeshore Drive and Bayou St. John.
(72)      Gas Reducing Station No. 217, situated in the Third District on land owned by others and located at the intersection of Gentilly Road and Darby Street.
(73)      Gas Reducing Station No. 219, situated in the Second District on land owned by others and located at the intersection of Robert E. Lee Boulevard and General Haig Street.
(74)      Gas Reducing Station No. 220; situated in the Third District on land owned by others and located at the intersection of Cerise Street and Chef Menteur Highway.
(75)      Gas Reducing Station No. 221, situated in the Seventh District on land owned by others and located at the intersection of Pontchartrain Boulevard and Brooks Street.
(76)      Gas Reducing Station No. 223, situated in the Seventh District on land owned by others and located on Academy Drive near Lakewood Drive.
(77)      Gas Reducing Station No. 224, situated in the Third District on land owned by others and located on Michoud Boulevard near Chef Menteur Highway.
(78)      Gas Reducing Station No. 225, situated in the Third District on land owned by others and located at 14700 Intracoastal Drive.
(79)      Gas Reducing Station No. 226, situated in the Third District on land owned by others and located at the intersection of Industrial Parkway and the L & N Railroad tracks.
(80)      Gas Reducing Station No. 227, situated in the Third District on land owned by others and located on Vinot Road near U.S. Highway 90.
(81)      Gas Reducing Station No. 228, situated in the First District on land owned by others and located on Thalia Street near S. Roman Street.




(82)      Gas Reducing Station No. 229, situated in the Third District on land owned by others and located on Read Road south of Morrison Road.
(83)      Gas Reducing Station No. 230, situated in the Third District on land owned by others and located on Wright Road south of Morrison Road.
(84)      Gas Reducing Station No. 231, situated in the Third District on land owned by others and located on U.S. Highway 90 east of Chef Menteur Pass.
(85)      Gas Reducing Station No. 232, situated in the Third District on land owned by others and located at the intersection of Paris and Old Gentilly Roads.
ST. BERNARD PARISH
(1)      The odorizer building, situated on land owned by others, located on Judge Perez Drive below Paris Road.
(2)      The Alligator Point Platform, situated on land owned by others and located in Lake Borgne.
(3)      The concrete-coated-steel 6 inch Chalmette submarine and non-submarine transmission pipeline extending from Chalona Drive in a generally northeasterly direction to Gas City Gate No. 8, a distance of approximately 3 miles. Also the following described property used and useful in connection with said transmission pipeline and on which portions of the
non-submarine part of said pipeline are located, more particularly described as follows:
That portion lying North of the 40 Arpent Canal of the following described property: One certain parcel of ground situated in the Parish of St. Bernard, State of Louisiana, on the East Bank of the Mississippi River at about four miles below the U.S. Barracks or about seven miles below Canal Street, in the City of New Orleans, forming part of the Corinne Plantation, known as Lot No. Two (2) on a plan by A. C. Bell, Civil Engineer, on the 11th day of July, 1893, annexed in the margin of an act of sale to Jules Meraux, executed before Charles T. Soniat, Notary, on January 2, 1894. The said parcel measures according to said plan one hundred ninety-one (191) feet, ten (10) inches front on a line designated by the letters “E” and “F”, said Lot No. Two (2) being bounded on the upper side by the line dividing said Lot No. Two (2) from Lot No. One (1) and on the lower side by the line dividing Lot No. Two (2) from Lot No. Three (3), together with the batture property in front of Lot No. Two (2), said lot extending from the river bank to the township line which divides Township 12 South from Township 13 South, Range 13 East; acquired by the Company from Goldking Properties Company on June 1, 1978, by deed registered in C.O.B. 156, Folio 109 of the records of St. Bernard Parish; LESS AND EXCEPTING THEREFROM the right of way of the New Orleans and Southern (commonly known as Shell Beach) Railroad and the right of way of the public road; and FURTHER LESS AND EXCEPTING THEREFROM the following: (A) a plot comprising the front portion of Lot No. Two (2) on a plan made by A. C. Bell, C.E., on July 11, 1893, annexed on the margin of act of sale to Jules Meraux executed before Charles T. Soniat, N.P., on January 2, 1894; (B) property acquired by Steve Favalora by purchase from Milton E. Drewes and Anthony J. Bertucci by act executed before Boris Burk, N.P., Parish of Orleans, on May 31, 1945, registered in C.O.B. 49, Folio 455; (C) drainage right of way acquired by Lake Borgne Basin Levee District by purchase from Milton E. Drewes and Anthony J. Bertucci by act executed before Anthony B. Nunez, Clerk of Court, St. Bernard Parish, Louisiana, on




March 29, 1946, registered in C.O.B. 50, Folio 294; (D) property acquired by Lawrence W. Bergeron by purchase from Milton E. Drewes and Anthony J. Bertucci by act before Anthony B. Nunez, Clerk of Court, St. Bernard Parish, Louisiana, on March 29, 1946, registered in C.O.B. 50, Folio 317; and (E) property acquired by Steve Favalora from Milton E. Drewes by act executed before Louis M. Vinsanau, N.P., Parish of St. Bernard, Louisiana, on December 27, 1947, registered in C.O.B. 51, Folio 550.
(4)      The concrete-coated, steel 6 inch Lake Borgne submarine transmission pipeline extending from Bayou Biloxi Field owned by others in a general direction to Alligator Point Platform, a distance of approximately 14 miles.
(5)      The concrete-coated, steel 8 inch Lake Borgne submarine transmission pipeline extending from Rigolets Field owned by others in a generally southwesterly direction to Alligator Point Platform, a distance of approximately 11 miles.
(6)      The concrete-coated, steel 10 inch Lake Borgne submarine transmission pipeline extending from the Alligator Point Platform in a general westerly direction to Gas City Gate No. 9, a distance of approximately 11 miles.
PARAGRAPH SEVEN
All of the franchises, privileges, permits, grants and consents for the construction, operation and maintenance of electric and gas systems in, on and under streets, alleys, highways, roads, public grounds and rights-of-way and all rights incident thereto which were granted by the governing bodies of the City of New Orleans, State of Louisiana, and which are shown together with the expiration dates thereof, in the following schedule:

ELECTRIC FRANCHISES
 
 
 
Description
 
   Expiration
 
 
 
Ordinance No.
    806 C.S.
Indeterminate
Ordinance No.
6,822 C.C.S.
Indeterminate
Ordinance No.
7,068 C.C.S.
Indeterminate
Ordinance No.
8,423 C.C.S.
Indeterminate
Ordinance No.
1,443 M.C.S.
Indeterminate
Ordinance No.
4,272 M.C.S.
Indeterminate

GAS FRANCHISES
 
 
 
Description
 
   Expiration
 
 
 
Ordinance No.
6,822 C.C.S.
Indeterminate
Ordinance No.
7,069 C.C.S.
Indeterminate
Ordinance No.
8,423 C.C.S.
Indeterminate
Ordinance No.
10,612 C.C.S.
Indeterminate
Ordinance No.
1,443 M.C.S.
Indeterminate
Ordinance No.
4,272 M.C.S.
Indeterminate






IN WITNESS WHEREOF, NEW ORLEANS PUBLIC SERVICE INC., party hereto of the first part, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by its Chairman of the Board, Chief Executive Officer, President or one of its Vice Presidents, and its corporate seal to be attested by its Secretary or one of its Assistant Secretaries for and in its behalf, and Bank of Montreal Trust Company, one of the parties hereto of the second part, in token of its acceptance of the trust hereby created, has caused its corporate name to be hereunto affixed, and this instrument to be signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and its corporate seal to be attested by one of its Assistant Secretaries, and Z. George Klodnicki, the other party hereto of the second part, for like purposes, has hereunto set his hand and affixed his seal, all as of the day and year first above written.
 
NEW ORLEANS PUBLIC SERVICE INC.
 
 
[CORPORATE SEAL]
By /s/M. H. McLETCHIE
M. H. McLETCHIE
Senior Vice President


ATTEST:

/s/N. J. BRILEY         
N. J. BRILEY
Assistant Secretary


Executed, sealed and delivered by
NEW ORLEANS PUBLIC SERVICE INC.,
in the presence of:


/s/ ALICE G. ROJAS


/s/ JEAN P. COLLINS







 
BANK OF MONTREAL TRUST COMPANY,
   as Trustee
 
 
[CORPORATE SEAL]
/s/K. O. HEALEY
K. O. HEALEY
Vice President and Trust Officer


ATTEST:

/s/T. GABALLAH         
T. GABALLAH
Assistant Secretary



 
 
 
/s/Z. GEORGE KLODNICKI  [L.S.]
Z. George Klodnicki
As Co-Trustee




Executed, sealed and delivered by
BANK OF MONTREAL TRUST COMPANY and,
Z. GEORGE KLODNICKI, in the
presence of:


/s/ K. BARKER         
K. BARKER

/s/ T. CORTES         
T. CORTES







STATE OF LOUISIANA      )
) SS.:
PARISH OF ORLEANS      )


On this 11th day of May, 1987, before me appeared M. H. McLETCHIE, to me personally known, who, being duly sworn, did say that he is Senior Vice President of NEW ORLEANS PUBLIC SERVICE INC., and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said M. H. McLETCHIE acknowledged said instrument to be the free act and deed of said corporation.
On the 11th day of May, in the year 1987, before me personally came M. H. McLETCHIE, to me known, who, being by me duly sworn, did depose and say that he resides at 21 Glacier Court, New Orleans, Louisiana 70114; that he is Senior Vice President of NEW ORLEANS PUBLIC SERVICE INC., one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARIAL SEAL]
/s/J. WAYNE ANDERSON
Notary Public
Parish of Orleans, State of Louisiana
      My Commission is Issued for Life






STATE OF NEW YORK      )
) SS.:
COUNTY OF NEW YORK      )


On this 8th day of May, 1987, before me appeared K. O. HEALEY, to me personally known, who, being duly sworn, did say that he is a Vice President and Trust Officer of BANK OF MONTREAL TRUST COMPANY, and that the seal affixed to said instrument is the corporate seal of said corporation and that said instrument was signed and sealed in behalf of said corporation by authority of its Board of Directors, and said K. O. HEALEY acknowledged said instrument to be the free act and deed of said corporation.
On the 8th day of May, in the year 1987, before me personally came K. O. HEALEY, to me known, who, being by me duly sworn, did depose and say that he resides at 25 McCutcheon Court, Middletown, New Jersey 07748; that he is a Vice President and Trust officer of BANK OF MONTREAL TRUST COMPANY, one of the corporations described in and which executed the above instrument; that he knows the seal of said corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by order of the Board of Directors of said corporation, and that he signed his name thereto by like order.
[NOTARIAL SEAL]
/s/MAUREEN RADIGAN
MAUREEN RADIGAN
Notary Public, State of New York
No. 31-4865983
Qualified in New York County
Commission Expires July 28, 1988








STATE OF NEW YORK      )
) SS.:
COUNTY OF NEW YORK      )


On this 8th day of May, 1987, before me personally appeared Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same as his free act and deed.
On the 8th day of May, 1987, before me personally came Z. GEORGE KLODNICKI, to me known to be the person described in and who executed the foregoing instrument, and acknowledged that he executed the same.

[NOTARIAL SEAL]
/s/MAUREEN RADIGAN
MAUREEN RADIGAN
Notary Public, State of New York
No. 31-4865983
Qualified in New York County
Commission Expires July 28, 1988
 





SUMMARY OF RECORDING DATA

Parish
Date Filed
Entry or
File No.
Mortgage
  Book  
Page or
 Folio 
Orleans
May 12, 1987
705481*
2515
615
St. Bernard
May 12, 1987
231021
457
1


_____________________

* Notarial Archives Number





Exhibit 4(g)4
ENTERGY TEXAS, INC.
OFFICER’S CERTIFICATE
7-B-5

Establishing the Form and Certain Terms of the
First Mortgage Bonds, 5.625% Series due June 1, 2064

THIS INSTRUMENT GRANTS A SECURITY INTEREST
BY A UTILITY

THIS INSTRUMENT CONTAINS AFTER-ACQUIRED
PROPERTY PROVISIONS

The undersigned, STACEY M. LOUSTEAU, ASSISTANT TREASURER, an Authorized Officer of Entergy Texas, Inc., a Texas Corporation (the “Company”) (all capitalized terms used herein which are not defined herein but are defined in the Indenture referred to below, shall have the meanings specified in such Indenture), pursuant to Board Resolutions dated August 29, 2008 and May 5, 2014 and Sections 201 and 301 of such Indenture, does hereby certify to THE BANK OF NEW YORK MELLON, as trustee (the “Trustee”) under the Indenture, Deed of Trust and Security Agreement of the Company dated as of October 1, 2008 (the “Indenture”) as of May 13, 2014, that:
1.
The Securities of the fifth series to be issued under the Indenture (the “Bonds”) shall be issued in a series designated “First Mortgage Bonds, 5.625% Series due June 1, 2064”; the Bonds shall be in substantially the form set forth in Exhibit A hereto; the Bonds shall initially be issued in the aggregate principal amount of $135,000,000; however, the aggregate principal amount of Bonds which may be authenticated and delivered under the Indenture is unlimited; and the Bonds issued on the original issue date and any additional Bonds issued thereafter shall be considered one and the same series of Securities under the Indenture; additional Bonds, without limitation as to amount, having substantially the same terms as the Outstanding Bonds (except for the issue date, price to public and, if applicable, the initial interest payment date) may be issued by the Company without notice to or the consent of the existing Holders of the Bonds.
2.
The Bonds shall mature and the principal shall be due and payable together with all accrued and unpaid interest thereon on June 1, 2064, and the Company shall not have any right to extend the Maturity of the Bonds as contemplated in Section 301(d) of the Indenture;
3.
The Bonds shall bear interest as provided in the form thereof set forth in Exhibit A hereto; the Interest Payment Dates for the Bonds shall be March 1, June 1, September 1 and December 1 of each year, commencing September 1, 2014;
4.
Each installment of interest on the Bonds shall be payable as provided in the form thereof set forth in Exhibit A hereto; the Company shall not have any right to extend any interest payment periods for the Bonds as contemplated in Section 301(e) of the Indenture;
5.
The principal of, premium, if any, and each installment of interest on the Bonds shall be payable, and registration of transfers and exchanges in respect of the Bonds may be effected, at the office or agency of the Company in The City of New York and as otherwise provided in the form of Bond set forth in Exhibit A hereto; and notices and demands to or upon the Company in respect of the Bonds may be served at the office or agency of the Company in The City of New York; the Corporate Trust Office of the Trustee will initially be the agency of the Company for such payment, registration of transfers and exchanges and service of notices and demands, and the Company hereby appoints the Trustee as its agent for all such purposes; and the Trustee will initially be the Security Registrar and the Paying Agent for the Bonds; provided , however , that the Company reserves the right to change, by one or more Officer’s Certificates, any such office or agency and such agent;
6.
The Regular Record Dates for the interest payable on any given Interest Payment Date with respect to the Bonds shall be the close of business on the Business Day immediately preceding such Interest Payment Date;
7.
The Bonds are subject to redemption as provided in the form thereof set forth in Exhibit A hereto;




8.
No service charge shall be made for the registration of transfer or exchange of the Bonds; provided , however , that the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with the exchange or transfer;
9.
The Bonds shall be issued initially in global form registered in the name of Cede & Co. (as nominee for The Depository Trust Company (“DTC”)); provided , that the Company reserves the right to provide for another depository, registered as a clearing agency under the Exchange Act, to act as depository for the global Bonds (DTC and any such successor depository, the “Depository”); beneficial interests in Bonds issued in global form may not be exchanged in whole or in part for individual certificated Bonds in definitive form, and no transfer of a global Bond in whole or in part may be registered in the name of any Person other than the Depository or its nominee except that (i) if the Depository (A) has notified the Company that it is unwilling or unable to continue as depository for the global Bonds or (B) has ceased to be a clearing agency registered under the Exchange Act and, in either case, a successor depository for such global Bonds has not been appointed by the Company within ninety (90) days after the Company receives such notice or becomes aware of such condition, as the case may be, (ii) the Company executes and delivers to the Trustee an Officer’s Certificate providing that the global Bonds shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Bonds, in each case, the Company will execute, and the Trustee, upon receipt of a Company Order for the authentication and delivery of definitive Bonds, will authenticate and deliver Bonds in definitive certificated form in an aggregate principal amount equal to the principal amount of the global Bonds representing such Bonds in exchange for such global Bonds, such definitive Bonds to be registered in the names provided by the Depository; each global Bond (i) shall represent and shall be denominated in an amount equal to the aggregate principal amount of the outstanding Bonds to be represented by such global Bond, (ii) shall be registered in the name of the Depository or its nominee, (iii) shall be delivered by the Trustee to the Depository, its nominee, any custodian for the Depository or otherwise pursuant to the Depository’s instruction and (iv) shall bear a legend restricting the transfer of such global Bond to any person other than the Depository or its nominee; none of the Company, the Trustee, any Paying Agent or any Authenticating Agent will have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in a global Bond or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests; the Bonds in global form will contain restrictions on transfer, substantially as described in the form set forth in Exhibit A hereto;
10.
None of the Trustee, the Security Registrar or the Company shall have any liability for any acts or omissions of the Depository, for any transfers of beneficial interests in the Bonds, for any Depository records of beneficial interests, for any transactions between the Depository and beneficial owners or in respect of any transfers effected by the Depository or by any participant members of the Depository or any beneficial owner of any interest in any Bonds held through any such participant member of the Depository;
11.
If the Company shall make any deposit of money and/or Eligible Obligations with respect to any Bonds, or any portion of the principal amount thereof, as contemplated by Section 801 of the Indenture, the Company shall not deliver an Officer’s Certificate described in clause (z) in the first paragraph of said Section 801 unless the Company shall also deliver to the Trustee, together with such Officer’s Certificate, either:
(A)      an instrument wherein the Company, notwithstanding the satisfaction and discharge of its indebtedness in respect of such Bonds, shall assume the obligation (which shall be absolute and unconditional) to irrevocably deposit with the Trustee or Paying Agent such additional sums of money, if any, or additional Eligible Obligations (meeting the requirements of Section 801), if any, or any combination thereof, at such time or times, as shall be necessary, together with the money and/or Eligible Obligations theretofore so deposited, to pay when due the principal of and premium, if any, and interest due and to become due on such Bonds or portions thereof, all in accordance with and subject to the provisions of said Section 801; provided , however , that such instrument may state that the obligation of the Company to make additional deposits as aforesaid shall be subject to the delivery to the Company by the Trustee of a notice asserting the deficiency accompanied by an opinion of an independent public accountant of nationally recognized standing, selected by the Trustee, showing the calculation thereof; or
(B)      an Opinion of Counsel to the effect that, as a result of a change in law occurring after the date of this certificate, the Holders of such Bonds, or portions of the principal amount thereof, will not recognize income, gain or loss for United States federal income tax purposes as a result of the satisfaction and discharge of the




Company’s indebtedness in respect thereof and will be subject to United States federal income tax on the same amounts, at the same times and in the same manner as if such satisfaction and discharge had not been effected;
12.
The Eligible Obligations with respect to the Bonds shall be Government Obligations;
13.
The Bonds shall have such other terms and provisions as are provided in the form set forth in Exhibit A hereto;
14.
No Event of Default under the Indenture has occurred or is occurring;
15.
The undersigned has read all of the covenants and conditions contained in the Indenture, and the definitions in the Indenture relating thereto, relating to the issuance and authentication and delivery of the Bonds and in respect of compliance with which this certificate is made;
16.
The statements contained in this certificate are based upon the familiarity of the undersigned with the Indenture, the documents accompanying this certificate, and upon discussions by the undersigned with officers and employees of the Company familiar with the matters set forth herein;
17.
In the opinion of the undersigned, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenants and conditions have been complied with; and
18.
In the opinion of the undersigned, such conditions and covenants, and all conditions precedent provided for in the Indenture (including any covenants compliance with which constitutes a condition precedent) relating to the authentication and delivery of the Bonds requested in the accompanying Company Order have been complied with.

[Remainder of page intentionally left blank]




IN WITNESS WHEREOF, I have executed this Officer’s Certificate as of the date set forth above.
By: _ /s/ Stacey M. Lousteau     
Name:      Stacey M. Lousteau
Title:      Assistant Treasurer







Exhibit A
[FORM OF BOND]
[Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation (“DTC”), to Entergy Texas, Inc., or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.]


No. ___      CUSIP No. 29365T 104
MATURITY DATE: June 1, 2064      PRINCIPAL AMOUNT: ____________
ENTERGY TEXAS, INC.
FIRST MORTGAGE BONDS, 5.625% SERIES DUE JUNE 1, 2064     
ENTERGY TEXAS, INC., a corporation duly organized and existing under the laws of the State of Texas (herein referred to as the “Company,” which term includes any successor Person under the Indenture referred to below), for value received, hereby promises to pay to
or registered assigns, the principal amount specified above on the Maturity Date set forth above and to pay interest on the unpaid principal hereof and on any overdue interest from and including May 16, 2014 or from and including the most recent interest payment date to which interest has been paid or duly provided for on March 1, June 1, September 1 and December 1 each year, commencing September 1, 2014, and on the Maturity Date (each, an “Interest Payment Date”), at the rate of 5.625% per annum (the “Interest Rate”) to but excluding the date on which the principal hereof is paid or made available for payment. In the event that any Interest Payment Date is not a Business Day, then payment of interest payable on such date will be made on the next succeeding day which is a Business Day (and without any interest or other payment in respect of such delay) with the same force and effect as if made on the Interest Payment Date. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Business Day immediately preceding such Interest Payment Date (each a “Regular Record Date”), except that interest payable at Maturity will be payable to the Person to whom principal shall be paid. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture referred to herein.
Payment of the principal of (and premium, if any) and interest at Maturity on this Security shall be made upon presentation of this Security at the office or agency of the Company maintained for that purpose in The City of New York, in the State of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided , however , that, at the option of the Company, interest on this Security (other than interest payable at Maturity) may be paid by check mailed to the address of the person entitled thereto, as such address shall appear on the Security Register, and provided , further , that if such person is a




securities depositary, such payment may be made by such other means in lieu of check as shall be agreed upon by the Company, the Trustee and such person.
All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture and in the Officer’s Certificate establishing the terms of the Securities of this series (the “Series Officer’s Certificate”).
This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, Deed of Trust and Security Agreement dated as of October 1, 2008 (herein, together with any amendments or supplements thereto, called the “Indenture”, which term shall have the meaning assigned to it in such instrument), between the Company and The Bank of New York Mellon, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), and reference is hereby made to the Indenture, for a statement of the property mortgaged, pledged and held in trust, the nature and extent of the security, the conditions upon which the Lien of the Indenture may be released and to the Indenture, Board Resolutions and Series Officer’s Certificate creating the series designated on the face hereof, for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. The acceptance of this Security shall be deemed to constitute the consent and agreement by the Holder thereof to all of the terms and provisions of the Indenture. This Security is one of the series designated on the face hereof.
Securities of this series shall be redeemable at the option of the Company in whole or in part, upon notice mailed at least 30 days but not more than 60 days prior to the date fixed for redemption (the “Redemption Date”) at any time on or after June 1, 2019, at the Redemption Price equal to 100% of the principal amount of Securities of this series being redeemed, plus, in each case, accrued and unpaid interest thereon to the Redemption Date.

“ Business Day ” means any day other than a Saturday or a Sunday or a day on which banking institutions in The City of New York are authorized or required by law or executive order to remain closed or a day on which the corporate trust office of the Trustee is closed for business.

Notice of redemption (other than at the option of the Holder) shall be given by mail to Holders of Securities all as provided in the Indenture. As provided in the Indenture, notice of redemption at the election of the Company as aforesaid may state that such redemption shall be conditional upon the receipt by the applicable Paying Agent or Agents of money sufficient to pay the principal of and premium, if any, and interest, if any, on this Security on or prior to the date fixed for such redemption; a notice of redemption so conditioned shall be of no force or effect if such money is not so received and, in such event, the Company shall not be required to redeem this Security.

In the event of redemption of this Security in part only, a new Security or Securities of this series of like tenor representing the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Security upon compliance with certain conditions set forth in the Indenture and the Series Officer’s Certificate.

If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of this series at any time by the Company and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding to be directly affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders




of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of a majority in aggregate principal amount of the Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as the Trustee and offered the Trustee reasonable indemnity, and the Trustee shall not have received from the Holders of a majority in aggregate principal amount of Securities of all series at the time Outstanding in respect of which an Event of Default shall have occurred and be continuing a direction inconsistent with such request, and shall have failed to institute any such proceeding for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

The Securities of this series are issuable only in registered form without coupons in denominations of $25 and integral multiples thereof. As provided in the Indenture and subject to certain limitations therein and herein set forth, Securities of this series are exchangeable for Securities of this series, of authorized denominations and of like tenor and aggregate principal amount, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

The Company shall not be required to execute, and the Security Registrar shall not be required to register, the transfer of or exchange of (a) Securities of this series during a period of 15 days immediately preceding the date notice is to be given identifying the serial numbers of the Securities of this series called for redemption, (b) any Security during the 15 days before an Interest Payment Date, or (c) any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

The Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the absolute owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

This Security shall be governed by and construed in accordance with the laws of the State of New York (including without limitation Section 5-1401 of the New York General Obligations Law or any successor to such statute), except to the extent that the Trust Indenture Act shall be applicable.

As provided in the Indenture, no recourse shall be had for the payment of the principal of or premium, if any, or interest on any Securities, or any part thereof, or for any claim based thereon or otherwise in respect thereof, or of the indebtedness represented thereby, or upon any obligation, covenant or agreement under the Indenture, against, and no personal liability whatsoever shall attach to, or be incurred by, any incorporator, shareholder, member, limited partner, officer, manager or director, as such, past, present or future of the Company or of any predecessor or successor of the Company (either directly or through the Company or a predecessor or successor of the Company), whether by virtue of any constitutional provision, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly agreed and understood that the Indenture and all the Securities are solely corporate obligations and that any such personal liability is hereby expressly waived and released as a condition of, and as part of the consideration for, the execution of the Indenture and the issuance of the Securities.





Unless the certificate of authentication hereon has been executed by the Trustee referred to herein by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

                        
ENTERGY TEXAS, INC.
By:_______________________________________
Name:
Title:

[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture.
Dated:

THE BANK OF NEW YORK MELLON, as Trustee
By:_______________________________________
Authorized Signatory






ENTERGYLOGOA44.GIF


Exhibit 10(a)46
Stock Option Agreement (“ Agreement ”) - Under the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries

The Personnel Committee of the Board of Directors (“ Committee ”) of Entergy Corporation (the “ Company ”) has agreed to grant you, pursuant to the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the “ Plan ”), a nonstatutory stock option (the “ Option ”) to purchase that number of shares of Entergy Corporation common stock (the “ Com-mon Stock ”) set forth on the Stock Option Grant Notice to which this Agreement is attached (the “Grant Notice”) at the Award Price set forth on the Grant Notice (the “ Exercise Price ”), subject to the Plan and the following terms and conditions:

1.      Effective Date of Option Grant, Acknowledgement and Acceptance of Option Grant . This Option grant is effective as of the Award Date set forth on the Grant Notice (the “ Grant Date ”), contingent upon your acceptance of this Option in accordance with the terms of this Agreement and the Grant Notice. The effectiveness of this Agreement is subject to your electronically acknowledging and accepting this Agreement and all of its terms and conditions and the terms of the Plan in the manner and at the time set forth on the Grant Notice. If you do not timely acknowledge and accept this Agreement in accordance the Grant Notice, the Company shall be entitled to unilaterally cancel and render void this Agreement and the Grant Notice.

2.      Option Term . The term of the Option (the “ Option Term ”) shall commence on the Grant Date and, unless the Option is previously terminated pursuant to the Plan or this Agreement, shall terminate upon the expiration of ten years from the Grant Date. Unless earlier terminated or forfeited, upon expiration of the Option Term, all of your rights under the Plan and this Agreement with respect to the Option shall terminate.

3.      Vesting of Option . The Option shall vest and become exercis-able as to one-third (1/3) of the shares of Common Stock subject to the Option on each of the first three (3) anniversaries of the Grant Date (each such anniversary a “ Vesting Date ”), subject to the terms of Section 5 and the Plan; provided, that in order for the portion of the Option to vest that is scheduled to become vested on each such Vesting Date, through each such Vesting Date you comply with Section 9 of this Agreement and you remain either (a) a continuous full-time regular employee of a System Company or (b) a continuous part-time regular System Company employee participating in the phased retirement program under the Entergy System Policies & Procedures Phased Retirement - Pre-Separation Policy (the “ Phased Retirement Program ”), unless otherwise provided in Section 5. There shall be no proportionate or partial vesting in the periods prior to each Vesting Date, and all vesting shall occur only on the appropriate Vesting Date set forth above.
 
4.      Exercise of Option .

(a)      Method of Exercise . You may exercise the vested portion of the Option by one of the methods approved by the Committee in connection with the grant of this Option. You can determine the permissible methods of exercise:
(I) by contacting Computershare Executive Services at 1(800) 851-1982, or
(II) via the Internet address https://www-us.computershare.com/EmployeePortal/
You will be required to choose from one of the payment methods made available by the Committee for exercising




stock options, which method shall also provide for the payment by you of all applicable income tax and employment tax amounts required to be withheld in connection with such exercise.

(b)      Limitations on Sale of Option Shares . Notwithstanding anything to the contrary in Section 4(a) above or in the general description of exercise alternatives, as a System Management Level (“ ML ”) 1-4 Participant, you must maintain the applicable Target Stock Ownership Level reflected in the chart below, which level is expressed as a multiple of your base salary and is based on your ML.

Target Stock Ownership Levels

System Management Level
Stock Ownership
Target Levels
ML1
6 times base salary
ML2
3 times base salary
ML3
2 times base salary
ML4
1 times base salary

These ownership multiples may be satisfied through any shares of Common Stock held by an ML 1-4 Participant, including, but not limited to, unvested restricted shares and shares held in tax-qualified 401(k) plans. Until you achieve your multiple of salary ownership position, you must continue to retain at least that number of shares of Common Stock equal to 75% of your After-Tax Net Profit (as defined below) from the exercise of the Option divided by the Fair Market Value of the Common Stock on the exercise date, rounded down to the nearest whole number, until the earlier of (a) achieving and maintaining your multiple of base salary ownership threshold, or (b) your termination of full-time employment (or part-time employment under the Phased Retirement Program) with all System Companies.

For purposes of this Section 4, “ After-Tax Net Profit ” means the total Fair Market Value of the shares that you elect to acquire by exercise under this Option, determined as of the date of exercise, minus the total of (I) the Exercise Price for these shares, and (II) the amount of all applicable federal, state and local income tax, employment tax, other tax withholding and other fees that must be withheld in connection with the exercise.

5.      Termination of Option . If your full-time System Company employment or part-time System Company employment under the Phased Retirement Program, as applicable, should terminate prior to the expiration of ten years from the Grant Date, you, or your designated beneficiary or heirs, as applicable, shall have only the following periods of time (“ Remaining Exercise Period ”), as specified below, and such additional periods of time, if any, that the Committee may designate in its sole discretion, to exercise the Option, to the extent vested at the time your employment terminates or as otherwise set forth below, subject to Sections 1, 6 and 7 hereof and to the Plan including, without limitation, Sections 5.6(e) and 13 of the Plan:
 
(a)      If you die while actively employed with a System Company, any unvested portion of the Option will immediately vest, and the Remaining Exercise Period for your designated beneficiary or heirs, as applicable, shall end on the earlier of (I) the fifth (5 th ) anniversary of the date of your death or (II) the tenth (10 th ) anniversary of the Grant Date.

(b)      If you Retire from System Company employment or your employment terminates because you have become Totally Disabled, any unvested portion of the Option shall immediately vest, and the Remaining Exercise Period shall end on the earlier of (I) the fifth (5 th ) anniversary of the date of such termination of employment or (II) the tenth (10 th ) anniversary of the Grant Date.

(c)      If your employment with your System Company employer terminates for Cause, both the vested and unvested portions of the Option shall immediately terminate, and the Remaining Exercise Period shall immediately end.





(d)      If your full-time System Company employment or part-time System Company employment under the Phased Retirement Program, as applicable, terminates for any other reason not set forth in Subsections 5(a), (b) or (c) above, any unvested portion of the Option will terminate, and the Remaining Exercise Period for the vested portion of the Option shall end on the earlier of (I) the date that is 10 years following the Grant Date or (II) the date that is ninety (90) days following your last date of System Company employment.

(e)      Except as provided below for an employee on an extended leave of absence bridge to Retirement under an approved severance program under the Entergy System Severance Pay Plan No. 537 or the Entergy System Severance Pay Plan No. 538, if you are approved by your System Company employer for a leave of absence (whether paid or unpaid) for reasons other than Total Disability or are a continuous part-time regular System Company employee participating in the Phased Retirement Program, your Option, to the extent not fully vested, will continue to vest while you remain on the approved leave of absence or during such participation in the Phased Retirement Program, as applicable, upon each anniversary of the Grant Date in accordance with the vesting schedule set forth in Section 3 hereof. If your System Company employment terminates during such approved leave period, the Remaining Exercise Period for your vested Option, if any, shall be determined in accordance with the provisions of Subsections 5(a) through (d) above, depending upon the reason for such termination. If you are on an extended leave of absence bridge to Retirement under an approved severance program under the Entergy System Severance Pay Plan No. 537 or the Entergy System Severance Pay Plan No. 538, you will not be considered under the Plan or this Agreement to be a full-time or eligible part-time System Company employee under the Phased Retirement Program during the extended leave of absence bridge period, and your System Company employment will be considered terminated for purposes of vesting in Options under this Agreement as of the commencement of your extended leave of absence bridge period.

6.      Change in Control . Notwithstanding any provision of Section 5 to the contrary, if you incur a CIC Separation from Service, then (a) any portion of the Option that is not vested and is outstanding as of the effective date of such CIC Separation from Service shall become fully vested and exercisable as of the later of the date your System Company employment is terminated or the date of the consummation of the applicable Change in Control, and any such vested and exercisable Option may be exercised within the remaining term of the Option, and (b) the restrictive covenants set forth in Section 9 hereof shall no longer apply, with the exception of those pursuant to Section 9(a). If you incur a CIC Separation from Service following the occurrence of a Potential Change in Control and prior to the occurrence of a Change in Control then, notwithstanding anything herein to the contrary, the Option shall remain outstanding and unvested and shall be cancelled and forfeited upon the earlier of (I) the date that is ninety (90) days after the date of your CIC Separation from Service or (II) the tenth (10 th ) anniversary of the Grant Date.

7.      Entergy Policies.

(a) Hedging Policy . Pursuant to the Entergy Corporation Policy Relating to Hedging, as adopted by the Company’s Board of Directors at its meeting held on December 3, 2010, and as in effect on the date hereof, officers, directors and employees are prohibited from entering into hedging or monetization transactions involving Common Stock so they continue to own Common Stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with the Company’s other shareholders. Participation in any hedging transaction with respect to Common Stock (including Options) is prohibited.

(b) Recoupment Policy; Dodd-Frank; Payment in Error . Pursuant to the Entergy Corporation Policy Relating to Recoupment of Certain Compensation, as adopted by the Company’s Board of Directors at its meeting held on December 3, 2010, and as in effect on the date hereof, the Company is allowed to seek reimbursement of certain incentive compensation (including Options) from “executive officers” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, if the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the federal securities laws (other than corrections resulting from changes to accounting standards); or there is a material miscalculation of a performance measure relative to incentive compensation, regardless of the requirement to restate the financial statements; or the Board of Directors determines that an executive officer engaged in fraud resulting in either a restatement of the Company’s financial statements or a material miscalculation of a performance measure relative to incentive compensation whether or not the financial statements were restated. In addition, the Option is subject to any forfeiture and/or recoupment policy which the Company has adopted or may adopt under the Dodd-Frank Wall Street Reform




and Consumer Protection Act of 2010 and implementing rules and regulations thereunder, or as may be required by applicable law. To the maximum extent permitted by applicable law, in the event that a payment is made to you (whether in cash, stock or other property) in error that exceeds the amount to which you are entitled pursuant to the terms of this Agreement or the Plan (such excess amount, an “ Excess Payment ”), you will repay to the Company, and the Company shall have the right to recoup from you such Excess Payment by notifying you in writing of the nature and amount of such Excess Payment together with (I) demand for direct repayment to the Company by you in the amount of such Excess Payment or (II) reduction of any amount(s) owed to you by the Company or any other System Company by the amount of the Excess Payment.

(c) Insider Trading Policy . All ML 1-4 Participants are considered “Restricted Employees” under the Entergy System Insider Trading Policy. As a Restricted Employee, you may trade in Entergy Corporation securities only during an open window period (and only if you are not in possession of material, non-public information). Generally, window periods begin on the second business day after the quarterly earnings release and run through the last business day of the second month of the quarter in which such quarterly earnings release is publicly reported. In addition, if you are a Restricted Employee, the Insider Trading Policy requires that you pre-clear all transactions involving Entergy securities with Entergy Corporation’s Office of the General Counsel. All exercises of the Option and transactions in the underlying Common Stock must be made in compliance with the Insider Trading Policy as in effect at such time.

8.      Option Nontransferable . This Option may not be sold, exchanged, pledged, transferred, assigned, or otherwise encumbered, hypothecated or disposed of by you (or your designated beneficiary) other than by (a) will or laws of descent and distribution or (b) a qualified domestic relations order (as defined in the Code). During your lifetime, this Option may be exercised only by you (or your alternate payee pursuant to a QDRO) or you or your alternate payee’s guardian or legal representative.
9.      Confidentiality and Restrictive Covenants . In consideration of the grant to you of the Option set forth herein, you hereby agree as follows:
(a)      Confidential Information . You acknowledge that the System Companies have unique methods and processes for the generation, transmission and distribution and sale of energy products, which give them a competitive advantage, including strategic and non-public plans for their products, geographic and customer markets, and for marketing, distributing and selling their products. You further acknowledge that you have held a position of confidence and trust with respect to the System Companies and that you have and will acquire additional detailed knowledge of the System Companies’ unique and confidential methods of doing business and plans for the future. You acknowledge that the System Companies expended and will continue to expend substantial amounts of time, money and effort to develop effective business and regulatory strategies, methodologies and technology. You also acknowledge that the System Companies have a compelling business interest in protecting the System Companies’ Confidential Information (as defined below) and that the System Companies would be seriously and irreparably damaged by the disclosure of Confidential Information. You therefore agree that, during your employment or other service with any System Company and at all times thereafter, you will hold in a fiduciary capacity for the benefit of the System Companies and, other than as authorized in writing by the General Counsel of the Company or as required by law or in the proper performance of your duties and responsibilities, or as otherwise provided in this Section 9, you will not disclose, directly or indirectly, to any person or entity, or use, for any purpose other than the furtherance of your responsibilities to any System Company, any Confidential Information. For purposes of this Agreement, “Confidential Information” means information that provides the System Companies with a competitive advantage, is not generally known by persons outside the System Companies and could not easily be determined or learned by someone outside the System Companies, including without limitation, any and all information and knowledge, whether or not explicitly designated as confidential and whether or not reduced to writing, regarding (I) the System Companies’ utility business, including, without limitation, the generation, transmission, brokering, marketing, distribution, sale and delivery of electric power or generation capacity (through regulated utilities or otherwise), and their natural gas distribution business, (II) the Entergy Wholesale Commodities business, including, without limitation, the ownership, development, management or operation of power plants and power generation facilities (including, without limitation, nuclear power plants), and the provision of operations and management services (including, without limitation, decommissioning services) with respect to power plants, and the sale of the electric power produced by the System Companies’ operating plants to




wholesale customers, (III) the System Companies’ proprietary methods and methodology, technical data, trade secrets, know-how, research and development information, product plans, customer lists, specific information relating to products, services and customers or prospective customers (including, but not limited to, customers or prospective customers of any System Company with whom you became or become acquainted during your relationship with the System Company), books and records of any System Company, corporate, regulatory, customer and strategic relationships, suppliers, markets, computer software, computer software development, inventions, processes, formulae, technology, designs, drawings, technical information, source codes, engineering information, hardware configuration information, and matters of a business nature such as information regarding marketing, costs, pricing, finances, financial models and projections, billings, new or existing business or economic development plans, initiatives, and opportunities, or any other similar business information made available to you in connection with your relationship with any System Company and (IV) any attorney-client privileged information of a System Company. Confidential Information shall also include non-public information concerning any director, officer, employee, shareholder, or partner of any System Company. You agree that your obligation not to disclose or use Confidential Information, and your obligation, detailed below, to return and, upon your termination of employment with all System Companies, not to retain materials and tangible property described in this Section shall also extend to such types of information, materials and tangible property of customers of and suppliers to the System Companies and to other third parties, in each case who may have disclosed or entrusted the same to you or to any System Company during your employment with any System Company.
(b)      Non-Competition . For one (1) year following the termination for any reason of your employment by or service with your last System Company employer (the “ Non-Compete Period ”), you will not engage in Competing Employment. For purposes of this Section, “ Competing Employment ” means working for, providing services to or otherwise directly or indirectly assisting (whether or not for compensation) any person, entity or business which directly or indirectly competes with any part of the System Company business, and such employment or services involves products, services and business activities that are the same as or similar to those you provided to a System Company, or as to which you had access to Confidential Information, in the two years preceding your termination of employment or service with all System Companies. You agree that it is reasonable for the restriction contained in this paragraph to apply in each and every county, province, state, city, parish or other political subdivision or territory of the United States in which any System Company engages in any business activity, or otherwise distributes, licenses or sells its products or services, including, without limitation, Arkansas, Connecticut, District of Columbia, Louisiana, Massachusetts, Michigan, Mississippi, Nebraska, New York, Texas, and Vermont and any other state in which any System Company engages in business at any time and, with respect to the State of Louisiana, means the following Parishes: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, La Salle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Point Coupee, Rapides, Red River, Richland, Sabine, Saint Bernard, St. Charles, St. Helena, Saint James, Saint John the Baptist, Saint Landry, Saint Martin, Saint Mary, Saint Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana and Winn (the “ Restricted Territory ”).

(c)      Non-Solicitation . You agree that, while you are employed by any System Company and during the Non-Compete Period (or, if later, the last day you are scheduled to receive cash severance payments from your System Company employer pursuant to any severance plan or other agreement), except in the good faith performance of your duties to the System Companies, you shall not, other than as authorized in writing by the General Counsel of the Company: (I) directly or indirectly advise, solicit, induce, hire, encourage or assist in the hiring process, or advise, cause, encourage or assist others to solicit, induce or hire, any employee or consultant of any System Company or any individual who was an employee or consultant of any System Company at any time during the six-month period immediately prior to such action or (II) induce, encourage, persuade or cause others to induce, encourage, or persuade any employee or consultant of any System Company to cease providing services to any System Company or in any way to modify such employee’s or consultant’s relationship with any System Company or (III) within the Restricted Territory, directly or indirectly solicit the trade, business or patronage of any clients, customers or vendors or prospective clients, customers or vendors of any System Company to provide competing products or services or advise, or assist such clients, customers or vendors or prospective clients, customers or vendors to in any way modify their relationship with any System Company. The foregoing non-solicitation (I) shall not be violated by general advertising not targeted




at the forgoing persons or entities; (II) shall not apply to solicitation of persons involuntarily terminated from System Company employment; and (III) shall only apply to persons or entities (x) who reported directly or indirectly to you; (y) with whom you had material contact while at a System Company; or (z) about whom or which you possessed (1) information regarding quality of performance while they were employed by a System Company, which information you would not otherwise have except for the position you held with a System Company, or (2) Confidential Information.

(d)      Non-Disparagement . You agree that, to the fullest extent permitted by applicable law, you will not at any time (whether during or after your employment or service with any System Company), other than in the proper performance of your duties, publish or communicate to any person or entity any “Disparaging” (as defined below) remarks, comments or statements concerning any System Company or any of their respective directors, officers, shareholders, employees, agents, attorneys, successors and assigns. “ Disparaging ” remarks, comments or statements are those that are intended to, or that could be construed in a manner so as to, impugn, discredit, injure or impair the business, reputation, character, honesty, integrity, judgment, morality or business acumen or abilities of the individual or entity being disparaged.
(e)      System Company Property . All tangible materials, equipment, devices, documents, copies of documents, data compilations (in whatever form), software programs, and electronically created or stored materials that you receive or create in the course of employment with a System Company are and shall remain the property of the System Company and you shall immediately return (and/or cooperate in the supervised deletion of) such property to your System Company employer upon the termination of your employment, for whatever reason. The obligation to return property and documents extends to anything received or made during and as a result of employment by a System Company, regardless of whether it was received from a System Company or a third party, such as an actual or potential vendor or customer, and regardless of whether a document contains Confidential Information. The only documents not subject to the obligation to return are documents directly relating to your compensation and benefits, such as your pay stubs and benefit plan information.
(f) Violation of the Restrictive Covenant Section . In the event that you violate any provision of this Section 9, the time periods set forth in those paragraphs shall be extended for the period of time you remain in violation of the provisions. The provisions of Section 9(a) - (e) hereof are, and shall be construed as, independent covenants, and no claimed or actual breach of any contractual or legal duty by any System Company shall excuse or terminate your obligations hereunder or preclude any System Company from obtaining injunctive relief for your violation, or threatened violation, of any of those provisions. You also agree to indemnify and hold the System Companies harmless from any and all losses (including, but not limited to, reasonable attorney’s fees and other expenses incurred to enforce this Agreement) suffered by any System Company as a result of any violation or threatened violation of any of your representations, warranties, covenants or undertakings set forth in this Agreement (in addition to any other remedies available to the System Companies set forth in Section 9(i) below), provided that a System Company is found to be the prevailing party in any such action.
(g)      Restrictive Covenants Contained in Other Agreements .  Notwithstanding any provision contained herein to the contrary, to the extent that you are or become subject to any other agreement that contains restrictive covenants different from the restrictive covenants contained in this Agreement, the restrictive covenants set forth in such other agreement shall supplement, and shall not replace, the restrictive covenants herein.
(h)      Exclusions . Notwithstanding anything else in this Section 9 or in this Agreement to the contrary:
(I) The restrictive covenants in this Section 9 are not intended to restrict you from cooperating with any investigation or proceeding initiated by the Nuclear Regulatory Commission (“ NRC ”) or any other federal or state regulatory agency. Further, you may make disclosure (A) to exercise your rights as a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission Rule 21F-17(a), or any other federal or state law providing whistleblower rights; (B) to the extent necessary when providing safety-related or other information to the NRC on matters within the NRC’s regulatory jurisdiction; (C) when participating in “protected activities,” as defined in Section 211 of the Energy Reorganization Act of 1974 and in C.F.R. Part 50.7; (D) when engaging in activities protected by the National




Labor Relations Act or any similar federal or state law; or (E) when required to do so by a court of law, by any governmental agency or administrative or legislative body with jurisdiction to order you to divulge, disclose or make accessible such information. With the exception of Confidential Information subject to the attorney-client privilege, you shall have no obligation to seek prior approval of any System Company or to inform any System Company of such disclosure. This Agreement does not limit your ability to communicate, without notice to any System Company, with any government agencies or otherwise participate in any investigation or proceeding that may be conducted by any government agency.
(II)      Defend Trade Secrets Act Immunity Notice. Pursuant to the Defend Trade Secrets Act of 2016, non-compliance with the disclosure provisions of this Agreement shall not subject you to criminal or civil liability under any Federal or State trade secret law for the disclosure of a System Company trade secret: (A) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney in confidence solely for the purpose of reporting or investigating a suspected violation of law; (B) in a complaint or other document filed in a lawsuit or other proceeding, provided that any complaint or document containing the trade secret is filed under seal; or (C) to an attorney representing you in a lawsuit for retaliation by any System Company for reporting a suspected violation of law or to use the trade secret information in that court proceeding, provided that any document containing the trade secret is filed under seal and you do not disclose the trade secret, except pursuant to court order.
(i)      Enforcement . You hereby agree that the covenants set forth in this Section 9 are reasonable with respect to their scope, duration, and geographical area. You further agree and acknowledge that the restrictions contained in Section 9 do not and would not unreasonably impose limitations on your ability to earn a living. If any court or other tribunal determines that any term or provision of Section 9 is overbroad or otherwise invalid or unenforceable, you and the Company hereby agree that such court or tribunal shall have the power and obligation to narrow or otherwise reform the unenforceable term or provision, including to delete, replace, or add specific words or phrases, but only to the narrowest extent necessary to render the provision valid and enforceable (provided that in no event shall the length of any restrictive covenant or its scope be extended or expanded), and this Agreement shall be fully enforceable as so modified. Your agreement to the restrictions provided for in this Agreement and the Company’s agreement to grant the Award are mutually dependent consideration. Therefore, notwithstanding any other provision to the contrary in this Agreement, if (I) the enforceability of any material restriction applicable to you as provided for in this Section 9 is challenged and found unenforceable by a court or other tribunal or (II) you breach any of the provisions of Section 9, then the Company shall have the right to terminate this Agreement and, to the extent that you have exercised the Option in whole or in part, recover from you an amount equal to the aggregate Fair Market Value of the Common Stock subject to such exercise on the date of such exercise of the Option, less the aggregate exercise price thereof. This provision shall be construed as a return of consideration or ill-gotten gains due to the failure of your promises and consideration under the Agreement, and not as a liquidated damages clause. In addition, in the event of the Company’s termination of this Agreement, you shall immediately forfeit all un-exercised Options. You further hereby agree that, in the event of a breach by you of any of the provisions of Sections 9(a), (b), (c), (d), or (e), monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach or threatened breach, the Company or a System Company may, in addition to and without prejudice to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, without the requirement of posting a bond or proving actual damages and without having to demonstrate that money damages would be inadequate. You acknowledge that you have carefully read this Agreement and have given careful consideration to the restraints imposed upon you by this Agreement, and you are in full accord as to their necessity for the reasonable and proper protection of the Confidential Information of the System Companies and their relationships with customers, suppliers and other business partners.
(j)      For purposes of this Section 9, “Company” shall include all System Companies. You and the Company agree that each System Company is an intended third-party beneficiary of this Section 9, and further agree that each System Company is entitled to enforce the provisions of this Section 9 in accordance with its terms. Notwithstanding anything to the contrary in this Agreement, the terms of the restrictive covenants set forth in this Section 9 shall survive the termination of this Agreement and shall remain in full force according to their respective terms.





(k)      In the twelve (12) months following the termination of your employment with your last System Company employer, in the event you seek or obtain employment or another business affiliation with any person or entity other than the Company, you agree to notify the Company in writing, as far in advance as is reasonably practicable, but in no event less than two weeks prior to your proposed commencement of employment, of the details of such employment or business affiliation. You also agree to show these restrictive covenant provisions to any prospective employer, and you consent to any System Company showing these provisions to any third party believed by a System Company to be a prospective or actual employer of you, or a receiver of services from you, and to insisting on your compliance with these terms. Your obligations under this Section will expire on that date which is twelve months after the end of your employment with all System Companies (or, if later, the last date as of which you are scheduled to receive separation payments from any System Company pursuant to a severance plan or other agreement).

10.      Withholding Taxes . Your System Company employer shall have the right to require you to remit to it, or to withhold from other amounts payable to you hereunder, an amount sufficient to satisfy all federal, state and local tax withholding requirements. The Company shall use the “net shares method” to satisfy any tax withholding obligation, which means the Company shall reduce the number of shares otherwise payable to you upon exercise of the Option by the amount necessary to cover such obligation. Depending upon the state or states in which you reside or have resided, or perform or have performed services, in the current, prior and future tax years, you may be subject to income tax in one or more states or jurisdictions. You should consult your personal tax advisor to determine the states or jurisdictions in which you owe income tax and/or are required to file an individual income tax return, based on your particular circumstances. In no event shall the Company or any other System Company have any liability to you for your individual income tax liability, for withholding or failing to withhold taxes, or for remitting or failing to remit taxes with respect to your income.

11.      Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. The parties hereby submit to the exclusive jurisdiction of the state and federal courts of the State of Delaware, County of New Castle, for any dispute arising out of or relating to this Agreement or the breach thereof, or regarding the interpretation thereof, or to your System Company employment or to the termination of your System Company employment.
12.      Incorporation of Plan . The Plan is hereby incorporated by reference and made a part hereof, and the Option and this Agreement shall be subject to all terms and conditions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. Any capitalized term which is not defined in this Agreement shall have the meaning set forth in the Plan. If any terms of this Agreement are inconsistent with the terms of the Plan, the terms of the Plan shall govern, and this Agreement shall be deemed to be modified accordingly, unless the Plan allows for such modification of the Plan’s terms by this Agreement.

13.      Amendments . This Agreement may be amended or modified at any time only by an instrument in writing signed by the parties hereto. The Plan may be amended, modified or terminated only in accordance with its terms.

14.      Rights as a Shareholder . Neither you nor any of your successors in interest shall have any rights as a stockholder of the Company with respect to any shares of Common Stock subject to the Option until either (I) such shares are credited to a separate book entry account in your name by Computershare; or (II) the date of issuance of a stock certificate for such shares of Common Stock.

15.      Notices . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to you, to your last known address filed in the personnel records of the System Companies, and if to the Company, to the address set forth below, or thereafter to such other address as either party may have furnished to the other in writing in accordance herewith, except that any notice of change of address shall be effective only upon actual receipt thereof:





If to the Company:

By hand delivery or email to your supervisor, with a courtesy copy to:

Entergy Services, Inc.
Attention: Executive Vice-President & General Counsel
639 Loyola Avenue, 26th Floor
New Orleans, LA 70113-3125

16.      Agreement Not a Contract of Employment . Neither the Plan, the granting of the Option, this Agreement, the Grant Notice, nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that you have a right to continue as an employee of any System Company for any period of time or at any specific rate of compensation.

17.      Authority of the Committee . The Committee shall have full authority and discretion to interpret and construe the terms of the Plan, the Grant Notice, and this Agreement. The determination of the Committee as to any such matter of interpretation or construc-tion shall be final, binding and conclusive.

18.      Waivers . Any term or provision of this Agreement may only be waived by a System Company. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized Company officer. The failure of any System Company to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any System Company thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.



This document constitutes part of a prospectus covering Securities that have been registered under the Securities Act of 1933. The remaining documents constituting the prospectus are available on Entergy Corporation’s intranet under Our Company, Corp Services, Human Resources, myMoney, Compensation, Other-Links and Phone Numbers (https://entergy.sharepoint.com/sites/myhra/myBenefits/Pages/Compensation.aspx)





ENTERGYLOGOA44.GIF

 
Exhibit 10(a)47
2018-2020 Performance Unit Agreement (“Agreement”) - Under the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries
 
Pursuant to the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the “ Plan ”), you are eligible to participate at a target Achievement Level (as defined below) of that number of performance units (the “ Target Performance Units ”) (based upon an Achievement Level of 100%) set forth under the heading “Total Granted” on the Performance Unit Grant Notice to which this Agreement is attached (the “ Grant Notice ”) for the performance period commencing January 1, 2018 and ending December 31, 2020 (the “ Performance Period ”), subject to the terms of the Plan and to the following terms and conditions:

1.      Effective Date of Agreement, Acknowledgment and Acceptance of Performance Units: This Agreement is effective as of the Award Date set forth on the Grant Notice, contingent upon your acceptance of this Agreement in accordance with the terms of this Agreement and the Grant Notice. The effectiveness of this Agreement is subject to your electronically acknowledging and accepting this Agreement and all of its terms and conditions and the terms of the Plan in the manner and at the time set forth on the Grant Notice. If you do not timely acknowledge and accept this Agreement in accordance the Grant Notice, the Company shall be entitled to unilaterally cancel and render void this Agreement and the Grant Notice.

2.      Achievement Levels : The Personnel Committee of the Board of Directors (the “ Committee ”) shall determine the Achievement Level attained by Entergy Corporation (the “ Company ”) for the Performance Period (the “ Achievement Level ”) based (a) 50% on total shareholder return ranking over the Performance Period (“TSR Achievement Level”); and (b) 50% on [ insert Committee approved 2 nd metric ] (“[ 2 nd metric insert ]”), and with the payout result for each of the two performance measures averaged to arrive at the overall payout for the Performance Period. For these purposes, and subject to the terms of the Plan, the metrics shall be determined as follows:

i. The “ TSR Achievement Level ” shall be determined by comparing the Company’s “total shareholder return” for the Performance Period (“ Company TSR ”) to that of the peer group companies comprising the Philadelphia Electric Utilities Index (the “ Peer Group ”). For this purpose, subject to the terms of the Plan, “total shareholder return” shall be determined in accordance with Company administrative practice based on the changes in the stock price and dividends over the course of the Performance Period. The possible “TSR Achievement Levels” for the Performance Period shall be as follows: for bottom quartile performance (where Company TSR is in the bottom quartile of Peer Group TSR), no payout is earned; for third quartile performance (where Company TSR is in the third quartile of Peer Group TSR), payout is determined by interpolating between index median (100% Achievement Level) and the performance of the Peer Group company at the top of the fourth quartile, starting at 25% TSR Achievement Level; for second quartile performance (where Company TSR is in the second quartile of Peer Group TSR), payout is determined by interpolating between the performance of the Peer Group Company at the bottom of the top quartile (200% TSR Achievement Level) and index median (100% TSR Achievement Level); and for top quartile performance (where Company TSR is in the top quartile of Peer Group TSR), a maximum payout of 200% is earned.

ii. The “[ insert 2 nd metric as approved ]” shall be [ insert description ], with payout opportunities ranging from 0 to 200% of the target payout opportunity. There shall be no payout for “[ 2 nd metric ”] that is less than the




Minimum “[ 2 nd metric ],” a 25% payout opportunity for “[ 2nd metric ]” equal to the Minimum “[ 2nd metric ]”, a 100% payout opportunity for “[ 2nd metric ]” equal to the Target “[ 2nd metric ],” and a 200% payout opportunity for “[ 2nd metric ]” that is equal to or exceeds the Maximum “[ 2nd metric ],” with Minimum, Target and Maximum as set by the Committee at the beginning of the Performance Period, and with the payout opportunity greater than the minimum and less than the maximum determined by straight line interpolation between the minimum and the target and the target and the maximum, as the case may be.

3.      Performance Units Earned : The actual number of performance units awarded to you under this Agreement, if any (the “ Performance Units ”), shall be calculated by the Committee at the end of the Performance Period by multiplying the Target Performance Units by the percentage of the Company’s attained Achievement Level, determined as outlined above, in each case subject to your remaining a full-time employee of a System Company for the remainder of the Performance Period and at your current System Management Level (“ ML ”).

Except as otherwise provided under the Plan or this Agreement, you must comply with Section 10 of this Agreement and maintain your current ML and be a full-time employee of a System Company through the end of the Performance Period in order to earn the Performance Units. Except as provided below for an employee on an extended leave of absence bridge to retirement under an approved severance program under the Entergy System Severance Pay Plan No. 537 or the Entergy System Severance Pay Plan No. 538, if you are approved by your System Company employer for a leave of absence (whether paid or unpaid) for reasons other than Total Disability or are a continuous part-time regular System Company employee participating in the phased retirement program under the Entergy System Policies & Procedures Phased Retirement - Pre-Separation Policy (the “ Phased Retirement Program ”), you will continue to be treated as a full-time employee of a System Company while you are on such approved leave of absence for purposes of the Plan and this Agreement or during such participation in the Phased Retirement Program, as applicable. If you are on an extended leave of absence bridge to retirement under an approved severance program offered pursuant to Entergy System Severance Pay Plan No. 537 or Entergy System Severance Pay Plan No. 538, you will not be considered under the Plan or this Agreement to be a full-time employee during the extended leave of absence bridge period or a part-time System Company employee under the Phased Retirement Program during the extended leave of absence bridge period, and your System Company employment will be considered terminated for purposes of vesting in Awards under this Agreement as of the commencement of your extended leave of absence bridge period.

Subject to Section 5.6(e) of the Plan, if you have completed a minimum of twelve months of full-time employment at an eligible ML during the Performance Period and you Retire, you will be eligible for a prorated portion of the applicable Achievement Level of Performance Units, based on your full months of participation and your ML(s) during the Performance Period. Subject to Section 5.6(e) of the Plan, if you become Totally Disabled or die during the Performance Period, you (or your Beneficiary or heirs) will be eligible for a prorated portion of the applicable Achievement Level of Performance Units, based on your full months of full-time employment prior to your Total Disability or death and your eligible ML(s) during the Performance Period.

While you are only required to either remain employed through the end of the Performance Period or meet the requirements for a pro-rated payout, you are not entitled to receipt of, and do not vest in, any Performance Units and/or any dividends that have accrued on any Performance Units unless and until the Personnel Committee has certified the Achievement Level after the close of the Performance Period.

If your ML changes during the Performance Period, but you remain at an eligible ML, the number of Target Performance Units set forth in this Agreement shall be adjusted to reflect the number of full months during the Performance Period for which you were eligible hereunder at each ML and the number of Performance Units, if any, awarded to you will be prorated to reflect the number of full months you earned Performance Units at each ML. If any change to a new ML is effective on a date other than the first day of a calendar month, the number of Performance Units, if any, awarded to you with respect to the transition month in accordance with this paragraph will be determined based on your prior ML.

If you are demoted below an eligible ML during the Performance Period, but remain employed on a regular full-time basis by a System Company for the duration of the Performance Period, the number of Performance Units, if any, awarded to you will be prorated to reflect only the number of full months you earned Performance Units at an eligible




ML.

4.      Accelerated Vesting:

(a)      Notwithstanding the foregoing provisions of Section 3 to the contrary: in the event that you incur a CIC Separation from Service during the Performance Period, then the restrictive covenants set forth in Section 10 hereof, with the exception of those in Section 10(a), shall cease to apply and (i) if you are not a “covered employee” as defined in Section 162(m) of the Code, the Target Achievement Level applicable to the Performance Period in which such CIC Separation from Service occurred will be deemed to have been achieved; and (ii) if you are a “covered employee,” you shall forfeit your Target Performance Units award opportunity and instead shall be entitled to receive a single-sum payment pursuant to the Plan that is not based on any outstanding Performance Period. The single-sum payment will be calculated using the number of performance units you would have been entitled to receive under the Plan at the Target Achievement Level with respect to the most recent Performance Period that precedes and does not include your date of termination of System Company employment; provided that, if you did not participate in the  Plan for such Performance Period, the single-sum payment will be calculated using for such Performance Period the number of performance units you would have been entitled to receive under the Plan at the Target Achievement Level for such Performance Period as though you had participated in the Plan for such Performance Period at your ML as of the termination of your System Company employment. Any Performance Units or single-sum payment payable pursuant to this Section 4 shall be paid in cash, subject to applicable withholding, on your System Company employer’s first regular payroll date following the later of the applicable Change in Control or your CIC Separation from Service; provided that, if your CIC Separation from Service occurs within the Change in Control Period and prior to the applicable Change in Control, then (A) if the Performance Units or single-sum payment payable pursuant to this Section 4 would constitute “nonqualified deferred compensation” for purposes of Section 409A of the Code then there shall not be an acceleration of any payment pursuant to this Section 4 unless the applicable Change in Control constitutes a “change in control event” within the meaning of Section 409A of the Code and (B) if the applicable Change in Control does not constitute a “change in control event” within the meaning of Section 409A of the Code, then the Performance Units shall vest and be paid out at the same time and in the same form as if you had remained employed by a System Company through such vesting and payment dates, subject to the terms of Section 28 of the Plan.
(b)      If you incur a CIC Separation from Service following the occurrence of a Potential Change in Control and prior to the occurrence of a Change in Control then, notwithstanding anything herein to the contrary, this Agreement and your Target Performance Units award opportunity shall remain outstanding and unvested until, and shall be cancelled and forfeited upon the earlier of (i) the date that is ninety (90) days after the date of your CIC Separation from Service or (ii) the expiration of the Performance Period, unless prior to such time you have received an Award of Performance Units pursuant to this Agreement.
(c)      Notwithstanding anything herein to the contrary, the time and form of any payments to which you may be entitled pursuant to this Section 4 are subject to the requirements and limitations set forth in Section 28 of the Plan.

5.      Dividend Equivalents : If you are awarded Performance Units pursuant to this Agreement, you will also be awarded the dividend equivalents attributable to such awarded Performance Units for the time you were a Participant at the ML necessary to earn such Performance Units (“ Dividend Equivalents ”). The Dividend Equivalents with respect to each awarded Performance Unit will be equal to only the dividends paid with respect to a share of Common Stock for the period of your participation in the Plan at an eligible ML during the Performance Period.

6.      Settlement of Performance Units and Dividend Equivalents :

(a)      As soon as reasonably practicable following the date on which the Committee determines the number of Performance Units, if any, to be awarded to you under this Agreement and no later than March 15th following the end of the calendar year in which the Performance Units are no longer subject to a “substantial risk of forfeiture” within the meaning of Code Section 409A, the Company shall issue to you, after withholding all applicable income tax and employment tax amounts required to be withheld in connection with such payment: (i) one share of Common Stock for each Performance Unit so determined to be awarded, and (ii) an additional number of shares of Common Stock




determined by dividing the total Dividend Equivalents with respect to such awarded Performance Units by the closing share price of Common Stock on the last trading date of the Performance Period.

(b)      Shares of Common Stock (including any Dividend Equivalents that are settled in Common Stock) shall be credited by Computershare to a separate book entry account in your name, and such vested shares shall be free of all restrictions except any that may be imposed by law. Upon the crediting of vested Common Stock to a book entry account, you may treat the Common Stock in the same manner as all other Common Stock owned by you, subject to the provisions of Section 6(c) below. All ML 1-4 Participants are considered Restricted Employees under Entergy’s Insider Trading Policy and, as such, may trade in Entergy Corporation securities only during an open window period (and only if not in possession of material, non-public information). Generally, window periods begin on the second business day after the quarterly earnings release and run through the last business day of the second month of the quarter in which such quarterly earnings release is publicly reported. In addition, if you are a Restricted Employee, the Insider Trading Policy requires that you pre-clear all transactions involving Entergy securities with Entergy Corporation’s Office of the General Counsel. The customer service number for Computershare Shareowner Services is 1 (877) ETR (387)-6299, or they may be reached via the following Internet address https://www-us.computershare.com/EmployeePortal/.

(c)      Common Stock Ownership Guidelines . All ML 1-4 Participants must maintain the applicable Common Stock Ownership Target Level in the chart below, which is expressed as a multiple of your base salary and depends on your ML.

System Management Level
Common Stock
Ownership
Target Levels
ML 1
6 times base salary
ML 2
3 times base salary
ML 3
2 times base salary
ML 4
1 times base salary

These ownership multiples may be satisfied through any shares of Common Stock held by the ML 1-4 Participant, including those shares earned during this Performance Period, all restricted shares, shares held in tax-qualified 401(k) plans, etc. You must continue to retain the book entry shares issued to you pursuant to this Agreement until the earlier of (a) achieving and maintaining your multiple of base salary ownership threshold, or (b) your termination of full-time employment within all System Companies. Once you have achieved and maintain your multiple of base salary ownership threshold, you are no longer bound to hold the shares earned during this Performance Period in book entry. However, you are still subject to the trading restrictions and pre-clearance requirements in transacting in these shares described in Subsection 6(b) of this Agreement.

(d)      Withholding Taxes . Your System Company employer shall have the right to require you to remit to it, or to withhold from other amounts payable to you, an amount sufficient to satisfy all federal, state and local tax withholding requirements. The Company shall use the “net shares method” to satisfy any tax withholding obligation, which means the Company will reduce the number of earned shares otherwise payable to you by the amount necessary to cover such obligation. Depending upon the state or states in which you reside or have resided, or perform or have performed services, in the current, prior and future tax years, you may be subject to income tax in one or more states or jurisdictions. You should consult your personal tax advisor to determine the states or jurisdictions in which you owe income tax and/or are required to file an individual income tax return, based on your particular circumstances. In no event whatsoever shall the Company or any other System Company have any liability to you for your individual income tax liability, for withholding or failing to withhold taxes, or for remitting or failing to remit taxes with respect to your income.

(e)      No Fractional Shares . Any fractional share to be distributed shall be settled in cash and applied to satisfy tax withholding requirements. The Company will not pay out any fractional shares.





7.      Termination of Agreement : Except as otherwise provided herein or in the Plan, this Agreement (other than the restrictive covenants set forth in Section 10) and your Target Performance Units award opportunity shall terminate and be forfeited on the date on which your full-time System employment terminates.

8.      Performance Units Nontransferable : Your Target Performance Units award opportunity and any Performance Units awarded pursuant to this Agreement may not be sold, exchanged, pledged, transferred, assigned, or otherwise encumbered, hypothecated or disposed of by you (or your beneficiary) other than by will or laws of descent and distribution or pursuant to a qualified domestic relations order (as defined by the Code).

9.      Entergy Policies :

(a)      Hedging Policy . Pursuant to the Entergy Corporation Policy relating to Hedging, as adopted by the Company’s Board of Directors at its meeting held on December 3, 2010, and as in effect on the date hereof, officers, directors and employees are prohibited from entering into hedging or monetization transactions involving Common Stock so they continue to own Common Stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with the Company’s other shareholders. Participation in any hedging transaction with respect to Common Stock (including Target Performance Units or Performance Units) is prohibited.

(b)      Recoupment Policy; Dodd-Frank; Payment in Error . Pursuant to the Entergy Corporation Policy Relating to Recoupment of Certain Compensation, as adopted by the Company’s Board of Directors at its meeting held on December 3, 2010, and as in effect on the date hereof, the Company is allowed to seek reimbursement of certain incentive compensation (including Performance Units and shares of Common Stock issued in payment of Performance Units) from “executive officers” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, if the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the federal securities laws (other than corrections resulting from changes to accounting standards) or there is a material miscalculation of a performance measure relative to incentive compensation, regardless of the requirement to restate the financial statements; or the Board of Directors determines that an executive officer engaged in fraud resulting in either a restatement of the Company’s financial statements or a material miscalculation of a performance measure relative to incentive compensation whether or not the financial statements were restated.  In addition, the Performance Units (and shares of Common Stock issued in payment of Performance Units) are subject to any forfeiture and/or recoupment policy which the Company has adopted or may adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and implementing rules and regulations thereunder, or as may be required by applicable law. To the maximum extent permitted by applicable law, in the event that a payment is made to you (whether in cash, stock or other property) in error that exceeds the amount to which you are entitled pursuant to the terms of this Agreement or the Plan (such excess amount, an “ Excess Payment ”), you will repay to the Company, and the Company shall have the right to recoup from you such Excess Payment by notifying you in writing of the nature and amount of such Excess Payment together with (i) demand for direct repayment to the Company by you in the amount of such Excess Payment or (ii) reduction of any amount(s) owed to you by the Company or any other System Company by the amount of the Excess Payment.
10.      Confidentiality and Restrictive Covenants . In consideration of the grant to you of the Target Performance Units award opportunity set forth herein and any Performance Units awarded to you pursuant to this Agreement, you hereby agree to the following restrictive covenants:
(a)      Confidential Information . You acknowledge that the System Companies have unique methods and processes for the generation, transmission and distribution and sale of energy products, which give them a competitive advantage, including strategic and non-public plans for their products, geographic and customer markets, and for marketing, distributing and selling their products. You further acknowledge that you have held a position of confidence and trust with respect to the System Companies and that you have and will acquire additional detailed knowledge of the System Companies’ unique and confidential methods of doing business and plans for the future. You acknowledge that the System Companies expended and will continue to expend substantial amounts of time, money and effort to develop effective business and regulatory strategies, methodologies and technology. You also acknowledge that the System Companies have a compelling business interest in protecting the System Companies’ Confidential Information (as defined below) and that the System Companies would be seriously and irreparably damaged by the disclosure of




Confidential Information. You therefore agree that, during your employment or other service with any System Company and at all times thereafter, you will hold in a fiduciary capacity for the benefit of the System Companies and, other than as authorized in writing by the General Counsel of the Company or as required by law or in the proper performance of your duties and responsibilities, or as otherwise provided in this Section 10, you will not disclose, directly or indirectly, to any person or entity, or use, for any purpose other than the furtherance of your responsibilities to any System Company, any Confidential Information. For purposes of this Agreement, “ Confidential Information ” means information that provides the System Companies with a competitive advantage, is not generally known by persons outside the System Companies and could not easily be determined or learned by someone outside the System Companies, including without limitation, any and all information and knowledge, whether or not explicitly designated as confidential and whether or not reduced to writing, regarding (i) the System Companies’ utility business, including, without limitation, the generation, transmission, brokering, marketing, distribution, sale and delivery of electric power or generation capacity (through regulated utilities or otherwise), and their natural gas distribution business, (ii) the Entergy Wholesale Commodities business, including, without limitation, the ownership, development, management or operation of power plants and power generation facilities (including, without limitation, nuclear power plants), and the provision of operations and management services (including, without limitation, decommissioning services) with respect to power plants, and the sale of the electric power produced by the System Companies’ operating plants to wholesale customers, (iii) the System Companies’ proprietary methods and methodology, technical data, trade secrets, know-how, research and development information, product plans, customer lists, specific information relating to products, services and customers or prospective customers (including, but not limited to, customers or prospective customers of any System Company with whom you became or become acquainted during your relationship with the System Company), books and records of any System Company, corporate, regulatory, customer and strategic relationships, suppliers, markets, computer software, computer software development, inventions, processes, formulae, technology, designs, drawings, technical information, source codes, engineering information, hardware configuration information, and matters of a business nature such as information regarding marketing, costs, pricing, finances, financial models and projections, billings, new or existing business or economic development plans, initiatives, and opportunities, or any other similar business information made available to you in connection with your relationship with any System Company and (iv) any attorney-client privileged information of a System Company. Confidential Information shall also include non-public information concerning any director, officer, employee, shareholder, or partner of any System Company. You agree that your obligation not to disclose or use Confidential Information, and your obligation, detailed below, to return and, upon your termination of employment with all System Companies, not to retain materials and tangible property described in this Section shall also extend to such types of information, materials and tangible property of customers of and suppliers to the System Companies and to other third parties, in each case who may have disclosed or entrusted the same to you or to any System Company during your employment with any System Company.
(b)      Non-Competition . For one (1) year following the termination for any reason of your employment by or service with your last System Company employer (the “ Non-Compete Period ”), you will not engage in Competing Employment. For purposes of this Section, “ Competing Employment ” means working for, providing services to or otherwise directly or indirectly assisting (whether or not for compensation) any person, entity or business which directly or indirectly competes with any part of the System Company business, and such employment or services involves products, services and business activities that are the same as or similar to those you provided to a System Company, or as to which you had access to Confidential Information, in the two years preceding your termination of employment or service with all System Companies. You agree that it is reasonable for the restriction contained in this paragraph to apply in each and every county, province, state, city, parish or other political subdivision or territory of the United States in which any System Company engages in any business activity, or otherwise distributes, licenses or sells its products or services, including, without limitation, Arkansas, Connecticut, District of Columbia, Louisiana, Massachusetts, Michigan, Mississippi, Nebraska, New York, Texas, and Vermont and any other state in which any System Company engages in business at any time and, with respect to the State of Louisiana, means the following Parishes: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, La Salle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Point Coupee, Rapides, Red River, Richland, Sabine, Saint Bernard, St. Charles, St. Helena, Saint James, Saint John the Baptist, Saint Landry, Saint Martin, Saint Mary, Saint Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana and Winn (the “ Restricted Territory ”).




(c)      Non-Solicitation . You agree that, while you are employed by any System Company and during the Non-Compete Period (or, if later, the last day you are scheduled to receive cash severance payments from your System Company employer pursuant to any severance plan or other agreement), except in the good faith performance of your duties to the System Companies, you shall not, other than as authorized in writing by the General Counsel of the Company: (i) directly or indirectly advise, solicit, induce, hire, encourage or assist in the hiring process, or advise, cause, encourage or assist others to solicit, induce or hire, any employee or consultant of any System Company or any individual who was an employee or consultant of any System Company at any time during the six-month period immediately prior to such action or (ii) induce, encourage, persuade or cause others to induce, encourage, or persuade any employee or consultant of any System Company to cease providing services to any System Company or in any way to modify such employee’s or consultant’s relationship with any System Company or (iii) within the Restricted Territory, directly or indirectly solicit the trade, business or patronage of any clients, customers or vendors or prospective clients, customers or vendors of any System Company to provide competing products or services or advise, or assist such clients, customers or vendors or prospective clients, customers or vendors to in any way modify their relationship with any System Company. The foregoing non-solicitation (A) shall not be violated by general advertising not targeted at the forgoing persons or entities; (B) shall not apply to solicitation of persons involuntarily terminated from System Company employment; and (C) shall only apply to persons or entities (x) who reported directly or indirectly to you; (y) with whom you had material contact while at a System Company; or (z) about whom or which you possessed (1) information regarding quality of performance while they were employed by a System Company, which information you would not otherwise have except for the position you held with a System Company, or (2) Confidential Information .
(d)      Non-Disparagement . You agree that, to the fullest extent permitted by applicable law, you will not at any time (whether during or after your employment or service with any System Company), other than in the proper performance of your duties, publish or communicate to any person or entity any “Disparaging” (as defined below) remarks, comments or statements concerning any System Company or any of their respective directors, officers, shareholders, employees, agents, attorneys, successors and assigns. “ Disparaging ” remarks, comments or statements are those that are intended to, or could be construed in a manner so as to, impugn, discredit, injure or impair the business, reputation, character, honesty, integrity, judgment, morality or business acumen or abilities of the individual or entity being disparaged.
(e)      System Company Property . All tangible materials, equipment, devices, documents, copies of documents, data compilations (in whatever form), software programs, and electronically created or stored materials that you receive or create in the course of employment with a System Company are and shall remain the property of the System Company and you shall immediately return (and/or cooperate in the supervised deletion of) such property to your System Company employer upon the termination of your employment, for whatever reason. The obligation to return property and documents extends to anything received or made during and as a result of employment by a System Company, regardless of whether it was received from a System Company or a third party, such as an actual or potential vendor or customer, and regardless of whether a document contains Confidential Information. The only documents not subject to the obligation to return are documents directly relating to your compensation and benefits, such as your pay stubs and benefit plan information.
(f)      Violation of the Restrictive Covenant Section . In the event that you violate any provision of this Section 10, the time periods set forth in those paragraphs shall be extended for the period of time you remain in violation of the provisions. The provisions of Section 10(a) - (e) hereof are, and shall be construed as, independent covenants, and no claimed or actual breach of any contractual or legal duty by any System Company shall excuse or terminate your obligations hereunder or preclude any System Company from obtaining injunctive relief for your violation, or threatened violation, of any of those provisions. You also agree to indemnify and hold the System Companies harmless from any and all losses (including, but not limited to, reasonable attorney’s fees and other expenses incurred to enforce this Agreement) suffered by any System Company as a result of any violation or threatened violation of any of your representations, warranties, covenants or undertakings set forth in this Agreement (in addition to any other remedies available to the System Companies set forth in Section 10(i) below), provided that a System Company is found to be the prevailing party in any such action.
(g)      Exclusions . Notwithstanding anything else in this Section 10 or in this Agreement to the contrary:




(i)      The restrictive covenants in this Section 10 are not intended to restrict you from cooperating with any investigation or proceeding initiated by the Nuclear Regulatory Commission (“ NRC ”) or any other federal or state regulatory agency. Further, you may make disclosure (A) to exercise your rights as a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission Rule 21F-17(a), or any other federal or state law providing whistleblower rights; (B) to the extent necessary when providing safety-related or other information to the NRC on matters within the NRC’s regulatory jurisdiction; (C) when participating in “protected activities,” as defined in Section 211 of the Energy Reorganization Act of 1974 and in C.F.R. Part 50.7; (D) when engaging in activities protected by the National Labor Relations Act or any similar federal or state law; or (E) when required to do so by a court of law, by any governmental agency or administrative or legislative body with jurisdiction to order you to divulge, disclose or make accessible such information. With the exception of Confidential Information subject to the attorney-client privilege, you shall have no obligation to seek prior approval of any System Company or to inform any System Company of such disclosure. This Agreement does not limit your ability to communicate, without notice to any System Company, with any government agencies or otherwise participate in any investigation or proceeding that may be conducted by any government agency.
(ii)      Defend Trade Secrets Act Immunity Notice. Pursuant to the Defend Trade Secrets Act of 2016, non-compliance with the disclosure provisions of this Agreement shall not subject you to criminal or civil liability under any Federal or State trade secret law for the disclosure of a System Company trade secret: (A) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney in confidence solely for the purpose of reporting or investigating a suspected violation of law; (B) in a complaint or other document filed in a lawsuit or other proceeding, provided that any complaint or document containing the trade secret is filed under seal; or (C) to an attorney representing you in a lawsuit for retaliation by any System Company for reporting a suspected violation of law or to use the trade secret information in that court proceeding, provided that any document containing the trade secret is filed under seal and you do not disclose the trade secret, except pursuant to court order .
(h)      Restrictive Covenants Contained in Other Agreements . Notwithstanding any provision contained herein to the contrary, to the extent that you are or become subject to any other agreement that contains restrictive covenants different from the restrictive covenants contained in this Agreement, the restrictive covenants set forth in such other agreement shall supplement, and shall not replace, the restrictive covenants herein.
(i)      Enforcement . You hereby agree that the covenants set forth in this Section 10 are reasonable with respect to their scope, duration, and geographical area. You further agree and acknowledge that the restrictions contained in Section 10 do not and would not unreasonably impose limitations on your ability to earn a living. If any court or other tribunal determines that any term or provision of Section 10 is overbroad or otherwise invalid or unenforceable, you and the Company hereby agree that such court or tribunal shall have the power and obligation to narrow or otherwise reform the unenforceable term or provision, including to delete, replace, or add specific words or phrases, but only to the narrowest extent necessary to render the provision valid and enforceable (provided that in no event shall the length of any restrictive covenant or its scope be extended or expanded), and this Agreement shall be fully enforceable as so modified. Your agreement to the restrictions provided for in this Agreement and the Company’s agreement to grant the Award are mutually dependent consideration. Therefore, notwithstanding any other provision to the contrary in this Agreement, if (i) the enforceability of any material restriction applicable to you as provided for in this Section 10 is challenged and found unenforceable by a court or other tribunal or (ii) you breach any of the provisions of Section 10, then the Company shall have the right to terminate this Agreement and recover from you all shares of Common Stock paid to you pursuant to this Agreement and if you have sold, transferred, or otherwise disposed of any shares of Common Stock paid to you pursuant to this Agreement, an amount equal to the aggregate Fair Market Value of such shares on the date such shares were paid to you pursuant to this Agreement. This provision shall be construed as a return of consideration or ill-gotten gains due to the failure of your promises and consideration under the Agreement, and not as a liquidated damages clause. In addition, in the event of the Company’s termination of this Agreement, you shall immediately forfeit all unvested Target Performance Units and your Target Performance Units award opportunity under this Agreement. You further hereby agree that, in the event of a breach by you of any of the provisions of Sections 10(a), (b), (c), (d), or (e), monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach or threatened breach, the Company or a System Company may, in




addition to and without prejudice to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, without the requirement of posting a bond or proving actual damages and without having to demonstrate that money damages would be inadequate. You acknowledge that you have carefully read this Agreement and have given careful consideration to the restraints imposed upon you by this Agreement, and you are in full accord as to their necessity for the reasonable and proper protection of the Confidential Information of the System Companies and their relationships with customers, suppliers and other business partners.
(j)      For purposes of this Section 10, “Company” shall include all System Companies. You and the Company agree that each System Company is an intended third-party beneficiary of this Section 10, and further agree that each System Company is entitled to enforce the provisions of this Section 10 in accordance with its terms. Notwithstanding anything to the contrary in this Agreement, the terms of the restrictive covenants set forth in this Section 10 shall survive the termination of this Agreement and shall remain in full force according to their respective terms.
(k)      In the twelve (12) months following the termination of your employment with your last System Company employer, in the event you seek or obtain employment or another business affiliation with any person or entity other than the Company, you agree to notify the Company in writing, as far in advance as is reasonably practicable, but in no event less than two weeks prior to your proposed commencement of employment, of the details of such employment or business affiliation. You also agree to show these restrictive covenant provisions to any prospective employer, and you consent to any System Company showing these provisions to any third party believed by a System Company to be a prospective or actual employer of you, or a receiver of services from you, and to insisting on your compliance with these terms. Your obligations under this Section will expire on that date which is twelve months after the end of your employment with all System Companies (or, if later, the last date as of which you are scheduled to receive separation payments from any System Company pursuant to a severance plan or other agreement).

11.      Governing Law : This Agreement shall be governed by and construed according to the laws of the State of Delaware. The parties hereby submit to the exclusive jurisdiction of the state and federal courts of the State of Delaware, County of New Castle, for any dispute arising out of or relating to this Agreement or the breach thereof, or regarding the interpretation thereof, or to your System Company employment or to the termination of your System Company employment.
    
12.      Incorporation of Plan : The Plan is hereby incorporated by reference and made a part hereof, and the Target Performance Units, your Target Performance Units award opportunity under this Agreement, any Performance Units (and any Dividend Equivalents) awarded pursuant to this Agreement, and this Agreement shall be subject to all terms and conditions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time. Any capitalized term that is not defined in this Agreement shall have the meaning set forth in the Plan. In the event of any conflict between the terms of this Agreement and the Plan, the terms of the Plan shall govern, and this Agreement shall be deemed to be modified accordingly, unless the Plan allows for such modification of the Plan’s terms by this Agreement.

13.      Amendments : This Agreement may be amended or modified at any time only by an instrument in writing signed by the parties hereto. The Plan may be amended, modified or terminated only in accordance with its terms.

14.      Rights as a Shareholder : Neither you nor any of your successors in interest shall have any rights as a stockholder of the Company with respect to any Target Performance Units, your Target Performance Units award opportunity under this Agreement, Performance Units awarded pursuant to this Agreement, or Dividend Equivalents.

15.      Notices . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to you, to your last known address filed in the personnel records of the System Companies, and if to the Company, to the address set forth below, or thereafter to such other




address as either party may have furnished to the other in writing in accordance herewith, except that any notice of change of address shall be effective only upon actual receipt thereof:

If to the Company:

By hand delivery or email to your supervisor, with a courtesy copy to:

Entergy Services, Inc.
Attention: Executive Vice-President & General Counsel
639 Loyola Avenue, 26th Floor
New Orleans, LA 70113-3125

16.      Agreement Not a Contract of Employment : Neither the Plan, the granting of the Target Performance Units and/or Dividend Equivalents, the Grant Notice, this Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that you have a right to continue as an employee of any System Company for any period of time or at any specific rate of compensation.

17.      Authority of the Committee: The Committee shall have full authority and discretion to interpret and construe the terms of the Plan, the Grant Notice, and this Agreement. The determination of the Committee as to any such matter of interpretation or construction shall be final, binding and conclusive.

18.      Compliance with Code Section 409A Limitations : Notwithstanding any provision to the contrary, all provisions of the Grant Notice and this Agreement shall be construed, administered and interpreted to comply with or be exempt from Code Section 409A, and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Code Section 409A or final regulations issued thereunder. Specifically, the terms “termination” and “termination of employment” shall be applied in a manner consistent with the definition of “separation from service” within the meaning of Code Section 409A. A right of any System Company, if any, to offset or otherwise reduce any sums that may be due or become payable by any System Company to you by any overpayment or indebtedness of yours shall be subject to limitations imposed by Code Section 409A. For purposes of the limitations on nonqualified deferred compensation under Code Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts. Amounts payable under this Agreement shall be excludible from the requirements of Code Section 409A, to the maximum possible extent, either as (i) short-term deferral amounts (e.g., amounts payable no later than the 15th day of the third month following the end of the taxable year of Grantee’s System Company employer in which such Performance Units are no longer subject to a substantial risk of forfeiture), or (ii) under the exclusion for involuntary separation pay provided in Treasury Regulations Section 1.409A-1(b)(9)(iii). To the extent that deferred compensation subject to the requirements of Code Section 409A becomes payable under this Agreement to Grantee at a time when Grantee is a “specified employee” (within the meaning of Code Section 409A), any such payments shall be delayed by six months to the extent necessary to comply with the requirements of Code Section 409A (a)(2)(B).

19.      Waivers . Any term or provision of this Agreement may only be waived by a System Company. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized Company officer. The failure of any System Company to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any System Company thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.
This document constitutes part of a prospectus covering Securities that have been registered under the Securities Act of 1933. The remaining documents constituting the prospectus are available on Entergy Corporation’s intranet under Our Company, Corp Services, Human Resources, myMoney, Compensation, Other-Links and Phone Numbers (https://entergy.sharepoint.com/sites/myhra/myBenefits/Pages/Compensation.aspx)





ENTERGYLOGOA44.GIF
R
Exhibit 10(a)48
Restricted Stock Agreement (“ Agreement ”) - Under the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries

The Personnel Committee of the Board of Directors (“ Committee ”) of Entergy Corporation (the “ Company ”) has agreed to grant you, pursuant to the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the “ Plan ”), that number of shares of Restricted Stock of Entergy Corporation (the “ Restricted Shares ”) set forth on the Restricted Stock Grant Notice to which this Agreement is attached (the “ Grant Notice ”), subject to the terms and conditions of this Agreement and the Plan.

1.         Effective Date of Restricted Shares Grant, Acknowledgment and Acceptance of Restricted Stock Grant .  This grant of Restricted Shares is effective as of the Award Date set forth on the Grant Notice (“ Grant Date ”), contingent upon your acceptance of the Restricted Shares in accordance with the terms of this Agreement and the Grant Notice. The effectiveness of this Agreement is subject to your electronically acknowledging and accepting this Agreement and all of its terms and conditions and the terms of the Plan in the manner and at the time set forth on the Grant Notice. If you do not timely acknowledge and accept this Agreement in accordance the Grant Notice, the Company shall be entitled to unilaterally cancel and render void this Agreement and the Grant Notice.

2.         Restricted Period . 
 
(a)        Except as otherwise provided in Subsection 2(b) to the contrary, and except as provided in Section 13 of the Plan, the following vesting provisions shall apply during the thirty-six (36)-months immediately following the Grant Date (the “ Restricted Period ”):
 
(i)         Restrictions shall lift on one-third (1/3 rd ) of the total Restricted Shares subject to this Agreement on each of the first three (3) anniversaries of the Grant Date (each such anniversary, a “ Vesting Date ”), provided you (A) are and remain a continuous full-time regular employee of a System Company at System Management Level 1 through 6 through each such anniversary date or are or later become and then remain a continuous part-time regular System Company employee participating in the phased retirement program under the Entergy System Policies & Procedures Phased Retirement - Pre-Separation Policy (the “ Phased Retirement Program ”) through each such anniversary date, and (B) comply with Section 12 of this Agreement.
 
(ii)        Unless solely attributable to your becoming a participant in the Phased Retirement Program, upon your termination of continuous full-time regular employment to become a part-time employee, or upon your demotion to a position below System Management Level 6, you shall forfeit all Restricted Shares on which restrictions have not already lifted in accordance with Subsection 2(a)(i) at such time.
 
(iii)       Except as set forth in Section 2(b) below, upon your Retirement or termination from System Company employment for any reason or no reason (including with or without Cause), you shall forfeit all Restricted Shares on which restrictions have not already lifted in accordance with Subsection 2(a)(i) at such time.
 
(b)        Notwithstanding the foregoing provisions of Subsection 2(a) to the contrary and subject in each case to Section 5.6(e) of the Plan, the following provisions shall govern to the extent applicable: 




 
(i)      If, during the Restricted Period, you die or become Totally Disabled while actively employed as an eligible System Company employee in accordance with the requirements set forth in Subsection 2(a)(i)(A) and you have continuously satisfied the vesting criteria of Section 2(a)(i) through the date of your death or Total Disability, then any then-remaining restrictions immediately shall lift on all of the then-outstanding Restricted Shares on which restrictions have not already lifted (as well as dividends declared on the Restricted Shares).
 
(ii)      If you are demoted to a position below System Management Level 6 and you thereafter remain a regular, full-time System Company employee until the immediately following Vesting Date, then you shall remain eligible to vest, upon such Vesting Date, in a pro-rated portion of the Restricted Shares on which restrictions were otherwise scheduled to lift on such immediately following Vesting Date (as well as dividends declared on such pro-rated portion of the Restricted Shares), which pro-rated vested portion shall be determined by multiplying (A) a fraction, the numerator of which shall be the number of days between (x) the immediately preceding Vesting Date or, if no Vesting Date has yet occurred, the Grant Date and (y) the date of your demotion, and the denominator of which shall be 365 days, times (B) that number of Restricted Shares on which restrictions were otherwise scheduled to lift on the immediately following Vesting Date.
 
(iii)      Except as provided below for an employee on an extended leave of absence bridge to Retirement under an approved severance program under the Entergy System Severance Pay Plan No. 537 or the Entergy System Severance Pay Plan No. 538, if you are on a leave of absence (whether paid or unpaid) approved by your System Company employer for reasons other than Total Disability or are a continuous part-time regular System Company employee participating in the Phased Retirement Program, you will be treated, solely for purposes of the Plan and this Agreement, as continuing to satisfy the requirements of Subsection 2(a)(i) while on such approved leave of absence or during such participation in the Phased Retirement Program, as applicable. If your System Company employment terminates during such approved leave of absence, the remaining provisions of this Section 2 shall apply as if you were actively employed by your System Company employer immediately prior to such termination event. If you are on an extended leave of absence bridge to Retirement under an approved severance program under the Entergy System Severance Plan Pay No. 537 or the Entergy System Severance Pay Plan No. 538, you will not be considered under the Plan or this Agreement to be a full-time employee or part-time System Company employee under the Phased Retirement Program during the extended leave of absence bridge period, and your System Company employment will be considered terminated for purposes of vesting in the Restricted Shares under this Agreement as of the commencement of your extended leave of absence bridge period.
(iv)      If you incur a CIC Separation from Service, then all restrictions imposed hereunder on the Restricted Shares (as well as dividends declared on the Restricted Shares), with the exception of those pursuant to Section 12(a), shall lift effective as of the later of the date your System Company employment is terminated or the consummation of the applicable Change in Control. If you incur a CIC Separation from Service following the occurrence of a Potential Change in Control and prior to the occurrence of a Change in Control then, notwithstanding anything herein to the contrary, the Restricted Shares on which restrictions have not already lifted shall remain outstanding and unvested and shall be cancelled and forfeited, if the restrictions have not lifted on such Restricted Shares, upon the earlier of (A) the date that is ninety (90) days after the date of your CIC Separation from Service or (B) the end of the original term of the Restricted Shares.
 
3.         Share Issuance .  During the Restricted Period, the Restricted Shares shall be held in an account with Computershare, as custodian, in book entry form and with the restrictions noted.  You can track your Restricted Shares account: by contacting Computershare Shareowner Services at 1 (877) ETR (387)-6299, or via the Internet address https://www-us.computershare.com/EmployeePortal/.
 
4.         Lifting of Restrictions .  Upon the satisfaction of all requirements for restrictions to lift on all or a portion of the Restricted Shares, the restrictions on such Restricted Shares shall lift and such vested shares of Common Stock (including any dividends on the such Restricted Shares that were reinvested in Common Stock) shall be credited by Computershare to a separate book entry account in your name, and such vested shares shall be free of all restrictions except any that may be imposed by law.  Upon the crediting of Common Stock in respect of Restricted




Shares upon which restrictions have lifted to a book entry account, participants may treat the Common Stock in the same manner as all other Common Stock owned by the participant.  All ML 1-4 Participants are considered “Restricted Employees” under Entergy’s Insider Trading Policy and, as such, may trade in Entergy Corporation securities only during an open window period (and only if not in possession of material, non-public information). Generally, window periods begin on the second business day after the quarterly earnings release and run through the last business day of the second month of the quarter in which such quarterly earnings release is publicly reported. In addition, if you are a Restricted Employee, the Insider Trading Policy requires that you pre-clear all transactions involving Entergy securities with Entergy Corporation’s Office of the General Counsel.

5.         Common Stock Ownership Guidelines .  If you are a System Management Level (“ ML ”) 1-4 Participant, you must maintain the applicable Target Stock Ownership Level in the chart below, which is expressed as a multiple of your base salary and dependent on your ML.
 
System Management Level
Common Stock
Ownership
Target Levels
ML1
6 times base salary
ML2
3 times base salary
ML3
2 times base salary
ML4
1 times base salary
            
These ownership multiples may be satisfied through any shares of Common Stock held by the ML 1-4 Participant, including Restricted Shares on which restrictions have not yet lifted, shares held in tax-qualified 401(k) plans, etc.  Until you achieve your multiple of base salary ownership position, upon restrictions lifting on your Restricted Shares, you must continue to retain the book entry shares until the earlier of (a) achieving and maintaining your multiple of base salary ownership threshold, or (b) your termination of full-time employment with all System Companies.  Once you have achieved and maintain your multiple of base salary ownership threshold, you are no longer bound to hold the Restricted Shares converted to book entry shares upon restrictions lifting.  However, you are still subject to the trading restrictions and pre-clearance requirements in transacting in these shares described in Section 4 of this Agreement.
 
6.        Withholding Taxes .  Your System Company employer shall have the right to require you to remit to it, or to withhold from other amounts payable to you, an amount sufficient to satisfy all federal, state and local tax withholding requirements.  The Company shall use the “net shares method” to satisfy any tax withholding obligation, which means the Company shall reduce the number of shares of Common Stock otherwise payable to you in respect of Restricted Shares upon which the restrictions have lifted by the number of shares necessary to cover such obligation. Depending upon the state or states in which you reside or have resided, or perform or have performed services, in the current, prior and future tax years, you may be subject to income tax in one or more states or jurisdictions. You should consult your personal tax advisor to determine the states or jurisdictions in which you owe income tax and/or are required to file an individual income tax return, based on your particular circumstances. In no event shall the Company or any other System Company have any liability to you for your individual income tax liability, for withholding or failing to withhold taxes, or for remitting or failing to remit taxes with respect to your income .
 
7.         No Fractional Shares .    Any fractional shares to be distributed shall be settled in cash and applied to satisfy tax withholding requirements. The Company will not pay out any fractional shares.
 
8.         Shareholder Rights .  Subject to the terms and conditions set forth herein and in the Plan, as the Grantee of the Restricted Shares, you shall have all rights as a Company shareholder, including, but not limited to, voting rights, the right to receive vested dividends and the right to participate in any capital adjustment applicable to all holders of Common Stock.  Notwithstanding the preceding sentence, any and all dividends paid with respect to the Restricted Shares shall be subject to the same restrictions on transfer and risks of forfeiture as applicable to the underlying Restricted Shares and shall also be subject to any other provisions or reinvestment requirements




(including, without limitation, the reinvestment of dividends in the form of Common Stock) as the Committee may, in its discretion, determine.  You shall have the same rights and privileges, and be subject to the same restrictions, with respect to any additional or substitute shares received pursuant to Plan Section 4.5.
 
9.         No Code Section 83(b) Election . This Award of Restricted Shares is conditioned upon you refraining from making an election with respect to the Award under Section 83(b) of the Code.
  
10.        Restricted Shares Nontransferable .  None of the Restricted Shares shall be sold, exchanged, pledged, transferred, assigned, or otherwise encumbered, hypothecated or disposed of by you (or your designated beneficiary) other than by (a) will or laws of descent and distribution or (b) a qualified domestic relations order (as defined by the Code).
 
11.       Entergy Policies .
 
(a)  Hedging Policy .  Pursuant to the Entergy Corporation Policy relating to Hedging, as adopted by the Company’s Board of Directors at its meeting held on December 3, 2010, and as in effect on the date hereof, officers, directors and employees are prohibited from entering into hedging or monetization transactions involving Common Stock so they continue to own Common Stock with the full risks and rewards of ownership, thereby ensuring continued alignment of their objectives with the Company’s other shareholders.  Participation in any hedging transaction with respect to Common Stock (including Restricted Shares) is prohibited.

(b)  Recoupment Policy; Dodd-Frank; Payment in Error .  Pursuant to the Entergy Corporation Policy Relating to Recoupment of Certain Compensation, as adopted by the Company’s Board of Directors at its meeting held on December 3, 2010, and as in effect on the date hereof, the Company is allowed to seek reimbursement of certain incentive compensation (including Restricted Shares) from “executive officers” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended, if the Company is required to restate its financial statements due to material noncompliance with any financial reporting requirement under the federal securities laws (other than corrections resulting from changes to accounting standards); or there is a material miscalculation of a performance measure relative to incentive compensation, regardless of the requirement to restate the financial statements; or the Board of Directors determines that an executive officer engaged in fraud resulting in either a restatement of the Company’s financial statements or a material miscalculation of a performance measure relative to incentive compensation whether or not the financial statements were restated.  In addition, the Restricted Shares are subject to any forfeiture and/or recoupment policy which the Company has adopted or may adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and implementing rules and regulations thereunder, or as may be required by applicable law. To the maximum extent permitted by applicable law, in the event that a payment is made to you (whether in cash, stock or other property) in error that exceeds the amount to which you are entitled pursuant to the terms of this Agreement or the Plan (such excess amount, an “ Excess Payment ”), you will repay to the Company, and the Company shall have the right to recoup from you such Excess Payment by notifying you in writing of the nature and amount of such Excess Payment together with (i) demand for direct repayment to the Company by you in the amount of such Excess Payment or (ii) reduction of any amount(s) owed to you by the Company or any other System Company by the amount of the Excess Payment.
12.        Confidentiality and Restrictive Covenants . In consideration of the grant to you of the Restricted Shares set forth herein, you hereby agree to the following restrictive covenants:
(a)      Confidential Information . You acknowledge that the System Companies have unique methods and processes for the generation, transmission and distribution and sale of energy products, which give them a competitive advantage, including strategic and non-public plans for their products, geographic and customer markets, and for marketing, distributing and selling their products. You further acknowledge that you have held a position of confidence and trust with respect to the System Companies and that you have and will acquire additional detailed knowledge of the System Companies’ unique and confidential methods of doing business and plans for the future. You acknowledge that the System Companies expended and will continue to expend substantial amounts of time, money and effort to develop effective business and regulatory strategies, methodologies and technology. You also acknowledge




that the System Companies have a compelling business interest in protecting the System Companies’ Confidential Information (as defined below) and that the System Companies would be seriously and irreparably damaged by the disclosure of Confidential Information. You therefore agree that, during your employment or other service with any System Company and at all times thereafter, you will hold in a fiduciary capacity for the benefit of the System Companies and, other than as authorized in writing by the General Counsel of the Company or as required by law or in the proper performance of your duties and responsibilities, or as otherwise provided in this Section 12, you will not disclose, directly or indirectly, to any person or entity, or use, for any purpose other than the furtherance of your responsibilities to any System Company, any Confidential Information. For purposes of this Agreement, “ Confidential Information ” means information that provides the System Companies with a competitive advantage, is not generally known by persons outside the System Companies and could not easily be determined or learned by someone outside the System Companies, including without limitation, any and all information and knowledge, whether or not explicitly designated as confidential and whether or not reduced to writing, regarding (i) the System Companies’ utility business, including, without limitation, the generation, transmission, brokering, marketing, distribution, sale and delivery of electric power or generation capacity (through regulated utilities or otherwise), and their natural gas distribution business, (ii) the Entergy Wholesale Commodities business, including, without limitation, the ownership, development, management or operation of power plants and power generation facilities (including, without limitation, nuclear power plants), and the provision of operations and management services (including, without limitation, decommissioning services) with respect to power plants, and the sale of the electric power produced by the System Companies’ operating plants to wholesale customers, (iii) the System Companies’ proprietary methods and methodology, technical data, trade secrets, know-how, research and development information, product plans, customer lists, specific information relating to products, services and customers or prospective customers (including, but not limited to, customers or prospective customers of any System Company with whom you became or become acquainted during your relationship with the System Company), books and records of any System Company, corporate, regulatory, customer and strategic relationships, suppliers, markets, computer software, computer software development, inventions, processes, formulae, technology, designs, drawings, technical information, source codes, engineering information, hardware configuration information, and matters of a business nature such as information regarding marketing, costs, pricing, finances, financial models and projections, billings, new or existing business or economic development plans, initiatives, and opportunities, or any other similar business information made available to you in connection with your relationship with any System Company and (iv) any attorney-client privileged information of a System Company. Confidential Information shall also include non-public information concerning any director, officer, employee, shareholder, or partner of any System Company. You agree that your obligation not to disclose or use Confidential Information, and your obligation, detailed below, to return and, upon your termination of employment with all System Companies, not to retain materials and tangible property described in this Section shall also extend to such types of information, materials and tangible property of customers of and suppliers to the System Companies and to other third parties, in each case who may have disclosed or entrusted the same to you or any System Company during your employment with any System Company.
(b)      Non-Competition . You agree that (i) at all times during the period of your employment or service with any System Company employer, and (ii) if you are an ML 1-4 Participant immediately prior to your Separation Date then for one (1) year following the termination for any reason of your employment by or service with your last System Company employer ((i) and (ii) collectively, as applicable, the “ Non-Compete Period ”), you will not engage in Competing Employment. For purposes of this Section, “ Competing Employment ” means working for, providing services to or otherwise directly or indirectly assisting (whether or not for compensation) any person, entity or business which directly or indirectly competes with any part of the System Company business, and such employment or services involves products, services and business activities that are the same as or similar to those you provided to a System Company, or as to which you had access to Confidential Information, in the two years preceding your termination of employment or service with all System Companies. You agree that it is reasonable for the restriction contained in this paragraph to apply in each and every county, province, state, city, parish or other political subdivision or territory of the United States in which any System Company engages in any business activity, or otherwise distributes, licenses or sells its products or services, including, without limitation, Arkansas, Connecticut, District of Columbia, Louisiana, Massachusetts, Michigan, Mississippi, Nebraska, New York, Texas, and Vermont and any other state in which any System Company engages in business at any time and, with respect to the State of Louisiana, means the following Parishes: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Baton Rouge, East Carroll, East




Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, La Salle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Point Coupee, Rapides, Red River, Richland, Sabine, Saint Bernard, St. Charles, St. Helena, Saint James, Saint John the Baptist, Saint Landry, Saint Martin, Saint Mary, Saint Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana and Winn (the “ Restricted Territory ”).
(c)      Non-Solicitation . You agree that during the Non-Compete Period (or, if later, the last day you are scheduled to receive cash severance payments from your System Company employer pursuant to any severance plan or other agreement), except in the good faith performance of your duties to the System Companies, you shall not, other than as authorized in writing by the General Counsel of the Company: (i) directly or indirectly advise, solicit, induce, hire, encourage or assist in the hiring process, or advise, cause, encourage or assist others to solicit, induce or hire, any employee or consultant of any System Company or any individual who was an employee or consultant of any System Company at any time during the six-month period immediately prior to such action or (ii) induce, encourage, persuade or cause others to induce, encourage, or persuade any employee or consultant of any System Company to cease providing services to any System Company or in any way to modify such employee’s or consultant’s relationship with any System Company or (iii) within the Restricted Territory, directly or indirectly solicit the trade, business or patronage of any clients, customers or vendors or prospective clients, customers or vendors of any System Company to provide competing products or services or advise, or assist such clients, customers or vendors or prospective clients, customers or vendors to in any way modify their relationship with any System Company. The foregoing non-solicitation (A) shall not be violated by general advertising not targeted at the forgoing persons or entities; (B) shall not apply to solicitation of persons involuntarily terminated from System Company employment; and (C) shall only apply to persons or entities (x) who reported directly or indirectly to you; (y) with whom you had material contact while at a System Company; or (z) about whom or which you possessed (1) information regarding quality of performance while they were employed by a System Company, which information you would not otherwise have except for the position you held with a System Company, or (2) Confidential Information.
(d)      Non-Disparagement . You agree that, to the fullest extent permitted by applicable law, you will not at any time (whether during or after your employment or service with any System Company), other than in the proper performance of your duties, publish or communicate to any person or entity any “Disparaging” (as defined below) remarks, comments or statements concerning any System Company or any of their respective directors, officers, shareholders, employees, agents, attorneys, successors and assigns. “ Disparaging ” remarks, comments or statements are those that are intended to, or could be construed in a manner so as to, impugn, discredit, injure or impair the business, reputation, character, honesty, integrity, judgment, morality or business acumen or abilities of the individual or entity being disparaged.
(e)      System Company Property . All tangible materials, equipment, devices, documents, copies of documents, data compilations (in whatever form), software programs, and electronically created or stored materials that you receive or create in the course of employment with a System Company are and shall remain the property of the System Company and you shall immediately return (and/or cooperate in the supervised deletion of) such property to your System Company employer upon the termination of your employment, for whatever reason. The obligation to return property and documents extends to anything received or made during and as a result of employment by a System Company, regardless of whether it was received from a System Company or a third party, such as an actual or potential vendor or customer, and regardless of whether a document contains Confidential Information. The only documents not subject to the obligation to return are documents directly relating to your compensation and benefits, such as your pay stubs and benefit plan information.
(f)      Violation of the Restrictive Covenant Section . In the event that you violate any provision of this Section 12, the time periods set forth in those paragraphs shall be extended for the period of time you remain in violation of the provisions. The provisions of Section 12(a) - (e) hereof are, and shall be construed as, independent covenants, and no claimed or actual breach of any contractual or legal duty by any System Company shall excuse or terminate your obligations hereunder or preclude any System Company from obtaining injunctive relief for your violation, or threatened violation, of any of those provisions. You also agree to indemnify and hold the System Companies harmless from any and all losses (including, but not limited to, reasonable attorney’s fees and other expenses incurred to enforce this Agreement) suffered by any System Company as a result of any violation or threatened violation




of any of your representations, warranties, covenants or undertakings set forth in this Agreement (in addition to any other remedies available to the System Companies set forth in Section 12(i) below), provided that a System Company is found to be the prevailing party in any such action.
(g)      Exclusions . Notwithstanding anything else in this Section 12 or in this Agreement to the contrary:
(i)      The restrictive covenants in this Section 12 are not intended to restrict you from cooperating with any investigation or proceeding initiated by the Nuclear Regulatory Commission (“ NRC ”) or any other federal or state regulatory agency. Further, you may make disclosure (A) to exercise your rights as a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission Rule 21F-17(a), or any other federal or state law providing whistleblower rights; (B) to the extent necessary when providing safety-related or other information to the NRC on matters within the NRC’s regulatory jurisdiction; (C) when participating in “protected activities,” as defined in Section 211 of the Energy Reorganization Act of 1974 and in C.F.R. Part 50.7; (D) when engaging in activities protected by the National Labor Relations Act or any similar federal or state law; or (E) when required to do so by a court of law, by any governmental agency or administrative or legislative body with jurisdiction to order you to divulge, disclose or make accessible such information. With the exception of Confidential Information subject to the attorney-client privilege, you shall have no obligation to seek prior approval of any System Company or to inform any System Company of such disclosure. This Agreement does not limit your ability to communicate, without notice to any System Company, with any government agencies or otherwise participate in any investigation or proceeding that may be conducted by any government agency.
(ii)      Defend Trade Secrets Act Immunity Notice . Pursuant to the Defend Trade Secrets Act of 2016, non-compliance with the disclosure provisions of this Agreement shall not subject you to criminal or civil liability under any Federal or State trade secret law for the disclosure of a System Company trade secret: (A) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney in confidence solely for the purpose of reporting or investigating a suspected violation of law; (B) in a complaint or other document filed in a lawsuit or other proceeding, provided that any complaint or document containing the trade secret is filed under seal; or (C) to an attorney representing you in a lawsuit for retaliation by any System Company for reporting a suspected violation of law or to use the trade secret information in that court proceeding, provided that any document containing the trade secret is filed under seal and you do not disclose the trade secret, except pursuant to court order.
(h)      Restrictive Covenants Contained in Other Agreements . Notwithstanding any provision contained herein to the contrary, to the extent that you are or become subject to any other agreement that contains restrictive covenants different from the restrictive covenants contained in this Agreement, the restrictive covenants set forth in such other agreement shall supplement, and shall not replace, the restrictive covenants herein.
(i)      Enforcement . You hereby agree that the covenants set forth in this Section 12 are reasonable with respect to their scope, duration, and geographical area. You further agree and acknowledge that the restrictions contained in Section 12 do not and would not unreasonably impose limitations on your ability to earn a living. If any court or other tribunal determines that any term or provision of Section 12 is overbroad or otherwise invalid or unenforceable, you and the Company hereby agree that such court or tribunal shall have the power and obligation to narrow or otherwise reform the unenforceable term or provision, including to delete, replace, or add specific words or phrases, but only to the narrowest extent necessary to render the provision valid and enforceable (provided that in no event shall the length of any restrictive covenant or its scope be extended or expanded), and this Agreement shall be fully enforceable as so modified. Your agreement to the restrictions provided for in this Agreement and the Company’s agreement to grant the Award are mutually dependent consideration. Therefore, notwithstanding any other provision to the contrary in this Agreement, if (A) the enforceability of any material restriction applicable to you as provided for in this Section 12 is challenged and found unenforceable by a court or other tribunal or (B) you breach any of the provisions of Section 12, then the Company shall have the right to terminate this Agreement and recover from you all shares of Common Stock paid to you pursuant to this Agreement and, if you have sold, transferred, or otherwise disposed of any Common Stock paid to you pursuant to this Agreement in respect of Restricted Shares on which the restrictions have lifted or in respect of dividends paid thereon, an amount equal to the aggregate Fair Market Value of such shares on the date on which such restrictions lifted. This provision shall be construed as a return of consideration




or ill-gotten gains due to the failure of your promises and consideration under the Agreement, and not as a liquidated damages clause. In addition, in the event of the Company’s termination of this Agreement, you shall immediately forfeit all Restricted Shares on which restrictions have not already lifted (as well as dividends declared on the Restricted Shares). You further hereby agree that, in the event of a breach by you of any of the provisions of Sections 12(a), (b), (c), (d), or (e), monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach or threatened breach, the Company or a System Company may, in addition to and without prejudice to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, without the requirement of posting a bond or proving actual damages and without having to demonstrate that money damages would be inadequate. You acknowledge that you have carefully read this Agreement and have given careful consideration to the restraints imposed upon you by this Agreement, and you are in full accord as to their necessity for the reasonable and proper protection of the Confidential Information of the System Companies and their relationships with customers, suppliers and other business partners.
(j)      For purposes of this Section 12, “Company” shall include all System Companies. You and the Company agree that each System Company is an intended third-party beneficiary of this Section 12, and further agree that each System Company is entitled to enforce the provisions of this Section 12 in accordance with its terms. Notwithstanding anything to the contrary in this Agreement, the terms of the restrictive covenants set forth in this Section 12 shall survive the termination of this Agreement and shall remain in full force according to their respective terms.
(k)      In the twelve (12) months following the termination of your employment as an ML 1-4 employee with your last System Company employer, in the event you seek or obtain employment or another business affiliation with any person or entity other than the Company, you agree to notify the Company in writing, as far in advance as is reasonably practicable, but in no event less than two weeks prior to your proposed commencement of employment, of the details of such employment or business affiliation. You also agree to show these restrictive covenant provisions to any prospective employer, and you consent to any System Company showing these provisions to any third party believed by a System Company to be a prospective or actual employer of you, or a receiver of services from you, and to insisting on your compliance with these terms. Your obligations under this Section will expire on that date which is twelve months after the end of your employment with all System Companies (or, if later, the last date as of which you are scheduled to receive separation payments from any System Company pursuant to a severance plan or other agreement).
13.      Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. The parties hereby submit to the exclusive jurisdiction of the state and federal courts of the State of Delaware, County of New Castle, for any dispute arising out of or relating to this Agreement or the breach thereof, or regarding the interpretation thereof, or to your System Company employment or to the termination of your System Company employment.
 
14.        Incorporation of Plan .  The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Shares and this Agreement shall be subject to all terms and conditions of the Plan, including, without limitation, the amendment provisions thereof, and to such rules, regulations and interpretations relating to the Plan as may be adopted by the Committee and as may be in effect from time to time.  Any capitalized term which is not defined in this Agreement shall have the meaning set forth in the Plan. If any terms of this Agreement are inconsistent with the terms of the Plan, the terms of the Plan shall govern unless the Plan allows for such modification by this Agreement.

15.        Amendments .  This Agreement may be amended or modified at any time only by an instrument in writing signed by the parties hereto.  The Plan may be amended, modified or terminated only in accordance with its terms.
 
16.        Notices . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to you, to your last known address filed in




the personnel records of the System Companies, and if to the Company, to the address set forth below, or thereafter to such other address as either party may have furnished to the other in writing in accordance herewith, except that any notice of change of address shall be effective only upon actual receipt thereof:

If to the Company:

By hand delivery or email to your supervisor, with a courtesy copy to:

Entergy Services, Inc.
Attention: Executive Vice-President & General Counsel
639 Loyola Avenue, 26th Floor
New Orleans, LA 70113-3125


17.      Agreement Not a Contract of Employment .  Neither the Plan, the granting of the Restricted Shares, the Grant Notice, this Agreement nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that you have a right to continue as an employee of any System Company for any period of time or at any specific rate of compensation.
 
18.       Authority of the Committee .  The Committee shall have full authority and discretion to interpret and construe the terms of the Plan, the Grant Notice, and this Agreement.  The determination of the Committee as to any such matter of interpretation or construc-tion shall be final, binding and conclusive

19.      Waivers . Any term or provision of this Agreement may only be waived by a System Company. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized Company officer. The failure of any System Company to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any System Company thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach .


This document constitutes part of a prospectus covering Securities that have been registered under the Securities Act of 1933. The remaining documents constituting the prospectus are available on Entergy Corporation’s intranet under Our Company, Corp Services, Human Resources, myMoney, Compensation, Other-Links and Phone Numbers (https://entergy.sharepoint.com/sites/myhra/myBenefits/Pages/Compensation.aspx)
    





Exhibit 10(a)49
2015 EQUITY OWNERSHIP PLAN OF ENTERGY CORPORATION AND SUBSIDIARIES
RESTRICTED STOCK UNITS AGREEMENT (STOCK SETTLED)

THIS RESTRICTED STOCK UNITS AGREEMENT (the “ Agreement ”), by and between Entergy Corporation (“ Entergy ” or the “ Company ”) and [NAME] (“ Grantee ”), is effective on [DATE], 2018 (the “ Effective Date ”), [subject to Grantee remaining a regular full-time employee of an Entergy System Company employer (a “ System Company Employer ”) through such date] [ for new hires : “subject to Grantee becoming a regular full-time employee of an Entergy System Company employer (a “System Company Employer”) on or prior to such date”]. For purposes of this Agreement, Entergy shall include any successor to its business or assets by operation of law or otherwise and any entity that assumes or agrees to perform this Agreement.

1.      Grant of Restricted Stock Units . Entergy hereby grants to Grantee, pursuant to the 2015 Equity Ownership Plan of Entergy Corporation and Subsidiaries (the “ Equity Plan ”), [NUMBER] Restricted Stock Units (the “ Restricted Units ”), for the purposes of retaining Grantee’s full-time active services as described herein through the Vesting Date described below, and for Grantee’s agreement to the terms and conditions of the Equity Plan and this Agreement.

2.      Incorporation of Equity Plan . The Equity Plan is hereby incorporated by reference and made a part hereof, and the Restricted Units and this Agreement shall be subject to all terms and conditions of the Equity Plan, a copy of which has been provided or otherwise made accessible to Grantee. Any capitalized term that is not defined in this Agreement shall have the meaning set forth in the Equity Plan.

3.      Vesting of Restricted Units . [Subject to the release requirement described in Section 4 hereof], the Restricted Units (excluding dividend equivalents) shall vest on [the third (3 rd ) anniversary of the Effective Date] (such date, the “ Vesting Date ”), provided that Grantee complies with Section 15 of this Agreement and remains continuously and actively employed through the Vesting Date as a regular full-time employee of a System Company Employer and performs Grantee’s job duties in a satisfactory manner through the Vesting Date, as determined solely in the discretion of [APPLICABLE SYSTEM COMPANY OFFICER] (“ Vesting Criteria ”). For purposes of this Section 3, Grantee shall no longer be considered a regular full-time employee of any System Company Employer on the date Grantee is no longer actively employed on a full-time basis with any System Company Employer for any reason, including without limitation because of Grantee’s resignation, retirement, death, separation from employment due to disability, involuntary termination of employment for any reason or no reason, or any other separation from full-time active employment with Grantee’s System Company Employer, except as otherwise required by law. If Grantee fails to meet the Vesting Criteria, then Grantee shall not vest in the Restricted Units, except as otherwise provided in Section 5 of this Agreement. [ Variation from this default vesting schedule and release requirement may be determined by Entergy Corporation’s Chief Executive Officer or the senior-most officer within the Human Resources Department. ]
  
4.      Scheduled Payment of Restricted Units . If Grantee meets the Vesting Criteria then, [subject to Grantee executing a release agreement in a form satisfactory to Entergy that, subject to applicable legal requirements, releases all claims that may then exist against all System Companies and their affiliates (a “ Release ”) and submitting the executed original Release to Entergy within the time period and in the manner provided in the Release, and upon the Release becoming irrevocable, then as soon as reasonably practicable after the date on which the Release becomes irrevocable, but in no event later than the 15 th day of the third month following the end of the taxable year of Grantee’s System Company Employer in which such Restricted Units are no longer subject to a substantial risk of forfeiture,] Entergy shall pay to Grantee, or Grantee’s beneficiary or estate (if Grantee should die after vesting, but prior to the payment date), as the case may be, a number of shares of Common Stock equal to the whole number of Restricted Units that vest on the Vesting Date, subject to withholding for all federal, state and local deductions, tax withholdings, and other withholdings




and offsets that may apply or be required to be withheld in connection with such payment, which shall be effected using the “net shares method” described in Section 9. Such payment shall be made in accordance with the short-term deferral exception under Code Section 409A and final regulations issued thereunder, as may be amended after the Effective Date. [For the avoidance of doubt, if Grantee does not timely sign and submit the executed original Release to Entergy, or signs but timely revokes, the Release, then Grantee shall not be paid any Restricted Units pursuant to this Agreement.]

5.      Accelerated Vesting . Notwithstanding the Vesting Criteria to the contrary and subject to the terms of this Agreement, if Grantee incurs a CIC Separation from Service, then the restrictive covenants set forth in Section 15(b), (c) and (d) hereof shall cease to apply and the vesting of Grantee’s then-unvested Restricted Units shall accelerate and Grantee shall fully vest in all Restricted Units upon the later of (a) the date of such CIC Separation from Service or (b) the consummation of the applicable Change in Control. In the event of accelerated vesting as described in this Section 5, but subject to the conditions and limitations described herein, Entergy shall pay Grantee a number of shares of Common Stock equal to the number of Restricted Units that vest in accordance with this Section 5 as of the first regular payroll date for Grantee’s System Company Employer following the later of the applicable Change in Control or Grantee’s CIC Separation from Service; provided that, if Grantee’s CIC Separation from Service occurs prior to the applicable Change in Control, then (i) if the Restricted Units payable pursuant to this Section 5 would constitute “nonqualified deferred compensation” for purposes of Code Section 409A, then there shall not be an acceleration of any payment pursuant to this Section 5 unless the applicable Change in Control constitutes a “change in control event” within the meaning of Code Section 409A and (ii) if the applicable Change in Control does not constitute a “change in control event” within the meaning of Code Section 409A, then the Restricted Units shall vest as above but be paid out at the same time and in the same form as if Grantee had remained employed by a System Company Employer through the Vesting Date, subject to Section 28 of the Equity Plan. Notwithstanding anything herein to the contrary, if, following the occurrence of a Potential Change in Control and prior to the occurrence of a Change in Control, Grantee incurs a Separation that would be a CIC Separation from Service if it occurred during a Change in Control Period, then the then-unvested Restricted Units shall remain outstanding and unvested until a Change in Control, but if the Potential Change in Control does not result in a Change in Control by the earlier of (A) the date that is ninety (90) days after the date of the Grantee’s Separation or (B) the Vesting Date, the unvested Restricted Units shall be cancelled and forfeited. Any payment to Grantee pursuant to this Section 5 shall be subject to withholding for all federal, state and local deductions, tax withholdings, and other withholdings and offsets that may apply or be required to be withheld in connection with such payment, which withholding shall be effected using the “net shares method” described in Section 9.

6.      Termination and Forfeiture of Restricted Units . Except as otherwise provided herein, this Agreement (other than the restrictive covenants set forth in Section 15) shall terminate and the then-unvested Restricted Units shall be forfeited on the date on which Grantee's full-time employment with all System Company Employers terminates. Further, except as otherwise provided in Section 5 of this Agreement, if Grantee fails to meet a condition of the Vesting Criteria at any time prior to the Vesting Date, then Grantee shall not vest in any then-unvested Restricted Units and shall forfeit all unvested Restricted Units. [ Variation from this default treatment upon termination of employment due to death, Total Disability or Retirement may be determined by Entergy Corporation’s Chief Executive Officer or the senior-most officer within the Human Resources Department. ]

7.      Compliance with Code Section 409A Limitations . Notwithstanding any provision to the contrary, all provisions of this Agreement shall be construed, administered and interpreted to comply with or be exempt from Code Section 409A, and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Code Section 409A or final regulations issued thereunder. Specifically, the terms “termination” and “termination of employment” shall be applied in a manner consistent with the definition of “separation from service” within the meaning of Code Section 409A. A right of any System Company, if any, to offset or otherwise reduce any sums that may be due or become payable by any System Company to Grantee by any overpayment or indebtedness of Grantee shall be subject to limitations imposed by Code Section 409A. For purposes of the limitations on nonqualified deferred compensation under Code Section 409A, each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts. Amounts payable under this




Agreement shall be excludible from the requirements of Code Section 409A, to the maximum possible extent, either as (i) short-term deferral amounts ( e.g ., amounts payable no later than the 15 th day of the third month following the end of the taxable year of Grantee’s System Company Employer in which such Restricted Units are no longer subject to a substantial risk of forfeiture), or (ii) under the exclusion for involuntary separation pay provided in Treasury Regulations Section 1.409A-1(b)(9)(iii). To the extent that deferred compensation subject to the requirements of Code Section 409A becomes payable under this Agreement to Grantee at a time when Grantee is a “specified employee” (within the meaning of Code Section 409A), any such payments shall be delayed by six months to the extent necessary to comply with the requirements of Code Section 409A(a)(2)(B).

8.      Restricted Units Nontransferable . Restricted Units awarded pursuant to this Agreement may not be sold, exchanged, pledged, transferred, assigned, or otherwise encumbered, hypothecated or disposed of by Grantee (or any beneficiary) other than by will or laws of descent and distribution or otherwise as the Equity Plan may allow.

9.      Withholding Taxes . Grantee’s System Company Employer shall have the right to require Grantee to remit to it, or to withhold from other amounts payable to Grantee, an amount sufficient to satisfy all federal, state and local tax withholding requirements. Entergy will use the “net shares method” to satisfy any tax withholding obligation, which means Entergy will reduce the number of shares of Common Stock in respect of any vested Restricted Units otherwise payable to Grantee under the terms and conditions of the Agreement by the number of vested shares of Common Stock necessary to cover such obligation. Depending upon the state or states in which Grantee resides or has resided, or performs or has performed services, in the current, prior and future tax years, Grantee may be subject to income tax in one or more states or jurisdictions. Grantee should consult Grantee’s personal tax advisor to determine the states or jurisdictions in which Grantee owes income tax and/or is required to file an individual income tax return, based on Grantee’s particular circumstances. In no event shall Entergy or any other System Company have any liability to Grantee for Grantee’s individual income tax liability, for withholding or failing to withhold taxes, or for remitting or failing to remit taxes with respect to Grantee’s income, including, without limitation, in the event that Grantee is subject to penalty tax pursuant to Section 409A of the Code.

10.      Governing Law . This Agreement shall be governed by and construed according to the laws of the State of Delaware. The parties hereby submit to the exclusive jurisdiction of the state and federal courts of the State of Delaware, County of New Castle, for any dispute arising out of or relating to this Agreement or the breach thereof, or regarding the interpretation thereof, or to Grantee’s System Company employment or to the termination of Grantee’s System Company employment.

11.      Amendments . The Equity Plan may be amended, modified or terminated only in accordance with its terms. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Grantee and such officer as may be specifically designated by the Committee. No waiver by either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

12.      Rights as a Shareholder . Neither Grantee nor any of Grantee's successors in interest shall have any rights as a shareholder of Entergy with respect to any Restricted Units, including without limitation the right to any dividends or dividend equivalents.

13.      Agreement Not a Contract of Employment . Grantee’s employment with Grantee’s System Company Employer shall remain at-will. Neither the Equity Plan, the granting of the Restricted Units, this Agreement nor any other action taken pursuant to the Equity Plan or this Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that Grantee has a right to continue as an employee of any System Company Employer for any period of time or at any specific rate of compensation.

14.      Notices . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when hand-delivered or mailed by United States registered mail, return receipt requested, postage prepaid, if to Grantee, to Grantee’s last known address as shown in the personnel records of Grantee’s System Company Employer, and if to Entergy or Grantee’s System




Company Employer, to the following address shown below or thereafter to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

If to Entergy or Grantee’s System Company Employer :

By hand delivery or email to Grantee’s supervisor, with a courtesy copy to:
    
Entergy Services, Inc.
Attention: General Counsel
639 Loyola Avenue, 26 th Floor
New Orleans, LA 70113-3125     

15.      Confidentiality and Restrictive Covenants . In consideration of the grant to Grantee of the Restricted Units set forth herein, Grantee hereby agrees as follows:
(a)      Confidential Information . Grantee acknowledges that the System Companies have unique methods and processes for the generation, transmission and distribution and sale of energy products, which give them a competitive advantage, including strategic and non-public plans for their products, geographic and customer markets, and for marketing, distributing and selling their products. Grantee further acknowledges that Grantee has held a position of confidence and trust with respect to the System Companies and that Grantee has and will acquire additional detailed knowledge of the System Companies’ unique and confidential methods of doing business and plans for the future. Grantee acknowledges that Entergy and the System Companies have expended and will continue to expend substantial amounts of time, money and effort to develop effective business and regulatory strategies, methodologies and technology. Grantee also acknowledges that the System Companies have a compelling business interest in protecting the System Companies’ Confidential Information (as defined below) and that the System Companies would be seriously and irreparably damaged by the disclosure of Confidential Information. Grantee therefore agrees that, from the date of Grantee’s execution of this Agreement and during Grantee’s employment or other service with any System Company and at all times thereafter, Grantee shall hold in a fiduciary capacity for the benefit of the System Companies and, other than as authorized in writing by the General Counsel of the Company or as required by law, in the proper performance of Grantee’s duties and responsibilities, or as otherwise provided in this Section 15, Grantee shall not disclose, directly or indirectly, to any person or entity or use for any purpose other than the furtherance of Grantee’s responsibilities to Entergy and any other System Company, any Confidential Information. For purposes of this Agreement, “Confidential Information” means information that provides the System Companies with a competitive advantage, is not generally known by persons outside the System Companies and could not easily be determined or learned by someone outside the System Companies, including without limitation, any and all information and knowledge, whether or not explicitly designated as confidential and whether or not reduced to writing, regarding (i) the System Companies’ utility business, including, without limitation, the generation, transmission, brokering, marketing, distribution, sale and delivery of electric power or generation capacity (through regulated utilities or otherwise), and its natural gas distribution business, (ii) the Entergy Wholesale Commodities business, including, without limitation, the ownership, development, management or operation of power plants and power generation facilities (including, without limitation, nuclear power plants) and the provision of operations and management services (including decommissioning services) with respect to power plants and the sale of the electric power produced by the System Companies’ operating plants to wholesale customers, (iii) the System Companies’ proprietary methods and methodology, technical data, trade secrets, know-how, research and development information, product plans, customer lists, specific information relating to products, services and customers or prospective customers (including, but not limited to, customers or prospective customers of the System Companies with whom Grantee becomes acquainted during Grantee’s relationship with Entergy or any System Company), books and records of the System Companies, corporate and strategic relationships, suppliers, markets, computer software, computer software development, inventions, processes, formulae, technology, designs, drawings, technical information, source codes, engineering information, hardware configuration information, and matters of a business nature such as information regarding marketing, costs, pricing, finances, financial models and projections, billings, new or existing business or economic development plans, initiatives, and opportunities, or any other similar business information made available to Grantee prior to or during Grantee’s employment with a System Company or otherwise in connection with Grantee’s relationship




with any System Company and (iv) any attorney-client privileged information of a System Company. Confidential Information shall also include non-public information concerning any director, officer, employee, shareholder, or partner of any System Company. Grantee agrees that Grantee’s obligation not to disclose or use Confidential Information, and Grantee’s obligation, detailed below, to return and, upon Grantee’s termination of employment with all System Companies, not to retain materials and tangible property described in this Section shall also extend to such types of information, materials and tangible property of customers of and suppliers to the System Companies and to other third parties, in each case who may have disclosed or entrusted the same to Grantee or to any System Company during Grantee’s employment with any System Company.
(b)      Non-Competition . For [one (1)] year following the termination for any reason of Grantee’s employment by or service with Grantee’s last System Company employer (the “ Non-Compete Period ”), Grantee will not engage in Competing Employment. For purposes of this Section, “Competing Employment” means working for, providing services to or otherwise directly or indirectly assisting (whether or not for compensation) any person, entity or business which directly or indirectly competes with any part of the System Company business, and such employment or services involves products, services and business activities that are the same as or similar to those Grantee provided to a System Company, or as to which Grantee had access to Confidential Information, in the two years preceding Grantee’s termination of employment or service with all System Companies. Grantee agrees that it is reasonable for the restriction contained in this paragraph to apply in each and every county, province, state, city, parish or other political subdivision or territory of the United States in which any System Company engages in any business activity, or otherwise distributes, licenses or sells its products or services, including, without limitation, Arkansas, Connecticut, District of Columbia, Louisiana, Massachusetts, Michigan, Mississippi, Nebraska, New York, Texas, and Vermont and any other state in which any System Company engages in business at any time and, with respect to the State of Louisiana, means the following Parishes: Acadia, Allen, Ascension, Assumption, Avoyelles, Beauregard, Bienville, Bossier, Caddo, Calcasieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Baton Rouge, East Carroll, East Feliciana, Evangeline, Franklin, Grant, Iberia, Iberville, Jackson, Jefferson, Jefferson Davis, Lafayette, Lafourche, La Salle, Lincoln, Livingston, Madison, Morehouse, Natchitoches, Orleans, Ouachita, Plaquemines, Point Coupee, Rapides, Red River, Richland, Sabine, Saint Bernard, St. Charles, St. Helena, Saint James, Saint John the Baptist, Saint Landry, Saint Martin, Saint Mary, Saint Tammany, Tangipahoa, Tensas, Terrebonne, Union, Vermilion, Vernon, Washington, Webster, West Baton Rouge, West Carroll, West Feliciana and Winn (the “ Restricted Territory ”). [ With approval of Entergy Corporation’s Chief Executive Officer or the senior-most officer within the Human Resources Department: (1) discretion to reduce the default Non-Compete Period from 1 year to a period not less than six months; and (2) with respect to a one-off grant to ML 5 or below, discretion to limit the provision to apply only if employee is later promoted to an ML 1-4 position prior to separation. ]
(c)      Non-Solicitation . Grantee agrees that, while Grantee is employed by any System Company and during the Non-Compete Period (or, if later, the last day Grantee is scheduled to receive cash severance payments from Grantee’s System Company employer pursuant to any severance plan or other agreement), except in the good faith performance of Grantee’s duties to the System Companies, Grantee shall not, other than as authorized in writing by the General Counsel of the Company: (i) directly or indirectly advise, solicit, induce, hire, encourage or assist in the hiring process, or advise, cause, encourage or assist others to solicit, induce or hire, any employee or consultant of any System Company or any individual who was an employee or consultant of any System Company at any time during the six-month period immediately prior to such action or (ii) induce, encourage, persuade or cause others to induce, encourage, or persuade any employee or consultant of any System Company to cease providing services to any System Company or in any way to modify such employee’s or consultant’s relationship with any System Company or (iii) within the Restricted Territory, directly or indirectly solicit the trade, business or patronage of any clients, customers or vendors or prospective clients, customers or vendors of any System Company to provide competing products or services or advise, or assist such clients, customers or vendors or prospective clients, customers or vendors to in any way modify their relationship with any System Company. The foregoing non-solicitation (A) shall not be violated by general advertising not targeted at the forgoing persons or entities; (B) shall not apply to solicitation of persons involuntarily terminated from System Company employment; and (C) shall only apply to persons or entities (x) who reported directly or indirectly to Grantee; (y) with whom Grantee had material contact while at a System Company; or (z) about whom or which Grantee possessed (1) information regarding quality of performance while they were employed by a System Company, which information Grantee would not otherwise have except for the position




Grantee held with a System Company, or (2) Confidential Information.
(d)      Non-Disparagement . Grantee agrees that, to the fullest extent permitted by applicable law, Grantee will not at any time (whether during or after Grantee’s employment or service with any System Company), other than in the proper performance of Grantee’s duties, publish or communicate to any person or entity any “Disparaging” (as defined below) remarks, comments or statements concerning any System Company or any of their respective directors, officers, shareholders, employees, agents, attorneys, successors and assigns. “ Disparaging ” remarks, comments or statements are those that are intended to, or could be construed in a manner so as to, impugn, discredit, injure or impair the business, reputation, character, honesty, integrity, judgment, morality or business acumen or abilities of the individual or entity being disparaged.
(e)      System Company Property . All tangible materials, equipment, devices, documents, copies of documents, data compilations (in whatever form), software programs, and electronically created or stored materials that Grantee receives or creates in the course of employment with a System Company are and shall remain the property of the System Company and Grantee shall immediately return (and/or cooperate in the supervised deletion of) such property to Grantee’s System Company employer upon the termination of Grantee’s employment, for whatever reason. The obligation to return property and documents extends to anything received or made during and as a result of employment by a System Company, regardless of whether it was received from a System Company or a third party, such as an actual or potential vendor or customer, and regardless of whether a document contains Confidential Information. The only documents not subject to the obligation to return are documents directly relating to Grantee’s compensation and benefits, such as Grantee’s pay stubs and benefit plan information.
(f)      Violation of the Restrictive Covenant Section . In the event that Grantee violates any provision of this Section 15, the time periods set forth in those paragraphs shall be extended for the period of time Grantee remains in violation of the provisions. The provisions of Section 15(a) - (e) hereof are, and shall be construed as, independent covenants, and no claimed or actual breach of any contractual or legal duty by any System Company shall excuse or terminate Grantee’s obligations hereunder or preclude any System Company from obtaining injunctive relief for Grantee’s violation, or threatened violation, of any of those provisions. Grantee also agree to indemnify and hold the System Companies harmless from any and all losses (including, but not limited to, reasonable attorney’s fees and other expenses incurred to enforce this Agreement) suffered by any System Company as a result of any violation or threatened violation of any of Grantee’s representations, warranties, covenants or undertakings set forth in this Agreement (in addition to any other remedies available to the System Companies set forth in Section 15(i) below), provided that a System Company is found to be the prevailing party in any such action.
(g)      Exclusions . Notwithstanding anything else in this Section 15 or in this Agreement to the contrary:
(i)      the restrictive covenants in this Section 15 are not intended to restrict Grantee from cooperating with any investigation or proceeding initiated by the Nuclear Regulatory Commission (“ NRC ”) or any other federal or state regulatory agency. Further, Grantee may make disclosure (i) to exercise Grantee’s rights as a whistleblower under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission Rule 21F-17(a) or any other federal or state law providing whistleblower rights; (ii) to the extent necessary when providing safety-related or other information to the NRC on matters within the NRC’s regulatory jurisdiction; (iii) when participating in “protected activities”, as defined in Section 211 of the Energy Reorganization Act of 1974 and in C.F.R. Part 50.7; (iv) when engaging in activities protected by the National Labor Relations Act or any similar federal or state law; or (v) when required to do so by a court of law, by any governmental agency or administrative or legislative body with jurisdiction to order Grantee to divulge, disclose or make accessible such information. With the exception of Confidential Information subject to the attorney-client privilege, Grantee shall have no obligation to seek prior approval of any System Company or to inform any System Company of such disclosure. This Agreement does not limit Grantee’s ability to communicate, without notice to any System Company, with any governmental agencies or otherwise participate in any investigation or proceeding that may be conducted by any governmental agency.




(ii)      Defend Trade Secrets Act Immunity Notice . Pursuant to the Defend Trade Secrets Act of 2016, non-compliance with the disclosure provisions of this Agreement shall not subject Grantee to criminal or civil liability under any Federal or State trade secret law for the disclosure of a System Company trade secret: (A) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney in confidence solely for the purpose of reporting or investigating a suspected violation of law; (B) in a complaint or other document filed in a lawsuit or other proceeding, provided that any complaint or document containing the trade secret is filed under seal; or (C) to an attorney representing Grantee in a lawsuit for retaliation by any System Company for reporting a suspected violation of law or to use the trade secret information in that court proceeding, provided that any document containing the trade secret is filed under seal and Grantee does not disclose the trade secret, except pursuant to court order.
(h)      Restrictive Covenants Contained in Other Agreements . Notwithstanding any provision contained herein to the contrary, to the extent that Grantee is or becomes subject to any other agreement that contains restrictive covenants that are different from the restrictive covenants contained in this agreement, the restrictive covenants set forth in such other agreement shall supplement, and shall not replace, the restrictive covenants herein.
(i)      Enforcement . Grantee hereby agrees that the covenants set forth in this Section 15 are reasonable with respect to their scope, duration, and geographical area. Grantee further agrees and acknowledges that the restrictions contained in Section 15 do not and would not unreasonably impose limitations on Grantee’s ability to earn a living. If any court or other tribunal determines that any term or provision of Sections 15 is overbroad or otherwise invalid or unenforceable, Grantee and Entergy hereby agree that such court or tribunal shall have the power and obligation to narrow or otherwise reform the unenforceable term or provision, including to delete, replace, or add specific words or phrases, but only to the narrowest extent necessary to render the provision valid and enforceable (provided that in no event shall the length of any restrictive covenant or its scope be extended or expanded), and this Agreement shall be fully enforceable as so modified. Grantee’s agreement to the restrictions provided for in this Agreement and Entergy’s agreement to grant the Award are mutually dependent consideration. Therefore, notwithstanding any other provision to the contrary in this Agreement, if (i) the enforceability of any material restriction applicable to Grantee as provided for in this Section 15 is challenged and found unenforceable by a court or other tribunal or (ii) Grantee breaches any of the provisions of Section 15, then Entergy shall have the right to terminate this Agreement and recover from Grantee all shares of Common Stock paid to Grantee pursuant to this Agreement and, if Grantee has sold, transferred, or otherwise disposed of any shares of Common Stock received in respect of the Restricted Units, an amount equal to the aggregate Fair Market Value of such shares of Common Stock on the date on which such Common Stock was paid to Grantee pursuant to this Agreement. This provision shall be construed as a return of consideration or ill-gotten gains due to the failure of Grantee’s promises and consideration under the Agreement, and not as a liquidated damages clause. In addition, in the event of Entergy’s termination of this Agreement, Grantee shall immediately forfeit all unvested Restricted Units and all vested and unpaid Restricted Units. Grantee further hereby agrees that, in the event of a breach by Grantee of any of the provisions of Sections 15(a), (b), (c) (d) or (e), monetary damages shall not constitute a sufficient remedy. Consequently, in the event of any such breach or threatened breach, Entergy or a System Company may, in addition to and without prejudice to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof, in each case without the requirement of posting a bond or proving actual damages and without having to demonstrate that money damages would be inadequate. Grantee acknowledges that Grantee has carefully read this Agreement and has given careful consideration to the restraints imposed upon Grantee by this Agreement, and Grantee is in full accord as to their necessity for the reasonable and proper protection of Confidential Information of the System Companies and their relationships with customers, suppliers and other business partners.
(j)      For purposes of this Section 15, “System Company” shall include Entergy and all other System Companies. Grantee and Entergy agree that each System Company is an intended third-party beneficiary of this Section 15, and further agree that System Company is entitled to enforce the provisions of this Section 15 in accordance with its terms. Notwithstanding anything to the contrary in this Agreement, the terms and conditions of the restrictive covenants set forth in this Section 15 shall survive the termination of this Agreement and shall remain in full force according to their respective terms and conditions.




(k)      In the twelve (12) months following the termination of Grantee’s employment with Grantee’s last System Company employer, in the event Grantee seeks or obtains employment or another business affiliation with any person or entity other than the Company, Grantee agrees to notify the Company in writing, as far in advance as is reasonably practicable, but in no event less than two weeks prior to Grantee’s proposed commencement of employment, of the details of such employment or business affiliation. Grantee also agrees to show these restrictive covenant provisions to any prospective employer, and Grantee consents to any System Company showing these provisions to any third party believed by a System Company to be a prospective or actual employer of Grantee, or a receiver of services from Grantee, and to insisting on Grantee’s compliance with these terms. Grantee’s obligations under this Section will expire on that date which is twelve months after the end of Grantee’s employment with all System Companies (or, if later, the last date as of which Grantee is scheduled to receive separation payments from any System Company pursuant to a severance plan or other agreement).

16.      Validity . Except as specifically provided in Section 15(g), the invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

17.      Payment in Error . To the maximum extent permitted by applicable law, in the event that a payment is made to Grantee or Grantee’s successor (whether in cash, stock or other property) in error that exceeds the amount to which Grantee and Grantee’s successor is entitled pursuant to the terms and conditions of this Agreement or the Equity Plan (such excess amount, an “ Excess Payment ”), Grantee or Grantee’s successor will repay to Entergy, and Entergy shall have the right to recoup from Grantee or Grantee’s successor such Excess Payment by notifying Grantee or Grantee’s successor in writing of the nature and amount of such Excess Payment together with (i) demand for direct repayment to Entergy by Grantee or Grantee’s successor in the amount of such Excess Payment or (ii) reduction of any amount(s) owed to Grantee or Grantee’s successor by Entergy or any other System Company by the amount of the Excess Payment.

18.      Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

19.      Waivers . Any term or provision of this Agreement may only be waived by a System Company. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if it is in writing signed by an authorized Company officer. The failure of any System Company to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any System Company thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach.





[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF , the parties have executed and delivered this Agreement, which is effective as of the Effective Date.

ENTERGY CORPORATION                 




________________________                 
By:      Andrea Coughlin Rowley     
Senior Vice President, HR
                                    

Date: ____________________


The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Agreement and to all the terms and provisions of the Equity Plan herein incorporated by reference. The undersigned Grantee further acknowledges that the 2015 Equity Plan and 2015 Equity Plan Prospectus are available to Grantee on Entergy’s internal Web page.


    
[NAME], Grantee

Date: _________________________________








  R   R                                                                                   





Exhibit 10(b)1
AVAILABILITY AGREEMENT

BETWEEN

MIDDLE SOUTH ENERGY, INC.

AND

ARKANSAS POWER & LIGHT COMPANY,
ARKANSAS-MISSOURI POWER COMPANY,
LOUISIANA POWER & LIGHT COMPANY,
MISSISSIPPI POWER & LIGHT COMPANY, and
NEW ORLEANS PUBLIC SERVICE INC.

THIS AGREEMENT, dated as of the 21st day of June, 1974, between Middle South Energy, Inc. (MSEI) and Arkansas Power & Light Company (AP&L), Arkansas‑Missouri Power Company (Ark-Mo), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L) and New Orleans Public Service Inc. (NOPSI), Witnesseth That:
Whereas, AP&L, Ark-Mo, LP&L, MP&L and NOPSI (collectively, System operating companies and, singly, System operating company), all outstanding shares of whose common stock are wholly owned by Middle South Utilities, Inc., operate electric generating, transmission and distribution facilities in the states of Arkansas, Louisiana, Mississippi and Missouri and comprise the Middle South System; and
Whereas, the System operating companies are parties to an agreement dated April 16, 1973 (as presently constituted and as amended in the future, System Agreement), which provides the contractual basis for the continued planning, construction and operation of certain facilities owned by the System operating companies to achieve the purposes set forth therein; and
Whereas, other entities may become parties to the System Agreement; and
Whereas, MSEI has been organized as a subsidiary of Middle South Utilities, Inc. to finance and own certain generating units for the benefit of the Middle South System, including the Grand Gulf Nuclear Electric Station project (Project), a two unit nuclear-fueled electric generating plant having an expected aggregate capacity of 2,500,000 KW and to be located near Port Gibson, Mississippi; and
Whereas, MSEI is, subject to the terms hereof, willing to undertake the construction and operation of the Project, to become a party to the System Agreement and to make available to the Parties, as hereinafter defined, all of the power (and the energy associated therewith) available at any MSEI Generating Unit, including the Project, under the terms hereof and of the System Agreement; and
Whereas, the Parties, as hereinafter defined, are, subject to the terms hereof, willing to purchase power (and the energy associated therewith) available or to be available at any MSEI Generating Unit, including the Project, under the terms hereof and of the System Agreement;
Now, Therefore, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree with each other as follows:




1. For the purposes of this Agreement, the following definitions shall apply:

(a) Party or Parties shall mean any entity or entities (other than MSEI) now or hereafter a party or parties to this Agreement.

(b) MSEI Generating Unit shall be that portion of any electric generator, together with its prime mover and all auxiliary and appurtenant devices and equipment designed to be operated as a unit for the production of electric power and energy and all associated equipment and facilities, which is owned by MSEI and which MSEI and the Parties have designated as being subject to this Agreement.

(c) Power shall mean both power and the energy associated therewith, including test power produced during construction or thereafter.

2. MSEI and the Parties hereby designate Unit No. 1 and Unit No. 2 of the Project as being subject to this Agreement and MSEI Generating Units hereunder, and MSEI hereby undertakes to use its best efforts to construct the Project.

3. On or before the date on which Unit No. 1 of the Project is placed in commercial operation, MSEI and the Parties will join in executing such document or documents as may be necessary for MSEI to become a party to the System Agreement. MSEI and the Parties will also join in executing at an appropriate time such document or documents as may be necessary for others who become parties to the System Agreement to join in and become parties to this Agreement. MSEI shall, subject to the provisions of the then applicable requirements of Section 6 of this Agreement and the then applicable provisions of the System Agreement (or any agreement substituted therefor), make available, or cause to be made available, to the Parties all Power available from time to time at any MSEI Generating Unit.

4. The Parties shall, subject to the provisions of the, then applicable requirements of Section 7 of this Agreement and the then applicable requirements of the System Agreement (or any agreement substituted therefor) be entitled to receive all Power available from time to time at any MSEI Generating Unit; provided, that (i) should any Party terminate its participation in the System Agreement, then it is agreed that MSEI, such Party and the other Parties shall enter into a separate agreement whereby such Party shall continue to be entitled to receive Power, and obligated to take Power, available at any MSEI Generating Unit which has been designated as being subject to this Agreement at the time such Party shall exercise its right to terminate such participation, in such amounts and for such consideration calculated from time to time as if such Party had remained a party to the System Agreement, and (ii) should the System Agreement be cancelled or terminated, then it is agreed that MSEI and all such Parties shall enter into a separate agreement whereby such Parties shall continue to be entitled to receive Power, and obligated to take Power, available at any MSEI Generating Unit which has been designated as being subject to this Agreement at the time of cancellation or termination of the System Agreement, in such amounts and for such consideration calculated from time to time as if the System Agreement had remained in effect and MSEI and such Parties were parties thereto. Notwithstanding such withdrawal from, or cancellation or termination of, the System Agreement, each Party shall remain bound by the terms of this Agreement with respect to any MSEI Generating Unit which has been designated as being subject to this Agreement at the time of such withdrawal, cancellation or termination. In consideration of MSEI’s commitment to undertake construction of the Project and its other obligations hereunder and of the right of the Parties to receive Power available at any MSEI Generating Unit under the terms of the System Agreement (or any separate agreement referred to above), the Parties agree to pay to MSEI, commencing on the date on which a particular MSEI Generating Unit is deemed to be in operation for the purposes of this Agreement, such amounts from time to time as, when added to amounts received by MSEI from any other source, including, but not limited to, amounts (if any) received by MSEI




with respect to such MSEI Generating Unit under the terms of the System Agreement, shall be at least equal to MSEI’s total operating expenses and interest charges with respect to such MSEI Generating Unit, including (without limitation), for the purposes of this Agreement, (i) all expenses, deductions, charges and other items properly chargeable to the applicable Income Accounts 400 to 435, inclusive, of the Uniform System of Accounts prescribed by the Federal Power Commission for Class A and Class B Public Utilities and Licensees, as in effect on April 1, 1973, (Uniform System of Accounts) or, if such MSEI Generating Unit is not in service for any reason, all expenses, deductions, charges and other items which would be chargeable to the above Accounts if such MSEI Generating Unit were in service; it being agreed that when a particular generating unit is designated as being subject to this Agreement by MSEI and the Parties, then, solely for the purposes of determining MSEI’s total operating expenses under this Section 4, such MSEI Generating Unit shall be deemed to be in operation on the date, and the accrual of depreciation as an operating expense with respect to the MSEI Generating Unit shall be deemed to commence on the date at the rate and in the manner and continue for the duration, as is specified in the document so designating such generating unit as a MSEI Generating Unit subject to this Agreement, whether or not such MSEI Generating Unit is actually in operation on such date, and (ii) such expenses as might be incurred in connection with permanent shut-down of any MSEI Generating Unit which is nuclear-fueled and, in the event of any such shut-down, for perpetual maintenance and surveillance of any such facility in accordance with, and as required by, all applicable regulations established by any governmental authority having jurisdiction. Payments to be made pursuant to this Section 4 shall be made monthly and shall be apportioned among the Parties whose Company Capability is less than its Capability Responsibility, as such terms are defined in the System Agreement and as determined in accordance with Section 10 of the System Agreement, in the ratio of each such Party’s deficiency to the sum of the deficiencies of all such deficient Parties; provided, however, that if in any month no Party has such a deficiency then the payments for such month shall be apportioned among the Parties in accordance with the ratio of their then respective Capability Responsibilities, as such term is defined in the System Agreement. For the purpose of this Agreement, the Capability of all MSEI Generating Units shall be included in the System Capability, as such terms are defined in the System Agreement. In the event the System Agreement is not then in effect, or has been amended or interpreted so that at least one or more of the Parties is not obligated to make the entire payment herein provided, then the Parties agree to make payments hereunder in accordance with the ratio of their then respective “Capability Responsibilities”, as such term is defined in Appendix A attached hereto and made a part hereof and not as defined in the System Agreement. Payments made by any Party to MSEI pursuant to this Section 4 shall be applied as a credit to such Party’s liability for payments to MSEI under the System Agreement.

5. For the purpose of determining MSEI’s expenses and the Parties’ obligations under Section 4 of this Agreement, it is hereby agreed that both Unit No. 1 and Unit No. 2 of the Project shall be deemed to be in operation on the earlier of December 31, 1982 (whether or not such Units, or either of them, are then completed or in operation) or the date on which either of such Units is first placed in commercial operation as determined under the System Agreement (or any agreement substituted therefor), and the accrual of depreciation and amortization with respect to the Project shall be deemed to commence on the earlier of such dates; that such accrual of depreciation and amortization shall be at the rate of 3.65% per annum of the aggregate amount properly chargeable (prior to the deduction therefrom of any depreciation or amortization) at the time with respect to the Project to Balance Sheet Accounts 101, 102, 103, 104, 105, 106, 107 (the aforementioned accounts being exclusive of land and land rights), 118, 120 (.1 through .5), 121, 123, 123.1, 124, 151, 152, 153, 154, 155, 156, 157, 163, 182, 183, 184, 185, 186, 187 and 188 of the Uniform System of Accounts and such other accounts as are properly subject to depreciation or amortization at the time pursuant to such Uniform System of Accounts; and that such accrual shall continue during each of the first 27.4 years after the date of commencement of such accrual hereunder whether or not such Units, or either of them, shall ever commence operation and/or remain in operation; provided, however, that if Unit No. 1 is placed in commercial operation prior to December 31, 1982 and Unit No. 2 is not completed and ready




for service at such time, then until December 31, 1982 or the date Unit No. 2 is placed in commercial operation, whichever date occurs earlier, expenditures included in Account 107 which are identified exclusively with the construction of Unit No. 2 may be excluded from the calculation of the aggregate amount subject to the accrual of depreciation and amortization pursuant to this paragraph.

6. The performance of the obligations of MSEI hereunder shall be subject to the receipt and continued effectiveness of all authorizations of governmental regulatory authorities at the time necessary to permit MSEI to perform its duties and obligations hereunder, including the receipt and continued effectiveness of all authorizations by governmental regulatory authorities at the time necessary to permit MSEI to finance, to construct or cause to be constructed, to operate or cause to be operated, and/or to make available to the Parties the Power available at any MSEI Generating Unit. MSEI shall use its best efforts to secure and maintain all such authorizations by governmental regulatory authorities.

7. The performance by each Party of its obligations hereunder shall be subject to the receipt and continued effectiveness of all authorizations of governmental regulatory authorities necessary at the time to permit it to perform its duties and obligations hereunder, including the receipt and continued effectiveness of all authorizations by governmental regulatory authorities necessary at the time to permit it to pay to MSEI, in consideration for the right to receive its share of the Power available at any MSEI Generating Unit, the amounts provided for in Section 4 of this Agreement. Each Party shall use its best efforts to secure and maintain all such authorizations by governmental regulatory authorities. Each Party shall, to the extent permitted by law, be obligated to perform its duties and obligations hereunder, subject to the then applicable provisions of this Section 7, (a) whether or not MSEI shall have received all authorizations of governmental regulatory authorities necessary to permit MSEI to perform its duties and obligations hereunder or under the System Agreement, (b) whether or not such authorizations, or any such authorization, shall at any time in question be in effect, (c) whether or not the System Agreement shall, from time to time, be amended, modified or supplemented or shall be cancelled or terminated or such Party shall have withdrawn therefrom and (d) so long as MSEI and such Party shall continue to be subsidiary companies of Middle South Utilities, Inc. (as said term is defined in Section 2(a)(8) of the Public Utility Holding Company Act of 1935) or a successor thereto, whether or not, at any time in question, MSEI shall have performed its duties and obligations under this Agreement or the System Agreement. In the event that MSEI or any Party shall cease to be such a subsidiary company, then and thereafter such Party shall not be relieved of its obligation to make payments pursuant to Section 4 of this Agreement by reason of the failure of MSEI to perform its duties and obligations hereunder or under the System Agreement occasioned by act of God, fire, flood, explosion, strike, civil or military authority, insurrection, riot, act of the elements, failure of equipment, or for any other cause beyond the control of MSEI.

8. To the extent they may legally do so, each Party and MSEI hereby irrevocably waive any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against it for specific performance of this Agreement by any other party to this Agreement, or by a trustee under any mortgage or other debt instrument which any such party to this Agreement may, subject to requisite regulatory authority, enter into, or by any receiver or trustee appointed for any such party under the bankruptcy or insolvency laws of any jurisdiction to which any such party may be subject; provided, however, that nothing herein contained shall be deemed to constitute a representation or warranty by any party to this Agreement that their respective obligations under this Agreement are, as a matter of law, subject to the equitable remedy of specific performance.

9. No Party shall be entitled to set off against any payment required to be made by such Party under this Agreement (i) any amounts owed by MSEI to such Party or (ii) the amount of any claim by such Party against MSEI. The foregoing, however, shall not affect in any other way the rights and remedies of




any Party with respect to any such amounts owed to such Party by MSEI or any such claim by such Party against MSEI.

10. The invalidity or unenforceability of any provision of this Agreement shall not affect the remaining provisions hereof.

11. This Agreement shall become effective forthwith. This Agreement may be amended, modified or terminated only with the consent of MSEI and of the Parties then having responsibility for two-thirds or more of the amounts to be paid under Section 4 hereof, and upon the receipt and continued effectiveness of all authorizations of governmental regulatory authorities at the time necessary.

12. This Agreement shall be binding upon the Parties and MSEI and their respective successors and assigns, but no assignment hereof, or, of any right to any funds due or to become due under this Agreement, shall in any event relieve any Party or MSEI of any of their respective obligations hereunder, or, in the case of the Parties, reduce to any extent their entitlement to receive Power available from time to time at any MSEI Generating Unit.

13. The agreements herein set forth have been made for the benefit of the Parties, MSEI and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement.





In Witness Whereof, the parties hereto have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
 
Arkansas Power & Light Company
By /s/ Reeves E. Ritchie
President
Witness:
     /s/ James A. Brignac
 
 
Arkansas-Missouri Power Company
By /s/ F. G. Smith
President
Witness:
     /s/ Cheryl B. Young
 
 
Louisiana Power & Light Company
By /s/ E. A. Rodgrique
President
Witness:
     /s/ Stephanie T. Tramonte
 
 
Mississippi Power & Light Company
By /s/ D. C. Lutken   
President
Witness:
     /s/ J. B. Bollinger
 
 
New Orleans Public Service Inc.
By /s/ William McCollam, Jr.
President
Witness:
     /s/ Barbara Plaisance
 
 
Middle South energy, Inc.
By /s/ F. W. Lewis
President
Witness:
     /s/ J. E. Ammon
 





APPENDIX A

Definition of “Capability Responsibility”
As Used in Availability Agreement
“Capability Responsibility” shall mean: with respect to any “Company”, the “System Capability” multiplied by the “Responsibility Ratio” for that Company.
“Company” shall mean one of the Middle South Utilities, Inc.’s System operating companies, as defined in the Availability Agreement; “System Capability” shall mean the arithmetical sum in megawatts of the individual “Company Capabilities”; “Company Capabilities” shall be the net output in megawatts that can be produced by all of a Company’s generating units, each unit of which consists of an electric generator, together with its prime mover and all auxiliary and appurtenant devices and equipment designed to be operated as a unit for the production of electric power and energy, under the conditions specified by the administrative organization then having the authority to so specify, under either the System Agreement or any similar and succeeding agreement to which such Company is a party, or the input in megawatts available under contract to such Company from a supplying source; provided, however, that each Company shall be deemed to have at least one Kilowatt of Capability, whether or not it has any such Capability; “Responsibility Ratio” shall mean the ratio obtained by dividing a “Company Load Responsibility” by the “System Load Responsibility”; “Company Load Responsibility” shall mean (a) the average of the four highest clock-hour demands in megawatts of a Company’s system, each on a different day, occurring during the twelve month period ending with the current month, but not less than 90% of the average of the four highest such demands occurring during the twenty-four (24) month period ending with the current month, where each such demand shall represent the simultaneous hourly input from all sources into the system of a company, less the sum of the simultaneous hourly outputs to the system of other interconnected utilities (Company demands shall include firm power supplied to other systems for its own account), (b) less the power supplied to others as sales for the joint account of all Companies, (c) less the contractual amount of firm purchases with reserves available during the month from other systems for its own account; provided, however, that each Company shall be deemed to have a Load Responsibility of at least one kilowatt, whether or not such Company has any such Load Responsibility; “System Load Responsibility” shall be the arithmetical sum in megawatts of the individual Company Load Responsibilities.





Exhibit 10(b)11
No. 1
CERTAIN RIGHTS OF THE LESSOR UNDER THIS FACILITY LEASE HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF THE INDENTURE TRUSTEE UNDER TRUST INDENTURE, DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF FACILITY LEASE NO. 1 DATED AS OF DECEMBER 1, 1988. THIS FACILITY LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. SEE SECTION 22(e) OF THIS FACILITY LEASE FOR INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.



FACILITY LEASE NO. 1
dated as of December 1, 1988
between
MERIDIAN TRUST COMPANY
and STEPHEN M. CARTA,
not in their individual capacities, but solely as Owner Trustee
under Trust Agreement No. 1, dated as of December 1, 1988,
with Public Service Resources Corporation,

Lessor

and

SYSTEM ENERGY RESOURCES, INC.,
Lessee

Sale and Leaseback of an Undivided Interest in
Grand Gulf Nuclear Station Unit No. 1








TABLE OF CONTENTS

P ARTIES         Page
i

Section 1.
Definitions      4
Section 2.
Lease of Undivided Interest and Sublease of Ground Lease Property; Term; Personal Property      4
(a)
Lease of Undivided Interest and Sublease of Ground Lease Property      4
(b)
Term      4
(c)
Personal Property      4
(d)
Description      5
Section 3.
Rent; Adjustments to Rent      5
(a)
Basic Rent      5
(b)
Supplemental Rent      6
(c)
Form of Payment      6
(d)
Adjustments to Rent for Change in Tax Rate      7
(e)
Other Adjustments to Rent      7
(f)
Computation of Adjustments      8
(g)
Sufficiency of Basic Rent and Supplemental Rent      9
(h)
Rent Differential      9
(i)
Application of Drawings under Letter of Credit      9
(j)
Rent for Ground Lease Property      10
Section 4.
Net Lease      10
Section 5.
Surrender of Leasehold Interest in the Undivided Interest      12
(a)
Return of the Undivided Interest      12
(b)
Inability to Return      13
(c)
Disposition Services      14
Section 6.
Warranty of the Lessor      14
(a)
Quiet Enjoyment      14
(b)
Disclaimer of Other Warranties      14
(c)
Enforcement of Certain Warranties      15
Section 7.
Liens      16
Section 8.
Operation and Maintenance; Inspection; Capital Improvements      16
(a)
Operation and Maintenance      16
(b)
Inspection      17
(c)
Capital Improvements      17
(d)
Reports      18
(e)
Title to Capital Improvements      18
(f)
Funding of the Cost of Capital Improvements      19




Section 9.
Event of Loss; Deemed Loss Event      21
(a)
Damage or Loss      21
(b)
Repair      21
(c)
Payment of Casualty Value      21
(d)
Payment of Special Casualty Value      21
(e)
Requisition of Use      22
(f)
Termination of Lease Term      22
(g)
Application of Payments on an Event of Loss      22
(h)
Application of Payments Not Relating to an Event of Loss      23
(i)
Other Dispositions      23
Section 10.
Insurance      23
(a)
Required Insurance      23
(b)
Other Insurance      27
Section 11.
Rights to Assign or Sublease      27
(a)
Assignment or Sublease by the Lessee      27
(b)
Assignment by Lessor as Security for Lessor’s Obligations      27
Section 12.
Lease Renewal      28
Section 13.
Notices for Renewal or Purchase; Purchase Options; Determination of Fair Market Value      28
(a)
Expiration of Basic Lease Term      28
(b)
Expiration of Renewal Term      29
(c)
Purchase Option at Expiration of the Lease Term      29
(d)
Purchase of the Undivided Interest; Payment, Etc      29
(e)
Determination of Fair Market Value      29
(f)
Purchase Option for Significant Expenditures      29
(g)
Periodic Purchase Option      30
Section 14.
Optional Termination      31
(a)
Termination Notice      31
(b)
Events on the Termination Date      31
(c)
Early Termination Notice      32
Section 15.
Events of Default      32
Section 16.
Remedies      35
(a)
Remedies      35
(b)
No Release      37
(c)
Remedies Cumulative      38
(d)
Exercise of Other Rights or Remedies      38
Section 17.
Notices      38
Section 18.
Successors and Assigns      38




Section 19.
Right to Perform for Lessee      38
Section 20.
Additional Covenants      39
Section 21.
Ground Lease      39
Section 22.
Amendments and Miscellaneous      39
(a)
Amendments in Writing      39
(b)
Survival      39
(c)
Severability of Provisions      40
(d)
True Lease      40
(e)
Original Lease      40
(f)
Governing Law      40
(g)
Headings      41
(h)
Concerning the Owner Trustee      41
(i)
Lien of the Indenture      41
(j)
Counterpart Execution      41


Schedule 1 Basic Rent Percentages [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Schedule 2 Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Schedule 3 Special Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Schedule 4 Net Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Schedule 5 Net Special Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Schedule U1 Description of Unit 1 [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Schedule PS Description of Plant Site [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 1.]
Appendix A Definitions








No. 1
FACILITY LEASE No. 1
This Facility Lease No. 1, Dated As Of December 1, 1988, between Meridian Trust Company, a Pennsylvania trust company (“MTC”), not in its individual capacity, but solely as Corporate Owner Trustee and Stephen M. Carta, not in his individual capacity but solely as Individual Owner Trustee (collectively, the “ Lessor ”), under the Trust Agreement (such term and all other capitalized terms used herein without definitions having the respective definitions to which reference is made in Section 1 below), and System Energy Resources, Inc., an Arkansas corporation (the “ Lessee ”),
W i t n e s s e t h :
Whereas, the Lessor owns the Undivided Interest;
Whereas, the Lessee desires to lease from the Lessor the Undivided Interest and to sublease from the Lessor the Ground Lease Property, in each case on the terms and conditions set forth herein; and
Whereas, the Lessor is willing to lease the Undivided Interest and to sublease the Ground Lease Property to the Lessee on the terms and conditions set forth herein;
Now, Therefore, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions.
For purposes hereof, capitalized terms used herein shall have the meanings assigned to such terms in Appendix A hereto. References in this Facility Lease to sections, paragraphs, schedules and clauses are to sections, paragraphs, schedules and clauses in and to this Facility Lease unless otherwise indicated.
Section 2.
Lease of Undivided Interest and Sublease of Ground Lease Property; Term; Personal Property.

(a) Lease of Undivided Interest and Sublease of Ground Lease Property. Upon the terms and subject to the conditions of this Facility Lease, the Lessor hereby leases to the Lessee, and the Lessee hereby leases from the Lessor, the Undivided Interest, and the Lessor hereby subleases to the Lessee, and the Lessee hereby subleases from the Lessor, the Ground Lease Property.

(b) Term. The term of this Facility Lease shall begin on the Closing Date and shall end on the last day of the Lease Term.

(c) Personal Property. It is the express intention of the Lessor and the Lessee that title to the Undivided Interest and every portion thereof is severed, and shall be and remain severed, from title to the real estate constituting the Plant Site. The Lessor and the Lessee intend that the Undivided Interest shall constitute personal property to the maximum extent permitted by Applicable Law.

(d) Description. The Undivided Interest is an undivided ownership interest (equal to the Undivided Interest Percentage) in Unit 1. Unit 1 is described in Schedule U1 hereto. The Plant Site is described in Schedule PS to the Ground Lease. A copy of Schedule PS is attached hereto.





Section 3. Rent; Adjustments to Rent.

(a) Basic Rent. The Lessee shall pay to the Lessor, as basic rent (“Basic Rent”) for the Undivided Interest, without demand, the following amounts:

(i) on July 15, 1989 and on each Basic Rent Payment Date thereafter to, and including, July 15, 2015, an amount equal to (A) the percentage of Facility Cost set forth opposite such Basic Rent Payment Date on Schedule 1, as such percentage of Facility Cost may be adjusted from time to time pursuant to Section 3(d) or Section 3(e), plus or minus (B) the Rent Differential, if any;

(ii) if the Lessee shall be entitled to, and shall, elect the Fixed Rate Renewal Term, on January 15, 2016 and on each Basic Rent Payment Date thereafter during such Renewal Term, an amount equal to (A) the sum of one-half of all payments of Basic Rent payable pursuant to clause (i) of this Section 3(a), divided by (B) 53;

(iii) if the Lessee shall be entitled to, and shall elect, a Fair Market Renewal Term, on the Basic Rent Payment Date next succeeding the commencement of such Renewal Term and on each Basic Rent Payment Date thereafter during such Renewal Term, an amount equal to the Fair Market Rental Value for such Renewal Term; and

(iv) if this Facility Lease shall be extended pursuant to Section 5(b) hereof, on each Basic Rent Payment Date thereafter during such extended Lease Term and on the last day of such extended Lease Term, an amount equal to the Fair Market Rental Value for such extended period, proportionately reduced if the last period is not a full six month Rental Period.

Payments made on each Basic Rent Payment Date shall be in satisfaction of the Lessee’s obligation to pay Basic Rent for the Rental Period (as hereinafter defined) ending on the day immediately preceding such Basic Rent Payment Date except that, during the Basic Lease Term, that portion of a payment to be made on a Basic Rent Payment Date which is indicated on Schedule 1 hereto as being made in arrears shall be in satisfaction of the Lessee’s obligation to pay Basic Rent for the Rental Period ending on the day immediately preceding such Basic Rent Payment Date, and that portion of such payment which is indicated on such Schedule as being made in advance shall be in satisfaction of the Lessee’s obligation to pay Basic Rent for the Rental Period commencing on such Basic Rent Payment Date. Subject to the foregoing, the term “Rental Period” shall mean the six month period ending on the day immediately preceding a Basic Rent Payment Date, or, in the case of the payment to be made on July 15, 1989, the period commencing with the Closing Date and ending on July 14, 1989. If an interest payment on any Note shall be due on a date other than a Basic Rent Payment Date, the Lessee shall pay an amount of Basic Rent on such date equal to such interest payment and such payment shall be credited against the Basic Rent due on the Basic Rent Payment Date next succeeding the date of such interest payment.
It is hereby recognized that amounts payable as Casualty Value or Special Casualty Value have been calculated to include the amount, if any, otherwise payable as Basic Rent on the date when payments of Casualty Value or Special Casualty Value (or amounts determined by reference thereto) are due hereunder. Accordingly, to the extent the Lessee has paid in full the Casualty Value or Special Casualty Value (or an amount determined by reference thereto) which is due on any date, the Lessee shall not be required to pay any additional amount in respect of Basic Rent which would otherwise be payable on such date pursuant to this Section 3(a).




(b) Supplemental Rent. The Lessee shall pay the following amounts as supplemental rent (“ Supplemental Rent ”):

(i) when due or, where no due date is specified, on demand, any amount (other than Basic Rent, Casualty Value and Special Casualty Value) which the Lessee assumes the obligation to pay or agrees to pay to, or for the account of, the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee or any Indemnitee under this Facility Lease (including amounts due under Section 3(j)), any other Transaction Document or the Collateral Trust Indenture;

(ii) when due, any amount payable hereunder or under any of the other Transaction Documents as Casualty Value or Special Casualty Value and an amount equal to any premium or prepayment penalty with respect to the Notes, including any payments of the type identified in Section 8 of the Initial Series Notes or similar provisions of any Additional Notes; and

(iii) on demand and in any event not later than the Basic Rent Payment Date next succeeding the date such amounts shall be due and payable hereunder, to the extent permitted by Applicable Law, (A) interest at the Overdue Interest Rate on that portion of the payment of Basic Rent or Supplemental Rent distributable pursuant to clause “first” of Section 5.1 or clause “second” of Section 5.3 of the Indenture (determined prior to the computation of interest on overdue payments referred to in such clauses), and (B) interest at the Penalty Rate on the balance of any such payment of Basic Rent or Supplemental Rent (including, without limitation, to the extent permitted by Applicable Law, interest payable pursuant to this clause (iii) not paid when due (without regard to any period of grace) for any period for which the same shall be overdue).

The Lessor shall have all rights, powers, and remedies provided for in this Facility Lease, at law, in equity or otherwise, in the case of non-payment of Basic Rent or Supplemental Rent.
(c) Form of Payment. Subject to Section 11(b), each payment of Rent under this Facility Lease shall be made in immediately available funds no later than 12:00 noon, local time at the place of receipt, on the date each such payment shall be due and payable hereunder and shall be paid either (i) in the case of payments other than Excepted Payments, to the Lessor at its address determined in accordance with Section 17, or at such other address as the Lessor may direct by notice in writing to the Lessee, or (ii) in the case of Excepted Payments, to such Person as shall be entitled to receive such payment at its address determined as provided in the Participation Agreement, or at such other address as such Person may direct by notice in writing to the Lessee. If the date on which any payment of Rent is due hereunder shall not be a Business Day, the payment otherwise due thereon shall be due and payable on the next succeeding Business Day, with the same force and effect as if paid on the nominal date provided in this Facility Lease; provided, however, that if any scheduled Basic Rent Payment Date shall not fall on a Business Day and if interest due on the Notes then Outstanding shall be computed to, but excluding, the Business Day next succeeding such Basic Rent Payment Date, the amount of Basic Rent payable on such succeeding Business Day shall include, in addition to amounts of Basic Rent otherwise due on such Basic Rent Payment Date, an amount equal to the interest accrued on such Notes from and including such Basic Rent Payment Date to but excluding such succeeding Business Day.

(d) Adjustments to Rent for Change in Tax Rate. If (i) there is any change (a “Tax Rate Change”) in the Code enacted into law after the Closing Date which results in the marginal federal income tax rates applicable to corporations (“Tax Rates”) differing from the rate assumed to be applicable in the Pricing Assumptions as in effect on the Closing Date and (ii) the Owner Participant shall have caused the




reoptimization of the amortization schedule of the Notes pursuant to Section 2(e) of the Participation Agreement, then Basic Rent and the Value Schedules attached hereto may be adjusted, at the option of the Lessor, upward or downward, to preserve Net Economic Return, each such adjustment to be made pursuant to, in accordance with and subject to the limitations contained in Section 3(f) hereof, except as modified by this subsection (d); provided, however, that no such adjustment shall (i) result in the net present value of the scheduled payments of Basic Rent exceeding the net present value of the scheduled payments of Basic Rent prior to such adjustment, in each case when discounted on a semi-annual basis at an annual interest rate of 11% or (ii) in the Lessee’s reasonable opinion, cause adverse regulatory accounting or rate regulation treatment.

(e) Other Adjustments to Rent. Basic Rent and the Value Schedules shall be adjusted (upward or downward) to preserve Net Economic Return (and, to the extent Net Economic Return is preserved, to minimize the net present value of Basic Rent payments), (i) following any Supplemental Financing, (ii) if Transaction Expenses paid by the Lessor pursuant to Section 14 of the Participation Agreement are not equal to 2.5% of the Purchase Price (any such adjustment to be made promptly following the second Basic Rent Payment Date), (iii) if the Closing Date occurs on a date other than December 22, 1988, (iv) in connection with the issuance of any Fixed Rate Notes and (v) as a result of (A) any change in the Code, which is enacted and effective on or before the Closing Date; (B) any change in (or addition to) the Regulations which is adopted and becomes effective on or before the Closing Date and (C) the finalization of any Proposed Regulation under Section 467 of the Code relating to the permissible range for variances in annual rents which proposal is published prior to the Closing Date and is promulgated thereafter as a final Regulation with an effective date prior to the Closing Date if and to the extent that such final Regulation would adversely affect Net Economic Return (any change in the Code or the Regulations referred to in subclause (A), (B) or (C) above being herein referred to as a “Tax Law Change”). The Lessee consents and agrees that any adjustments pursuant to this Section 3(e) shall satisfy, in the opinion of the Owner Participant’s Special Tax Counsel or other independent counsel selected by the Owner Participant and reasonably satisfactory to the Lessee, the provisions of Section 4.07(1) and (2) of Revenue Procedure 75-28, Section 467 of the Code and any other applicable statutes, regulations, revenue procedures, revenue rulings or technical information releases relating to the subject matter of such Revenue Procedure and Code section. Notwithstanding the foregoing, (x) in the event of the issuance prior to the Closing Date of any Regulation under Section 467 of the Code whether in proposed, temporary or final form, or (y) if any Regulation under Section 467 of the Code is issued in proposed, temporary or final form and is not applicable to the transactions contemplated by this Facility Lease as of the Closing Date as a result of the effective date provisions or transitional rules of such Regulation but which, as a result of any adjustment to Basic Rent hereunder, becomes applicable, then, in either case, Basic Rent and the Value Schedules shall be adjusted (upward or downward) to preserve Net Economic Return, while complying with any such Regulation, but such adjustments shall in no case result in the net present value of Basic Rent payments as of the Closing Date exceeding 91.19% of Facility Cost, when discounted on a semi-annual basis at an annual interest rate of 11%. The Value Schedules shall be appropriately adjusted to reflect any Indemnity Payment that the Lessee becomes required to pay under the Tax Indemnification Agreement.

(f) (i)      Computation of Adjustments. Upon the occurrence of an event requiring an adjustment to Basic Rent and the Value Schedules pursuant to subsection (d) or (e) of this Section 3, the Owner Participant shall compute, on a basis consistent with the original calculations (which calculations were computed using the Pricing Assumptions) and furnish to the Lessee, the Loan Participants, the Lessor, the Indenture Trustee and any Collateral Trust Trustee the revised amounts and percentages (“Revised Rent Amounts”) together with a certificate of an authorized financial representative of the Owner Participant to the effect that the basis of the computation thereof is consistent with the requirements of this subsection (f) (but which, in the case of an adjustment pursuant to subsection (d) of this Section 3, shall be subject to the Lessee’s confirmation




that such adjustments avoid, in the Lessee’s reasonable opinion, adverse regulatory accounting or rate regulation treatment), which Revised Rent Amounts shall be implemented and Basic Rent and such Value Schedules shall be adjusted accordingly upon the later of (A) delivery of the computations of such Revised Rent Amounts or (B) if the Letter of Credit is in effect, 30 days after the delivery thereof, and, in either case, effective as of the date of occurrence of the event requiring such adjustment and shall remain effective subject to any change which may be required as a consequence of the verification procedure set forth in paragraph (ii) of this Section 3(f) or as a consequence of any event thereafter requiring further adjustment pursuant to Section 3(d) or 3(e).

(i) Verification Procedure. Upon request of the Lessee, such Revised Rent Amounts and the bases of the computation thereof shall be subject to independent verification by a firm of nationally recognized independent public accountants selected by the Owner Participant and reasonably acceptable to the Lessee. Such accountants shall either (A) confirm to the Lessee and the Lessor in writing that such Revised Rent Amounts were computed on a basis consistent with the requirements of this subsection (f), or (B) compute and provide to the Lessee, the Lessor, the Owner Participant, each Loan Participant, the Indenture Trustee and any Collateral Trust Trustee, Revised Rent Amounts which are computed on such a basis. The Revised Rent Amounts, as so confirmed or computed (as the case may be) shall be conclusive and binding upon the Lessee, the Lessor, the Owner Participant, each Loan Participant, the Indenture Trustee and any Collateral Trust Trustee. The cost of any such verification shall be borne by the Lessee unless such accountants shall require a downward adjustment to the Revised Rent Amounts as computed and furnished by the Owner Participant which is greater than 5% of the amount of the adjustment to Basic Rent so furnished by the Owner Participant, in which case such cost shall be paid by the Owner Participant. If, as a result of any such verification, it is determined that the Lessee has made any overpayment or underpayment of Basic Rent or Supplemental Rent, then such overpayment or underpayment shall be factored into revised computations of the Revised Rent Amounts. Each adjustment pursuant to paragraph (d) or (e) of this Section 3 shall be evidenced by the execution and delivery of a supplement to this Facility Lease in form and substance satisfactory to the Lessee and the Owner Participant, but shall be effective as provided herein without regard to the date on which each supplement to this Facility Lease is so executed and delivered, and the parties hereto shall do such further acts and things as may be reasonably required to effectuate the execution and delivery of such supplement.

(g) Sufficiency of Basic Rent and Supplemental Rent. Notwithstanding any other provision of this Facility Lease, any other Transaction Document or any Financing Document, (i) the amount of Basic Rent payable on each Basic Rent Payment Date shall be at least equal to the aggregate scheduled amount of principal, premium, if any, and accrued interest then payable on all Notes then Outstanding and (ii) each payment of Casualty Value and Special Casualty Value shall be in no event less (when added to all other amounts required to be paid by the Lessee under this Facility Lease in respect of any Event of Loss, Deemed Loss Event or termination of this Facility Lease) than an amount sufficient, as of the date of payment, to pay in full the principal of, premium, if any, and interest on, all Notes Outstanding on and as of such date of payment (taking into account any assumption of the Notes by the Lessee permitted by the Indenture). In no event shall the provisions of this Section, or any other provision of any Transaction Document, constitute a guaranty or assumption by the Lessee of the Notes (other than in connection with an assumption by the Lessee effected pursuant to Section 3.9(b) of the Indenture).

(h) Rent Differential. Each installment of Basic Rent shall be increased or decreased, as the case may be, by the Rent Differential (as hereinafter defined), if any. The term “Rent Differential” shall mean, as of any Basic Rent Payment Date with respect to the applicable Rental Period, an amount equal to the difference between (i) the aggregate amount of interest actually accrued on all Outstanding Notes during such Rental Period and (ii) the aggregate amount of interest that would have accrued on such Notes if such




Notes had at all times during the Rental Period borne interest at the interest rate assumed in the Pricing Assumptions then in effect. As of any Basic Rent Payment Date, (x) if the amount determined in accordance with clause (i), above, is greater than the amount determined in accordance with clause (ii) above, the amount of Basic Rent due on such date shall be increased by the Rent Differential, and (y) if the amount determined in accordance with clause (ii) exceeds the amount determined in accordance with clause (i), the amount of Basic Rent due on such date shall be decreased by the Rent Differential.

(i) Application of Drawings under Letter of Credit. Drawings under the Letter of Credit by the Owner Participant shall be deemed to be in satisfaction of the Lessee’s obligation to pay the Equity Portion of Rent to the extent of such drawing (but if a drawing is made by reason of an Event of Default, such drawing shall not cure such Event of Default) and shall be applied as follows:

(A) in the case of a drawing by reason of a Deemed Loss Event, as a reduction of the Special Casualty Value payable under Section 9(d);

(B) in the case of a drawing by reason of an Event of Loss, as a reduction of the Casualty Value payable under Section 9(c);

(C) in the case of a drawing by reason of the occurrence of a “ Date of Early Termination ” as defined in the Initial Letter of Credit (or an analogous event as described in any subsequent Letter of Credit), to the liquidated damages payable under Section 16(a)(v); and

(D) in the case of a Partial Draw made by reason of an Event of Default, to the Rent obligation of the Lessee which triggered such Event of Default, in such order and amounts as the Owner Participant may elect; provided , however, that if the Owner Participant has made a Partial Draw on the Letter of Credit in an amount which exceeds the Equity Portion of Rent and if the Owner Participant shall have delivered such excess to the Indenture Trustee in accordance with Section 6.8(a) of the Indenture, such drawing shall be in satisfaction of the Lessee’s obligation to pay Rent to the extent of such drawing (but such drawing shall not cure the Event of Default giving rise to such drawing unless and until the Letter of Credit shall have been reinstated by the full amount of such Partial Draw).

(j) Rent for Ground Lease Property. During the term of this Facility Lease, the Lessee shall pay to the Lessor as rent for the sublease of the Ground Lease Property an amount equal to the amount due as rent under Section 3.01 of the Ground Lease, which amount shall be offset against such amount due by the Lessor under said Section 3.01.

Section 4. Net Lease.

This Facility Lease is a net lease and the Lessee hereby acknowledges and agrees that (a) the Lessee’s obligation to pay all Rent hereunder shall be absolute, unconditional and irrevocable, (b) the rights of the Lessor to such Rents shall be absolute, unconditional and irrevocable, and (c) neither the Lessee’s obligation to pay Rent hereunder nor the rights of the Lessor to receive such Rent shall be affected by any circumstances of any character, including, without limitation, (i) any set-off, abatement, counterclaim, suspension, recoupment, reduction, rescission, defense or other right or claim which the Lessee may have against the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Issuing Bank, any Loan Participant, SMEPA, any vendor or manufacturer of any equipment or assets included in the Undivided Interest, Unit 1, the Plant, any Capital Improvement, the Plant Site, or any part of any thereof, or any other Person for any reason whatsoever, (ii) any defect in or failure of the title, merchantability, condition, design,




compliance with specifications, operation or fitness for use of all or any part of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site, (iii) any damage to, or removal, abandonment, decommissioning, shutdown, salvage, scrapping, requisition, taking, condemnation, loss, theft or destruction of all or any part of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site or any interference, interruption or cessation in the use or possession thereof or of the Undivided Interest by the Lessee or by any other Person (including, but without limitation, SMEPA) for any reason whatsoever or of whatever duration, (iv) any restriction, prevention or curtailment of or interference with any use of all or any part of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site, (v) to the maximum extent permitted by law, any insolvency, bankruptcy, reorganization or similar proceeding by or against the Lessee, the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Loan Participant, SMEPA, any Issuing Bank or any other Person, (vi) the invalidity, illegality or unenforceability of this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements, the Reimbursement Agreement, or any other instrument referred to herein or therein or any other infirmity herein or therein or any lack of right, power or authority of the Lessor, the Lessee, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Loan Participant, any Issuing Bank or any other Person to enter into this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements or the Reimbursement Agreement or to perform the obligations hereunder or thereunder or the transactions contemplated hereby or thereby, or any doctrine of force majeure, impossibility, frustration, failure of consideration, or any similar legal or equitable doctrine that the Lessee’s obligation to pay Rent is excused because the Lessee has not received or will not receive the benefit for which it bargained, it being the intent of the Lessee to assume all risks from all causes whatsoever that it does not receive such benefit, (vii) the breach or failure of any warranty or representation made in this Facility Lease or any other Transaction Document or any Financing Document or the Reimbursement Agreement by the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Loan Participant, any Issuing Bank or any other Person, (viii) any amendment or other change of, or any assignment of rights under, this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements, or any waiver, action or inaction under or in respect of this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements, or any exercise or non-exercise of any right or remedy under this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements or the Reimbursement Agreement, including, without limitation, the exercise of any foreclosure or other remedy under the Indenture, the Collateral Trust Indenture or this Facility Lease, or the sale of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site or any part thereof or any interest therein or (ix) any other circumstance or happening whatsoever whether or not similar to any of the foregoing. The Lessee acknowledges that by conveying the leasehold estate created by this Facility Lease to the Lessee and by putting the Lessee in possession of the Undivided Interest and subleasing to the Lessee the Ground Lease Property, the Lessor has performed all of the Lessor’s obligations under and in respect of this Facility Lease, except the covenant contained in Section 6(a). The Lessee hereby waives, to the extent permitted by Applicable Law, any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Facility Lease or to effect or claim any diminution or reduction of Rent payable by the Lessee hereunder, except in accordance with the express terms hereof. If for any reason whatsoever this Facility Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Lessee nonetheless agrees, to the maximum extent permitted by law, to pay to the Lessor or other Person entitled thereto an amount equal to each installment of Basic Rent and all Supplemental Rent at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Lease not been terminated in whole or in part. Each payment of Rent made by the Lessee hereunder shall be final and the Lessee shall not seek or have any right to recover all or any part of such payment from the Lessor or any other Person for any reason whatsoever except with respect to overpayments of Rent in respect of which the Lessee is entitled to reimbursement under Section 3(f). All covenants, agreements and undertakings of the Lessee herein shall




be performed at its cost, expense and risk unless expressly otherwise stated. Nothing in this Section 4 or elsewhere shall be construed as a guaranty by the Lessee of any residual value in the Undivided Interest or as a guaranty of the Notes or any Bonds.
Section 5. Surrender of Leasehold Interest in the Undivided Interest.

(a) Return of the Undivided Interest. Unless the Lessee has theretofore acquired or is required to acquire the Undivided Interest as provided herein, in Section 10(b)(3)(ix) of the Participation Agreement or Article V of the Assignment and Assumption Agreement, (i) on the Lease Termination Date, the Lessee will surrender possession of the Undivided Interest to the Lessor (or to a Person specified by the Lessor to the Lessee in writing not less than 6 months prior to the Lease Termination Date) and (ii) on or prior to the tenth day prior to the Lease Termination Date, furnish to the Lessor: (A) copies certified by a senior officer of the Lessee of the agreements for substitute power, transmission access and availability of the Unit 1 Retained Assets contemplated by Article V of the Assignment and Assumption Agreement and all Governmental Action (including, without limitation, appropriate amendments to the License) necessary to effect such surrender and receipt of possession and permitting the Lessor and the Owner Participant (or such Person specified by the Lessor) to possess the Undivided Interest with or without the continued involvement of the Lessee (except as operator of Unit 1), but without the Lessor or the Owner Participant being required to change their respective business operations or corporate structures as a result of such surrender and receipt of possession (unless such change or modification is limited to the creation of a subsidiary corporation that does not, in the opinion of the Owner Participant, cause the Lessor or the Owner Participant to suffer adverse tax, regulatory, economic or other consequences or otherwise to suffer any real or potential adverse effect on its business or that of its Affiliates), which Governmental Action shall be in full force and effect; and (B) an opinion of counsel experienced with NRC and other nuclear and utility matters reasonably satisfactory to the Owner Participant to the effect that (1) the Lessee has obtained all Governmental Action and action under the Plant Agreements necessary to effect such surrender by the Lessee and receipt of possession by the Lessor (or by the Person so specified by the Lessor) of the Undivided Interest and without regard to the continued involvement of the Lessee (except as operator of Unit 1), (2) such Governmental Action is in full force and effect and not subject to any judicial or administrative contest, challenge or review and (3) in the case in which such surrender is to be made to the Lessor, the Lessor and the Owner Participant will not, solely by reason of such return, be or become subject to regulation as an “electric utility,” an “electric utility company,” a “public utility,” a “holding company” or a “public utility holding company” by any Federal, state or local public utility commission or other regulatory body, authority or group (including, without limitation, the SEC or FERC). At the time of such return the Lessee shall pay or have paid all amounts due and payable, or to become due and payable, under the Plant Agreements to the extent allocable or chargeable (whether or not payable during or after the Lease Term) to the Undivided Interest or the Ground Lease Property in respect of any period or periods ending on or prior to the Lease Termination Date, and the Undivided Interest shall be free and clear of all Liens (other than Permitted Liens described in the following clauses of the definition of Permitted Liens, namely clauses (i), (v) (other than those for which arrangements for the payment thereof satisfactory to the Lessor and the Owner Participant have not been made), (vi) (other than Indenture Trustee’s Liens), (vii) (other than those arising by, through or under the Lessee alone unless arrangements for the payment thereof satisfactory to the Lessor and the Owner Participant have been made), (viii) (other than as aforesaid with respect to clause (v)), (ix), (x), (xi), (xii), and (xiii)) and in the condition and state of repair required by Section 8. In the event that on or prior to the Lease Termination Date there shall have occurred a default under the Plant Agreements by any party thereto (other than the Lessee) and such default shall not have been cured by the defaulting party, then (x) the Lessee agrees to indemnify and hold the Lessor (and each successor, assign and transferee thereof) harmless against any and all obligations under the Plant Agreements with respect to contributions or payments required to be made thereby as a result of such default and (y) the Lessor (and each successor, assign and transferee thereof) agrees to reimburse




the Lessee for all amounts paid by it pursuant to the foregoing clause (x) to the extent, but only to the extent, that the Lessor (or such successor, assign or transferee) shall have actually received proceeds from such defaulting party or from the other non-defaulting parties as a result of such default and, to the extent the Lessor (or such successor, assign or transferee) shall have received such proceeds, the amount to be reimbursed to the Lessee pursuant to this clause (y) shall include interest at the Prime Rate from the date of any receipt of the proceeds described above through the date of reimbursement of such amount pursuant to this clause (y).

The Lessor and the Owner Participant agree to use their best efforts to assist the Lessee in its efforts to obtain all required Governmental Action consistent with the provisions of this Section 5(a).
(b) Inability to Return. If the Lessee shall have notified the Lessor and the Owner Participant, not less than twenty-one months prior to the Lease Termination Date, that, due to the nature of the business operations or corporate structure of the Lessor or the Owner Participant, the Lessee will be unable to satisfy the conditions set forth in subsection (a) to the surrender by the Lessee of possession of the Undivided Interest, the Lessor and the Owner Participant shall use their reasonable best efforts to sell or re-lease the Undivided Interest by the Lease Termination Date to a third party the business operations or corporate structure of which is such as to enable the Lessee to satisfy such conditions (other than the condition set forth in Section 5(a)(ii)(B)(3)) (a “Qualified Third Party”) and the Lessee agrees to cooperate fully in connection with such sale or re-lease. The Lessor hereby expressly acknowledges that if the notice referred to above in this subsection (b) has been given, the Lessee shall have complied with its covenant of cooperation set forth herein and in subsection (c) of this Section 5, and the Lessor and the Owner Participant, despite their respective best efforts, shall be unable to sell or re-lease the Undivided Interest to a Qualified Third Party by the Lease Termination Date, the failure of the Lessee to surrender possession of the Undivided Interest in accordance with Section 5(a), in and of itself, shall not constitute a Default or Event of Default under this Facility Lease, anything in this Facility Lease to the contrary notwithstanding; and, in such case, the Lessor’s exclusive remedy in respect of such failure shall be to receive from the Lessee on or prior to the tenth day prior to the Lease Termination Date all Rent due on the Lease Termination Date plus an amount equal to the excess of (i) the Fair Market Sales Value of the Undivided Interest over (ii) an amount equal to the product of (x) the Estimated Cost of Decommissioning and (y) the Undivided Interest Percentage, but in no event less than $1.00. If the Lessee shall have made such payment, the Lessor shall on the Lease Termination Date Transfer the Undivided Interest to the Lessee, or an Affiliate thereof, as may be designated by the Lessee in the Lessee’s Notice in effect immediately prior to such Transfer, or if no Lessee’s Notice shall then be in effect, to the Lessee, and pay to the Lessee the earnings derived from the investment of such payment in any Permitted Investment, in accordance with instructions delivered to the Lessor by the Lessee. Notwithstanding the foregoing, if, on or prior to a date which is three months prior to the scheduled expiration of this Facility Lease, the Lessor or the Owner Participant shall have identified, in a written notice to the Lessee, a Qualified Third Party willing to purchase the Undivided Interest and the conditions set forth in Section 5(a) hereof have not been satisfied by the Lessee on or prior to the scheduled expiration of this Facility Lease, the Lease Term shall be automatically extended until the earliest of (i) one year after the date of the scheduled expiration of this Facility Lease, (ii) a date specified by the Owner Participant and (iii) the date which is ten (10) Business Days after the date on which the Lessor has been notified by the Lessee that such conditions have been met. The Basic Rent payable by Lessee during such extended Lease Term shall be the Fair Market Rental Value of the Undivided Interest. If the Lessee shall not have received the notice referred to in the second preceding sentence by the date therein specified, the Lessee shall be entitled to assume that the Lessor and the Owner Participant shall be unable to sell or re-lease the Undivided Interest to a Qualified Third Party.




If the Lessee has failed to give the notice referred to in this subsection (b) or shall have breached its covenant of cooperation set forth herein or in subsection (c) of this Section 5, then the failure of the Lessee to surrender possession of the Undivided Interest in accordance with Section 5(a) shall constitute an Event of Default under this Facility Lease.
(c) Disposition Services. The Lessee agrees that if it shall not elect to exercise either an option to renew or purchase upon the expiration of the Basic Lease Term or any Renewal Term as provided in Sections 12 and 13, respectively, then during the last twenty-four months of the Lease Term, the Lessee will fully cooperate with the Lessor in connection with the Lessor’s efforts to lease or dispose of the Undivided Interest including using the Lessee’s reasonable efforts to lease or dispose of the Undivided Interest. The Lessor agrees to reimburse the Lessee for reasonable costs and expenses incurred by it at the request of the Lessor or the Owner Participant in connection with such cooperation and such efforts, but only to the extent of proceeds actually received by the Lessor.

Section 6. Warranty of the Lessor.

(a) Quiet Enjoyment. The Lessor warrants that unless an Event of Default has occurred and is continuing the Lessee’s use and possession of Unit 1, including the Undivided Interest, and the Ground Lease Property, in accordance with the terms of the Transaction Documents shall not be interrupted by the Lessor or any Person claiming by, through or under the Lessor, and their respective successors and assigns, except that the Lessor shall not be responsible for any acts of the Ground Lessor under the Ground Lease which result in a violation of this Section 6(a).

(b) Disclaimer of Other Warranties. The warranty set forth in Section 6(a) is in lieu of all other warranties of the Lessor or the Owner Participant, whether written, oral or implied, with respect to this Facility Lease, the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site. Notwithstanding anything, however, in this Section 6, the Lessee shall bear all risks of any infirmity in the rights, title and interests of the Lessor in Unit 1 which existed prior to the Closing. As among the Owner Participant, the Loan Participants, the Indenture Trustee, the Collateral Trust Trustee, the Lessor and the Lessee, execution by the Lessee of this Facility Lease shall be conclusive proof of the compliance of Unit 1 (including any Capital Improvement) and the Undivided Interest with all requirements of this Facility Lease, and the Lessee acknowledges and agrees that (i) NEITHER THE LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (ii) THE LESSOR LEASES AND THE LESSEE TAKES THE UNDIVIDED INTEREST, AND SHALL TAKE EACH CAPITAL IMPROVEMENT AND ANY PART THEREOF AS IS AND WHERE IS, WITH ALL FAULTS AND (iii) THE LESSOR SUBLEASES AND THE LESSEE TAKES THE GROUND LEASE PROPERTY AS IS AND WHERE IS, WITH ALL FAULTS and neither the Lessor nor the Owner Participant shall be deemed to have made, and THE LESSOR AND THE OWNER PARTICIPANT EACH HEREBY DISCLAIMS, ANY OTHER REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE UNDIVIDED INTEREST, UNIT 1, THE PLANT, ANY CAPITAL IMPROVEMENT, THE PLANT SITE OR THE GROUND LEASE PROPERTY, OR ANY PART THEREOF, THE MERCHANTABILITY THEREOF OR THE FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO THE UNDIVIDED INTEREST, UNIT 1, THE PLANT, ANY CAPITAL IMPROVEMENT, THE PLANT SITE OR THE GROUND LEASE PROPERTY, OR ANY PART THEREOF, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR THE ABSENCE OF ANY LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, NOR SHALL THE LESSOR OR THE OWNER PARTICIPANT BE LIABLE FOR INCIDENTAL OR




CONSEQUENTIAL DAMAGES (INCLUDING LIABILITY IN TORT, STRICT OR OTHERWISE), it being agreed that all such risks, as among the Owner Participant, the Loan Participants, the Collateral Trust Trustee, the Indenture Trustee, the Lessor and the Lessee, are to be borne by the Lessee. The provisions of this Section 6(b) have been negotiated, and, except with respect to the warranties expressly made in Section 6(a), the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by the Lessor, the Owner Participant, the Loan Participants, the Collateral Trust Trustee or the Indenture Trustee, express or implied, with respect to the Undivided Interest, Unit 1, the Plant, any Capital Improvement, the Plant Site or the Ground Lease Property that may arise pursuant to any law now or hereafter in effect, or otherwise.

(c) Enforcement of Certain Warranties . The Lessor authorizes the Lessee (directly or through agents), at the Lessee’s expense, to assert for the Lessor’s account, during the Lease Term, all of the Lessor’s rights (if any) under any applicable warranty and any other claims (under this Facility Lease or any Purchase Document) that the Lessee or the Lessor may have against any vendor or manufacturer with respect to Unit 1 (including any Capital Improvement) or the Undivided Interest, and the Lessor agrees to cooperate, at the Lessee’s expense, with the Lessee in asserting such rights. Any amount receivable (without regard to any right of setoff or other similar right of any Person against the Lessee) by the Lessee under any such warranty or other claim against any vendor or manufacturer (or, if such warranty or claim relates to the Undivided Interest and the Retained Assets, the portion of such received amount appropriately allocable to the Undivided Interest) shall be applied in accordance with Sections 9(g), (h) and (i).

Section 7. Liens.

The Lessee will not, directly or indirectly, create, incur, assume or permit to exist any Lien, except Permitted Liens, on or with respect to the Undivided Interest, the property purported to be covered by the Ground Lease, the Lessor’s title thereto or any interest of the Lessor or the Lessee therein (and the Lessee will promptly, at its own expense, take such action as may be necessary duly to discharge any such Lien, except Permitted Liens).
Section 8. Operation and Maintenance; Inspection; Capital Improvements.

(a) Operation and Maintenance. The Lessee will (i) maintain Unit 1 and the Plant Site in such condition (ordinary wear and tear excepted) that Unit 1 will have the capacity and functional ability to perform, on a continuing basis in normal commercial operation, the functions for which it was designed, (ii) operate, service, maintain and repair Unit 1 and the Plant Site and replace all necessary or useful parts and components thereof so that the condition and operating efficiency will be maintained and preserved, ordinary wear and tear excepted, in all material respects in accordance with (A) Prudent Utility Practice for items of similar size and nature, (B) such operating standards as shall be required to take advantage of and enforce all available warranties and (C) the terms and conditions of all insurance policies maintained in effect at any time with respect thereto, (iii) use, possess, operate, maintain, service and repair Unit 1 and the Plant Site in compliance with all material applicable Governmental Actions (including the License) affecting the Plant or Unit 1 or the Plant Site or the use, possession, operation and maintenance thereof and (iv) otherwise act in accordance with the Plant Agreements. The Lessee will comply with all its obligations under Applicable Law affecting the Undivided Interest, Unit 1, the Plant, the Plant Site and the Ground Lease Property, and the use, operation and maintenance thereof; provided, however, that the Lessee shall not be obligated to so comply with Applicable Law (i) whose application or validity is being contested diligently and in good faith by appropriate proceedings, (ii) compliance with which shall have been excused or exempted by a nonconforming use permit, waiver, extension or forbearance exempting it from such Applicable Law, (iii) if good faith efforts and appropriate steps are being taken to comply, or (iv) if failure of compliance would




result in no material adverse consequences to the Lessor, the Indenture Trustee, the Original Loan Participants, the Lessee or the Owner Participant, so long as, in each of clauses (i) through (iv) above (A) such failure of compliance cannot result in any material danger of the sale, forfeiture or loss of any part of the Undivided Interest, Unit 1, the Plant, the Plant Site or the Ground Lease Property or subject any of the foregoing to any Lien, other than Permitted Liens, or materially interfere with the operation or use or disposition of any of the Undivided Interest, Unit 1, the Plant, the Plant Site or the Ground Lease Property or any part thereof, title thereto or any interest therein, or the payment of Rent, or subject any Indemnitee to regulation as a public utility or to any criminal charges or other materially adverse regulatory or financial consequences and (B) if reasonably requested by the Owner Participant or a majority in interest of the Original Loan Participants, security arrangements reasonably satisfactory to the Owner Participant or such Original Loan Participants, as the case may be, in respect of such non-compliance shall have been made. The Lessee will maintain in full force and effect a license from the NRC adequate for it to possess the Undivided Interest and to operate Unit 1 under the circumstances contemplated by the Plant Agreements and as required by Applicable Law. The Lessor shall not be obligated in any way to maintain, alter, repair, rebuild or replace Unit 1, any Capital Improvement or the Plant Site, or any part thereof, or, except as provided in Section 8(f), to pay the cost of alteration, rebuilding, replacement, repair or maintenance of Unit 1, any Capital Improvement or the Plant Site, or any part thereof, and the Lessee expressly waives the right to perform any such action at the expense of the Lessor pursuant to any law at any time in effect.

(b) Inspection. The Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee and prospective purchasers of the Undivided Interest or the beneficial interest in the Trust Estate (or their respective authorized representatives with appropriate security clearance, if necessary) shall have the right to inspect the Plant (subject, in each event, to the Plant Agreements, Applicable Law, applicable confidentiality undertakings and procedures established by the Lessee) at their expense at such times and as often as shall be reasonably requested. The Lessor, the Owner Participant and prospective purchasers of the Undivided Interest or the beneficial interest in the Trust Estate and their respective authorized representatives (with appropriate security clearance if necessary) shall have the right to inspect, at their expense, the books and records of the Lessee relating to Unit 1, and make copies of and extracts therefrom (subject as aforesaid) and may, at their expense, discuss the Lessee’s affairs, finances and accounts with its executive officers, all at such times and as often as may be reasonably requested. None of the Lessor, the Owner Participant, the Indenture Trustee and the Collateral Trust Trustee shall have any duty whatsoever to make any inspection or inquiry referred to in this Section 8(b) and shall not incur any liability or obligation by reason of not making any such inspection or inquiry.

(c) Capital Improvements. The Lessee shall, if and to the extent required of it under the Plant Agreements or Applicable Law, at its sole expense (except as provided in Section 8(f)), promptly, but subject to Section 8(a) hereof, participate in the making of any Capital Improvement to Unit 1. The Undivided Interest Percentage of the net proceeds of (x) any sale or other disposition of property removed from Unit 1 received (without deduction of any amount set off or deducted by any Person claiming a right against the Lessee to do so) by, or credited to the account of, the Lessee in accordance with the Plant Agreements and (y) any insurance proceeds received (without deduction of any amount set off or deducted by any Person claiming a right against the Lessee to do so) for the account of the Lessor or the Lessee in respect of the loss or destruction of, or damage or casualty to, any such property shall be applied as provided in Section 9(g), (h) or (i), as the case may be. The Undivided Interest Percentage in property at any time removed from Unit 1 shall remain the property of the Lessor, no matter where located, until such time as a Capital Improvement constituting a replacement of such property shall have been installed in Unit 1 or such removed property has been disposed of in accordance with the Plant Agreements. Simultaneously with such disposition, title to the Lessor’s undivided interest in the removed property shall vest in the Person receiving such property, free and clear of any and all claims or rights of the Lessor. Unless paragraph (iii) of Section 8(e) shall be applicable,




upon the incorporation of a Capital Improvement in Unit 1, without further act, (x) title to an undivided interest equal to the Undivided Interest Percentage in such Capital Improvement shall vest in the Lessor and (y) such undivided interest in such Capital Improvement shall become subject to this Facility Lease and be deemed to be part of the Undivided Interest for all purposes hereof to the same extent that the Lessor had a like undivided interest in the property originally incorporated or installed in Unit 1. The Lessee warrants and agrees that the Lessor’s interest in all Capital Improvements shall be free and clear of all Liens, except Permitted Liens.

(d) Reports. To the extent permissible, the Lessee shall prepare and file in a timely fashion, or, where the Lessor shall be required to file, the Lessee shall prepare or cause to be prepared and delivered to the Lessor within a reasonable time prior to the date for filing, any reports with respect to Unit 1, the Undivided Interest, the Ground Lease Property or the condition or operation thereof that shall be required to be filed with any Governmental Authority. On or before March 1 of each year (commencing March 1, 1990) and on the Lease Termination Date, the Lessee shall furnish the Lessor and the Owner Participant with a report stating the total cost of all Capital Improvements and describing separately and in reasonable detail each Capital Improvement (or related group of Capital Improvements) made during the period from the date hereof to December 31, 1989 in the case of the first such report and during the period from the end of the period covered by the last previous report to the December 31 immediately preceding such report in the case of subsequent reports. On or before March 1 in each year (commencing March 1, 1990) and at such other times as the Lessor or the Owner Participant shall reasonably request in writing, the Lessee will report in writing to the Lessor with respect to (i) the capital expenditures contemplated by the most recent annual budget for Unit 1 and (ii) the current plans (if any) which the Lessee may have for the financing of its share (in accordance with the Plant Agreements) of the same under Section 8(f):

(e) Title to Capital Improvements. Title to an undivided interest, equal to the Undivided Interest Percentage, in each Capital Improvement to Unit 1 shall vest as follows:

(i) in the case of each Nonseverable Capital Improvement, whether or not the Lessor shall have financed or provided financing (in whole or in part) for such undivided interest in such Capital Improvement by an Additional Equity Investment or a Supplemental Financing, or both, effective on the date such Capital Improvement shall have been incorporated or installed in Unit 1, the Lessor shall, without further act, acquire title to such undivided interest in such Capital Improvement;

(ii) in the case of each Severable Capital Improvement, if the Lessor shall have financed (by an Additional Equity Investment or a Supplemental Financing, or both) the Undivided Interest Percentage of the cost of such Capital Improvement, or if such Capital Improvement shall be required by Applicable Law or pursuant to Section 8(a)(i), 8(a)(ii) or, to the extent of compliance with Governmental Actions not significantly more onerous than those in effect on the Closing Date, 8(a)(iii), the Lessor shall, without further act, acquire title to such undivided interest in such Capital Improvement; and

(iii) in the case of each Severable Capital Improvement which does not constitute a Capital Improvement required to be made by Applicable Law or pursuant to Section 8(a)(i), 8(a)(ii) or, to the extent of compliance with Governmental Actions not significantly more onerous than those in effect on the Closing Date, 8(a)(iii), if the Lessor shall not have financed (by either an Additional Equity Investment or a Supplemental Financing, or both) the Undivided Interest Percentage of the cost of such Capital Improvement, the Lessee shall retain title to such undivided interest;





provided, however, that if, as a result of the foregoing, title to an undivided interest in a Severable Capital Improvement which is in replacement of any component of Unit 1 vests in the Lessor, title to an equivalent undivided interest in the replaced component shall vest in the Lessee at the time of such replacement, provided no Event of Default shall have occurred and be continuing at such time. Immediately upon title to such undivided interest in any Capital Improvement vesting in the Lessor pursuant to paragraph (i) or paragraph (ii) of this Section 8(e), such undivided interest in such Capital Improvement shall, without further act, become subject to this Facility Lease and be deemed part of the Undivided Interest and Unit 1 for all purposes hereof.
(f) Funding of the Cost of Capital Improvements . The Lessee shall give the Lessor and the Owner Participant reasonable advance notice before placing in service any Capital Improvement to Unit 1 the cost of which exceeds $100,000,000 in the aggregate. The Owner Participant shall have the option, in its sole discretion, of financing through the Lessor the Undivided Interest Percentage of the cost of any Capital Improvement, or any other Capital Improvement presented to the Owner Participant for financing, including or not including the making of an investment by the Owner Participant (an “Additional Equity Investment”) and the issuance of one or more Additional Notes, all on terms acceptable to the Lessee and the Owner Participant. In the case of any Capital Improvement whose cost is to be incurred during the last five years of the Basic Lease Term, if the Lessee shall not have given the notice specified in clause (ii) of Section 13(a), then the Owner Participant shall have the option, at its sole discretion, to finance through the Lessor the Undivided Interest Percentage of the cost of any such Capital Improvement on such terms as the Lessee and the Owner Participant may reasonably agree. If the Owner Participant does not finance, or arrange the financing of, the Undivided Interest Percentage of the cost of such Capital Improvement, the Lessee may require the Lessor to issue, if and to the extent permitted by the Indenture, to one or more Persons (other than the Lessee, a shareholder of the Lessee or any Person affiliated with the Lessee within the meaning of Section 318 of the Code or any agent of any thereof) one or more Additional Notes and to use the proceeds thereof to pay the Undivided Interest Percentage of the cost of such Capital Improvement, subject to satisfaction of the following conditions:

(i) there shall be no more than one Supplemental Financing in any calendar year;

(ii) the sum of the Supplemental Financing Amounts in any calendar year shall equal or exceed an amount equal to the product of $10,000,000 and the Lessor’s Percentage;

(iii) the Lessee may include in any request for a Supplemental Financing only Capital Improvements not previously financed in any Supplemental Financing;

(iv) in the opinion of the Owner Participant’s Special Tax Counsel or other independent tax counsel to the Owner Participant, such Supplemental Financing shall not result in any adverse tax consequences to the Owner Participant or affect the status of this Facility Lease as a “true lease” for Federal income tax purposes, and the Owner Participant and the Lessee shall have agreed upon the amount and manner of payment of any indemnity which may become payable by the Lessee as a consequence of such Supplemental Financing;

(v) if the Owner Participant shall be making an Additional Equity Investment pursuant to this Section 8 and if the Lessee requests that tax benefits associated with such Capital Improvements be taken into account in making the adjustments in accordance with paragraphs (e) and (f) of Section 3 hereof, the sum of the Supplemental Financing Amount and any Additional Equity Investment shall




not exceed that portion of the cost of Capital Improvements which, when financed, will constitute an addition to the Owner Participant’s basis under Section 1012 or 1016 of the Code;

(vi) the Additional Notes shall have a final maturity date no later than July 15, 2015;

(vii) if the Owner Participant shall be making an Additional Equity Investment pursuant to this Section 8 and if the Lessee requests that tax benefits associated with such Capital Improvements be taken into account in making the adjustment in accordance with paragraphs (e) and (f) of Section 3 hereof, the Lessee shall have made such representations and warranties and covenants regarding the tax characteristics of the Lessor’s undivided interest in each Capital Improvement as shall be acceptable to the Owner Participant and the Tax Indemnification Agreement shall have been appropriately modified;

(viii) appropriate increases, if any, to Basic Rent and the Value Schedules shall have been agreed to by the Owner Participant and the Lessee in accordance with the adjustment provisions of paragraphs (e) and (f) of Section 3 hereof to support the amortization of the Additional Notes issued in respect of such Supplemental Financing and to preserve (but not increase) Net Economic Return (without regard to any tax benefits associated with such Capital Improvement);

(ix) the Lessee shall have paid to the Lessor an amount on an After-Tax Basis equal to all out-of-pocket costs and expenses reasonably incurred by the Lessor or the Owner Participant relating to such Capital Improvements and Supplemental Financing and not financed as a part of such Supplemental Financing or reflected in adjustments to Basic Rent;

(x) no Default, Event of Default, Reimbursement Default or Reimbursement Event of Default shall have occurred and be continuing; and

(xi) the Lessee shall enter into such agreements and shall have made or delivered such representations, warranties, covenants, opinions, certificates and other documents as the Owner Participant shall reasonably request or as shall be required by the Collateral Trust Indenture or the Trust Indenture Act in connection with the issuance of Additional Bonds.

Section 9. Event of Loss; Deemed Loss Event.

(a) Damage or Loss. In the event that an Event of Loss shall occur, or Unit 1 or any substantial part thereof shall suffer destruction, substantial damage, loss, condemnation, confiscation, theft or seizure for any reason whatsoever, such fact shall promptly, and in any case within five Business Days after such event, be reported by the Lessee to the Lessor and the Owner Participant.

(b) Repair. The Lessee shall promptly make any and all payments required of it under the provisions of the Plant Agreements relating to damage, destruction or the like to Unit 1 or any portion thereof.

(c) Payment of Casualty Value. Following the occurrence of an Event of Loss, on the date specified in a notice from the Lessor to the Lessee, the Lessee shall pay to the Lessor (A) an amount equal to the excess of (i) Casualty Value, determined as of the date such payment is due, if such date is a Basic Rent Payment Date, or the next succeeding Basic Rent Payment Date, in all other cases (except if such Event of Loss occurs on a Basic Rent Payment Date, in which event the Casualty Value shall be determined as of such Basic Rent Payment Date), over (ii) the unpaid principal amount of the Notes Outstanding on such date and assumed by the Lessee on such date, after giving effect to the payment, if any, of the principal installment due and




payable and paid in respect of such Notes on such date, together with (B) any other amounts of Supplemental Rent then due. If the Lessee shall have made such payment and shall have assumed all obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9 (b) of the Indenture, the Lessor shall, as long as no Default or Event of Default shall have occurred and be continuing (and at any time after the occurrence of an Event of Loss the Lessor may) Transfer the Undivided Interest, subject to the Lien of the Indenture, to the Lessee, or an Affiliate thereof, as may be designated by the Lessee in the Lessee’s Notice in effect immediately prior to such Transfer, or if no Lessee’s Notice shall then be in effect, to the Lessee.

If, following the occurrence of an Event of Loss, the Lessor or the Owner Participant shall have received an amount equal to Net Casualty Value and the Lessor and the Owner Participant shall have received all other amounts due and owing to them by the Lessee hereunder and under the other Transaction Documents, but the Lessee shall not have assumed the obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Owner Participant shall effect the Special Transfer, in which case, without further act on the part of the Lessor or the Lessee, the obligation of the Lessee to pay further Basic Rent shall be reduced to an amount, payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount of principal of and premium, if any, and accrued interest then payable on, all Notes then Outstanding.
(d) Payment of Special Casualty Value. If events giving rise to a Deemed Loss Event shall occur, the party hereto having knowledge thereof shall promptly notify the other party of the occurrence thereof (provided that the failure by the Lessor to furnish to the Lessee the foregoing notice shall not impair the rights of the Lessor referred to below) and at any time thereafter, the Lessor may demand, by written notice to the Lessee, that the Lessee pay, and the Lessee shall pay, on the date specified in such notice, to the Lessor (A) an amount equal to the excess of (i) Special Casualty Value, determined as of the date such payment is due, if such date is a Basic Rent Payment Date, or the immediately succeeding Basic Rent Payment Date, in all other cases (except that if such Deemed Loss Event occurs on a Basic Rent Payment Date, the Special Casualty Value shall be determined as of such Basic Rent Payment Date), over (ii) the unpaid principal amount of the Notes Outstanding on such date and assumed by the Lessee on such date, after giving effect to the payment, if any, of the principal installment due and payable and paid in respect of the Notes on such date, together with (B) any other amounts of Supplemental Rent then due. If the Lessee shall have made such payment and shall have assumed all obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Lessor shall, so long as no Default or Event of Default shall have occurred and be continuing (and at any time after the occurrence of a Deemed Loss Event the Lessor may), Transfer the Undivided Interest, subject to the Lien of the Indenture, to the Lessee or an Affiliate thereof, as may be designated in the Lessee’s Notice in effect immediately prior to such Transfer, or if no Lessee’s Notice shall then be in effect, to the Lessee.

If following the occurrence of a Deemed Loss Event, the Lessor or the Owner Participant shall have received Net Special Casualty Value and the Lessor and the Owner Participant shall have received all other amounts due and owing to them by the Lessee hereunder and under the other Transaction Documents, but the Lessee shall not have assumed all obligations and liabilities of the Owner Trustee under the Indenture and Notes pursuant to Section 3.9(b) of the Indenture, the Owner Participant shall effect the Special Transfer, in which case, without further act on the part of the Lessor or the Lessee, the obligation of the Lessee to pay further Basic Rent shall be reduced to an amount, payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount of principal, premium, if any, and accrued interest then payable on all Notes Outstanding.




(e) Requisition of Use. In the case of a requisition of use not constituting an Event of Loss, this Facility Lease shall continue, and each and every obligation of the Lessee hereunder and under each Transaction Document shall remain in full force and effect. So long as no Default or Event of Default shall have occurred and be continuing, the Lessee shall be entitled to all sums received by reason of any such requisition of use for the period ending on the Lease Termination Date, and the Lessor shall be entitled to all sums received by reason of any such requisition of use for the period after the Lease Termination Date.

(f) Termination of Lease Term. Upon (but only upon) a Transfer by the Lessor pursuant to Section 9(c) or 9(d) to the Lessee, the assumption by the Lessee of all remaining obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture and payment of the amounts specified in the Indenture, the Notes and this Facility Lease, the Lease Term shall end and the Lessee’s obligation to pay further Basic Rent shall cease, but the Lessee shall continue to be required to make all payments of Supplemental Rent when due. In all other cases, the Lease Term shall continue and this Facility Lease shall remain in full force and effect.

(g) Application of Payments on an Event of Loss. Any payments received at any time by the Lessor or the Lessee (other than insurance placed by the Owner Trustee or the Owner Participant pursuant to Section 10(b)) from any Governmental Authority, insurer or other Person (except the Lessee) as a result of the occurrence of an Event of Loss (without deduction of any amount which was set off or deducted therefrom as a result of a claim by any Person against the Lessee) shall be applied as follows:

(i) all such payments shall be promptly paid to the Lessor for application pursuant to the following provisions of this Section 9(g), except that the Lessee may retain any amounts that would at the time be payable to the Lessee as reimbursement under the provisions of clause (ii) below;

(ii) so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 9(c) shall be applied in reduction of the Lessee’s obligation to pay such amount if not already paid by the Lessee or, if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amount; and

(iii) the balance, if any, of such payments in the case of payments from insurance carried by or on - behalf of the Lessee shall be paid to the Lessee or in the case of any other payments shall be divided between the Lessor and the Lessee as their respective interests may appear.

(h) Application of Payments Not Relating to an Event of Loss. Payments received (without deduction of any amount which was set off or deducted therefrom as a result of a claim by any Person against the Lessee) at any time by the Lessor, the Lessee or the Owner Participant (other than insurance placed by the Lessor or the Owner Participant pursuant to Section 10(b)) from any insurer or other Person with respect to any event giving rise to receipt of an amount referred to in the second sentence of Section 6(c) or the second sentence of Section 8(c), or to any destruction, damage, loss, condemnation, confiscation, theft, seizure of or requisition of title to the Undivided Interest or any part thereof, in each case not constituting an Event of Loss, shall be applied first to reimburse the Lessee for all amounts expended by it pursuant to Section 9(b) and second, the balance, if any, of such payments shall, in the case of payments from insurance carried by or on behalf of the Lessee, be paid to the Lessee or, in the case of other payments, be divided between the Lessor and the Lessee as their respective interests may appear.

(i) Other Dispositions. Notwithstanding the foregoing provisions of this Section 9, if a Default or an Event of Default shall have occurred and be continuing, any amount that would otherwise be payable




to or for the account of, or that would otherwise be retained by, the Lessee pursuant to Section 10 or this Section 9 relating to the Undivided Interest or the Ground Lease Property shall be paid to the Lessor as security for the obligations of the Lessee under this Facility Lease and, at such time thereafter as no Default or Event of Default shall be continuing, such amount shall be paid promptly to the Lessee unless this Facility Lease shall have theretofore been declared to be in default, in which event such amount shall be disposed of in accordance with the provisions hereof, of the Indenture (to the extent then in effect) and of the Trust Agreement.

Section 10. Insurance.

(a) Required Insurance. The Lessee shall provide and maintain at least the following insurance coverage with respect to the Undivided Interest, Unit 1 and the Plant Site with insurers of recognized responsibility; provided, however, in the case of all insurance described in Section 10(a)(i) hereof, that any such insurance is commercially available at a commercially reasonable cost; provided further, however, that no determination shall be made that any such insurance is not commercially available at a commercially reasonable cost unless such issue shall have first been discussed with the Owner Participant and the Owner Participant shall have been given an opportunity to present information to the contrary. Any such insurance coverage may be carried and maintained by the Lessee or jointly with respect to other owners of the Plant or with respect to ownership interests in the Plant other than the Undivided Interest.

In the event of any payment of loss in respect of Unit 1 or the Plant Site, the Lessee shall request reinstatement of insurance from insurers to the extent available on commercially reasonable terms and at a commercially reasonable cost, it being understood that no determination as to the non-availability on commercially reasonable terms of such insurance shall be made until the Owner Participant shall have had the opportunity to discuss such issue with the Lessee and to present information to the contrary.
(i) Non-Nuclear Insurance.

(A) The Lessee shall maintain “all risk” property insurance (excluding flood and earthquake) covering physical loss with respect to Unit 1 in such an amount and with such other terms as are consistent with the Lessee’s normal practice in respect of those other owned, leased or operated nuclear electric generating units with respect to which the Lessee determines or controls the determination of the amount and other terms of such insurance and which, in any event, shall be consistent with Applicable Law and Prudent Utility Practice. Subject to Section 10(a)(vi), the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(i)(A) to be endorsed to provide, or to otherwise provide, that:

(1) losses shall be adjusted and proceeds paid as provided in Section 10(a)(v);

(2) (m) the Corporate Owner Trustee and the Owner Participant (the “Additional Insureds”) are included as additional insureds, as their interests may appear, and (n) any obligation imposed upon any insured (including without limitation the liability to pay premiums) shall be the sole obligation of the Lessee and not that of any Additional Insured;

(3) the insurer thereunder waives all rights of subrogation against the Additional Insureds with respect to their respective interests in Unit 1;





(4) such insurance shall be primary without right of contribution of any other insurance carried by or on behalf of any Additional Insured with respect to its interest in Unit 1; and

(5) if such insurance is cancelled for any reason whatsoever including nonpayment of premium or any material change is made in the coverage which adversely affects the interest of the Additional Insureds, such cancellation or change shall not be effective as to the Additional Insureds for thirty days after receipt by the Lessor for itself and as agent for the other Additional Insureds, of written notice from such insurer of such cancellation or change.

The Lessee will use its best efforts to cause the applicable insurer to deliver the written notice referred to in clause (5) above with respect to such cancellation or change to the Owner Participant, the Corporate Owner Trustee and the Corporate Indenture Trustee as soon as practicable alter the event giving rise to such cancellation or change.
Any such insurance may insure other properties owned or leased by the Lessee and need not be amended to provide that the Undivided Interest shall have priority to insurance proceeds in the event of losses; provided, however, that the Additional Insureds shall have an equal right to their proportionate share of insurance proceeds in any case in which the Undivided Interest is affected.
(B) The Lessee shall maintain bodily injury and property damage liability insurance (including product liability, completed operations and personal injury insurance) covering claims arising out of the ownership, operation, maintenance, condition or use of Unit 1. The amount and other terms of such insurance, including self insurance amounts and deductibles, shall be in accordance with the Lessee’s normal practice in respect of those other owned, leased or operated nuclear electric generating units with respect to which the Lessee determines or controls the determination of the amount and other terms of such insurance and which, in any event, shall be consistent with Applicable Law and Prudent Utility Practice. Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(i)(B) to be endorsed to provide, or to otherwise provide, as set forth in sub-paragraphs (2), (3), (4), and (5) of Section 10(a)(i)(A).

With respect to this Section 10(a)(i), the Lessee hereby waives any right of recovery it may have against the Additional Insureds, including any right to which another may be subrogated.
(ii) Nuclear Insurance.

(A) The Lessee shall maintain nuclear property insurance in amounts and with other such terms, including deductibles, as are consistent with the normal practice of the Lessee in respect of those other owned, leased or operated nuclear electric generating units for which the Lessee determines or controls the determination of the amount and other terms of such insurance as required by Applicable Law and consistent with Prudent Utility Practice. Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(ii)(A) to be endorsed to provide, or to otherwise provide, as set forth in subparagraphs (1), (2), (3), (4) and (5) of Section 10(a)(i)(A).

(B) The Lessee shall maintain nuclear liability insurance in such an amount and with other such terms as are consistent with the normal practice of the Lessee in respect of its other owned, leased or operated nuclear electric generating units for which the Lessee determines or controls the




determination of the amount and other terms of such insurance, which insurance shall in any event comply with Applicable Law and Prudent Utility Practice. The Lessee shall also maintain (x) supplier’s and transporter’s insurance and (y) nuclear worker occupational exposure insurance, in each case in amounts consistent with Prudent Utility Practice and Applicable Law. Nuclear liability insurance shall be maintained pursuant to this Section 10(a)(ii)(B), whether or not the Lease Termination Date shall have occurred (but at the expense of the Owner Participant after the Lease Termination Date), until the Lessee shall have been notified by the Owner Participant that neither the Lessor nor the Owner Participant have any further liability in connection with the ownership, operation, maintenance, condition or use of the Undivided Interest. Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(ii)(B) to be endorsed to provide or to otherwise provide, as set forth in subparagraphs (2), (3), (4) and (5) of Section 10(a)(i)(A).

With respect to this Section 10(a)(ii), the Lessee hereby waives any right of recovery it may have against the Additional Insureds, including any right to which another may be subrogated.
(iii) Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts at all times to obtain an endorsement providing that the respective interests of the Additional Insureds shall not be invalidated by any breach of any warranty by the Lessee or SMEPA contained in such policies on all insurance referred to in this Section 10.

(iv) Annual Reports and Certificates. On the Closing Date and as soon as practicable after the end of each fiscal year of the Lessee commencing with the end of fiscal year 1989, and in any event within 120 days thereafter, the Lessee shall deliver to the Lessor and the Indenture Trustee (A) an Officers’ Certificate of the Lessee setting forth the insurance obtained pursuant to this Section 10 and as then in effect, stating whether, in the opinion of such officers, such insurance policies comply with the requirements of this Section 10, whether all premiums then due thereon have been paid and whether such policies are in full force and effect, and (B) certification of all insurance required to be maintained under this Section 10, executed by each insurer, or by an authorized representative of each insurer, identifying underwriters, the type of insurance, the insurance limits (including applicable deductibles) and the policy term, and the other material policy terms (including an indication of the endorsements in place as required by this Facility Lease). Upon request, the Lessee will provide the Owner Participant and, if the Lien of the Indenture shall then be in effect, the Indenture Trustee, with copies of all insurance policies, binders and cover notes or other evidence of such insurance in respect of all insurance required to be maintained pursuant to this Section 10, certified by authorized representatives of the insurers.

(v) Proceeds. All insurance proceeds paid in respect of or pursuant to paragraphs (i) and (ii) above shall (A) be applied as provided in Section 9(g), (h) or (i), as the case may be, and (B) be adjusted with the insurance companies or otherwise collected, including the filing of appropriate proceedings, by the Lessee, subject, however, to any priority allocations of such proceeds to Decommissioning, decontamination and debris removal and to any obligations to pay such proceeds to a separate trust as may be established for the purpose of paying the costs of Decommissioning, decontamination and debris removal in each case as may be set forth in the insurance policies or required under Applicable Law.

(vi) Notwithstanding the provisions of this Section 10(a) requiring the Lessee to utilize its best efforts to cause insurance carried in accordance with this Section 10(a) to be endorsed to provide, or to otherwise provide, as set forth above, (x) the Lessee shall in all events be unconditionally




obligated to cause insurance carried in accordance with this Section 10(a) to be endorsed to provide, or to otherwise provide, as set forth in subparagraph (2)(m) of Section 10(a)(i)(A), and (y) if the Lessee shall have knowledge, or shall have been notified in writing by the Owner Participant (with sufficient information to enable the Lessee to confirm such notification), that any such endorsement (other than any of those described in clause (x) of this paragraph (vi)) for such insurance is then available from the provider of such insurance to the Lessee (or, in the case of nuclear liability insurance, from any provider of such insurance), the Lessee shall cause such insurance to be so endorsed or to so otherwise provide.

(b) Other Insurance. Nothing in this Section 10 shall prohibit the Lessor or the Owner Participant from placing at its expense other insurance on or with respect to Unit 1, the Undivided Interest, the Plant Site or the operation of Unit 1, naming the Lessor or the Owner Participant as insured and/or loss payee, unless such insurance would conflict with or otherwise limit the insurance to be provided or maintained in accordance with Section 10(a).

Section 11. Rights to Assign or Sublease.

(a) Assignment or Sublease by the Lessee. The Lessee may, without the prior consent of the Lessor, assign, sublease, transfer or encumber its rights and obligations under the Facility Lease and the other Transaction Documents; provided, however, that (i) such assignment, sublease, transfer or encumbrance shall not (A) permit the early termination of the Letter of Credit (such condition to be deemed waived if the Issuing Bank shall have waived its right to terminate the Letter of Credit in a manner satisfactory to the Owner Participant) or (B) result in any Tax Loss, and (ii) the Lessee shall remain the primary obligor under this Facility Lease and the other Transaction Documents to which it is a party.

(b) Assignment by Lessor as Security for Lessor’s Obligations. To secure the indebtedness evidenced by the Notes, the Lessor will assign to the Indenture Trustee (i) its right, title and interest (not including, in any event, any Excepted Rights) in and to this Facility Lease, including the right to receive certain payments of Rent (not including, in any event, Excepted Payments), to the extent provided in the Indenture and (ii) its right, title and interest in the Undivided Interest. The Lessee hereby (v) agrees it will not assert against the Indenture Trustee any claim or defense it may have against the Lessor, (w) consents to such assignment and to the terms of the Indenture, (x) agrees to pay directly to the Indenture Trustee at the Indenture Trustee’s Office (so long as the lien of the Indenture has not been satisfied and discharged and the Lessor is obligated thereunder) all amounts of Rent (other than Excepted Payments) due or to become due to the Lessor, (y) agrees that the right of the Indenture Trustee to any such payments shall be absolute and unconditional and shall not be affected by any circumstances whatsoever, including, without limitation, those circumstances set forth in Section 4, and (z) agrees that, to the extent provided in the Indenture and until the Indenture is discharged in accordance with its terms, the Indenture Trustee shall have all the rights of the Lessor hereunder (other than Excepted Rights and the right to receive Excepted Payments) as if the Indenture Trustee had originally been named herein as the Lessor. Following any transfer to, or purchase by, the Lessee of the Undivided Interest, the Undivided Interest shall (unless the Notes shall have been paid in full) remain subject to the lien of the Indenture and such lien shall not be impaired in consequence thereof.

Section 12. Lease Renewal.

(a) Subject to the notice requirements set forth in Section 13(a), at the end of the Basic Lease Term, provided that no Default or Event of Default shall have occurred and be continuing, no Event of Loss or Deemed Loss Event shall have occurred in respect of which the Lessor has demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected, and




all Notes shall have been paid in full, the Lessee shall have the option to renew the term of this Facility Lease for a single period of a number of years (not less than two) selected by the Lessee (such renewal period or such shorter period as shall extend to the expiration of the Facility Lease being herein referred to as the “Fixed Rate Renewal Term”); provided, however, that the Lessee, at the time of the exercise of its renewal option as provided in this subsection (a), shall have furnished an appraisal of an independant appraiser as to the useful life of Unit 1, which appraiser and appraisal shall be reasonably satisfactory to the Lessor, and which appraisal shall indicate that at the end of the proposed Fixed Rate Renewal Term the residual value of the Undivided Interest will be equal to at least 20% of Facility Cost for the Undivided Interest (without taking into account inflation or deflation that has occurred or will have occurred from the Closing Date to the end of the proposed Fixed Rate Renewal Term), and that the proposed Fixed Rate Renewal Term does not extend the Lease Term beyond 80% of the economic useful life of Unit 1 as established by such appraisal.

(b) Subject to the notice requirements set forth in Section 13(a), at the end of the Basic Lease Term or any Renewal Term, provided that no Default or Event of Default shall have occurred and be continuing, no Event of Loss or Deemed Loss Event shall have occurred in respect of which the Lessor has demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected, and all the Notes have been paid in full, the Lessee shall have the option to renew the term of this Facility Lease for one or more periods of three years or such shorter period as shall extend to the expiration of the License (each such renewal period being herein referred to as a “Fair Market Renewal Term”).

Section 13.
Notices for Renewal or Purchase; Purchase Options; Determination of Fair Market Value.

(a) Expiration of Basic Lease Term. Not earlier than five nor later than two years prior to the expiration date of the Basic Lease Term, the Lessee shall give to the Lessor written notice of its election either to (i) return the Undivided Interest to the Lessor pursuant to Section 5 or (ii) exercise one of the renewal options permitted by Section 12 or the purchase option permitted by Section 13 (c). If the notice specified in clause (ii) of the preceding sentence is given, then not later than 18 months prior to the expiration date of the Basic Lease Term, the Lessee will give the Lessor written notice of its election to exercise either (x) the purchase option permitted by Section 13(c), (y) the option to renew this Facility Lease for the Fixed Rate Renewal Term or (z) the option to renew this Facility Lease for the Fair Market Renewal Term. Such election shall be irrevocable as to the Lessee, but shall not be binding on the Lessor if, on the effective date thereof, an Event of Default shall have occurred and be continuing or an Event of Loss or a Deemed Loss Event shall have occurred and the Lessor shall have demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected.

(b) Expiration of Renewal Term. Not later than two years prior to the expiration of any Renewal Term, if elected, the Lessee shall give to the Lessor written notice of its election to (i) return the Undivided Interest to the Lessor pursuant to Section 5, (ii) exercise the purchase option permitted by Section 13(c) or (iii) exercise the renewal option permitted by Section 12(b). Such election shall be irrevocable as to the Lessee, but shall not be binding on the Lessor, if, on the effective date thereof, an Event of Default shall have occurred and be continuing or an Event of Loss or Deemed Loss Event shall have occurred and the Lessor shall have demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected.

(c) Purchase Option at Expiration of the Lease Term. Subject to the notice requirements set forth in Section 13(a) or 13(b) and the provisions of Article V of the Assignment and Assumption Agreement, as the case may be, provided that no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall




have occurred and be continuing, and the Notes shall have been paid in full, the Lessee (or any Affiliate thereof) shall have the right to purchase the Undivided Interest on the date of the expiration of the Basic Lease Term or any Renewal Term (if elected), for a purchase price equal to the Fair Market Sales Value thereof.

(d) Purchase of the Undivided Interest; Payment, Etc. If the Lessee (or any Affiliate thereof) shall have elected to purchase the Undivided Interest pursuant to Section 13(c), payment by the Lessee (or such Affiliate) of the purchase price therefor shall be made in immediately available funds, whereupon the Lessor shall Transfer the Undivided Interest to the Lessee, or such Affiliate, as the case may be, all subject, however, to the provisions of Article V of the Assignment and Assumption Agreement.

(e) Determination of Fair Market Value. Not later than two years and six months prior to the expiration date of the Basic Lease Term and any Renewal Term, if elected, the Lessee and the Owner Participant shall agree on the Fair Market Sales Value and the Fair Market Rental Value of the Undivided Interest as of the expiration of the Basic Lease Term or such Renewal Term, as the case may be, and the estimated Fair Market Sales Value as of the expiration of the Renewal Term, if any, which would follow the expiration of the Basic Lease Term or such Renewal Term, as the case may be or if the Lessee and the Owner Participant are unable to agree upon such Fair Market Values by such time, such Fair Market Values shall be determined by the Appraisal Procedure.

(f) Purchase Option for Significant Expenditures. So long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing, the Lessee shall have the option to terminate this Facility Lease on any Basic Rent Payment Date occurring on or after January 15, 1999 on at least 90 days prior written notice to the Lessor, the Owner Participant and the Indenture Trustee to the effect that a Significant Expenditure in respect of a Project is planned or required. On such Basic Rent Payment Date the Lessee shall pay to the Lessor an amount equal to the higher of the Fair Market Sales Value of the Undivided Interest and the Casualty Value, in each case determined as of such Basic Rent Payment Date, together with any other amounts of Supplemental Rent then due. To the extent the Lessee has assumed the Outstanding Notes pursuant to, and in accordance with, Section 3.9(b) of the Indenture as of such Basic Rent Payment Date, the amount determined pursuant to the immediately preceding sentence shall be reduced by the principal amount of the Notes so assumed, taking into account any amounts paid on such date in respect of principal installments then due. Upon compliance in full by the Lessee with the foregoing provisions of this Section 13(f), the Lessor shall (so long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing) Transfer the Undivided Interest (subject, however, in the case in which the Outstanding Notes have been assumed in accordance with Section 3.9(b) of the Indenture, to the Lien of the Indenture) to the Lessee, or an Affiliate thereof, as designated by the Lessee in its notice to the Lessor, the Owner Participant and the Indenture Trustee given pursuant to this Section 13(f).

As used in this Section 13(f), the term “Significant Expenditure” shall mean expenditures in respect of Nonseverable Capital Improvements to Unit 1 (other than those required by Section 8(a) (i), (ii) or, to the extent of compliance with Governmental Actions not significantly more onerous than those in effect on the Closing Date, Section 8(a)(iii)) and which (i) for the period to and including the twentieth anniversary of the Closing Date, shall exceed $250,000,000, as such amount may be adjusted on each anniversary of the Closing Date by the percentage change in the Consumer Price Index issued from time to time by the U.S. Department of Labor, Bureau of Labor Statistics, for the region which includes the Plant Site and in respect of which the Owner Trustee or the Owner Participant shall not permit the cost thereof to be financed through the Lessor and (ii) for the period from the day next succeeding the last day of the period specified in clause (i) above to the end of the Lease Term, shall exceed $100,000,000, as such amount may be adjusted on each anniversary of the Closing Date by the percentage change in the Consumer Price Index issued from time to time by the




U.S. Department of Labor, Bureau of Labor Statistics, for the region which includes the Plant Site. The term “ Project ” , as used in this Section 13(f), shall mean either (x) an addition, betterment or improvement to Unit 1 which, in the opinion of an engineer selected by the Lessee and reasonably acceptable to the Owner Participant, would involve no more than a single major component and work integral thereto of Unit 1 or (y) a series of additions, betterments or improvements to Unit 1 which are required by Governmental Action taken within a period of 6 months and which relate to matters of public health, safety or the environment.
(g) Periodic Purchase Option. So long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing, the Lessee shall have the option to terminate this Facility Lease on the Basic Rent Payment Date immediately succeeding each of the tenth, fifteenth or twentieth anniversaries of the Closing Date on at least 90 days prior written notice to the Lessor, the Owner Participant and the Indenture Trustee. On such Basic Rent Payment Date the Lessee shall pay to the Lessor an amount equal to the higher of the Fair Market Sales Value of the Undivided Interest and the Casualty Value, in each case determined as of such Basic Rent Payment Date, together with any other amounts of Supplemental Rent then due. To the extent the Lessee has assumed the Outstanding Notes pursuant to, and in accordance with, Section 3.9(b) of the Indenture as of such Basic Rent Payment Date, the amount determined pursuant to the immediately preceding sentence shall be reduced by the principal amount of the Notes so assumed, taking into account any amounts paid on such date in respect of principal installments then due. Upon compliance in full by the Lessee with the foregoing provisions of this Section 13(g), the Lessor shall (so long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing) Transfer the Undivided Interest (subject, however, in the case in which the Outstanding Notes have been assumed in accordance with Section 3.9(b) of the Indenture, to the Lien of the Indenture) to the Lessee, or an Affiliate thereof, as designated by the Lessee in its notice to the Lessor, the Owner Participant and the Indenture Trustee given pursuant to this Section 13(g).

Section 14. Optional Termination.

(a) Termination Notice. Unless a Default or an Event of Default shall have occurred and be continuing or an Event of Loss or a Deemed Loss Event shall have occurred in respect of which the Lessor shall have demanded payment under Section 9(c) or 9(d), the Lessee shall have the option, exercisable by the giving of at least 360 days’ prior written notice (a “Termination Notice”) to the Lessor, the Owner Participant and the Indenture Trustee (provided that the Lessee shall have delivered to the Lessor an Officers’ Certificate to the effect that the Board of Directors of the Lessee - has adopted and there are in effect resolutions determining that Unit 1 as to the Lessee is economically obsolete for any reason and that the Lessee should seek to dispose of all of its interest (owned or leased) in Unit 1) to terminate this Facility Lease on any Basic Rent Payment Date on or after the tenth anniversary of the Closing Date (the “Termination Date”). If the Lessee shall give the Lessor a Termination Notice, the Lessee shall, as agent for the Lessor, use its best efforts to obtain cash bids for the purchase of the Undivided Interest. The Lessor shall also have the right to obtain such cash bids, either directly or through agents other than the Lessee. The Lessee shall certify to the Lessor within ten days after the Lessee’s receipt of each bid (and, in any event, prior to the Termination Date) the amount and terms thereof and the name and address of the party (which shall not be the Lessee or any Affiliate or agent thereof) which submitted such bid.

(b) Events on the Termination Date. On the Termination Date the Lessor shall (but only upon receipt of the sale price and all additional payments specified in the next sentence) Transfer the Undivided Interest for cash to the bidder (which shall not be the Lessee or an Affiliate or agent thereof) that shall have submitted the highest bid on or before the Termination Date. The total sale price realized at such sale shall be retained by the Lessor (subject, however, to the terms of the Indenture and the requirement that on the




Termination Date there shall have been paid to the Indenture Trustee an amount sufficient to pay in full the unpaid principal amount of all Notes Outstanding on the Obsolescence Redemption Date and all premium, if any, and interest accrued and unpaid on such Outstanding Notes as of the Termination Date and to accrue on the Outstanding Notes from such date to the Obsolescence Redemption Date) and, in addition, on the Termination Date the Lessee shall pay to the Lessor (i) the excess, if any, of the Special Casualty Value as of the Termination Date over the net sale price of the Undivided Interest and (ii) an amount equal to any premium payable on the Outstanding Notes as of the Obsolescence Redemption Date and any interest to accrue on the Outstanding Notes from and including the Termination Date to the Obsolescence Redemption Date, and shall pay to the Person or Persons entitled thereto all Supplemental Rent then due (other than Special Casualty Value). Upon compliance by the Lessee with the applicable provisions of this Section 14, the obligation of the Lessee to pay Basic Rent due hereunder for any period after the Termination Date shall cease and the Basic Lease Term shall end on the Termination Date; but the obligation of the Lessee to pay Supplemental Rent when and as due shall continue in full force and effect and shall not be impaired by reason of any such termination. If on or as of the Termination Date no such sale shall occur or the Lessee shall not have complied in full with this Section 14, this Facility Lease shall continue in full force and effect in accordance with its terms, subject to the continuing rights of the Lessee under this Section. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise take any action in connection with any such sale other than to Transfer the Undivided Interest to the purchaser named in the highest bid certified by the Lessee to the Lessor or obtained by the Lessor, against receipt of the payments provided for herein.

(c) Early Termination Notice. In the event that the Lessee shall fail to exercise either a Renewal Option or the purchase option permitted by Section 13(c) within the time limits provided by Section 13(a) or Section 13(b), the Lessor shall have the option, on any Basic Rent Payment Date thereafter, on at least one year’s prior written notice (an “ Early Termination Notice ”) to the Lessee and the Indenture Trustee, to terminate this Facility Lease on the Basic Rent Payment Date specified in such notice (the “ Early Termination Date ”). Such Early Termination Notice may be revoked by the Lessor at any time on or prior to the 30th day preceding the Early Termination Date (the “ Early Termination Commitment Date ”), after which day the Lessor shall be irrevocably committed to terminate this Facility Lease on the Early Termination Date. On or prior to the Early Termination Commitment Date, the Lessor shall deposit with the Indenture Trustee cash in an amount (or a letter of credit for such amount of any bank whose long-term unsecured debt securities are rated not less than A2 by Moody’s or, so long as any Bonds rated by Standard & Poor’s are then Outstanding, whose unsecured debt securities are assigned a rating by Standard & Poor’s which is not less than the rating then assigned by Standard & Poor’s to any debt securities of the Lessee then outstanding) equal to the unpaid principal amount of all Notes Outstanding on such date and all premium, if any, and interest accrued and to accrue on and as of the Early Termination Date. On the Early Termination Date, the Lessee shall pay to the Lessor any Basic Rent due or accrued, as the case may be, to and including the Early Termination Date, and shall pay to the Person or Persons entitled thereto all Supplemental Rent (excluding from such Supplemental Rent any amount due and owing with respect to principal of, and premium, if any, on the Notes being prepaid on such date, other than any amount of principal which would have been paid on such date if such Notes were not being prepaid), whereupon the obligation of the Lessee to pay any Basic Rent for any period after the Early Termination Date shall cease and the Lease Term shall end, but the obligations of the Lessee to pay Supplemental Rent when and as due shall continue in full force and effect and shall not be impaired by reason of any such termination.

Section 15. Events of Default.

The term Event of Default, wherever used herein, shall mean any of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary, or come about or be




effected by operation of law, or be pursuant to or in compliance with any Applicable Law or Governmental Action):
(i) the Lessee shall fail to make, or cause to be made, (A) any payment of Casualty Value, Special Casualty Value or Basic Rent within five Business Days after the same shall become due or (B) any payment of Supplemental Rent (other than Casualty Value or Special Casualty Value) including, without limitation, any payments due under the Tax Indemnification Agreement, within 20 days after the same shall become due or be demanded, as the case may be; or

(ii) (x) the Lessee shall fail (A) to perform or observe any covenant, condition or agreement to be performed or observed by it under Section 10(b)(3)(i) or 10(b)(3)(ii) of the Participation Agreement or Section 11 of this Facility Lease or (B) to make the payments required to be made by the penultimate paragraph of Section 10(b)(3)(ix) of the Participation Agreement or the penultimate paragraph of Section 5(b) hereof, in each case on the dates therein specified, or (y) the Event of Default referred to in the last paragraph of Section 5(b) hereof;

(iii) the Lessee shall fail to perform or observe any covenant, condition or agreement (other than those referred to in clauses (i), (ii), (vii), (ix) and (x) of this Section 15) to be performed or observed by it under this Facility Lease or any other Transaction Document (other than under the Tax Indemnification Agreement or under Section 13(b) or 19(c) of the Participation Agreement as it relates to the Owner Participant or any Affiliates thereof), and such failure shall continue for a period of 30 days after there shall have been given to the Lessee by the Lessor or the Owner Participant a notice specifying such failure and requiring it to be remedied; provided, however, that the continuation of such failure for a period of 30 days or more after such notice has been so given (but in no event for a period which is greater than one year after such notice has been given) shall not constitute an Event of Default if (a) such failure can be remedied but cannot be remedied within such 30 days, (b) the Lessee is diligently pursuing a remedy of such failure and (c) such failure does not impair in any material respect the Lessor’s interest in Unit 1 or the mortgage and security interest created by the Indenture; or

(iv) any representation or warranty made by the Lessee in this Facility Lease, any other Transaction Document (other than the Tax Indemnification Agreement or Section 19(b) of the Participation Agreement) or any agreement, document or certificate delivered by the Lessee in connection herewith or therewith shall prove to have been incorrect in any material respect when such representation or warranty was made or given if such representation or warranty continues to be material and remains materially incorrect at the time in question; provided, however, that such failure of such representation or warranty to be correct shall not constitute an Event of Default if (a) the facts or circumstances making such representation or warranty incorrect can be remedied or changed so that such representation or warranty will thenceforth be correct in all material respects, (b) the Lessee is diligently pursuing such a remedy or change, (c) such remedy or change is, in fact, accomplished within a period of one year from the time that the Lessee has been notified of such misrepresentation or breach of warranty and (d) such facts or circumstances do not impair in any material respect the Lessor’s interest in Unit 1 or the mortgage and security interest created by the Indenture; or

(v) the Lessee shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any




such relief or to the appointment of or taking of possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing; or an involuntary case or other proceeding shall be commenced against the Lessee seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of 60 consecutive days; or

(vi) final judgment for the payment of money in excess of $10,000,000 shall be rendered against the Lessee and the Lessee shall not have discharged the same or provided for its discharge in accordance with its terms or bonded the same or procured a stay of execution thereof within 60 days from the entry thereof; or

(vii) the Lessee (A) shall fail, at any time, to provide or maintain a Letter of Credit which complies with all of the terms and conditions of Section 10(b)(3)(ix) of the Participation Agreement, whether or not the Lessee has used best efforts to obtain and maintain such Letter of Credit or (B) shall fail to provide a renewal or replacement Letter of Credit so complying (1) by the 15th day prior to the stated termination date of an Existing Letter of Credit, (2) if the Issuing Bank of an Existing Letter of Credit shall have delivered notice, in accordance with the terms thereof, that such Existing Letter of Credit will be terminated prior to its stated termination date and if such Issuing Bank was required to give at least 30 days’ notice of such early termination, by the 15th day prior to the date of such early termination or (3) if the Issuing Bank of an Existing Letter of Credit shall have delivered notice, in accordance with the terms thereof, that such Existing Letter of Credit will be terminated prior to its stated termination date and if such Issuing Bank was not required to give at least 30 days’ notice of such early termination, by the later of (x) the time of the effectiveness of such notice and (y) the 15th day prior to the date of such early termination; or

(viii) the exercise of remedies upon the occurrence and continuance of an event of default under any other lease under which the Lessee is the lessee of equipment or facilities (other than fuel) which equipment or facilities (A) were owned or leased by the Lessee on the Closing Date and (B) were purchased by the lessor at an original purchase price not less than $100,000,000 (considering the property subject to each such lease individually and not together with the property subject to any other such lease); or

(ix) any suspension, revocation or termination of insurance required to be maintained pursuant to Section 10(a)(i) hereof, and such suspension, revocation or termination shall continue for more than five Business Days from the effective date of such suspension, revocation or termination unless such insurance is reinstated or replaced; or

(x) any suspension, revocation or termination of insurance required to be maintained pursuant to Section 10(a)(ii) or 10(a)(iii) hereof; provided, however, that such suspension, revocation or termination shall not constitute an Event of Default if the applicable insurer has failed to comply with applicable notice termination provisions of the pertinent policy; and provided, further, that the foregoing proviso shall cease to apply upon the earlier of (x) five Business Days following receipt by the Lessee of actual notice of such suspension, revocation or termination or (y) the applicable termination date of such policy assuming that the insurer had complied with its notice obligations under the pertinent policy; or





(xi) so long as any Initial Series Notes shall remain Outstanding, any of the events specified in Section 19(d) of the Participation Agreement.

Anything herein to the contrary notwithstanding, so long as any Initial Series Notes shall remain Outstanding (x) the provisos contained in clauses (iii) and (iv) above shall have no force or effect and (y) a failure by the Lessee to perform or observe the covenants and agreements contained in Section 7 hereof shall constitute an immediate Event of Default, without notice or lapse of time.
Section 16. Remedies.

(a) Remedies. Upon the occurrence of any Event of Default and so long as the same shall be continuing, the Lessor may, to the extent permitted by Applicable Law, exercise one or more of the following remedies, except as hereinbelow expressly otherwise set forth, as the Lessor in its sole discretion shall elect:

(i) the Lessor may declare this Facility Lease to be in default by written notice to such effect given to the Lessee, or may, by notice to the Lessee, rescind or terminate this Facility Lease;

(ii) the Lessor may (A) demand that the Lessee, and thereupon the Lessee shall, return possession of the Undivided Interest promptly to the Lessor in the manner and condition required by, and otherwise in accordance with the provisions of, this Facility Lease as if the Undivided Interest were being returned at the end of the Lease Term and the Lessor shall not be obligated to reimburse the Lessee for any costs and expenses incurred by the Lessee in connection therewith and (B) take all actions required to enable it to, and, thereafter, enter upon the Plant Site and take immediate possession of (to the exclusion of the Lessee) the Undivided Interest, by summary proceedings or otherwise, all without liability to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise;

(iii) subject to the rights of first refusal, if any, of any owner of an undivided interest in the Plant other than the Lessee under Section 6.02 of the Ownership Agreement and Section 6.01 of the Operating Agreement, the Lessor may sell the Undivided Interest or any part thereof, together with any interest of the Lessor under the Assignment and Assumption Agreement and the Ground Lease at public or private sale, as the Lessor may determine, free and clear of any rights of the Lessee in the Undivided Interest and without any duty to account to the Lessee with respect to such action or inaction or any proceeds with respect thereto (except to the extent required by clause (v) or (vi) below if the Lessor shall elect to exercise its rights thereunder), in which event the Lessee’s obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated or proportionately reduced, as the case may be (except to the extent that Basic Rent is to be included in computations under clause (v) or (vi) below if the Lessor shall elect to exercise its rights thereunder);

(iv) the Lessor may hold, keep idle or lease to others all or any part of the Undivided Interest, as the Lessor in its sole discretion may determine, free and clear of any rights of the Lessee and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds with respect to such action or inaction, except that the Lessee’s obligation to pay Basic Rent for periods commencing after the Lessee shall have been deprived of use of the Undivided Interest pursuant to this clause (iv) shall be reduced by an amount equal to the net proceeds, if any, received by the Lessor from leasing the Undivided Interest to any Person other than the Lessee for the same periods or any portion thereof;





(v) the Lessor may, whether or not the Lessor shall have exercised or shall thereafter at any time exercise its rights under clause (i), (ii), (iii) or (iv) above, demand, by written notice to the Lessee specifying a payment date which shall be a Basic Rent Payment Date not earlier than 10 days after the date of such notice, that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor, on the Basic Rent Payment Date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent accrued after the Basic Rent Payment Date specified in such notice), any unpaid Rent (other than Basic Rent already included in the applicable Casualty Value payment as contemplated by Section 3(a) hereof) accrued through the Basic Rent Payment Date specified in such notice plus whichever of the following amounts the Lessor, in its sole discretion, shall specify in such notice (together with interest on such amount at the interest rates specified in Section 3(b)(iii) from the Basic Rent Payment Date specified in such notice to the date of actual payment):

(A) an amount equal to the excess, if any, of (1) Casualty Value, computed as of the Basic Rent Payment Date specified in such notice over (2) the Fair Market Rental Value of the Undivided Interest (determined on the basis of the then actual condition of Unit 1) until the end of the remaining useful life of Unit 1, after discounting such Fair Market Rental Value semi-annually to present value as of the Basic Rent Payment Date specified in such notice at an annual rate of interest equal to 2% per annum in excess of the Prime Rate then in effect;

(B) an amount equal to the excess, if any, of (1) such Casualty Value over (2) the Fair Market Sales Value of the Undivided Interest (determined on the basis of the then actual condition of Unit 1) as of the Basic Rent Payment Date specified in such notice;

(C) an amount equal to the excess, if any, of (1) the present value as of the Basic Rent Payment Date specified in such notice of all installments of Basic Rent until the end of the Basic Lease Term or the Renewal Term, as the case may be, discounted semi-annually at an annual rate of interest equal to 2% per annum in excess of the Prime Rate then in effect, over (2) the present value as of such Basic Rent Payment Date of the Fair Market Rental Value of the Undivided Interest (determined on the basis of the then actual condition of Unit 1) until the end of the Basic Lease Term or the Renewal Term, as the case may be, discounted, semi-annually at an annual rate of interest equal to 2% per annum in excess of the Prime Rate then in effect; or

(D) an amount equal to the highest of (1) such Casualty Value, (2) such discounted Fair Market Rental Value and (3) such Fair Market Sales Value and, in this event, upon full payment by the Lessee of all sums due hereunder, the Lessor shall, at its option, either Transfer the Undivided Interest to the Lessee, or promptly sell the Undivided Interest and pay over to the Lessee the net proceeds thereof up to the amount set forth in (1), (2) or (3) above actually paid by the Lessee to the Lessor;

(vi) if the Lessor shall have sold all the Undivided Interest pursuant to clause (iii) above, the Lessor, in lieu of exercising its rights under clause (v) above with respect to the Undivided Interest may, if it shall so elect, demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of Basic Rent due for periods commencing after the next Basic Rent Payment Date following the date of such sale), any unpaid Rent (other than Basic Rent already included in the applicable Casualty Value payment as contemplated by Section 3(a) hereof) accrued through such Basic Rent Payment Date, plus the amount of any deficiency between the Sale Proceeds and Casualty Value,




computed as of such Basic Rent Payment Date, together with interest at the interest rates specified in Section 3(b)(iii) on the amount of such Rent and such deficiency from the date of such sale until the date of actual payment; or

(vii) without affecting any rights the Lessor may have in respect of any other provisions of the Transaction Documents, the Lessor may exercise any other right or remedy that may be available to it under any Applicable Law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof.

(b) No Release. No rescission or termination of this Facility Lease, in whole or in part, or repossession of the Undivided Interest or exercise of any remedy under subsection (a) of this Section 16 shall, except as specifically provided therein, relieve the Lessee of any of its liabilities and obligations hereunder. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due hereunder before, after or during the exercise of any of the foregoing remedies, including all reasonable legal fees and other costs and expenses incurred by the Lessor or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor’s remedies with respect thereto. At any sale of the Undivided Interest, or any part thereof pursuant to this Section 16, the Owner Participant, the Lessor or the Indenture Trustee may bid for and purchase such property.

(c) Remedies Cumulative. Except as expressly set forth therein, no remedy under paragraph (a) of this Section 16 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy provided under such paragraph (a) or otherwise available to the Lessor at law or in equity. No express or implied waiver by the Lessor of any Default or Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future or subsequent Default or Event of Default. The failure or delay of the Lessor in exercising any right granted it hereunder upon any occurrence of any of the contingencies set forth herein shall not constitute a waiver of any such right upon the continuation or recurrence of any such contingencies or similar contingencies and any single or partial exercise of any particular right by the Lessor shall not exhaust the same or constitute a waiver of any other right provided herein. To the extent permitted by Applicable Law, the Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Undivided Interest or Unit 1 in mitigation of the Lessor’s damages as set forth in paragraph (a) of this Section 16 or which may otherwise limit or modify any of the Lessor’s rights and remedies provided in this Section 16.

(d) Exercise of Other Rights or Remedies. In addition to all other rights and remedies provided in this Section 16, the Lessor may exercise any other right or remedy that may be available to it under Applicable Law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof.

Section 17. Notices.

All communications and notices provided for in this Facility Lease shall be in writing and shall be given in person or by means of telex, telecopy, or other wire transmission, or mailed by registered or certified mail, addressed as provided in the Participation Agreement. All such communications and notices given in such manner shall be effective (x) if sent by telex, telecopy or other wire transmission, on the date of transmission thereof, or (y) if sent by mail, three Business Days after being mailed.




Section 18. Successors and Assigns.

This Facility Lease, including all agreements, covenants, indemnities, representations and warranties, shall be binding upon and inure to the benefit of the Lessor and its successors and permitted assigns, and the Lessee and its successors and, to the extent permitted hereby, assigns.
Section 19. Right to Perform for Lessee.

If the Lessee shall fail to make any payment of Rent to be made by it, or shall fail to perform or comply with any of its other agreements contained herein, or shall fail to make any payment to be made by it under the Plant Agreements, or shall fail to perform or comply with any of its other agreements contained in the Plant Agreements, either the Lessor or the Owner Participant may, but shall not be obligated to, to the extent not prohibited by Applicable Law, (i) tender such payment, or (ii) in the case of the Plant Agreements, to the extent not expressly prohibited thereby, effect such performance or compliance, and the amount of such payment and the amount of all costs and expenses (including, without limitation, attorneys’ and other professionals’ fees and expenses) of the Lessor or the Owner Participant, as the case may be, incurred in connection with such payment or the performance of or compliance with the Plant Agreements, as the case may be, together with interest thereon at the Overdue Interest Rate, shall be deemed Supplemental Rent, payable by the Lessee upon demand. The foregoing provisions of this Section 19 shall not, however, be read into the Indenture in derogation of the limitation upon the rights of the Lessor and/or the Owner Participant to cure Defaults or Events of Default as provided in Section 6.8 of the Indenture.
Section 20. Additional Covenants.

The Lessee agrees to comply with and to pay as Supplemental Rent, all amounts payable by it under the provisions of Section 13 of the Participation Agreement and under the provisions of the Tax Indemnification Agreement, which provisions are incorporated herein by this reference as fully as if set forth in full at this place. The Lessee agrees to comply with its covenants and agreements set forth in Sections 10(b), 14 and 16 of the Participation Agreement and Articles II, III, IV and V of the Assignment and Assumption Agreement which covenants and agreements are incorporated herein by this reference as fully as if set forth in full at this place.
Section 21. Ground Lease.

The Lessee hereby assumes and will duly and punctually observe and perform, at its expense, all covenants, terms and conditions imposed upon Lessor, as tenant under the Ground Lease (including without limitation the payment of all rents and other sums), to the end that the Lessor, as tenant under the Ground Lease, shall have no responsibility for compliance with the provisions of the Ground Lease and shall be indemnified against all liability, loss, cost and expenses resulting from nonperformance thereunder and the acts of the Lessee, as ground lessor.
Section 22. Amendments and Miscellaneous.

(a) Amendments in Writing. The terms of this Facility Lease may not be waived, altered, modified, amended, supplemented or terminated in any manner whatsoever except by written instrument signed by the Lessor and the Lessee. It is expressly understood by the parties hereto that any waiver, alteration, modification, amendment, supplement or termination of this Facility Lease that requires the consent of the Indenture Trustee or the Holders of all or any portion of the Notes (in each case as provided in Section 10.2 of the Indenture) shall not be effective unless and until such consent shall have been obtained as provided in said Section 10.2.





(b) Survival. (1) All indemnities, representations and warranties contained in this Facility Lease and the other Transaction Documents and the Financing Documents and in any agreement, document or certificate delivered pursuant hereto or thereto or in connection herewith or therewith shall survive, and continue in effect following, the execution and delivery of this Facility Lease and the expiration or other termination of this Facility Lease.

(1) The obligations of the Lessee to pay Supplemental Rent and the obligations of the Lessee under Sections 5, 16, 19, 20 and this subsection 22(b)(2) shall survive the expiration or termination of this Facility Lease. The extension of any applicable statute of limitations by the Lessor, the Indenture Trustee, the Lessee, the Owner Participant, any Loan Participant or any Indemnitee shall not affect such survival. The obligations of the Lessee under Section 20 are expressly made for the benefit of, and shall be enforceable by, any Indemnitee, separately or together, without declaring this Facility Lease to be in default and notwithstanding any assignment by the Lessor of this Facility Lease or any of its rights thereunder or any disposition of all or any part of any interest in the Undivided Interest, Unit 1 or any other property referred to in this Facility Lease, any other Transaction Document or Financing Document. All payments required to be made pursuant to Section 20 shall be made directly to, or as otherwise requested by, the Indemnitee entitled thereto upon written demand by such Indemnitee.

(2) It is the intention of the Lessor and the Lessee that, notwithstanding any Special Transfer or the Lessee’s becoming successor Owner Trustee as contemplated by Section 7(b)(4) of the Participation Agreement (subject, however, to the provisions of Section 9.01(f) of the Trust Agreement) and in view of the rights and interests of the Loan Participants, until the conditions set forth in Section 3.9(b) of the Indenture shall have been satisfied, this Facility Lease and the Lessee’s obligations hereunder shall not be extinguished but shall remain in full force and effect and shall be enforceable by the Indenture Trustee and the Loan Participants, in accordance with its terms and the terms of the Indenture; provided, however, that, after the Lessee shall be deemed to have assumed, and shall be obligated to pay, the Notes as provided in Section 7(b)(4)(H) of the Participation Agreement, the obligation of the Lessee to make any payment of Rent under this Facility Lease shall be satisfied to the extent of the corresponding payment by the Lessee of principal of or premium, if any, or interest on the Notes then Outstanding.

(c) Severability of Provisions. Any provision of this Facility Lease which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Applicable Law, the Lessee hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

(d) True Lease. This Facility Lease is intended as, and shall constitute, an agreement of lease, and a true lease for Federal income tax purposes, and nothing herein shall be construed as conveying to the Lessee any right, title or interest in or to the Undivided Interest except as lessee only.

(e) Original Lease. The single executed original of this Facility Lease marked “THIS COUNTERPART IS THE ORIGINAL COUNTERPART” and containing the receipt of the Indenture Trustee thereon shall be the “Original” of this Facility Lease. To the extent that this Facility Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Facility Lease may be created through the transfer or possession of any counterpart other than the “Original”.





(f) Governing Law. This Facility Lease shall be governed by and construed in accordance with the laws of the State of New York except to the extent that the laws of other jurisdictions are mandatorily applicable.

(g) Headings. The division of this Facility Lease into sections, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Facility Lease.

(h) Concerning the Owner Trustee. MTC and Stephen M. Carta are entering into this Facility Lease solely as Owner Trustee under the Trust Agreement and not in their individual capacities. Anything herein to the contrary notwithstanding, all and each of the representations, warranties, undertakings and agreements herein made on the part of the Owner Trustee are made and intended not as personal representations, warranties, undertakings and agreements by or for the purpose or with the intention of binding MTC and Stephen M. Carta personally but are made and intended for the purpose of binding only the Trust Estate, and this Facility Lease is executed and delivered by the Owner Trustee solely in the exercise of the powers expressly conferred upon it as trustee under the Trust Agreement; and no personal liability or responsibility is assumed hereunder by or shall at any time be enforceable against MTC and Stephen M. Carta or any successor in trust or the Owner Participant on account of any representation, warranty, undertaking or agreement hereunder of the Owner Trustee, either expressed or implied, all such personal liability, if any, being expressly waived by the Lessee, except that the Lessee or any Person claiming by, through or under it, making a claim hereunder, may look to the Trust Estate for satisfaction of the same and the Owner Trustee or its successor in trust, as applicable, shall be personally liable for its own gross negligence or willful misconduct. If a successor owner trustee is appointed in accordance with the terms of the Trust Agreement, such successor owner trustee shall, without any further act, succeed to all the rights, duties, immunities and obligations of the Owner Trustee hereunder and the predecessor owner trustee shall be released from all further duties and obligations hereunder.

(i) Lien of the Indenture. The Lessee hereby agrees that any transfer of all or any part of the property which is subject to the lien of the Indenture, to the extent such lien cannot be released, shall be transferred subject to such lien.

(j) Counterpart Execution. This Facility Lease may be executed in any number of counterparts and by each of the parties hereto or thereto on separate counterparts, all such counterparts together constituting but one and the same instrument. Although this Facility Lease is dated as of the date first above written for convenience, the actual date of execution hereof by the parties hereto is the Closing Date and this Facility Lease shall be executed on, and shall not be binding on any party hereto until, the Closing Date.








In Witness Whereof, each of the parties hereto has caused this Facility Lease to be duly executed by an officer thereunto duly authorized.
ATTEST:
MERIDIAN TRUST COMPANY,
not in its individual capacity but
solely as Corporate Owner Trustee
 
 
/s/ Joseph Barry
By: /s/ Stephen M. Carta
Name:Stephen M. Carta
Title:Vice President
 
 
 
/s/ Stephen M. Carta
Stephen M. Carta, not in his individual capacity but solely as Individual Owner Trustee
 
 
ATTEST:


/s/ Mary Ball Ellett
SYSTEM ENERGY RESOURCES INC.


By: /s/  G. E. Harder
Name:G. E. Harder
Title:Vice President and Treasurer







No. 1
STATE OF NEW YORK     
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for the said County and State, on this 24th day of December, 1988, within my jurisdiction, the within named Stephen M. Carta, who acknowledged that he is Vice President of Meridian Trust Company, a Pennsylvania trust company, Corporate Owner Trustee under that certain Trust Agreement No. 1, dated as of December 1, 1988 among Public Service Resources Corporation, as Owner Participant, Meridian Trust Company, as Corporate Owner Trustee, and Stephen M. Carta, as Individual Owner Trustee, and that for and on behalf of the said trust company, and as its act and deed in said capacity as Corporate Owner Trustee and its having been duly authorized so to do, he executed the above and foregoing instrument after first having been duly authorized by said trust company so to do.

/s/ Jo Ann Nagell     
Notary Public



My Commission Expires:
/s/ Jo Ann Nagell
Jo Ann Nagell
NOTARY PUBLIC, State of New York
No. 31-4836362
Certificate Filed in New York County
Commission Expires November 30, 1989
(SEAL)







No. 1
STATE OF NEW YORK     
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for the said County and State, on this 24th day of December, 1988, within my jurisdiction, the within named Stephen M. Carta, who acknowledged that he is the Individual Owner Trustee under that certain Trust Agreement No. 1 dated as of December 1, 1988 among Public Service Resources Corporation, as Owner Participant, Meridian Trust Company, as Corporate Owner Trustee, and Stephen M. Carta, as Individual Owner Trustee, and that in his capacity as Individual Owner Trustee he executed the above and foregoing instrument, after first having been duly authorized by said corporation so to do.

/s/ Jo Ann Nagell     
Notary Public



My Commission Expires:
/s/ Jo Ann Nagell     
Jo Ann Nagell
NOTARY PUBLIC, State of New York
No. 31-4836362
Certificate Filed in New York County
Commission Expires November 30, 1989
(SEAL)







STATE OF NEW YORK     
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for the said County and State, on this 24th day of December, 1988, within my jurisdiction, the within named G.E. Harder, who acknowledged that he is a Vice President and the Treasurer of System Energy Resources, Inc., an Arkansas corporation, and that for and on behalf of the said corporation, and as its act and deed he executed the above and foregoing instrument, after first having been duly authorized by said corporation so to do.

/s/ Jo Ann Nagell     
Notary Public



My Commission Expires:
/s/ Jo Ann Nagell     
Jo Ann Nagell
NOTARY PUBLIC, State of New York
No. 31-4836362
Certificate Filed in New York County
Commission Expires November 30, 1989
(SEAL)








APPENDIX A
DEFINITIONS

The terms defined herein relate to the Participation Agreement (as defined below) and certain Transaction Documents executed, or to be executed, in connection with the Participation Agreement. Such terms include the plural as well as the singular. Any agreement defined or referred to below shall include each amendment, modification and supplement thereto and waiver thereof as may become effective from time to time, except where otherwise indicated. Any term defined below by reference to any agreement shall have such meaning whether or not such document is in effect. The terms “hereof”, “herein”, “hereunder” and comparable terms refer to the entire agreement with respect to which such terms are used and not to any particular article, section or other subdivision thereof.
If, and to the extent that, the Participation Agreement shall be amended from time to time pursuant to the terms thereof, this Appendix and the Appendix to each Transaction Document which incorporates this Appendix shall be, or be deemed to have been, amended concurrently with the execution and delivery of each such amendment of the Participation Agreement in order to conform the definitions herein and therein to the new or amended definitions set forth in or required by each such amendment to the Participation Agreement.
Actual Method Decommissioning Cost shall mean the Decommissioning Cost as determined in accordance with the actual method of Decommissioning ultimately approved by the NRC or such other Governmental Authority or Governmental Authorities as shall have jurisdiction or, until such a method has been so approved, in accordance with the Estimated Cost of Decommissioning.
Additional Bonds shall mean Bonds in addition to the initial series of Bonds.
Additional Equity Investment shall have the meaning specified in Section 8(f) of the Facility Lease.
Additional Insureds shall mean the Corporate Owner Trustee and the Owner Participant.
Additional Notes shall have the meaning set forth in the fourth recital to the Indenture, which Additional Notes shall be issued, if at all, pursuant to Section 3.5 of the Indenture.
Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with such Person. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
After-Tax Basis shall mean, with respect to any payment received or accrued or deemed to have been received or accrued by any Person, the amount of such payment supplemented by a further payment to that Person so that the sum of the two payments shall, after deduction of all taxes and other charges (without regard to Section 13(b)(2) of the Participation Agreement, but taking into account any credits or deductions arising therefrom and the timing thereof) computed at the highest marginal statutory tax rate resulting from the receipt (actual or constructive) or accrual of such two payments imposed under any Applicable Law or by any Governmental Authority, be equal to such payment received or accrued or deemed to have been received or accrued.




After-Tax Earnings, with respect to any Decommissioning Trust Fund shall mean the projected earnings, as estimated in accordance with the provisions of Section 10(b)(3)(viii) of the Participation Agreement, from the investment of amounts contributed to any such fund, net of any tax or taxes thereon. The interest rate to be used in computing such earnings shall be the Assumed Decommissioning Interest Rate.
Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses and permits of any Governmental Authority and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other judicial or quasi-judicial tribunal of competent jurisdiction (including those pertaining to health, safety, the environment or otherwise).
Appraisal Procedure shall mean a procedure whereby two independent appraisers, one chosen by the Lessee and one by the Lessor, shall mutually agree upon the value, period, amount or determination then the subject of an appraisal. If either the Lessor or the Lessee, as the case may be, shall determine that a value, period, amount or determination to be determined under the Facility Lease or any other Transaction Document cannot timely be established by mutual agreement, it or they, as the case may be, shall appoint its or their appraiser and deliver a written notice thereof to the other party or parties, as the case may be. Such other party or parties shall appoint its or their appraiser within 30 days after receipt from the other party or parties of the foregoing written notice. If within 60 days after appointment of the two appraisers, as described above, the two appraisers are unable to agree upon the value, period, amount or determination in question, a third independent appraiser shall be chosen within ten days thereafter by the mutual consent of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser within such period, such appointment shall be made by the American Arbitration Association, or any organization successor thereto, from a panel of arbitrators having familiarity with nuclear electric generating plants and a familiarity with equipment used or operated in connection therewith. The decision of the third appraiser so appointed and chosen shall be given within 60 days after the selection of such third appraiser. If three appraisers shall be so appointed and the determination of one appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two determinations shall be averaged and such average shall be binding and conclusive on the Lessor and the Lessee; otherwise the average of all three determinations shall be binding and conclusive on the Lessor and the Lessee. The fees and expenses of appraisers incurred in connection with any Appraisal Procedure relating to any transaction contemplated by any provision of any Transaction Document shall be divided equally between the Lessor, on the one part, and the Lessee, on the other part (except pursuant to Section 13 or 16 of the Facility Lease, which shall be paid solely by the Lessee).
Appraiser shall mean Ebasco Business Consulting Company.
Approved Amounts shall have the meaning set forth in Section 10(b)(3)(viii)(C)II(1) of the Participation Agreement.
Approved Transferee shall mean the Person identified as such on the concluding page of this Appendix A.
Assigned Payments shall have the meaning specified in Section 2.1(2) of the Indenture.
Assignment and Assumption Agreement shall mean the Assignment, Assumption and Further Agreement No. [See Additional Information], dated as of December 1, 1988, among the Owner Trustee, the Lessee and SMEPA.




Assumed Decommissioning Interest Rate shall mean, as of the determination thereof, an interest rate determined by the Lessee subject to the approval of the Owner Participant as being an appropriate market rate of interest over the period in question, and in the case of a disagreement between the Lessee and the Owner Participant, such rate shall be determined by an independent financial advisor mutually acceptable to the Lessee and the Owner Participant. In the event that the Lessee and the Owner Participant cannot agree on such financial advisor, the rate shall be determined by the Appraisal Procedure.
Assumed Inflation Rate shall mean, as of the determination thereof, an inflation rate, determined by the Lessee subject to the approval of the Owner Participant, as being the average rate of inflation over the period in question, and, in case of a disagreement between the Lessee and the Owner Participant, such rate shall be determined by an independent financial advisor mutually acceptable to the Lessee and the Owner Participant. In the event that the Lessee and the Owner Participant cannot agree on such financial advisor, the rate shall be determined by the Appraisal Procedure.
Assumption Agreement shall mean the Assumption Agreement substantially in the form of Exhibit B to the Indenture.
Assumption Event shall mean and include (A) a Deemed Loss Event or an Event of Loss in respect of which demand for payment has been made under Section 9(c) or 9(d) of the Facility Lease or in response to which a Special Transfer has been effected and (B) each of the events giving rise to the exercise of the purchase options referred to in Sections 13(f) and 13(g) of the Facility Lease and Section 10(b)(3)(ix) of the Participation Agreement in respect of which the Lessee shall have given notice of its election to exercise any such option.
Assumptions shall mean the Pricing Assumptions and the Tax Assumptions.
Atomic Energy Act shall mean the Atomic Energy Act of 1954, as amended, and regulations from time to time issued, published or promulgated pursuant thereto.
Authorized Officer shall mean, with respect to the Corporate Indenture Trustee, any officer of the Corporate Indenture Trustee assigned to the Corporate Trust Office of the Corporate Indenture Trustee, including any vice president, assistant vice president, trust officer or any other officer performing functions similar to those performed by the persons who, at the time, shall be such officers, and any other officer of the Corporate Indenture Trustee to whom such matter is referred because of his knowledge and familiarity with the subject, and who shall be duly authorized by appropriate corporate action to authenticate a Note or to execute any Transaction Document and shall mean, with respect to the Corporate Owner Trustee, any officer of the Corporate Owner Trustee who shall be duly authorized by appropriate corporate action to execute any Transaction Document.
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978, as amended, and any law with respect to bankruptcy, insolvency, liquidation, moratorium, reorganization, or similar laws affecting creditors’ rights generally.
Basic Lease Term shall mean the initial term of the Facility Lease, which shall begin on the Closing Date and end on July 15, 2015, unless earlier terminated as provided in the Facility Lease.
Basic Rent shall have the meaning set forth in Section 3(a) of the Facility Lease.
Basic Rent Payment Dates shall mean and include January 15 and July 15 of each year thereafter commencing July 15, 1989, and ending July 15, 2015, and, if one or more Renewal Terms shall be permitted under the Facility Lease and the Lessee shall elect one or more Renewal Terms, each January 15 and July




15 of each year during such Renewal Terms and the day next succeeding the last day of each such Renewal Term.
Bill of Sale shall mean the Deed, Bill of Sale, Instrument of Transfer and Severance Agreement No. [See Additional Information], dated the Closing Date, between the Lessee and the Owner Trustee.
Bill of Sale and Assignment shall mean the Bill of Sale and Assignment substantially in the form of Schedule 3 to the Participation Agreement.
Bonds shall mean all bonds, notes and other evidences of indebtedness from time to time issued and outstanding under the Collateral Trust Indenture.
BTC shall mean Bankers Trust Company in its individual capacity, and its successors and assigns.
Business Day shall mean any day other than a Saturday or Sunday or other day on which banks in New Orleans, Louisiana, New York, New York or, so long as any Notes are Outstanding, the city in which the Indenture Trustee’s Office is located, are authorized or obligated to be closed.
Capital Improvement shall mean (a) the addition, betterment or enlargement of any property constituting part of Unit 1 or the replacement of any such property with other property, irrespective of whether (i) such replacement property constitutes an enlargement or betterment of the property which it replaces, (ii) the cost of such addition, betterment, enlargement or replacement is or may be capitalized, or not charged to maintenance or repairs, in accordance with the Uniform System of Accounts or (iii) such addition, betterment or enlargement is or is not included or reflected in the plans and specifications for Unit 1, as built, and (b) any alteration, modification, addition or improvement to Unit 1; provided, however, that, where the context so requires, reference to a Capital Improvement shall mean the Lessor’s Undivided Interest Percentage in such Capital Improvement.
Casualty Value, as of any date during the Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite such date (or the Basic Rent Payment Date next succeeding such date) in Schedule 2 to the Facility Lease. Casualty Value as of any Basic Rent Payment Date during any Renewal Term shall mean the amount determined by amortizing ratably the Fair Market Sales Value of the Undivided Interest as of the commencement of such Renewal Term in semi-annual steps to the amount estimated as of such commencement date to be the Fair Market Sales Value of the Undivided Interest as of the last day of such Renewal Term, together with amounts of Basic Rent then due.
Chief Financial Officer shall mean the Person who is the chief financial officer of the Lessee.
Claims shall mean liabilities, obligations, losses, damages, penalties, claims (including, without limitation, claims involving liability in tort, strict or otherwise), actions, suits, judgments, costs, interest, expenses and disbursements, whether or not any of the foregoing shall be founded or unfounded (including, without limitation, legal fees and expenses and costs of investigation) of any kind and nature whatsoever without any limitation as to amount.
Closing shall mean the proceedings and transactions which occur on the Closing Date, as contemplated by the Participation Agreement.
Closing Date shall mean the date specified as such in the Notice of Closing.
Code shall mean the Internal Revenue Code of 1986, as amended, or any comparable successor law.




Collateral Trust Indenture shall mean a Collateral Trust Indenture, in form and substance satisfactory to Owner Participant, among the Lessee, Funding Corporation and the Collateral Trust Trustee.
Collateral Trust Indenture Supplement shall mean a supplement to the Collateral Trust Indenture.
Collateral Trust Trustee shall mean the bank or trust company acting as trustee under the Collateral Trust Indenture, and the successors or assigns of such trustee.
Common Facilities shall have the meaning set forth in Schedule Ul to the Bill of Sale.
Corporate Indenture Trustee means Bankers Trust Company, not in its individual capacity, but solely as Indenture Trustee under the Indenture.
Corporate Owner Trustee means Meridian Trust Company, not in its individual capacity, but solely as trustee under the Trust Agreement.
Decommissioning shall have the meaning set forth in Section 10(b)(3)(viii)(A) of the Participation Agreement.
Decommissioning Beneficiaries shall have the meaning set forth in Section 10(b)(3)(viii)(B) of the Participation Agreement.
Decommissioning Cost shall have the meaning set forth in Section 10(b)(3)(viii)(B) of the Participation Agreement.
Decommissioning Date shall mean the date, determined by the Decommissioning Expert, upon which Decommissioning is estimated to begin (based on the Decommissioning method selected in accordance with Section 10(b)(3)(viii)(C)VII of the Participation Agreement).
Decommissioning Expert shall have the meaning set forth in Section 10(b)(3)(viii)(C)VII of the Participation Agreement.
Decommissioning Proportionate Interest shall mean, as of the date of computation, the aggregate percentage interest of the Lessee or any of its Affiliates in Unit 1, whether owned, leased or otherwise controlled (directly or indirectly).
Decommissioning Trust Agreement shall mean the Existing Decommissioning Trust Agreement, as amended and supplemented from time to time, or any other trust agreement dedicated to the administration, investment, maintenance and/or application of the Decommissioning Trust Funds.
Decommissioning Trust Funds shall have the meaning set forth in Section 10(b)(3)(viii)(C)I of the Participation Agreement.
Decommissioning Trustee shall mean the trustee under the Decommissioning Trust Agreement.
Deemed Loss Event shall mean any of the following events (unless and until waived in writing by the Owner Participant):
(1)      Utility Regulation. If, at any time from and including the Closing Date and before the Lease Termination Date, the Lessor or the Owner Participant, solely by reason of the acquisition or ownership of the Undivided Interest or any part thereof by the Lessor (or any beneficial interest therein by the Owner Participant) or the lease of the Undivided Interest to the Lessee or any of the other transactions




contemplated by the Transaction Documents (the “Transaction Role”) and not in whole or in part as a result of the business activities, other than the Transaction Role, of the Lessor, the Owner Participant or any of their Affiliates, shall be deemed by any Governmental Authority having jurisdiction to be, or shall become subject to regulation (other than Non-Burdensome Regulation) as, an electric utility, a public utility or a holding company of an electric utility or public utility under any Applicable Law or as a consequence of any Governmental Action and the effect thereof on the Lessor or the Owner Participant would be, in the sole judgment of the Owner Participant, acting on the advice of outside counsel, adverse, except that if the Lessee, at its sole cost and expense, is contesting diligently and in good faith any Governmental Action which would otherwise constitute a Deemed Loss Event under this clause (1), such Deemed Loss Event shall be deemed not to have occurred so long as in the sole judgment of the Owner Participant (a) such contest does not involve any danger of the foreclosure, sale, forfeiture or loss of, or the creation of any Lien on, the Undivided Interest, or any part thereof or any interest therein, (b) such contest does not adversely affect the Undivided Interest or any part thereof or any other property, assets or rights of the Lessor or the Owner Participant or the lien of the Indenture thereon, (c) the Lessee shall have furnished the Owner Participant with an opinion of independent counsel reasonably satisfactory to the Owner Participant to the effect that (x) there exists a reasonable basis for contesting such determination or (y) in the case of any action arising from or relating to the Lessor or the Owner Participant under the Holding Company Act, it is more likely than not that the Lessee will successfully contest such determination without the need for any appeal (except appeal from determinations by the SEC staff), (d) such determination shall be effectively stayed or withdrawn during such contest (and shall not in the sole judgment of the Owner Participant be subject to retroactive application at the conclusion of such contest) in a manner satisfactory to the Owner Participant, and the Owner Participant shall have determined in its sole judgment that such contest and the Lessor’s continued ownership of the Undivided Interest during the pendency of such contest will not adversely affect its business or the business of any of its Affiliates, and (e) the Lessee shall have indemnified the Lessor and the Owner Participant in a manner satisfactory to the Owner Participant for any liability or loss which any thereof may incur.
(2)      Change in Applicable Law. Any change in, or new interpretation by a Governmental Authority having jurisdiction relating to Applicable Law, including, without limitation, the Price-Anderson Act, the Atomic Energy Act, the Nuclear Waste Act or the regulations of the NRC, in each case as in effect on the Closing Date, as a result of which, in the opinion of independent counsel to the Owner Participant: (i) the Lessor or the Owner Participant would become liable or responsible in any capacity (including, without limitation, through assessments imposed by a Governmental Authority) for payments owed in respect of the Nuclear Waste Fund (as such term is used in Section 302 of the Nuclear Waste Act) or in respect of the handling or disposal of nuclear waste, decontamination, storage, transportation or safekeeping of radioactive or hazardous materials or any other obligation in the nature of the foregoing; or (ii) the Lessor or the Owner Participant would be prohibited from asserting any material right, protection or defense available under Applicable Law as of the Closing Date with respect to civil or criminal actions brought in connection with a Nuclear Incident. Without limiting the generality of the foregoing, independent counsel to the Owner Participant shall be entitled to conclude that the Lessor or the Owner Participant is prohibited from asserting a material right, protection or defense referred to in clause (ii) above in the event that there is in effect a decision by a court of competent jurisdiction in which the Owner Trustee, the Owner Participant, a Person having an interest in a nuclear generating unit similar to that of the Owner Trustee or the Owner Participant (such person being hereinafter referred to as a “Similar Person”) or any owner or holder of notes or other debt securities issued in connection with the financing of a nuclear generating unit (or any trustee or mortgagee relating thereto) has been held to be liable in respect of a Nuclear Incident relating to, or otherwise to have liability arising out of its interest in, or investment relating to, a nuclear generating unit under circumstances in which the Owner Trustee, the Owner Participant, such Similar Person or such owner, holder, trustee or mortgagee, as the case may




be, has taken steps to defend itself against such alleged liability; provided, however, that in the case of any such decision of a court other than a United States federal court, no Deemed Loss Event shall be deemed to have occurred if such decision has been effectively stayed pending appeal.
(3)      License. Any expiration, revocation, suspension, or amendment of the License or new interpretation by any Governmental Authority of the License or any other change in Applicable Law or Governmental Action, as a result of which, in the opinion of independent counsel to the Owner Participant, prior to the Lease Termination Date, either the Lessor or the Owner Participant is (i) required to be or become a licensee under the Atomic Energy Act with respect to Unit 1 (unless, in the reasonable opinion of the Owner Participant, the liabilities and obligations imposed upon such a licensee would be non-burdensome), (ii) subject to the obligations or liabilities imposed, as of the Closing Date or thereafter, on licensees under the Atomic Energy Act with respect to Unit 1 (unless, in the reasonable opinion of the Owner Participant, the liabilities and obligations imposed upon such a licensee would be non-burdensome), or (iii) otherwise subject to significant regulation relating to nuclear energy, environmental or safety matters by reason of its Transaction Role. Without limiting the generality of the foregoing, independent counsel to the Owner Participant shall be entitled to conclude that a Deemed Loss Event of the type described in this clause (3) has occurred on the basis of (x) a regulation, order, interpretation or other action of the NRC or other federal governmental regulatory authority, or (y) there being in effect a decision by a court of competent jurisdiction in which the Owner Trustee, the Owner Participant, or Similar Person or any owner or holder of notes or other debt securities issued in connection with the financing of a nuclear generating unit (or any trustee or mortgagee relating thereto) has been required to take the action or held to be subject to the liabilities, obligations or regulation described in the preceding clauses (i) through (iii) arising out of its interest in, or investment relating to, a nuclear generating unit under circumstances in which the Owner Trustee, the Owner Participant, such Similar Person or such owner, holder, trustee or mortgagee, as the case may be, has taken steps to defend itself in respect thereof; provided, however, that in the case of any such decision of a court other than a United States federal court, no Deemed Loss Event shall be deemed to have occurred if such decision has been effectively stayed pending appeal.
(4)          Certain Other Events. Any change in Applicable Law or any Governmental Action the effect of which is (i) to (a) cause or make the transactions contemplated by the Transaction Documents illegal or contrary to Applicable Law; (b) impede (x) the exercise by the Lessor or the Owner Participant of any right or remedy under any Transaction Document relating to a Special Transfer by the Owner Participant of its beneficial interest in the Undivided Interest in accordance with the provisions of Section 7(b)(4) of the Participation Agreement or the transfer by the Owner Trustee of its interest in the Undivided Interest or (y) the assertion of claims for rent or monetary damages; provided, however, that for as long as the Lessor or the Owner Participant has the right, to the exclusion of all other remedies, to assert a claim for monetary damages, no Deemed Loss Event shall occur under this subclause (b)(y); or (c) cause the Lessor or the Owner Participant to be or become liable in any capacity in respect of Decommissioning, or (ii) to constitute an assertion to the effect that (a) the exercise by the Lessor or the Owner Participant of any right (irrespective of the event giving rise to such right) under any Transaction Document would constitute impermissible control over Unit 1 or the licensees of Unit 1, other than an assertion consistent with the second sentence of Section 184 of the Atomic Energy Act and the NRC’s regulations thereunder, including, without limitation, 10 C.F.R. Section 50.81, as now in effect, or (b) the acquisition or transfer of the Undivided Interest was, or any transaction contemplated by the Transaction Documents would be, in violation of, or otherwise contrary to, Applicable Law.
Default shall mean an event or condition which, with the giving of notice or lapse of time, or both, would constitute an Event of Default.




Directive shall mean an instrument in writing executed in accordance with the terms and provisions of the Indenture by the Holders, or their duly authorized agents or attorneys-in-fact representing a Majority in Interest of Holders of Notes, directing the Indenture Trustee to take or refrain from taking the action specified in such instrument or otherwise advising the Indenture Trustee; provided, however, that, except in the case of the Initial Series Notes, each Holder of Notes then Outstanding, or its duly authorized agent or attorney-in-fact, shall be entitled to direct the Indenture Trustee as herein provided only with respect to the aggregate unpaid principal amount of Notes (or portion thereof) issued and Outstanding which are registered in the name of such Holder and which are certified by such Holder or its duly authorized agent or attorney-in-fact to be (i) held by it for its own account and not pledged as collateral for any of its obligations or (ii) pledged as collateral for one or more of its obligations, or obligations with respect to which it is acting as trustee under a related indenture, but in respect of which it has received a directive, satisfactory in form and substance to the Indenture Trustee, given by the holder or holders of a proportionate interest in the obligations secured by such Notes in accordance with the instrument governing such obligations. More than one directive can be given by a registered Holder of Notes or its duly authorized agent or attorney-in-fact pursuant to clause (ii) of the preceding sentence, and such directives may be contradictory or inconsistent, so long as each directive to take or refrain from taking the action specified therein or otherwise advising the Indenture Trustee meets the requirements of said clause (ii).
Disclosure Documents shall have the meaning specified in Section 10(a)(11) of the Participation Agreement.
Discretionary Special Transfer Event shall mean a Special Transfer Event referred to in clause (b) or (c) of the definition thereof.
Early Termination Commitment Date shall have the meaning set forth in Section 14(c) of the Facility Lease.
Early Termination Date shall have the meaning specified in Section 14(c) of the Facility Lease.
Early Termination Notice shall have the meaning specified in Section 14(c) of the Facility Lease.
Earnings shall mean the product of the after-tax accounting yield and the outstanding net investment in leveraged lease as defined in Financial Accounting Standards Board Statement No. 13 as such terms are defined as of the Closing Date.
Eligible Bank shall mean a commercial bank, trust company in the nature of a bank or a foreign bank, in each case maintaining a United States branch or agency, or submitting irrevocably to jurisdiction in the United States or any state thereof (as used herein, a “Letter of Credit Bank”) not related to the Owner Participant or the Lessee at the time of issuance of any Letter of Credit which, unless otherwise consented to in writing by the Owner Participant, shall be (i) in the case of the Initial Letter of Credit, The Fuji Bank, Limited, acting through its New York branch or (ii) any Letter of Credit Bank (x) whose long-term unsecured senior debt securities, or if it has no long-term unsecured senior debt securities, its long-term deposits, are rated not less than A2 by Moody’s (it being understood that, in the case of a Letter of Credit Bank which is part of a holding company structure, the failure of such Letter of Credit Bank’s parent holding company to have a rating not less than A2 by Moody’s in respect of its long-term unsecured senior debt securities shall have no bearing on whether or not such Letter of Credit Bank is an Eligible Bank), and (y) which has capital and surplus of not less than $1 billion; provided, however, that any Letter of Credit issued by a Letter of Credit Bank that is not incorporated in the United States shall provide that all payments shall be in United States dollars and shall be made in a city in the United States. A Letter of Credit Bank which, at the time of its designation by the Lessee (which shall occur no earlier than one year prior to the stated expiration date




of an Existing Letter of Credit), meets the above criteria shall remain an Eligible Bank from the date of such designation through the stated expiration date of the Letter of Credit which it has been designated to renew or replace (such period, the “Eligible Period”); provided, however, that such Letter of Credit Bank shall cease to be an Eligible Bank 180 days following a notice from the Owner Participant to the Lessee of a reduction in the rating of such Bank’s senior long-term unsecured debt securities or, if it has no senior long-term unsecured debt securities, its long-term deposits, as the case may be, during the Eligible Period to a rating less than A3.
Equity Portion of Rent shall mean (i) in the case of any payment of Basic Rent, the amount of Basic Rent payable under the Facility Lease (taking into account any Rent Differential) reduced by the principal and interest then due and payable on the Notes, (ii) in the case of any payment of Casualty Value or Special Casualty Value, the amount thereof reduced by the principal amount of and accrued interest on the Outstanding Notes or (iii) in the case of any other payment of Supplemental Rent, the amount thereof payable to the Owner Participant.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.
Estimated Cost of Decommissioning shall have the meaning set forth in Section 10(b)(3)(viii)(C)VII of the Participation Agreement.
Estimated Decommissioning Period shall mean, as of the determination thereof, the period over which Decommissioning is estimated to occur by the Decommissioning Expert (based on the Decommissioning method selected in accordance with Section 10(b)(3)(viii)(C)VII of the Participation Agreement).
Event of Default shall have the meaning set forth in Section 15 of the Facility Lease.
Event of Loss shall mean any of the following events: (a) a Final Shutdown, (b) a Requisition of Title, (c) a Requisition of Use or (d) a failure by the Lessee to satisfy any of its obligations under Sections 5.01, 5.02, 5.03 or 5.04 of the Assignment and Assumption Agreement within the time periods prescribed therein.
Excepted Payments shall mean (i) all indemnity payments (including, without limitation, payments under the Tax Indemnification Agreement) to which the Owner Trustee or the Owner Participant, or any of their respective Affiliates (or the respective successors, assigns, agents, officers, directors or employees of the Owner Trustee (in their individual capacities or otherwise), the Owner Participant, or any of their respective Affiliates), is entitled, (ii) any amounts payable under any Transaction Document to reimburse the Lessor or the Owner Participant, or any of their respective Affiliates (including the reasonable expenses of the Lessor or the Owner Participant incurred in connection with any such payment), for performing or complying with any of the obligations of the Lessee under and as permitted by any Transaction Document, (iii) any amount payable to or upon the order of the Owner Participant or the Original Owner Participant as the purchase price of the Owner Participant’s or the Original Owner Participant’s interest in the Trust Estate, (iv) any insurance proceeds or other payments received from any Governmental Authority or other Person (except the Lessee) with respect to an Event of Loss in excess of amounts then due and owing to reimburse the Indenture Trustee for any Trustee’s Expenses and to pay the reasonable remuneration of the Indenture Trustee plus amounts then due and owing in respect of the principal of, and premium, if any, and interest on all Notes Outstanding, (v) any insurance proceeds (or payments with respect to risks self-insured) under liability policies and any insurance proceeds in respect of insurance maintained pursuant to Section 10(b) of the Facility Lease, (vi) all payments of Secured Obligations by the Lessee, (vii) if the Letter of Credit has been terminated or has expired, the portion, if any, of Casualty Value or Special Casualty Value as of any date (before taking into account the effect of Section 3(i) of the Facility Lease) equal to the amount by which Net Casualty Value as of such date exceeds the sum of all amounts drawn under the Letter of Credit and not reinstated and (viii)




any payments in respect of interest to the extent attributable to payments referred to in clauses (i) through (vii) above.
Excepted Rights shall mean all rights with respect to Excepted Payments of the Person entitled thereto and all rights and interests with respect to the Letter of Credit and any amounts paid or payable under the Letter of Credit.
Excess Amount shall have the meaning set forth in Section 20(f) of the Participation Agreement.
Existing Decommissioning Trust Agreement shall mean the Decommissioning Trust Agreement, dated as of September 21, 1987, between the Lessee and Irving Trust Company, as amended, supplemented or modified to the Closing Date, but excluding any amendments, supplements or modifications made after the Closing Date.
Existing Letter of Credit shall mean any Letter of Credit which, at the time of determination, is in full force and effect.
Existing Mortgage shall mean the Mortgage and Deed of Trust, dated as of June 15, 1977, of the Lessee to United States Trust Company of New York and Malcolm J. Hood, trustees.
Expenses shall mean liabilities, obligations, losses, damages, taxes (other than taxes on net income), claims, actions, suits, costs, interest, expenses and disbursements (including legal fees and expenses) of any kind and nature whatsoever.
Facility Cost shall mean the Purchase Price plus the sum of (x) all Supplemental Financing Amounts and (y) all Additional Equity Investment amounts.
Facility Lease shall mean the Facility Lease No. [See Additional Information], dated as of December 1, 1988, between the Lessee and the Owner Trustee.
Fair Market Renewal Term shall have the meaning set forth in Section 12 of the Facility Lease.
Fair Market Rental Value or Fair Market Sales Value of any property or service shall mean the value, which shall not in any event be less than zero, of such property or service for lease or sale determined on the basis of an arm’s-length transaction for cash between an informed and willing lessee or buyer or purchaser (under no compulsion to lease or purchase) and an informed and willing lessor or seller (under no compulsion to lease or sell), and shall take into account the Lessor’s rights and obligations under the Assignment and Assumption Agreement and the Ground Lease and rights under the Bill of Sale, provided that the determination of Fair Market Rental Value and Fair Market Sales Value of the Undivided Interest shall take into account the existence of the Decommissioning Trust Funds and the rights afforded by Section 10(b)(3)(viii) of the Participation Agreement to the parties identified therein and shall in any event assume that the Lessee shall have complied with its obligations under Sections 2.01(f), 5.01, 5.02 and 5.03 of the Assignment and Assumption Agreement to vest in the Lessor the right of first refusal and to cause to be delivered the agreement pertaining to the use of the Unit 1 Retained Assets, the transmission agreement and the substitute power agreement, in each case therein referred to. With respect to any Transfer of the Undivided Interest to the Lessee or to an Affiliate of the Lessee, Fair Market Sales Value shall be reduced by the amount which would otherwise be payable to the Lessee pursuant to Section 10(b)(3)(viii) of the Participation Agreement if such Transfer were to a third party. Except pursuant to Section 16 of the Facility Lease, Fair Market Rental Value and Fair Market Sales Value of the Undivided Interest shall be determined on the assumption that (i) Unit 1 has been maintained in accordance with, and the Lessee has complied with, the requirements of the Facility Lease and the other Transaction Documents, (ii) the Lessee is otherwise in compliance with the




requirements of all Transaction Documents, (iii) an owner of the Undivided Interest will have rights and obligations under the Plant Agreements to the extent set forth in the Assignment and Assumption Agreement, (iv) in the case of a proposed purchase by the Lessee pursuant to Section 13(f) of the Facility Lease, the Fair Market Sales Value of the Undivided Interest equals the Fair Market Sales Value after the contemplated Capital Improvements are made minus the Undivided Interest Percentage of the estimated cost of making such Capital Improvements and (v) the Undivided Interest is encumbered by the Facility Lease. For purposes of the preceding clause (v) in the case of a proposed purchase pursuant to Section 13(g) of the Facility Lease, “encumbered” by the Facility Lease shall, with respect to Fair Market Sales Value, mean the Fair Market Sales Value increased or decreased, as the case may be, to take into account the benefits and burdens of the Facility Lease and the Lien of the Indenture. Fair Market Rental Value shall be determined on the assumption that Basic Rent will be payable in equal semi-annual installments in arrears.
Federal Power Act shall mean the Federal Power Act, as amended.
Federal Securities shall have the meaning set forth in Section 2.4(c) of the Indenture.
FERC shall mean the Federal Energy Regulatory Commission of the United States of America or any successor agency.
Final Determination shall have the meaning set forth in Section 13(b)(7) of the Participation Agreement.
Final Shutdown shall mean the occurrence of any of the following:
(1)      the permanent suspension, revocation or expiration of the License relating to Unit 1, or any portion thereof, with the result that the operation of Unit 1 or the possession by the Lessee of the Undivided Interest in Unit 1 is no longer permitted;
(2)      (A) any order or direction (or series of orders or directions) by the NRC or other Governmental Authority that Unit 1 suspend operations for reasons of radiological health and safety for a period exceeding 24 consecutive months (or any such order or direction (or series of orders or directions) that results in the suspension of operations of Unit 1 for a period exceeding 24 consecutive months) or (B) any cessation of operation of Unit 1 for a period of 24 consecutive months if the resumption of operations requires the concurrence of the NRC or any other Governmental Authority;
(3)      the occurrence of a Nuclear Incident at Unit 1 or Unit 2 as a result of which Unit 1 ceases to operate (or if Unit 1 is not in operation immediately prior to such Nuclear Incident, the failure to resume operation as a result of such Nuclear Incident) for a period of 18 consecutive months;
(4)      damage to Unit 1 and the failure to complete restoration or reconstruction of Unit 1 within three years of such damage, or in the case of damage occurring less than three years prior to the date of expiration of the Lease Term, on or before the expiration of the Lease Term; and
(5)      the destruction of Unit 1.
Financing Documents shall mean the Collateral Trust Indenture and the Underwriting Agreement.
Fixed Rate Notes shall mean any non-recourse promissory notes which are issued by the Owner Trustee and authenticated by the Indenture Trustee on any Refunding Date to refund an Outstanding series of Notes, in whole or in part.




Fixed Rate Renewal Term shall have the meaning set forth in Section 12 of the Facility Lease.
Form U-7D shall mean the certificate to be filed by the Owner Participant and the Owner Trustee pursuant to Rule 7(d) under the Holding Company Act.
Funding Corporation shall mean GG1A Funding Corporation, a Delaware corporation.
General Decommissioning Amount shall mean an amount sufficient, together with (x) the Undivided Interest Amount and (y) After-Tax Earnings on such amount and such Undivided Interest Amounts through the Estimated Decommissioning Period to provide for the full funding, when required, of the Actual Method Decommissioning Cost of the Decommissioning Proportionate Interest through the Estimated Decommissioning Period.
General Decommissioning Funds shall mean all Decommissioning Trust Funds other than the Undivided Interest Funds.
Governmental Action shall mean all authorizations, consents, approvals, waivers, exceptions, variances, orders, licenses, exemptions, publications, filings, notices to and declarations of or with any Governmental Authority (other than routine reporting requirements the failure to comply with which will not affect the validity or enforceability of any of the Transaction Documents or have a material adverse effect on the transactions contemplated by any Transaction Document or any Financing Document or any material right, power or remedy of any Person thereunder or any other action in respect of any Governmental Authority) and shall include, without limitation, all siting, environmental and operating permits and licenses which are required for the use and operation of Unit 1, including the Undivided Interest.
Governmental Authority shall mean any Federal, state, county, municipal, foreign, international, regional or other governmental authority, agency, board, body, instrumentality or court.
Granting Clause Documents shall have the meaning specified in Section 2.1(2) of the Indenture.
Ground Lease shall mean Ground Lease No. [See Additional Information], dated as of December 1, 1988, between the Lessee and the Owner Trustee.
Ground Lease Property shall have the meaning set forth in Section 2.01(b) of the Ground Lease.
Ground Lease Term shall have the meaning specified in Section 2.01(a) of the Ground Lease.
Ground Lease Termination Date shall have the meaning specified in Section 2.01(a) of the Ground Lease.
Holders shall mean the registered holders of the Notes.
Holding Company Act shall mean the Public Utility Holding Company Act of 1935, as amended.
Indemnitees shall mean the Owner Participant, the Owner Trustee, each in their individual and fiduciary capacities, the Original Loan Participants, Funding Corporation, the stockholders of Funding Corporation and its officers and directors, the Corporate Indenture Trustee and the Individual Indenture Trustee, each in their individual and fiduciary capacities, each Holder of a Note from time to time Outstanding, the Collateral Trust Trustee, the Trust, the Trust Estate, the Lease Indenture Estate, the indenture estate under the Collateral Trust Indenture, any Affiliate of any of the foregoing and the respective successors, assigns, agents, shareholders, officers, directors or employees of any of the foregoing.




Indemnity Payment shall mean any payment made or to be made pursuant to the Tax Indemnification Agreement.
Indenture shall mean the Trust Indenture, Deed of Trust, Mortgage, Security Agreement and Assignment of Facility Lease No. [See Additional Information], dated as of December 1, 1988, between the Owner Trustee and the Indenture Trustee.
Indenture Default shall mean an event which, after giving of notice or lapse of time, or both, would become an Indenture Event of Default.
Indenture Event of Default shall mean any of the events specified in Section 6.2 of the Indenture.
Indenture Trustee shall mean Bankers Trust Company, a New York banking corporation, not in its individual capacity, but solely as Corporate Indenture Trustee or Indenture Trustee under the Indenture and each successor trustee and co-trustee thereunder; provided, however, that for purposes of Section 6.4(g) of the Indenture, Indenture Trustee shall mean Stanley Burg, not in his individual capacity but solely as Individual Indenture Trustee and Indenture Trustee under the Indenture, and any successor trustee thereunder.
Indenture Trustee’s Counsel shall mean White & Case, 1155 Avenue of the Americas, New York, New York 10036, or such other counsel as shall be selected by the Indenture Trustee.
Indenture Trustee’s Liens shall mean Liens against the Lease Indenture Estate which result from acts of, or any failure to act by, or as a result of claims against, the Indenture Trustee, in its individual capacity, unrelated to the transactions contemplated by the Transaction Documents.
Indenture Trustee’s Office shall mean the office of the Corporate Indenture Trustee located at Four Albany Street, New York, New York, 10015, Attention: Corporate Trust & Agency Group, or such other office as may be designated by the Indenture Trustee to the Owner Trustee and each Holder of a Note Outstanding under the Indenture.
Individual Indenture Trustee shall mean Stanley Burg, not in his individual capacity, but solely as Individual Indenture Trustee under the Indenture, and any successor trustee thereunder.
Individual Owner Trustee shall mean Stephen M. Carta, not in his individual capacity, but solely as trustee under the Trust Agreement, and any successor trustee thereunder.
Initial Funding Date shall mean the earlier to occur of (x) the License Expiration Date or (y) the Decommissioning Date.
Initial Letter of Credit shall have the meaning set forth in Section 10(b)(3)(ix) of the Participation Agreement.
Initial Series Notes shall mean the non-recourse promissory notes, substantially in the form of Exhibit A to the Indenture, to be issued by the Owner Trustee and authenticated by the Indenture Trustee on the Closing Date to finance a portion of the Purchase Price.
Investment shall have the meaning set forth in Section 3(a) of the Participation Agreement and shall be subject to adjustment in accordance with Sections 3(b) and 3(c) of the Participation Agreement and Section 8(f) of the Facility Lease.
Investment Company Act shall mean the Investment Company Act of 1940, as amended.




Investment Percentage shall mean the percentage set forth in Item 1 of Schedule 5 to the Participation Agreement.
IRS shall mean the Internal Revenue Service of the United States Department of the Treasury or any successor agency.
Issuing Bank shall mean, with respect to the Initial Letter of Credit, The Fuji Bank, Limited, acting through its New York branch, and with respect to each other Letter of Credit, the issuing bank thereof.
Lease Indenture Estate shall have the meaning set forth in Section 2.1 of the Indenture.
Lease Term shall mean the aggregate of the Basic Lease Term, each elected Renewal Term and any extension of any thereof pursuant to Section 5(b) of the Facility Lease.
Lease Termination Date shall mean the last day of the Lease Term (whether occurring by reason of a termination or expiration of the Lease Term).
Lessee shall mean System Energy Resources, Inc., an Arkansas corporation, and its respective successors and assigns, as lessee under the Facility Lease and as party to the other Transaction Documents and Financing Documents to which it is a signatory.
Lessee’s Counsel shall mean Wise, Carter, Child & Caraway, Professional Association, 600 Heritage Building, Congress at Capitol, Jackson, Mississippi 39201, or such other counsel as shall be selected by the Lessee.
Lessee’s Notice shall mean a notice given by the Lessee to the Owner Trustee and the Owner Participant which specifies, in the event of a Special Transfer or a Transfer pursuant to the provisions of Sections 9(c) or 9(d) of the Facility Lease, whether such Special Transfer or Transfer shall be made to (i) the Lessee or (ii) any Affiliate of the Lessee. Each such Lessee’s Notice shall be effective, as to any party, on the date of receipt thereof by such party, and shall supersede any prior Lessee’s Notice.
Lessee’s NRC Counsel shall mean Bishop, Cook, Purcell & Reynolds, 1400 L Street, N.W., Washington 20005, or such other counsel expert in matters relating to the NRC as shall be selected by the Lessee.
Lessee’s Special Arkansas Counsel shall mean Friday, Eldredge & Clark, First National Bank Building, Little Rock, Arkansas 72201, or such other counsel as shall be selected by the Lessee.
Lessee’s Special Counsel shall mean Reid & Priest, 40 West 57th Street, New York, New York 10019, or such other counsel as shall be selected by the Lessee.
Lessee’s Special Louisiana Counsel shall mean Jones, Walker, Waechter, Poitevent, Carrere & Denegre, 201 St. Charles Avenue, New Orleans, Louisiana 70170, or such other counsel as shall be selected by the Lessee.
Lessor shall mean the Owner Trustee, as lessor under the Facility Lease, and its successors and assigns as such lessor.
Lessor Possession Date shall mean the earlier of the date on which the Undivided Interest is returned to the Lessor pursuant to and in accordance with the terms of Section 5(a) of the Facility Lease and the date of the loss by the Lessee of the use or possession of the Undivided Interest pursuant to Section 16 of the Facility Lease.




Lessor’s Liens or Owner Trustee’s Liens shall mean Liens against the Trust Estate or the Lease Indenture Estate which result from acts of, or any failure to act by, or as a result of claims against, MTC, unrelated to the Owner Trustee’s ownership of the Undivided Interest, the administration of the Trust Estate or the transactions contemplated by the Transaction Documents.
Lessor’s Percentage shall have the meaning set forth in Section 14(a) of the Participation Agreement.
Letter of Credit shall have the meaning set forth in Section 10(b)(3)(ix) of the Participation Agreement.
Letter of Credit Bank shall have the meaning set forth in the definition of Eligible Bank.
License shall mean NRC Facility Operating License No. NPF-29, as the same may be amended, modified, extended, renewed or superseded from time to time.
License Expiration Date shall mean June 16, 2022, or such later date or earlier date as the License shall expire or be terminated.
Lien shall mean any mortgage, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof or the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
Loan shall have the meaning set forth in Section 2(a) of the Participation Agreement.
Loan Participants shall mean the Original Loan Participants, so long as the Initial Series Notes are Outstanding, and each other Holder of a Note from time to time.
Loan Percentage shall mean, in respect of each Original Loan Participant, the percentage set forth opposite the name of such Original Loan Participant in Schedule 1-B to the Participation Agreement.
Majority in Interest of Holders of Notes shall mean Holders of a majority in principal amount of all Notes Outstanding under the Indenture at the time of any determination thereunder; provided , however, that for purposes of any determination with respect to the Initial Series Notes, such term shall mean Holders of not less than 66⅔% in principal amount at the time of such determination.
Mandatory Special Transfer Event shall mean a Special Transfer Event referred to in clause (a) of the definition of Special Transfer Event.
Maximum Letter of Credit Amount shall mean the maximum credit amount in any Letter of Credit.
Moody’s shall mean Moody’s Investors Service, Inc., and any successor thereto which is issuing nationally accepted securities ratings.
Morgan Stanley shall mean Morgan Stanley & Co. Incorporated.
Mortgage Release shall mean the release under and with respect to the Existing Mortgage releasing, among other things, the Undivided Interest and the Ground Lease Property from the lien of the Existing Mortgage.
MTC shall mean Meridian Trust Company in its individual capacity, and its successors and assigns.




Net Casualty Value shall mean Casualty Value reduced by the principal amount of and accrued interest on the Outstanding Notes, as set forth in Schedule 4 to the Facility Lease.
Net Economic Return shall mean:
(i)      the net after-tax economic yield originally expected by the Owner Participant on the Closing Date with respect to the Undivided Interest, calculated using the Assumptions and the initial computations of Basic Rent, Casualty Values and Special Casualty Values derived from the Assumptions (the “Closing Schedules and Assumptions”) as such yield shall be adjusted pursuant to and in accordance with Section 3 of the Facility Lease; and
(ii)      the sum of after-tax cash flow over the Basic Lease Term at least equal to that originally expected by the Owner Participant on the Closing Date calculated using the Closing Schedules and Assumptions; and
(iii)      in connection with adjustments to Basic Rent provided for in the Facility Lease the sum of all after-tax Earnings in the period beginning on the Closing Date to and including the Owner Participant’s fiscal year which includes December 31, 1999 at least equal to that expected by the Owner Participant on the Closing Date calculated using the Closing Schedules and Assumptions.
Notwithstanding the above, nothing in this definition shall be construed to obligate the Lessee to restore any portion of a reduction in Earnings where such portion of the reduction is due to events other than changes in Basic Rent provided for in the Facility Lease, including, by example, changes in Financial Accounting Standards Board Statement No. 13 occurring after the Closing Date.
For the purposes of this definition, the Assumptions shall be deemed to include the assumptions that (i) the Owner Participant is fully taxable during the entire Basic Lease Term, provided, however, that nothing in this definition or the Participation Agreement shall be construed to be a representation by the Owner Participant as to the actual residual value assumed by the Owner Participant for purposes of calculating its earnings according to Financial Accounting Standards Board Statement No. 13 accounting or for any other purpose and (ii) none of the Investment is comprised of borrowed funds.
Net Special Casualty Value shall mean Special Casualty Value reduced by the principal amount of and accrued interest on the Outstanding Notes, as set forth in Schedule 5 to the Facility Lease.
Net Transaction Expenses shall have the meaning set forth in Section 3(a) of the Participation Agreement.
Net Worth shall mean the aggregate consolidated common stockholders’ equity, preference and preferred stock of any Person and its respective subsidiaries, taken as a whole (but excluding any preference or preferred stock which is redeemable at the option of the holder thereof), but does not include intangibles determined by such Person’s auditors on the basis of generally accepted accounting principles.
No-Action Letter shall mean the response of the Staff of the Division of Investment Management of the SEC to the letters of Lessee’s Special Counsel, dated November 9, and December 19, 1988, regarding the application of Section 2(a)(3) of the Holding Company Act to the transactions contemplated by the Transaction Documents.
Non-Burdensome Regulation shall mean (i) ministerial regulatory requirements which do not impose limitations or regulatory requirements on the business or activities of the Owner Participant and which are deemed, in the reasonable discretion of the Owner Participant, not to be burdensome, (ii) assuming redelivery




of the Undivided Interest in accordance with Section 5(a) of the Facility Lease, regulation resulting from any possession of the Undivided Interest on or after the Lease Termination Date or (iii) regulation of the Owner Trustee which would be terminated by the appointment of a successor Owner Trustee or a Co-Trustee pursuant to the terms of the Trust Agreement.
Nonseverable, when used with respect to any Capital Improvement, shall mean any Capital Improvement which is not a Severable Capital Improvement.
Noteholder shall mean any Holder from time to time of a Note Outstanding under the Indenture.
Notes shall mean the Initial Series Notes and any Additional Notes.
Notice of Closing shall have the meaning set forth in Section 5(a) of the Participation Agreement.
NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.
Nuclear Incident shall have the meaning set forth in the Atomic Energy Act, as in effect as of the Closing Date; provided, that if the Atomic Energy Act shall be amended to expand the definition of “nuclear incident”, the term “Nuclear Incident” shall be similarly expanded.
Nuclear Waste Act shall mean the Nuclear Waste Policy Act of 1982, as amended, or any comparable successor law.
Obligor shall have the meaning set forth in Section 3.9(b) of the Indenture.
Obsolescence Redemption Date shall mean the Termination Date .
Offered Trust Interest shall have the meaning set forth in Section 15(b) of the Participation Agreement.
Officers’ Certificate shall mean a certificate signed by the President or any Vice President and by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Person with respect to which such term is used.
Operating Agreement shall mean the Operating Agreement, dated as of May 1, 1980, between the Lessee and SMEPA, as amended.
Original Loan Participants shall mean the financial institutions listed in Schedule 1-B of the Participation Agreement under the heading “Original Loan Participants”.
Original Loan Participants’ Counsel shall mean Cravath, Swaine & Moore, or such other counsel as shall be selected by the Original Loan Participants.
Original of the Facility Lease shall mean the fully executed counterpart of the Facility Lease, marked “THIS COUNTERPART IS THE ORIGINAL COUNTERPART”, pursuant to Section 22(e) of the Facility Lease and containing the receipt of the Indenture Trustee.
Original Owner Participant shall mean the Person identified as such on the concluding page of this Appendix A.
Outstanding when used with respect to Notes, shall mean, as of the date of determination, all such Notes theretofore issued, authenticated and delivered under the Indenture, except (a) Notes theretofore




cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation, (b) Notes or portions thereof deemed to have been paid within the meaning of Section 2.4(c) of the Indenture, (c) Notes or portions thereof which have been pledged as collateral for any obligations of the obligor thereof to the extent that an amount sufficient to make full payment of such obligations when due has been deposited with the pledgee of such Notes for the purpose of holding such amount in trust for the payment of such obligations in accordance with the indenture or agreement under which such obligations are secured and (d) Notes in exchange for, or in lieu of, which other Notes have been issued, authenticated and delivered pursuant to the Indenture; provided, however, that any Note owned by the Lessee, the Owner Participant or the Owner Trustee or any Affiliate of any thereof shall be disregarded and deemed not to be Outstanding for the purpose of any Directive.
Overdue Interest Rate shall mean the weighted average rate per annum of interest payable with respect to overdue payments of principal on the Notes Outstanding, computed as set forth in such Notes.
Owner Participant shall mean the Original Owner Participant and each successor or permitted assign of such Person.
Owner Participant’s Liens shall mean Liens against the Trust Estate or the Lease Indenture Estate and which result from acts of, or any failure to act by, or as a result of claims against, the Owner Participant unrelated to the transactions contemplated by the Transaction Documents but not Liens against the Owner Participant’s beneficial interest in the Trust Estate.
Owner Participant’s NRC Counsel shall mean Shaw, Pittman, Potts & Trowbridge, 1880 M Street, N.W., Washington, D.C. 20036, or such other counsel expert in matters relating to the NRC as shall be selected by the Owner Participant.
Owner Participant’s Special Counsel shall mean Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038, or such other counsel as shall be selected by the Owner Participant.
Owner Participant’s Special Mississippi Counsel shall mean Butler, Snow, O’Mara, Stevens & Cannada, 210 East Capital Street, Jackson, Mississippi, 39205 or such other counsel as shall be selected by the Owner Participant.
Owner Participant’s Special Tax Counsel shall mean Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038, or such other counsel as shall be selected by the Owner Participant.
Owner Trustee shall mean, unless otherwise specified, collectively, the Corporate Owner Trustee and the Individual Owner Trustee, not in their individual capacities, but solely as Owner Trustee under the Trust Agreement, and each successor as trustee, separate trustee and co-trustee thereunder; provided, however, that the term Owner Trustee, as used in the Trust Agreement, shall mean Meridian Trust Company and Stephen M. Carta in their individual capacities.
Owner Trustee’s Counsel shall mean Haight, Gardner, Poor & Havens, 195 Broadway, New York, New York 10007 or such other counsel as shall be selected by the Owner Trustee.
Owner Trustee’s Entitlement Share shall mean a share of the capacity of, and energy generated by, Unit 1 equal to the Undivided Interest Percentage.
Ownership Agreement shall mean the Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between the Lessee and SMEPA, as amended.




Partial Draw shall have the meaning set forth in Schedule I to the Initial Letter of Credit, and thereafter shall include similar events in any subsequent Reimbursement Agreement with respect to any Initial Letter of Credit.
Participation Agreement shall mean the Participation Agreement No. [See Additional Information], dated as of December 1, 1988, among the Owner Trustee, the Indenture Trustee, Funding Corporation, the Original Loan Participants, the Owner Participant and the Lessee.
Penalty Rate shall mean the higher of (x) 2% per annum in excess of the Prime Rate and (y) 2% per annum in excess of the Overdue Interest Rate.
Permitted Investments shall mean (i) direct obligations of the United States of America which are taken into consideration for purposes of the public debt limit, or (ii) obligations the principal of and interest on which are fully guaranteed by the United States of America, or (iii) obligations of a state or local government which are rated Al by Moody’s or the equivalent by Standard & Poor’s, which are not in default as to principal or interest and the interest on which is exempt from tax under Code section 103(a), or (iv) certificates of deposit by, or bankers’ acceptances of, or time deposits with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of the States thereof having a combined capital and surplus of at least $1,000,000,000 and the unsecured debt securities of which shall be rated at least Aa3 by Moody’s or the equivalent thereof by Standard & Poor’s (or, if neither such organization shall rate such unsecured debt securities at any time, by any nationally recognized statistical rating organization in the United States of America) (including the Decommissioning Trustee if such conditions are met), or (v) commercial paper of companies incorporated or doing business under the laws of the United States of America or one of the States thereof (including the Decommissioning Trustee if the other conditions herein are met) and in each case having a rating assigned to such commercial paper by Standard & Poor’s or Moody’s (or, if neither such organization shall rate such commercial paper at any time, by any nationally recognized statistical rating organization in the United States of America) equal to the highest rating assigned by such organization, or (vi) repurchase agreements fully collateralized by an obligation of the type described in clause (i) or (ii) above, pursuant to which a bank, trust company or national banking association referred to in clause (iv) above or another financial institution having a net worth of at least $1,000,000,000 and the unsecured debt securities of which shall be rated at least Aa3 by Moody’s or the equivalent thereof by Standard & Poor’s is obligated to repurchase any such obligation not later than 90 days after the purchase of any such obligation, or (vii) such other investments as shall be proposed by the Lessee and consented to in writing from time to time by the Owner Participant. The term “Permitted Investments” shall not include any securities or other obligations of the Lessee or any other owner of an interest in Unit 1 or any Affiliate of any thereof. Permitted Investments shall have maturity dates not later than the earlier of the June 16, 2022 and the Decommissioning Date; provided, however, that Permitted Investments made after (x) the date when the Lessee determines to use a particular method of Decommissioning and (y) the approval of such method by the NRC and other Governmental Authorities having jurisdiction, may have maturity dates not later than the dates when the proceeds thereof are reasonably expected to be needed to pay the Undivided Interest Percentage of the Actual Method Decommissioning Cost.
Permitted Liens shall mean (i) the respective rights and interests of the Lessee, the Owner Participant, the Owner Trustee, the Loan Participants and the Indenture Trustee, as provided in the Transaction Documents and the Financing Documents; (ii) the rights of any sublessee or assignee under a sublease or an assignment permitted by the terms of the Facility Lease; (iii) the Lien of the Existing Mortgage and “Excepted Encumbrances” (as defined in Section 1 of the Reimbursement Agreement relating to the Initial Letter of Credit) on the leasehold estate under the Facility Lease and on the Retained Assets and the Unit 1 Retained Assets and on the Lessee’s interest in the Plant Site (other than the Ground Lease Property); (iv) Liens for




taxes either not yet delinquent or which are being contested in good faith and by appropriate proceedings diligently conducted, so long as such proceedings shall not (x) involve any danger of the sale, forfeiture or loss of the Undivided Interest or any part thereof or interest therein, (y) interfere with the use, possession or disposition of the Undivided Interest or any part thereof or interest therein or (z) impair payment of Rent; (v) inchoate materialmen’s, mechanics’, workmen’s, repairmen’s, employees’, carriers’, warehousemen’s, or other like Liens arising in the ordinary course of business for the Plant or Liens of such sort which are not inchoate and which aggregate not in excess of $20 million with respect to Unit 1 and the Ground Lease Property, so long as such Liens, individually or in the aggregate, shall not involve any material danger of the sale, forfeiture or loss of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not materially interfere with the use or disposition of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not adversely affect the Trust Estate or the Lease Indenture Estate and shall not impair in any material respect the Lien of the Indenture; (vi) Lessor’s Liens, Owner Participant’s Liens and Indenture Trustee’s Liens; (vii) Liens that have been bonded for the full amount in dispute or as to which other security arrangements satisfactory to the Lessor and the Owner Participant shall have been made and which are being contested diligently by the appropriate party in good faith and by appropriate proceedings so long as such proceedings shall not violate clause (x), (y) or (z) of clause (iv) above; (viii) Liens of any of the types described in clause (v) above that have been bonded for the full amount in dispute or as to which other security arrangements satisfactory to the Lessor and the Owner Participant shall have been made and which arise out of judgments or awards and with respect to which (A) an appeal or proceeding for review is being prosecuted in good faith and for the payment of which adequate reserves shall have been provided as required by generally accepted accounting practice and (B) there shall have been secured a stay of execution pending such appeal or proceeding for review, so long as such proceedings shall not violate clause (x), (y) or (z) of clause (iv) above; (ix) the rights and interests of the Lessee under the Assignment and Assumption Agreement, the Plant Agreements and the Ground Lease; (x) the rights of the NRC under the License; (xi) the rights of Persons other than the Lessee and the Owner Trustee under the Plant Agreements and under instruments contemplated thereby; (xii) Liens on the undivided ownership interests in Unit 1 other than the Undivided Interest; (xiii) the reservations, encumbrances and title defects described in the title report referred to in Section 11(a)(30) of the Participation Agreement; and (xiv) easements, servitudes, licenses and rights of way arising with respect to the Plant Site after the Closing Date, so long as such Liens, individually or in the aggregate, shall not involve any material danger of the sale, forfeiture or loss of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not materially interfere with the use or disposition of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not adversely affect the Trust Estate or the Lease Indenture Estate and shall not impair in any material respect the Lien of the Indenture.
Person shall mean any individual, partnership, corporation, trust, unincorporated association or joint venture, a government or any department or agency thereof, or any other entity.
Plant shall mean the Grand Gulf Nuclear Station consisting of Unit 1 and Unit 2, which station is located in Claiborne County, Mississippi.
Plant Agreements shall mean the Ownership Agreement and the Operating Agreement.
Plant Site shall mean the site of the Plant as more fully described in Schedule PS to the Ground Lease.
Price-Anderson Act shall mean the Price-Anderson Act, Pub. L. No. 85-256, 71 Stat. 576 (1957), as amended from time to time.




Pricing Assumptions shall mean the pricing assumptions set forth in Schedule 5 to the Participation Agreement.
Prime Rate shall mean the rate of interest publicly announced from time to time by the banking facilities of the Owner Trustee at its principal office as its prime, base or reference lending rate, or if the Owner Trustee shall not quote a prime, base or reference lending rate on the date in question, then the prime, base or reference lending rate publicly announced from time to time by the Indenture Trustee at its principal place of business. Any change in the Prime Rate shall be effective on the date such change in the Prime Rate is announced.
Project shall have the meaning set forth in Section 13(f) of the Facility Lease.
Prudent Utility Practice shall mean, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers’ warranties, the requirements of governmental agencies and authorities of competent jurisdiction and the requirements of the Transaction Documents.
Purchase Documents shall mean the Bill of Sale and such other documents as the Owner Participant, the Owner Trustee, the Indenture Trustee, the Original Loan Participants or their respective counsel shall deem necessary or desirable to convey good and marketable title to the Undivided Interest to the Owner Trustee.
Purchase Price shall mean the purchase price to be paid for the Undivided Interest as set forth on the concluding page of this Appendix A.
Reasonable Basis for a position shall exist if tax counsel may properly advise reporting such position on a tax return in accordance with Formal Opinion 85-352 issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association.
Refunding Bonds shall mean any series of bonds of Funding Corporation issued, authenticated and delivered under the Collateral Trust Indenture, as supplemented, if necessary, by a Refunding Supplemental Indenture, the proceeds of which will be used to refund the Initial Series Notes or any Additional Notes.
Refunding Date shall mean any date on which Refunding Bonds are issued.
Refunding Loan shall have the meaning set forth in Section 2(d) of the Participation Agreement.
Refunding Supplemental Indenture shall mean any Refunding Bond Supplemental Indenture among the Lessee, Funding Corporation and the Collateral Trust Trustee, supplementing the Collateral Trust Indenture and providing, among other things, for the issuance of Refunding Bonds.
Registration Statement shall mean a registration statement, including all exhibits and all documents incorporated in such Registration Statement by reference, filed with the SEC under the Securities Act in connection with the offer, issue and sale of any Refunding Bonds.




Regulations shall mean the income tax regulations issued, published or promulgated under the Code, or under the Internal Revenue Code of 1954, as amended.
Reimbursement Agreement shall mean, with respect to the Initial Letter of Credit, the Reimbursement Agreement dated as of December 1, 1988, among the Lessee, The Fuji Bank, Limited, acting through its New York branch, and Chemical Bank as administrating bank, and the participating banks named therein, and with respect to any subsequent Letter of Credit, the reimbursement agreement governing the rights and obligations of the Lessee and the Issuing Bank.
Reimbursement Default, while the Initial Letter of Credit is outstanding, shall have the meaning set forth in Section 1 of the Reimbursement Agreement relating to the Initial Letter of Credit and thereafter shall include similar events in any subsequent Reimbursement Agreement with respect to a subsequent Letter of Credit.
Reimbursement Event of Default, shall mean, while the Initial Letter of Credit is outstanding, either a Reimbursement Event of Default or a Prepayment Event, in each case as defined in Section 1 of the Reimbursement Agreement relating to the Initial Letter of Credit and thereafter shall include similar events in any subsequent Reimbursement Agreement with respect to a subsequent Letter of Credit.
Releveraging Amount shall mean the proceeds of any Additional Notes issued in accordance with Section 2(c) of the Participation Agreement.
Releveraging Loan shall have the meaning specified in Section 2(c) of the Participation Agreement.
Releveraging Note shall mean a Note, or that portion thereof, evidencing a Releveraging Loan.
Renewal Option shall mean the option to elect an extension of the Facility Lease for any Renewal Term.
Renewal Term shall mean any Fixed Rate Renewal Term or Fair Market Renewal Term.
Rent shall mean Basic Rent, Supplemental Rent and amounts payable by the Lessee pursuant to Section 3(j) of the Facility Lease.
Rent Differential shall have the meaning set forth in Section 3(h) of the Facility Lease.
Rental Period shall have the meaning set forth in Section 3(a) of the Facility Lease.
Reoptimization Date shall mean the date of a reoptimization in accordance with Section 2(e) of the Participation Agreement.
Required Rent Payment Amount shall mean the Equity Portion of Rent in respect of the following amounts payable as Supplemental Rent by the Lessee through the Indenture Trustee (i) in the case of Special Transfer Events based upon Deemed Loss Events, Special Casualty Value as of the Basic Rent Payment Date on which occurs the Special Transfer, or if the date on which the Special Transfer occurs is not a Basic Rent Payment Date, the Basic Rent Payment Date next succeeding the Special Transfer, (ii) in the case of Special Transfer Events based upon Events of Loss, Casualty Value as of the Basic Rent Payment Date next succeeding the Special Transfer except that if such Event of Loss occurs on a Basic Rent Payment Date, Casualty Value shall be as of such Basic Rent Payment Date and (iii) in the case of Special Transfer Events based upon Events of Default, the amount set forth in Section 16(a)(v)(D) of the Facility Lease, together, in each case, with interest thereon, if any in accordance with Section 3(b)(iii) of the Facility Lease.




Requisition of Title shall mean any circumstance or event in consequence of which Unit 1 or the Undivided Interest, or any portion of the Common Facilities or the Plant Site the loss of which would result in the practical inability to operate Unit 1 or the Undivided Interest, shall be condemned or seized or title thereto shall be requisitioned or taken by any Governmental Authority under power of eminent domain or otherwise, where such condemnation, seizure or requisition shall be for a stated period which shall, or for an indefinite period which is reasonably expected to, exceed the lesser of (i) the remaining portion of the Lease Term and (ii) 60 months; provided, that a Requisition of Title shall not be deemed to have occurred if the Lessee is contesting diligently and in good faith such action and (i) the duration of such contest has not exceeded 6 months without the entry of a judicial determination staying the effect of such action and such stay shall remain in effect, (ii) the Lessee shall have furnished the Owner Participant with an opinion of independent counsel reasonably satisfactory to the Owner Participant to the effect that there exists a reasonable basis for contesting such action and that it is more likely than not that the Lessee will successfully contest such action, (iii) such action and contest shall not adversely affect Lessee’s payment obligations under the Facility Lease and other Transaction Documents and (iv) such contest shall be successfully concluded within the earlier of 36 months from the date on which action is first taken by a Governmental Authority with respect to such condemnation, seizure or requisition or the period ending on the day prior to the last Basic Rent Payment Date.
Requisition of Use shall mean any circumstance or event other than a Requisition of Title in consequence of which the use of Unit 1 or the Undivided Interest, or any portion of the Common Facilities or the Plant Site the loss of which would significantly interfere with the use of Unit 1 or the Undivided Interest, shall be requisitioned or taken by any Governmental Authority under power of eminent domain or otherwise, where such requisition or taking shall be for a stated period which shall, or for an indefinite period which is reasonably expected to, exceed the lesser of (i) the remaining portion of the Lease Term and (ii) 60 months; provided, that a Requisition of Use shall not be deemed to have occurred if the Lessee is contesting diligently and in good faith such requisition or taking and (i) such contest has not exceeded 6 months without the entry of a judicial determination staying the effect of such action and such stay shall remain in effect, (ii) the Lessee shall have furnished the Owner Participant with an opinion of independent counsel reasonably satisfactory to the Owner Participant to the effect that there exists a reasonable basis for contesting such action and that it is more likely than not that the Lessee will successfully contest such action, (iii) such action and contest shall not adversely affect Lessee’s payment obligations under the Facility Lease and other Transaction Documents and (iv) such contest shall be successfully concluded within the earlier of 36 months from the date on which action is first taken by a Governmental Authority with respect to such requisition or taking or the period ending on the day prior to the last Basic Rent Payment Date.
Responsible Officer shall mean, with respect to the subject matter of any covenant, agreement or obligation of any party contained in any Transaction Document, the President, any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer or any other officer who in the normal performance of his operational responsibility would have knowledge of such matter and the requirements with respect thereto.
Retained Assets shall mean (i) the Lessee’s interest in the Plant other than the Undivided Interest and (ii) Severable Capital Improvements or any interest therein title to which is retained by the Lessee in accordance with Section 8(e) of the Facility Lease.
Revenue Measures shall mean any liability or obligation for any tax, fee, assessment or other charge asserted against any Indemnitee under the Price-Anderson Act, the Atomic Energy Act, or any successor legislation thereto, as a result of such Indemnitee’s interest in Unit 1.
Revised Rent Amounts shall have the meaning set forth in Section 3(f)(i) of the Facility Lease.




Sale Proceeds shall mean, with respect to any sale of the Undivided Interest by the Lessor to any Person, the gross proceeds of such sale paid in cash, less all costs and expenses whatsoever incurred by the Lessor and the Owner Participant in connection therewith.
SEC shall mean the Securities and Exchange Commission of the United States of America or any successor agency.
Section 6(c) Application shall mean Funding Corporation’s Application for an Order under Section 6(c) of the Investment Company Act of 1940 exempting Funding Corporation from all provisions of such Act, as filed with the SEC on November 16, 1988, as amended from time to time with the approval of the Owner Participant.
Secured Obligations shall have the meaning set forth in Section 7(b)(4)(C) of the Participation Agreement.
Securities Act shall mean the Securities Act of 1933, as amended.
Securities Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
SERI shall mean System Energy Resources, Inc., an Arkansas corporation, and its permitted successors and assigns.
Severable, when used with respect to any Capital Improvement, shall mean any Capital Improvement which can be readily removed from Unit 1 without materially damaging Unit 1 or materially diminishing or impairing the value, utility, condition or useful life of Unit 1.
Share shall mean a percentage equal to the Undivided Interest Percentage.
Significant Expenditure shall have the meaning set forth in Section 13(f) of the Facility Lease.
Similar Person shall have the meaning set forth in paragraph (2) of the definition of Deemed Loss Event.
SMEPA shall mean the South Mississippi Electric Power Association, a Mississippi corporation.
Special Casualty Value, as of any date during the Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite such date (or the Basic Rent Payment Date next succeeding such date) in Schedule 3 to the Facility Lease. Special Casualty Value, as of any Basic Rent Payment Date during any Renewal Term, shall mean the amount determined by amortizing ratably the Fair Market Sales Value of the Undivided Interest as of the first day of such Renewal Term in semi-annual steps to the amount estimated as of such first day to be the Fair Market Sales Value of the Undivided Interest as of the last day of such Renewal Term, together with amounts of Basic Rent then due.
Special Transfer shall have the meaning set forth in Section 7(b)(4)(A) of the Participation Agreement.
Special Transfer Event shall mean (a) if a Deemed Loss Event or Event of Loss shall have occurred and the Lessee or, if applicable, an Affiliate thereof shall not have assumed the Notes as contemplated by Section 3.9(b) of the Indenture, the receipt by the Owner Participant of the payments to be made by the Lessee as provided in Section 9(c) or 9(d) of the Facility Lease as the case may be; (b) the occurrence of an Event of Loss or a Deemed Loss Event; or (c) the occurrence and continuance of an Event of Default.




Standard & Poor’s shall mean Standard & Poor’s Corporation and any successor thereto which is issuing nationally accepted securities ratings.
Supplemental Financing shall mean a financing of the Supplemental Financing Amount of Capital Improvements made pursuant to Section 8(f) of the Facility Lease.
Supplemental Financing Amount shall mean the Undivided Interest Percentage of the cost of a Capital Improvement less the amount of the related Additional Equity Investment of the Lessor, if any.
Supplemental Rent shall have the meaning set forth in Section 3(b) of the Facility Lease.
Surviving Lessee shall have the meaning specified in Section 10(b)(3)(ii) of the Participation Agreement.
Tax shall mean any and all fees (including, without limitation, documentation, recording, license and registration fees), taxes (including, without limitation, net income, franchise, value added, ad valorem, gross income, gross receipts, sales, use, property (personal and real, tangible and intangible) and stamp taxes), levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever, general or special, ordinary or extraordinary, together with any and all penalties, fines, additions to tax and interest thereon.
Tax Assumptions shall mean the assumptions set forth in the Tax Indemnification Agreement with respect to the Federal income tax consequences of the transactions contemplated by the Transaction Documents.
Tax Indemnification Agreement shall mean the Tax Indemnification Agreement No. [See Additional Information], dated as of December 1, 1988 , between the Lessee and the Owner Participant.
Tax Law Change shall have the meaning set forth in Section 3(e) of the Facility Lease.
Tax Loss shall have the meaning set forth in the Tax Indemnification Agreement.
Tax Rate Change shall have the meaning set forth in Section 3(d) of the Facility Lease.
Tax Rates shall have the meaning set forth in Section 3(d) of the Facility Lease.
Termination Date shall have the meaning set forth in Section 14(a) of the Facility Lease.
Termination Event shall mean any early termination of the Facility Lease in accordance with Section 14 thereof.
Termination Notice shall have the meaning set forth in Section 14(a) of the Facility Lease.
Transaction Documents shall mean the Participation Agreement, the Facility Lease, the Ground Lease, the Trust Agreement, the Indenture, the Existing Decommissioning Trust Agreement, any other Decommissioning Trust Agreement, the Tax Indemnification Agreement, the Assignment and Assumption Agreement, each Purchase Document and the Notes.
Transaction Expenses shall have the meaning set forth in Section 14(a) of the Participation Agreement.
Transaction Role shall have the meaning set forth in clause (1) of the definition of Deemed Loss Event.




Transfer shall mean the transfer, by bill of sale or otherwise, by the Lessor of all the Lessor’s right, title and interest in and to the Undivided Interest and under the Assignment and Assumption Agreement on an “as is, where is with all faults” basis, (but subject to the Lien of the Indenture if and to the extent it attaches) but otherwise without recourse, representation or warranty (including an express disclaimer of representations and warranties in a manner comparable to that set forth in the second sentence of Section 6(b) of the Facility Lease), together with the due assumption by the transferee of, and the due release of the Lessor from, all the Lessor’s obligations under the Assignment and Assumption Agreement by an instrument or instruments satisfactory in form and substance to the Lessor and the Owner Participant.
Transferee shall have the meaning assigned thereto in Section 15(a) of the Participation Agreement.
Trust shall mean the trust created by the Trust Agreement.
Trust Agreement shall mean the Trust Agreement No. [See Additional Information], dated as of December 1, 1988, between the Owner Participant, Stephen M. Carta and MTC.
Trust Estate shall have the meaning set forth in Section 2.02 of the Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as amended.
Trustee’s Expenses shall mean any and all liabilities, obligations, costs, compensation, fees, expenses and disbursements (including, without limitation, legal fees and expenses) of any kind and nature whatsoever (other than such amounts as are included in Transaction Expenses) which may be imposed on, incurred by or asserted against the Indenture Trustee or any of its agents, servants or personal representatives, in any way relating to or arising out of the Indenture, the Lease Indenture Estate, the Participation Agreement or the Facility Lease, or any document contemplated thereby, or the performance or enforcement of any of the terms thereof, or in any way relating to or arising out of the administration of such Lease Indenture Estate or the action or inaction of the Indenture Trustee under the Indenture; provided, however, that such amounts shall not include any Taxes or any amount expressly excluded from the Lessee’s indemnity obligation pursuant to Section 13(a) or 13(b) of the Participation Agreement.
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code as in effect in any applicable jurisdiction.
Underwriting Agreement shall mean an agreement among Funding Corporation, the Lessee, and the underwriter or underwriters for any Refunding Bonds relating to the purchase, sale and delivery of such Refunding Bonds.
Undivided Interest shall mean the Owner Trustee’s undivided ownership interest in Unit 1 as a result of the transactions contemplated by the Participation Agreement and other Transaction Documents which, when expressed as a percentage of all undivided ownership interests in Unit 1, shall be equal to the Undivided Interest Percentage; the owner of the Undivided Interest shall be a tenant-in-common with the owners (including the Lessee, if it should be such an owner) of all other undivided interests in Unit 1.
Undivided Interest Amount shall have the meaning set forth in Section 10(b)(3)(viii)(C)III(1) of the Participation Agreement.
Undivided Interest Funds shall mean that portion of the Decommissioning Trust Funds to be used for funding the Decommissioning Cost allocable to the Undivided Interest.




Undivided Interest Percentage shall mean, as of the Closing Date, the undivided interest percentage specified as such on the concluding page of this Appendix A; the Undivided Interest Percentage may change from time to time as a result of a disposition or acquisition of an undivided ownership interest in Unit 1.
Uniform System of Accounts shall mean the Uniform System of Accounts prescribed for Public Utilities and Licensees subject to the provisions of the Federal Power Act (Class A and Class B), 10 C.F.R. Section 101, as in effect on the date of execution of the Participation Agreement, as amended or modified from time to time after such date.
Unit 1 shall mean the 1250 megawatt class nuclear generating unit commonly known as Grand Gulf 1, as more fully described in Schedule Ul to the Bill of Sale, together with all Capital Improvements thereto.
Unit 1 Retained Assets shall have the meaning set forth in Schedule Ul to the Bill of Sale.
Unit 2 shall mean Unit 2 of the Plant, the construction of which unit has not been completed as of the Closing Date.
User shall mean a Person unrelated to the Lessee (within the meaning of Section 318 of the Code) possessing the Undivided Interest after the Lease Termination Date.
Value Schedules shall mean the schedules of Casualty Values, Special Casualty Values, Net Casualty Values and Net Special Casualty Values attached to the Facility Lease.






No. 1
ADDITIONAL INFORMATION:
1. The Original Owner Participant is Public Service Resources Corporation, a New Jersey corporation.
2.
The Undivided Interest Percentage is 12.1168317%.
3.
The number in the name of each Transaction Document pertaining to the Undivided Interest is 1.
4.
The Purchase Price is $400,000,000.
5.
The Approved Transferee is Resources Capital Management Corporation.





Exhibit 10(b)13
No. 2
CERTAIN RIGHTS OF THE LESSOR UNDER THIS FACILITY LEASE HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF THE INDENTURE TRUSTEE UNDER TRUST INDENTURE, DEED OF TRUST, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF FACILITY LEASE NO. 2 DATED AS OF DECEMBER 1, 1988. THIS FACILITY LEASE HAS BEEN EXECUTED IN SEVERAL COUNTERPARTS. SEE SECTION 22(e) OF THIS FACILITY LEASE FOR INFORMATION CONCERNING THE RIGHTS OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.




FACILITY LEASE NO. 2
dated as of December 1, 1988
between
MERIDIAN TRUST COMPANY
and STEPHEN M. CARTA,
not in their individual capacities, but solely as Owner Trustee
under Trust Agreement No. 2, dated as of December 1, 1988,
with Lease Management Realty Corporation IV,

Lessor

and

SYSTEM ENERGY RESOURCES, INC.,
Lessee

Sale and Leaseback of an Undivided Interest in
Grand Gulf Nuclear Station Unit No. 1








TABLE OF CONTENTS

P ARTIES         Page
i

Section 1.
Definitions      4
Section 2.
Lease of Undivided Interest and Sublease of Ground Lease Property; Term; Personal Property      4
(a)
Lease of Undivided Interest and Sublease of Ground Lease Property      4
(b)
Term      4
(c)
Personal Property      4
(d)
Description      5
Section 3.
Rent; Adjustments to Rent      5
(a)
Basic Rent      5
(b)
Supplemental Rent      6
(c)
Form of Payment      6
(d)
Adjustments to Rent for Change in Tax Rate      7
(e)
Other Adjustments to Rent      7
(f)
Computation of Adjustments      8
(g)
Sufficiency of Basic Rent and Supplemental Rent      9
(h)
Rent Differential      9
(i)
Application of Drawings under Letter of Credit      9
(j)
Rent for Ground Lease Property      10
Section 4.
Net Lease      10
Section 5.
Surrender of Leasehold Interest in the Undivided Interest      12
(a)
Return of the Undivided Interest      12
(b)
Inability to Return      13
(c)
Disposition Services      14
Section 6.
Warranty of the Lessor      14
(a)
Quiet Enjoyment      14
(b)
Disclaimer of Other Warranties      14
(c)
Enforcement of Certain Warranties      15
Section 7.
Liens      16
Section 8.
Operation and Maintenance; Inspection; Capital Improvements      16
(a)
Operation and Maintenance      16
(b)
Inspection      17
(c)
Capital Improvements      17
(d)
Reports      18
(e)
Title to Capital Improvements      18
(f)
Funding of the Cost of Capital Improvements      19




Section 9.
Event of Loss; Deemed Loss Event      21
(a)
Damage or Loss      21
(b)
Repair      21
(c)
Payment of Casualty Value      21
(d)
Payment of Special Casualty Value      21
(e)
Requisition of Use      22
(f)
Termination of Lease Term      22
(g)
Application of Payments on an Event of Loss      22
(h)
Application of Payments Not Relating to an Event of Loss      23
(i)
Other Dispositions      23
Section 10.
Insurance      23
(a)
Required Insurance      23
(b)
Other Insurance      27
Section 11.
Rights to Assign or Sublease      27
(a)
Assignment or Sublease by the Lessee      27
(b)
Assignment by Lessor as Security for Lessor’s Obligations      27
Section 12.
Lease Renewal      28
Section 13.
Notices for Renewal or Purchase; Purchase Options; Determination of Fair Market Value      28
(a)
Expiration of Basic Lease Term      28
(b)
Expiration of Renewal Term      29
(c)
Purchase Option at Expiration of the Lease Term      29
(d)
Purchase of the Undivided Interest; Payment, Etc      29
(e)
Determination of Fair Market Value      29
(f)
Purchase Option for Significant Expenditures      29
(g)
Periodic Purchase Option      30
Section 14.
Optional Termination      31
(a)
Termination Notice      31
(b)
Events on the Termination Date      31
(c)
Early Termination Notice      32
Section 15.
Events of Default      32
Section 16.
Remedies      35
(a)
Remedies      35
(b)
No Release      37
(c)
Remedies Cumulative      38
(d)
Exercise of Other Rights or Remedies      38
Section 17.
Notices      38
Section 18.
Successors and Assigns      38




Section 19.
Right to Perform for Lessee      38
Section 20.
Additional Covenants      39
Section 21.
Ground Lease      39
Section 22.
Amendments and Miscellaneous      39
(a)
Amendments in Writing      39
(b)
Survival      39
(c)
Severability of Provisions      40
(d)
True Lease      40
(e)
Original Lease      40
(f)
Governing Law      40
(g)
Headings      41
(h)
Concerning the Owner Trustee      41
(i)
Lien of the Indenture      41
(j)
Counterpart Execution      41


Schedule 1 Basic Rent Percentages [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Schedule 2 Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Schedule 3 Special Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Schedule 4 Net Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Schedule 5 Net Special Casualty Values [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Schedule U1 Description of Unit 1 [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Schedule PS Description of Plant Site [Omitted as superseded by schedule in Lease Supplement No. 4, dated as of May 28, 2014, to Facility Lease No. 2.]
Appendix A Definitions










No. 2
FACILITY LEASE No. 2
This Facility Lease No. 2, dated as of December 1, 1988, between Meridian Trust Company, a Pennsylvania trust company (“MTC”), not in its individual capacity, but solely as Corporate Owner Trustee and Stephen M. Carta, not in his individual capacity but solely as Individual Owner Trustee (collectively, the “ Lessor ”), under the Trust Agreement (such term and all other capitalized terms used herein without definitions having the respective definitions to which reference is made in Section 1 below), and System Energy Resources, Inc., an Arkansas corporation (the “ Lessee ”),
W i t n e s s e t h :
Whereas, the Lessor owns the Undivided Interest;
Whereas, the Lessee desires to lease from the Lessor the Undivided Interest and to sublease from the Lessor the Ground Lease Property, in each case on the terms and conditions set forth herein; and
Whereas, the Lessor is willing to lease the Undivided Interest and to sublease the Ground Lease property to the Lessee on the terms and conditions set forth herein;
Now, Therefore, in consideration of the premises and of other good and valuable consideration, receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions.

For purposes hereof, capitalized terms used herein shall have the meanings assigned to such terms in Appendix A hereto. References in this Facility Lease to sections, paragraphs, schedules and clauses are to sections, paragraphs, schedules and clauses in and to this Facility Lease unless otherwise indicated.
Section 2. Lease of Undivided Interest and Sublease of Ground Lease Property; Term; Personal Property .

(a) Lease of Undivided Interest and Sublease of Ground Lease Property. Upon the terms and subject to the conditions of this Facility Lease, the Lessor hereby leases to the Lessee, and the Lessee hereby leases from the Lessor, the Undivided Interest, and the Lessor hereby subleases to the Lessee, and the Lessee hereby subleases from the Lessor, the Ground Lease Property.

(b) Term. The term of this Facility Lease shall begin on the Closing Date and shall end on the last day of the Lease Term.

(c) Personal Property. It is the express intention of the Lessor and the Lessee that title to the Undivided Interest and every portion thereof is severed, and shall be and remain. severed, from title to the real estate constituting the Plant Site. The Lessor and the Lessee intend that the Undivided Interest shall constitute personal property to the maximum extent permitted by Applicable Law.

(d) Description. The Undivided Interest is an undivided ownership interest (equal to the Undivided Interest Percentage) in Unit 1. Unit 1 is described in Schedule Ul hereto. The Plant Site is described in Schedule PS to the Ground Lease. A copy of Schedule PS is attached hereto.





Section 3. Rent; Adjustments to Rent.

(a) Basic Rent. The Lessee shall pay to the Lessor, as basic rent (“Basic Rent”) for the Undivided Interest, without demand, the following amounts:

(i) on July 15, 1989 and on each Basic Rent Payment Date thereafter to, and including, July 15, 2015, an amount equal to (A) the percentage of Facility Cost set forth opposite such Basic Rent Payment Date on Schedule 1, as such percentage of Facility Cost may be adjusted from time to time pursuant to Section 3(d) or Section 3(e), plus or minus (B) the Rent Differential, if any;

(ii) if the Lessee shall be entitled to, and shall, elect the Fixed Rate Renewal Term, on January 15, 2016 and on each Basic Rent Payment Date thereafter during such Renewal Term, an amount equal to (A) the sum of one-half of all payments of Basic Rent payable pursuant to clause (i) of this Section 3(a), divided by (B) 53;

(iii) if the Lessee shall be entitled to, and shall elect, a Fair Market Renewal Term, on the Basic Rent Payment Date next succeeding the commencement of such Renewal Term and on each Basic Rent Payment Date thereafter during such Renewal Term, an amount equal to the Fair Market Rental Value for such Renewal Term; and

(iv) if this Facility Lease shall be extended pursuant to Section 5(b) hereof, on each Basic Rent Payment Date thereafter during such extended Lease Term and on the last day of such extended Lease Term, an amount equal to the Fair Market Rental Value for such extended period, proportionately reduced if the last period is not a full six month Rental Period.

Payments made on each Basic Rent Payment Date shall be in satisfaction of the Lessee’s obligation to pay Basic Rent for the Rental Period (as hereinafter defined) ending on the day immediately preceding such Basic Rent Payment Date except that, during the Basic Lease Term, that portion of a payment to be made on a Basic Rent Payment Date which is indicated on Schedule 1 hereto as being made in arrears shall be in satisfaction of the Lessee’s obligation to pay Basic Rent for the Rental Period ending on the day immediately preceding such Basic Rent Payment Date, and that portion of such payment which is indicated on such Schedule as being made in advance shall be in satisfaction of the Lessee’s obligation to pay Basic Rent for the Rental Period commencing on such Basic Rent Payment Date. Subject to the foregoing, the term “Rental Period” shall mean the six month period ending on the day immediately preceding a Basic Rent Payment Date, or, in the case of the payment to be made on July 15, 1989, the period commencing with the Closing Date and ending on July 14, 1989. If an interest payment on any Note shall be due on a date other than a Basic Rent Payment Date, the Lessee shall pay an amount of Basic Rent on such date equal to such interest payment and such payment shall be credited against the Basic Rent due on the Basic Rent Payment Date next succeeding the date of such interest payment.
It is hereby recognized that amounts payable as Casualty Value or Special Casualty Value have been calculated to include the amount, if any, otherwise payable as Basic Rent on the date when payments of Casualty Value or Special Casualty Value (or amounts determined by reference thereto) are due hereunder. Accordingly, to the extent the Lessee has paid in full the Casualty Value or Special Casualty Value (or an amount determined by reference thereto) which is due on any date, the Lessee shall not be required to pay any additional amount in respect of Basic Rent which would otherwise be payable on such date pursuant to this Section 3(a).




(b) Supplemental Rent. The Lessee shall pay the following amounts as supplemental rent (“ Supplemental Rent ”):

(i) when due or, where no due date is specified, on demand, any amount (other than Basic Rent, Casualty Value and Special Casualty Value) which the Lessee assumes the obligation to pay or agrees to pay to, or for the account of, the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee or any Indemnitee under this Facility Lease (including amounts due under Section 3(j)), any other Transaction Document or the Collateral Trust Indenture;

(ii) when due, any amount payable hereunder or under any of the other Transaction Documents as Casualty Value or Special Casualty Value and an amount equal to any premium or prepayment penalty with respect to the Notes, including any payments of the type identified in Section 8 of the Initial Series Notes or similar provisions of any Additional Notes; and

(iii) on demand and in any event not later than the Basic Rent Payment Date next succeeding the date such amounts shall be due and payable hereunder, to the extent permitted by Applicable Law, (A) interest at the Overdue Interest Rate on that portion of the payment of Basic Rent or Supplemental Rent distributable pursuant to clause “first” of Section 5.1 or clause “second” of Section 5.3 of the Indenture (determined prior to the computation of interest on overdue payments referred to in such clauses), and (B) interest at the Penalty Rate on the balance of any such payment of Basic Rent or Supplemental Rent (including, without limitation, to the extent permitted by Applicable Law, interest payable pursuant to this clause (iii) not paid when due (without regard to any period of grace) for any period for which the same shall be overdue).

The Lessor shall have all rights, powers, and remedies provided for in this Facility Lease, at law, in equity or otherwise, in the case of non-payment of Basic Rent or Supplemental Rent.
(c) Form of Payment. Subject to Section 11(b), each payment of Rent under this Facility Lease shall be made in immediately available funds no later than 12:00 noon, local time at the place of receipt, on the date each such payment shall be due and payable hereunder and shall be paid either (i) in the case of payments other than Excepted Payments, to the Lessor at its address determined in accordance with Section 17, or at such other address as the Lessor may direct by notice in writing to the Lessee, or (ii) in the case of Excepted Payments, to such Person as shall be entitled to receive such payment at its address determined as provided in the Participation Agreement, or at such other address as such Person may direct by notice in writing to the Lessee. If the date on which any payment of Rent is due hereunder shall not be a Business Day, the payment otherwise due thereon shall be due and payable on the next succeeding Business Day, with the same force and effect as if paid on the nominal date provided in this Facility Lease; provided, however, that if any scheduled Basic Rent Payment Date shall not fall on a Business Day and if interest due on the Notes then Outstanding shall be computed to, but excluding, the Business Day next succeeding such Basic Rent Payment Date, the amount of Basic Rent payable on such succeeding Business Day shall include, in addition to amounts of Basic Rent otherwise due on such Basic Rent Payment Date, an amount equal to the interest accrued on such Notes from and including such Basic Rent Payment Date to but excluding such succeeding Business Day.

(d) Adjustments to Rent for Change in Tax Rate. If (i) there is any change (a “Tax Rate Change”) in the Code enacted into law after the Closing Date which results in the marginal federal income tax rates applicable to corporations (“Tax Rates”) differing from the rate assumed to be applicable in the Pricing Assumptions as in effect on the Closing Date and (ii) the Owner Participant shall have caused the




reoptimization of the amortization schedule of the Notes pursuant to Section 2(e) of the Participation Agreement, then Basic Rent and the Value Schedules attached hereto may be adjusted, at the option of the Lessor, upward or downward, to preserve Net Economic Return, each such adjustment to be made pursuant to, in accordance with and subject to the limitations contained in Section 3(f) hereof, except as modified by this subsection (d); provided, however, that no such adjustment shall (i) result in the net present value of the scheduled payments of Basic Rent exceeding the net present value of the scheduled payments of Basic Rent prior to such adjustment, in each case when discounted on a semi-annual basis at an annual interest rate of 11% or (ii) in the Lessee’s reasonable opinion, cause adverse regulatory accounting or rate regulation treatment.

(e) Other Adjustments to Rent. Basic Rent and the Value Schedules shall be adjusted (upward or downward) to preserve Net Economic Return (and, to the extent Net Economic Return is preserved, to minimize the net present value of Basic Rent payments), (i) following any Supplemental Financing, (ii) if Transaction Expenses paid by the Lessor pursuant to Section 14 of the Participation Agreement are not equal to 2.5% of the Purchase Price (any such adjustment to be made promptly following the second Basic Rent Payment Date), (iii) if the Closing Date occurs on a date other than December 22, 1988, (iv) in connection with the issuance of any Fixed Rate Notes and (v) as a result of (A) any change in the Code, which is enacted and effective on or before the Closing Date; (B) any change in (or addition to) the Regulations which is adopted and becomes effective on or before the Closing Date and (C) the finalization of any Proposed Regulation under Section 467 of the Code relating to the permissible range for variances in annual rents which proposal is published prior to the Closing Date and is promulgated thereafter as a final Regulation with an effective date prior to the Closing Date if and to the extent that such final Regulation would adversely affect Net Economic Return (any change in the Code or the Regulations referred to in subclause (A), (B) or (C) above being herein referred to as a “Tax Law Change”). The Lessee consents and agrees that any adjustments pursuant to this Section 3(e) shall satisfy, in the opinion of the Owner Participant’s Special Tax Counsel or other independent counsel selected by the Owner Participant and reasonably satisfactory to the Lessee, the provisions of Section 4.07(1) and (2) of Revenue Procedure 75-28, Section 467 of the Code and any other applicable statutes, regulations, revenue procedures, revenue rulings or technical information releases relating to the subject matter of such Revenue Procedure and Code section. Notwithstanding the foregoing, (x) in the event of the issuance prior to the Closing Date of any Regulation under Section 467 of the Code whether in proposed, temporary or final form, or (y) if any Regulation under Section 467 of the Code is issued in proposed, temporary or final form and is not applicable to the transactions contemplated by this Facility Lease as of the Closing Date as a result of the effective date provisions or transitional rules of such Regulation but which, as a result of any adjustment to Basic Rent hereunder, becomes applicable, then, in either case, Basic Rent and the Value Schedules shall be adjusted (upward or downward) to preserve Net Economic Return, while complying with any such Regulation, but such adjustments shall in no case result in the net present value of Basic Rent payments as of the Closing Date exceeding 91.19% of Facility Cost, when discounted on a semi-annual basis at an annual interest rate of 11%. The Value Schedules shall be appropriately adjusted to reflect any Indemnity Payment that the Lessee becomes required to pay under the Tax Indemnification Agreement.

(f) (i)      Computation of Adjustments. Upon the occurrence of an event requiring an adjustment to Basic Rent and the Value Schedules pursuant to subsection (d) or (e) of this Section 3, the Owner Participant shall compute, on a basis consistent with the original calculations (which calculations were computed using the Pricing Assumptions) and furnish to the Lessee, the Loan Participants, the Lessor, the Indenture Trustee and any Collateral Trust Trustee the revised amounts and percentages (“Revised Rent Amounts”) together with a certificate of an authorized financial representative of the Owner Participant to the effect that the basis of the computation thereof is consistent with the requirements of this subsection (f) (but which, in the case of an adjustment pursuant to subsection (d) of this Section 3, shall be subject to the Lessee’s confirmation




that such adjustments avoid, in the Lessee’s reasonable opinion, adverse regulatory accounting or rate regulation treatment), which Revised Rent Amounts shall be implemented and Basic Rent and such Value Schedules shall be adjusted accordingly upon the later of (A) delivery of the computations of such Revised Rent Amounts or (B) if the Letter of Credit is in effect, 30 days after the delivery thereof, and, in either case, effective as of the date of occurrence of the event requiring such adjustment and shall remain effective subject to any change which may be required as a consequence of the verification procedure set forth in paragraph (ii) of this Section 3(f) or as a consequence of any event thereafter requiring further adjustment pursuant to Section 3(d) or 3(e).

(i) Verification Procedure. Upon request of the Lessee, such Revised Rent Amounts and the bases of the computation thereof shall be subject to independent verification by a firm of nationally recognized independent public accountants selected by the Owner Participant and reasonably acceptable to the Lessee. Such accountants shall either (A) confirm to the Lessee and the Lessor in writing that such Revised Rent Amounts were computed on a basis consistent with the requirements of this subsection (f), or (B) compute and provide to the Lessee, the Lessor, the Owner Participant, each Loan Participant, the Indenture Trustee and any Collateral Trust Trustee, Revised Rent Amounts which are computed on such a basis. The Revised Rent Amounts, as so confirmed or computed (as the case may be) shall be conclusive and binding upon the Lessee, the Lessor, the Owner Participant, each Loan Participant, the Indenture Trustee and any Collateral Trust Trustee. The cost of any such verification shall be borne by the Lessee unless such accountants shall require a downward adjustment to the Revised Rent Amounts as computed and furnished by the Owner Participant which is greater than 5% of the amount of the adjustment to Basic Rent so furnished by the Owner Participant, in which case such cost shall be paid by the Owner Participant. If, as a result of any such verification, it is determined that the Lessee has made any overpayment or underpayment of Basic Rent or Supplemental Rent, then such overpayment or underpayment shall be factored into revised computations of the Revised Rent Amounts. Each adjustment pursuant to paragraph (d) or (e) of this Section 3 shall be evidenced by the execution and delivery of a supplement to this Facility Lease in form and substance satisfactory to the Lessee and the Owner Participant, but shall be effective as provided herein without regard to the date on which each supplement to this Facility Lease is so executed and delivered, and the parties hereto shall do such further acts and things as may be reasonably required to effectuate the execution and delivery of such supplement.

(g) Sufficiency of Basic Rent and Supplemental Rent. Notwithstanding any other provision of this Facility Lease, any other Transaction Document or any Financing Document, (i) the amount of Basic Rent payable on each Basic Rent Payment Date shall be at least equal to the aggregate scheduled amount of principal, premium, if any, and accrued interest then payable on all Notes then Outstanding and (ii) each payment of Casualty Value and Special Casualty Value shall be in no event less (when added to all other amounts required to be paid by the Lessee under this Facility Lease in respect of any Event of Loss, Deemed Loss Event or termination of this Facility Lease) than an amount sufficient, as of the date of payment, to pay in full the principal of, premium, if any, and interest on, all Notes Outstanding on and as of such date of payment (taking into account any assumption of the Notes by the Lessee permitted by the Indenture). In no event shall the provisions of this Section, or any other provision of any Transaction Document, constitute a guaranty or assumption by the Lessee of the Notes (other than in connection with an assumption by the Lessee effected pursuant to Section 3.9(b) of the Indenture).

(h) Rent Differential. Each installment of Basic Rent shall be increased or decreased, as the case may be, by the Rent Differential (as hereinafter defined), if any. The term “Rent Differential” shall mean, as of any Basic Rent Payment Date with respect to the applicable Rental Period, an amount equal to the difference between (i) the aggregate amount of interest actually accrued on all Outstanding Notes during such Rental Period and (ii) the aggregate amount of interest that would have accrued on such Notes if such




Notes had at all times during the Rental Period borne interest at the interest rate assumed in the Pricing Assumptions then in effect. As of any Basic Rent Payment Date, (x) if the amount determined in accordance with clause (i), above, is greater than the amount determined in accordance with clause (ii) above, the amount of Basic Rent due on such date shall be increased by the Rent Differential, and (y) if the amount determined in accordance with clause (ii) exceeds the amount determined in accordance with clause (i), the amount of Basic Rent due on such date shall be decreased by the Rent Differential.

(i) Application of Drawings under Letter of Credit. Drawings under the Letter of Credit by the Owner Participant shall be deemed to be in satisfaction of the Lessee’s obligation to pay the Equity Portion of Rent to the extent of such drawing (but if a drawing is made by reason of an Event of Default, such drawing shall not cure such Event of Default) and shall be applied as follows:

(A) in the case of a drawing by reason of a Deemed Loss Event, as a reduction of the Special Casualty Value payable under Section 9(d);

(B) in the case of a drawing by reason of an Event of Loss, as a reduction of the Casualty Value payable under Section 9(c);

(C) in the case of a drawing by reason of the occurrence of a “ Date of Early Termination ” as defined in the Initial Letter of Credit (or an analogous event as described in any subsequent Letter of Credit), to the liquidated damages payable under Section 16(a)(v); and

(D) in the case of a Partial Draw made by reason of an Event of Default, to the Rent obligation of the Lessee which triggered such Event of Default, in such order and amounts as the Owner Participant may elect; provided , however, that if the Owner Participant has made a Partial Draw on the Letter of Credit in an amount which exceeds the Equity Portion of Rent and if the Owner Participant shall have delivered such excess to the Indenture Trustee in accordance with Section 6.8(a) of the Indenture, such drawing shall be in satisfaction of the Lessee’s obligation to pay Rent to the extent of such drawing (but such drawing shall not cure the Event of Default giving rise to such drawing unless and until the Letter of Credit shall have been reinstated by the full amount of such Partial Draw).

(j) Rent for Ground Lease Property. During the term of this Facility Lease, the Lessee shall pay to the Lessor as rent for the sublease of the Ground Lease Property an amount equal to the amount due as rent under Section 3.01 of the Ground Lease, which amount shall be offset against such amount due by the Lessor under said Section 3.01.

Section 4. Net Lease.

This Facility Lease is a net lease and the Lessee hereby acknowledges and agrees that (a) the Lessee’s obligation to pay all Rent hereunder shall be absolute, unconditional and irrevocable, (b) the rights of the Lessor to such Rents shall be absolute, unconditional and irrevocable, and (c) neither the Lessee’s obligation to pay Rent hereunder nor the rights of the Lessor to receive such Rent shall be affected by any circumstances of any character, including, without limitation, (i) any set-off, abatement, counterclaim, suspension, recoupment, reduction, rescission, defense or other right or claim which the Lessee may have against the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Issuing Bank, any Loan Participant, SMEPA, any vendor or manufacturer of any equipment or assets included in the Undivided Interest, Unit 1, the Plant, any Capital Improvement, the Plant Site, or any part of any thereof, or any other Person for any reason whatsoever, (ii) any defect in or failure of the title, merchantability, condition, design,




compliance with specifications, operation or fitness for use of all or any part of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site, (iii) any damage to, or removal, abandonment, decommissioning, shutdown, salvage, scrapping, requisition, taking, condemnation, loss, theft or destruction of all or any part of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site or any interference, interruption or cessation in the use or possession thereof or of the Undivided Interest by the Lessee or by any other Person (including, but without limitation, SMEPA) for any reason whatsoever or of whatever duration, (iv) any restriction, prevention or curtailment of or interference with any use of all or any part of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site, (v) to the maximum extent permitted by law, any insolvency, bankruptcy, reorganization or similar proceeding by or against the Lessee, the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Loan Participant, SMEPA, any Issuing Bank or any other Person, (vi) the invalidity, illegality or unenforceability of this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements, the Reimbursement Agreement, or any other instrument referred to herein or therein or any other infirmity herein or therein or any lack of right, power or authority of the Lessor, the Lessee, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Loan Participant, any Issuing Bank or any other Person to enter into this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements or the Reimbursement Agreement or to perform the obligations hereunder or thereunder or the transactions contemplated hereby or thereby, or any doctrine of force majeure, impossibility, frustration, failure of consideration, or any similar legal or equitable doctrine that the Lessee’s obligation to pay Rent is excused because the Lessee has not received or will not receive the benefit for which it bargained, it being the intent of the Lessee to assume all risks from all causes whatsoever that it does not receive such benefit, (vii) the breach or failure of any warranty or representation made in this Facility Lease or any other Transaction Document or any Financing Document or the Reimbursement Agreement by the Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee, any Loan Participant, any Issuing Bank or any other Person, (viii) any amendment or other change of, or any assignment of rights under, this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements, or any waiver, action or inaction under or in respect of this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements, or any exercise or non-exercise of any right or remedy under this Facility Lease, any other Transaction Document, any Financing Document, the Plant Agreements or the Reimbursement Agreement, including, without limitation, the exercise of any foreclosure or other remedy under the Indenture, the Collateral Trust Indenture or this Facility Lease, or the sale of the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site or any part thereof or any interest therein or (ix) any other circumstance or happening whatsoever whether or not similar to any of the foregoing. The Lessee acknowledges that by conveying the leasehold estate created by this Facility Lease to the Lessee and by putting the Lessee in possession of the Undivided Interest and subleasing to the Lessee the Ground Lease Property, the Lessor has performed all of the Lessor’s obligations under and in respect of this Facility Lease, except the covenant contained in Section 6(a). The Lessee hereby waives, to the extent permitted by Applicable Law, any and all rights which it may now have or which at any time hereafter may be conferred upon it, by statute or otherwise, to terminate, cancel, quit or surrender this Facility Lease or to effect or claim any diminution or reduction of Rent payable by the Lessee hereunder, except in accordance with the express terms hereof. If for any reason whatsoever this Facility Lease shall be terminated in whole or in part by operation of law or otherwise, except as specifically provided herein, the Lessee nonetheless agrees, to the maximum extent permitted by law, to pay to the Lessor or other Person entitled thereto an amount equal to each installment of Basic Rent and all Supplemental Rent at the time such payment would have become due and payable in accordance with the terms hereof had this Facility Lease not been terminated in whole or in part. Each payment of Rent made by the Lessee hereunder shall be final and the Lessee shall not seek or have any right to recover all or any part of such payment from the Lessor or any other Person for any reason whatsoever except with respect to overpayments of Rent in respect of which the Lessee is entitled to reimbursement under Section 3(f). All covenants, agreements and undertakings of the Lessee herein shall




be performed at its cost, expense and risk unless expressly otherwise stated. Nothing in this Section 4 or elsewhere shall be construed as a guaranty by the Lessee of any residual value in the Undivided Interest or as a guaranty of the Notes or any Bonds.
Section 5. Surrender of Leasehold Interest in the Undivided Interest.

(a) Return of the Undivided Interest. Unless the Lessee has theretofore acquired or is required to acquire the Undivided Interest as provided herein, in Section 10(b)(3)(ix) of the Participation Agreement or Article V of the Assignment and Assumption Agreement, (i) on the Lease Termination Date, the Lessee will surrender possession of the Undivided Interest to the Lessor (or to a Person specified by the Lessor to the Lessee in writing not less than 6 months prior to the Lease Termination Date) and (ii) on or prior to the tenth day prior to the Lease Termination Date, furnish to the Lessor: (A) copies certified by a senior officer of the Lessee of the agreements for substitute power, transmission access and availability of the Unit 1 Retained Assets contemplated by Article V of the Assignment and Assumption Agreement and all Governmental Action (including, without limitation, appropriate amendments to the License) necessary to effect such surrender and receipt of possession and permitting the Lessor and the Owner Participant (or such Person specified by the Lessor) to possess the Undivided Interest with or without the continued involvement of the Lessee (except as operator of Unit 1), but without the Lessor or the Owner Participant being required to change their respective business operations or corporate structures as a result of such surrender and receipt of possession (unless such change or modification is limited to the creation of a subsidiary corporation that does not, in the opinion of the Owner Participant, cause the Lessor or the Owner Participant to suffer adverse tax, regulatory, economic or other consequences or otherwise to suffer any real or potential adverse effect on its business or that of its Affiliates), which Governmental Action shall be in full force and effect; and (B) an opinion of counsel experienced with NRC and other nuclear and utility matters reasonably satisfactory to the Owner Participant to the effect that (1) the Lessee has obtained all Governmental Action and action under the Plant Agreements necessary to effect such surrender by the Lessee and receipt of possession by the Lessor (or by the Person so specified by the Lessor) of the Undivided Interest and without regard to the continued involvement of the Lessee (except as operator of Unit 1), (2) such Governmental Action is in full force and effect and not subject to any judicial or administrative contest, challenge or review and (3) in the case in which such surrender is to be made to the Lessor, the Lessor and the Owner Participant will not, solely by reason of such return, be or become subject to regulation as an “electric utility,” an “electric utility company,” a “public utility,” a “holding company” or a “public utility holding company” by any Federal, state or local public utility commission or other regulatory body, authority or group (including, without limitation, the SEC or FERC). At the time of such return the Lessee shall pay or have paid all amounts due and payable, or to become due and payable, under the Plant Agreements to the extent allocable or chargeable (whether or not payable during or after the Lease Term) to the Undivided Interest or the Ground Lease Property in respect of any period or periods ending on or prior to the Lease Termination Date, and the Undivided Interest shall be free and clear of all Liens (other than Permitted Liens described in the following clauses of the definition of Permitted Liens, namely clauses (i), (v) (other than those for which arrangements for the payment thereof satisfactory to the Lessor and the Owner Participant have not been made), (vi) (other than Indenture Trustee’s Liens), (vii) (other than those arising by, through or under the Lessee alone unless arrangements for the payment thereof satisfactory to the Lessor and the Owner Participant have been made), (viii) (other than as aforesaid with respect to clause (v)), (ix), (x), (xi), (xii), and (xiii)) and in the condition and state of repair required by Section 8. In the event that on or prior to the Lease Termination Date there shall have occurred a default under the Plant Agreements by any party thereto (other than the Lessee) and such default shall not have been cured by the defaulting party, then (x) the Lessee agrees to indemnify and hold the Lessor (and each successor, assign and transferee thereof) harmless against any and all obligations under the Plant Agreements with respect to contributions or payments required to be made thereby as a result of such default and (y) the Lessor (and each successor, assign and transferee thereof) agrees to reimburse




the Lessee for all amounts paid by it pursuant to the foregoing clause (x) to the extent, but only to the extent, that the Lessor (or such successor, assign or transferee) shall have actually received proceeds from such defaulting party or from the other non-defaulting parties as a result of such default and, to the extent the Lessor (or such successor, assign or transferee) shall have received such proceeds, the amount to be reimbursed to the Lessee pursuant to this clause (y) shall include interest at the Prime Rate from the date of any receipt of the proceeds described above through the date of reimbursement of such amount pursuant to this clause (y).

The Lessor and the Owner Participant agree to use their best efforts to assist the Lessee in its efforts to obtain all required Governmental Action consistent with the provisions of this Section 5(a).
(b) Inability to Return. If the Lessee shall have notified the Lessor and the Owner Participant, not less than twenty-one months prior to the Lease Termination Date, that, due to the nature of the business operations or corporate structure of the Lessor or the Owner Participant, the Lessee will be unable to satisfy the conditions set forth in subsection (a) to the surrender by the Lessee of possession of the Undivided Interest, the Lessor and the Owner Participant shall use their reasonable best efforts to sell or re-lease the Undivided Interest by the Lease Termination Date to a third party the business operations or corporate structure of which is such as to enable the Lessee to satisfy such conditions (other than the condition set forth in Section 5(a)(ii)(B)(3)) (a “Qualified Third Party”) and the Lessee agrees to cooperate fully in connection with such sale or re-lease. The Lessor hereby expressly acknowledges that if the notice referred to above in this subsection (b) has been given, the Lessee shall have complied with its covenant of cooperation set forth herein and in subsection (c) of this Section 5, and the Lessor and the Owner Participant, despite their respective best efforts, shall be unable to sell or re-lease the Undivided Interest to a Qualified Third Party by the Lease Termination Date, the failure of the Lessee to surrender possession of the Undivided Interest in accordance with Section 5(a), in and of itself, shall not constitute a Default or Event of Default under this Facility Lease, anything in this Facility Lease to the contrary notwithstanding; and, in such case, the Lessor’s exclusive remedy in respect of such failure shall be to receive from the Lessee on or prior to the tenth day prior to the Lease Termination Date all Rent due on the Lease Termination Date plus an amount equal to the excess of (i) the Fair Market Sales Value of the Undivided Interest over (ii) an amount equal to the product of (x) the Estimated Cost of Decommissioning and (y) the Undivided Interest Percentage, but in no event less than $1.00. If the Lessee shall have made such payment, the Lessor shall on the Lease Termination Date Transfer the Undivided Interest to the Lessee, or an Affiliate thereof, as may be designated by the Lessee in the Lessee’s Notice in effect immediately prior to such Transfer, or if no Lessee’s Notice shall then be in effect, to the Lessee, and pay to the Lessee the earnings derived from the investment of such payment in any Permitted Investment, in accordance with instructions delivered to the Lessor by the Lessee. Notwithstanding the foregoing, if, on or prior to a date which is three months prior to the scheduled expiration of this Facility Lease, the Lessor or the Owner Participant shall have identified, in a written notice to the Lessee, a Qualified Third Party willing to purchase the Undivided Interest and the conditions set forth in Section 5(a) hereof have not been satisfied by the Lessee on or prior to the scheduled expiration of this Facility Lease, the Lease Term shall be automatically extended until the earliest of (i) one year after the date of the scheduled expiration of this Facility Lease, (ii) a date specified by the Owner Participant and (iii) the date which is ten (10) Business Days after the date on which the Lessor has been notified by the Lessee that such conditions have been met. The Basic Rent payable by Lessee during such extended Lease Term shall be the Fair Market Rental Value of the Undivided Interest. If the Lessee shall not have received the notice referred to in the second preceding sentence by the date therein specified, the Lessee shall be entitled to assume that the Lessor and the Owner Participant shall be unable to sell or re-lease the Undivided Interest to a Qualified Third Party.




If the Lessee has failed to give the notice referred to in this subsection (b) or shall have breached its covenant of cooperation set forth herein or in subsection (c) of this Section 5, then the failure of the Lessee to surrender possession of the Undivided Interest in accordance with Section 5(a) shall constitute an Event of Default under this Facility Lease.
(c) Disposition Services. The Lessee agrees that if it shall not elect to exercise either an option to renew or purchase upon the expiration of the Basic Lease Term or any Renewal Term as provided in Sections 12 and 13, respectively, then during the last twenty-four months of the Lease Term, the Lessee will fully cooperate with the Lessor in connection with the Lessor’s efforts to lease or dispose of the Undivided Interest including using the Lessee’s reasonable efforts to lease or dispose of the Undivided Interest. The Lessor agrees to reimburse the Lessee for reasonable costs and expenses incurred by it at the request of the Lessor or the Owner Participant in connection with such cooperation and such efforts, but only to the extent of proceeds actually received by the Lessor.

Section 6. Warranty of the Lessor.

(a) Quiet Enjoyment. The Lessor warrants that unless an Event of Default has occurred and is continuing the Lessee’s use and possession of Unit 1, including the Undivided Interest, and the Ground Lease Property, in accordance with the terms of the Transaction Documents shall not be interrupted by the Lessor or any Person claiming by, through or under the Lessor, and their respective successors and assigns, except that the Lessor shall not be responsible for any acts of the Ground Lessor under the Ground Lease which result in a violation of this Section 6(a).

(b) Disclaimer of Other Warranties. The warranty set forth in Section 6(a) is in lieu of all other warranties of the Lessor or the Owner Participant, whether written, oral or implied, with respect to this Facility Lease, the Undivided Interest, Unit 1, the Plant, any Capital Improvement or the Plant Site. Notwithstanding anything, however, in this Section 6, the Lessee shall bear all risks of any infirmity in the rights, title and interests of the Lessor in Unit 1 which existed prior to the Closing. As among the Owner Participant, the Loan Participants, the Indenture Trustee, the Collateral Trust Trustee, the Lessor and the Lessee, execution by the Lessee of this Facility Lease shall be conclusive proof of the compliance of Unit 1 (including any Capital Improvement) and the Undivided Interest with all requirements of this Facility Lease, and the Lessee acknowledges and agrees that (i) NEITHER THE LESSOR NOR THE OWNER PARTICIPANT IS A MANUFACTURER OR A DEALER IN PROPERTY OF SUCH KIND, (ii) THE LESSOR LEASES AND THE LESSEE TAKES THE UNDIVIDED INTEREST, AND SHALL TAKE EACH CAPITAL IMPROVEMENT AND ANY PART THEREOF AS IS AND WHERE IS, WITH ALL FAULTS AND (iii) THE LESSOR SUBLEASES AND THE LESSEE TAKES THE GROUND LEASE PROPERTY AS IS AND WHERE IS, WITH ALL FAULTS and neither the Lessor nor the Owner Participant shall be deemed to have made, and THE LESSOR AND THE OWNER PARTICIPANT EACH HEREBY DISCLAIMS, ANY OTHER REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE DESIGN OR CONDITION OF THE UNDIVIDED INTEREST, UNIT 1, THE PLANT, ANY CAPITAL IMPROVEMENT, THE PLANT SITE OR THE GROUND LEASE PROPERTY, OR ANY PART THEREOF, THE MERCHANTABILITY THEREOF OR THE FITNESS THEREOF FOR ANY PARTICULAR PURPOSE, TITLE TO THE UNDIVIDED INTEREST, UNIT 1, THE PLANT, ANY CAPITAL IMPROVEMENT, THE PLANT SITE OR THE GROUND LEASE PROPERTY, OR ANY PART THEREOF, THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT OR THE ABSENCE OF ANY LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, NOR SHALL THE LESSOR OR THE OWNER PARTICIPANT BE LIABLE FOR INCIDENTAL OR




CONSEQUENTIAL DAMAGES (INCLUDING LIABILITY IN TORT, STRICT OR OTHERWISE), it being agreed that all such risks, as among the Owner Participant, the Loan Participants, the Collateral Trust Trustee, the Indenture Trustee, the Lessor and the Lessee, are to be borne by the Lessee. The provisions of this Section 6(b) have been negotiated, and, except with respect to the warranties expressly made in Section 6(a), the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by the Lessor, the Owner Participant, the Loan Participants, the Collateral Trust Trustee or the Indenture Trustee, express or implied, with respect to the Undivided Interest, Unit 1, the Plant, any Capital Improvement, the Plant Site or the Ground Lease Property that may arise pursuant to any law now or hereafter in effect, or otherwise.

(c) Enforcement of Certain Warranties . The Lessor authorizes the Lessee (directly or through agents), at the Lessee’s expense, to assert for the Lessor’s account, during the Lease Term, all of the Lessor’s rights (if any) under any applicable warranty and any other claims (under this Facility Lease or any Purchase Document) that the Lessee or the Lessor may have against any vendor or manufacturer with respect to Unit 1 (including any Capital Improvement) or the Undivided Interest, and the Lessor agrees to cooperate, at the Lessee’s expense, with the Lessee in asserting such rights. Any amount receivable (without regard to any right of setoff or other similar right of any Person against the Lessee) by the Lessee under any such warranty or other claim against any vendor or manufacturer (or, if such warranty or claim relates to the Undivided Interest and the Retained Assets, the portion of such received amount appropriately allocable to the Undivided Interest) shall be applied in accordance with Sections 9(g), (h) and (i).

Section 7. Liens.

The Lessee will not, directly or indirectly, create, incur, assume or permit to exist any Lien, except Permitted Liens, on or with respect to the Undivided Interest, the property purported to be covered by the Ground Lease, the Lessor’s title thereto or any interest of the Lessor or the Lessee therein (and the Lessee will promptly, at its own expense, take such action as may be necessary duly to discharge any such Lien, except Permitted Liens).
Section 8. Operation and Maintenance; Inspection; Capital Improvements.

(a) Operation and Maintenance. The Lessee will (i) maintain Unit 1 and the Plant Site in such condition (ordinary wear and tear excepted) that Unit 1 will have the capacity and functional ability to perform, on a continuing basis in normal commercial operation, the functions for which it was designed, (ii) operate, service, maintain and repair Unit 1 and the Plant Site and replace all necessary or useful parts and components thereof so that the condition and operating efficiency will be maintained and preserved, ordinary wear and tear excepted, in all material respects in accordance with (A) Prudent Utility Practice for items of similar size and nature, (B) such operating standards as shall be required to take advantage of and enforce all available warranties and (C) the terms and conditions of all insurance policies maintained in effect at any time with respect thereto, (iii) use, possess, operate, maintain, service and repair Unit 1 and the Plant Site in compliance with all material applicable Governmental Actions (including the License) affecting the Plant or Unit 1 or the Plant Site or the use, possession, operation and maintenance thereof and (iv) otherwise act in accordance with the Plant Agreements. The Lessee will comply with all its obligations under Applicable Law affecting the Undivided Interest, Unit 1, the Plant, the Plant Site and the Ground Lease Property, and the use, operation and maintenance thereof; provided, however, that the Lessee shall not be obligated to so comply with Applicable Law (i) whose application or validity is being contested diligently and in good faith by appropriate proceedings, (ii) compliance with which shall have been excused or exempted by a nonconforming use permit, waiver, extension or forbearance exempting it from such Applicable Law, (iii) if good faith efforts and appropriate steps are being taken to comply, or (iv) if failure of compliance would




result in no material adverse consequences to the Lessor, the Indenture Trustee, the Original Loan Participants, the Lessee or the Owner Participant, so long as, in each of clauses (i) through (iv) above (A) such failure of compliance cannot result in any material danger of the sale, forfeiture or loss of any part of the Undivided Interest, Unit 1, the Plant, the Plant Site or the Ground Lease Property or subject any of the foregoing to any Lien, other than Permitted Liens, or materially interfere with the operation or use or disposition of any of the Undivided Interest, Unit 1, the Plant, the Plant Site or the Ground Lease Property or any part thereof, title thereto or any interest therein, or the payment of Rent, or subject any Indemnitee to regulation as a public utility or to any criminal charges or other materially adverse regulatory or financial consequences and (B) if reasonably requested by the Owner Participant or a majority in interest of the Original Loan Participants, security arrangements reasonably satisfactory to the Owner Participant or such Original Loan Participants, as the case may be, in respect of such non-compliance shall have been made. The Lessee will maintain in full force and effect a license from the NRC adequate for it to possess the Undivided Interest and to operate Unit 1 under the circumstances contemplated by the Plant Agreements and as required by Applicable Law. The Lessor shall not be obligated in any way to maintain, alter, repair, rebuild or replace Unit 1, any Capital Improvement or the Plant Site, or any part thereof, or, except as provided in Section 8(f), to pay the cost of alteration, rebuilding, replacement, repair or maintenance of Unit 1, any Capital Improvement or the Plant Site, or any part thereof, and the Lessee expressly waives the right to perform any such action at the expense of the Lessor pursuant to any law at any time in effect.

(b) Inspection. The Lessor, the Owner Participant, the Indenture Trustee, the Collateral Trust Trustee and prospective purchasers of the Undivided Interest or the beneficial interest in the Trust Estate (or their respective authorized representatives with appropriate security clearance, if necessary) shall have the right to inspect the Plant (subject, in each event, to the Plant Agreements, Applicable Law, applicable confidentiality undertakings and procedures established by the Lessee) at their expense at such times and as often as shall be reasonably requested. The Lessor, the Owner Participant and prospective purchasers of the Undivided Interest or the beneficial interest in the Trust Estate and their respective authorized representatives (with appropriate security clearance if necessary) shall have the right to inspect, at their expense, the books and records of the Lessee relating to Unit 1, and make copies of and extracts therefrom (subject as aforesaid) and may, at their expense, discuss the Lessee’s affairs, finances and accounts with its executive officers, all at such times and as often as may be reasonably requested. None of the Lessor, the Owner Participant, the Indenture Trustee and the Collateral Trust Trustee shall have any duty whatsoever to make any inspection or inquiry referred to in this Section 8(b) and shall not incur any liability or obligation by reason of not making any such inspection or inquiry.

(c) Capital Improvements. The Lessee shall, if and to the extent required of it under the Plant Agreements or Applicable Law, at its sole expense (except as provided in Section 8(f)), promptly, but subject to Section 8(a) hereof, participate in the making of any Capital Improvement to Unit 1. The Undivided Interest Percentage of the net proceeds of (x) any sale or other disposition of property removed from Unit 1 received (without deduction of any amount set off or deducted by any Person claiming a right against the Lessee to do so) by, or credited to the account of, the Lessee in accordance with the Plant Agreements and (y) any insurance proceeds received (without deduction of any amount set off or deducted by any Person claiming a right against the Lessee to do so) for the account of the Lessor or the Lessee in respect of the loss or destruction of, or damage or casualty to, any such property shall be applied as provided in Section 9(g), (h) or (i), as the case may be. The Undivided Interest Percentage in property at any time removed from Unit 1 shall remain the property of the Lessor, no matter where located, until such time as a Capital Improvement constituting a replacement of such property shall have been installed in Unit 1 or such removed property has been disposed of in accordance with the Plant Agreements. Simultaneously with such disposition, title to the Lessor’s undivided interest in the removed property shall vest in the Person receiving such property, free and clear of any and all claims or rights of the Lessor. Unless paragraph (iii) of Section 8(e) shall be applicable,




upon the incorporation of a Capital Improvement in Unit 1, without further act, (x) title to an undivided interest equal to the Undivided Interest Percentage in such Capital Improvement shall vest in the Lessor and (y) such undivided interest in such Capital Improvement shall become subject to this Facility Lease and be deemed to be part of the Undivided Interest for all purposes hereof to the same extent that the Lessor had a like undivided interest in the property originally incorporated or installed in Unit 1. The Lessee warrants and agrees that the Lessor’s interest in all Capital Improvements shall be free and clear of all Liens, except Permitted Liens.

(d) Reports. To the extent permissible, the Lessee shall prepare and file in a timely fashion, or, where the Lessor shall be required to file, the Lessee shall prepare or cause to be prepared and delivered to the Lessor within a reasonable time prior to the date for filing, any reports with respect to Unit 1, the Undivided Interest, the Ground Lease Property or the condition or operation thereof that shall be required to be filed with any Governmental Authority. On or before March 1 of each year (commencing March 1, 1990) and on the Lease Termination Date, the Lessee shall furnish the Lessor and the Owner Participant with a report stating the total cost of all Capital Improvements and describing separately and in reasonable detail each Capital Improvement (or related group of Capital Improvements) made during the period from the date hereof to December 31, 1989 in the case of the first such report and during the period from the end of the period covered by the last previous report to the December 31 immediately preceding such report in the case of subsequent reports. On or before March 1 in each year (commencing March 1, 1990) and at such other times as the Lessor or the Owner Participant shall reasonably request in writing, the Lessee will report in writing to the Lessor with respect to (i) the capital expenditures contemplated by the most recent annual budget for Unit 1 and (ii) the current plans (if any) which the Lessee may have for the financing of its share (in accordance with the Plant Agreements) of the same under Section 8(f):

(e) Title to Capital Improvements. Title to an undivided interest, equal to the Undivided Interest Percentage, in each Capital Improvement to Unit 1 shall vest as follows:

(i) in the case of each Nonseverable Capital Improvement, whether or not the Lessor shall have financed or provided financing (in whole or in part) for such undivided interest in such Capital Improvement by an Additional Equity Investment or a Supplemental Financing, or both, effective on the date such Capital Improvement shall have been incorporated or installed in Unit 1, the Lessor shall, without further act, acquire title to such undivided interest in such Capital Improvement;

(ii) in the case of each Severable Capital Improvement, if the Lessor shall have financed (by an Additional Equity Investment or a Supplemental Financing, or both) the Undivided Interest Percentage of the cost of such Capital Improvement, or if such Capital Improvement shall be required by Applicable Law or pursuant to Section 8(a)(i), 8(a)(ii) or, to the extent of compliance with Governmental Actions not significantly more onerous than those in effect on the Closing Date, 8(a)(iii), the Lessor shall, without further act, acquire title to such undivided interest in such Capital Improvement; and

(iii) in the case of each Severable Capital Improvement which does not constitute a Capital Improvement required to be made by Applicable Law or pursuant to Section 8(a)(i), 8(a)(ii) or, to the extent of compliance with Governmental Actions not significantly more onerous than those in effect on the Closing Date, 8(a)(iii), if the Lessor shall not have financed (by either an Additional Equity Investment or a Supplemental Financing, or both) the Undivided Interest Percentage of the cost of such Capital Improvement, the Lessee shall retain title to such undivided interest;





provided, however, that if, as a result of the foregoing, title to an undivided interest in a Severable Capital Improvement which is in replacement of any component of Unit 1 vests in the Lessor, title to an equivalent undivided interest in the replaced component shall vest in the Lessee at the time of such replacement, provided no Event of Default shall have occurred and be continuing at such time. Immediately upon title to such undivided interest in any Capital Improvement vesting in the Lessor pursuant to paragraph (i) or paragraph (ii) of this Section 8(e), such undivided interest in such Capital Improvement shall, without further act, become subject to this Facility Lease and be deemed part of the Undivided Interest and Unit 1 for all purposes hereof.
(f) Funding of the Cost of Capital Improvements . The Lessee shall give the Lessor and the Owner Participant reasonable advance notice before placing in service any Capital Improvement to Unit 1 the cost of which exceeds $100,000,000 in the aggregate. The Owner Participant shall have the option, in its sole discretion, of financing through the Lessor the Undivided Interest Percentage of the cost of any Capital Improvement, or any other Capital Improvement presented to the Owner Participant for financing, including or not including the making of an investment by the Owner Participant (an “Additional Equity Investment”) and the issuance of one or more Additional Notes, all on terms acceptable to the Lessee and the Owner Participant. In the case of any Capital Improvement whose cost is to be incurred during the last five years of the Basic Lease Term, if the Lessee shall not have given the notice specified in clause (ii) of Section 13(a), then the Owner Participant shall have the option, at its sole discretion, to finance through the Lessor the Undivided Interest Percentage of the cost of any such Capital Improvement on such terms as the Lessee and the Owner Participant may reasonably agree. If the Owner Participant does not finance, or arrange the financing of, the Undivided Interest Percentage of the cost of such Capital Improvement, the Lessee may require the Lessor to issue, if and to the extent permitted by the Indenture, to one or more Persons (other than the Lessee, a shareholder of the Lessee or any Person affiliated with the Lessee within the meaning of Section 318 of the Code or any agent of any thereof) one or more Additional Notes and to use the proceeds thereof to pay the Undivided Interest Percentage of the cost of such Capital Improvement, subject to satisfaction of the following conditions:

(i) there shall be no more than one Supplemental Financing in any calendar year;

(ii) the sum of the Supplemental Financing Amounts in any calendar year shall equal or exceed an amount equal to the product of $10,000,000 and the Lessor’s Percentage;

(iii) the Lessee may include in any request for a Supplemental Financing only Capital Improvements not previously financed in any Supplemental Financing;

(iv) in the opinion of the Owner Participant’s Special Tax Counsel or other independent tax counsel to the Owner Participant, such Supplemental Financing shall not result in any adverse tax consequences to the Owner Participant or affect the status of this Facility Lease as a “true lease” for Federal income tax purposes, and the Owner Participant and the Lessee shall have agreed upon the amount and manner of payment of any indemnity which may become payable by the Lessee as a consequence of such Supplemental Financing;

(v) if the Owner Participant shall be making an Additional Equity Investment pursuant to this Section 8 and if the Lessee requests that tax benefits associated with such Capital Improvements be taken into account in making the adjustments in accordance with paragraphs (e) and (f) of Section 3 hereof, the sum of the Supplemental Financing Amount and any Additional Equity Investment shall




not exceed that portion of the cost of Capital Improvements which, when financed, will constitute an addition to the Owner Participant’s basis under Section 1012 or 1016 of the Code;

(vi) the Additional Notes shall have a final maturity date no later than July 15, 2015;

(vii) if the Owner Participant shall be making an Additional Equity Investment pursuant to this Section 8 and if the Lessee requests that tax benefits associated with such Capital Improvements be taken into account in making the adjustment in accordance with paragraphs (e) and (f) of Section 3 hereof, the Lessee shall have made such representations and warranties and covenants regarding the tax characteristics of the Lessor’s undivided interest in each Capital Improvement as shall be acceptable to the Owner Participant and the Tax Indemnification Agreement shall have been appropriately modified;

(viii) appropriate increases, if any, to Basic Rent and the Value Schedules shall have been agreed to by the Owner Participant and the Lessee in accordance with the adjustment provisions of paragraphs (e) and (f) of Section 3 hereof to support the amortization of the Additional Notes issued in respect of such Supplemental Financing and to preserve (but not increase) Net Economic Return (without regard to any tax benefits associated with such Capital Improvement);

(ix) the Lessee shall have paid to the Lessor an amount on an After-Tax Basis equal to all out-of-pocket costs and expenses reasonably incurred by the Lessor or the Owner Participant relating to such Capital Improvements and Supplemental Financing and not financed as a part of such Supplemental Financing or reflected in adjustments to Basic Rent;

(x) no Default, Event of Default, Reimbursement Default or Reimbursement Event of Default shall have occurred and be continuing; and

(xi) the Lessee shall enter into such agreements and shall have made or delivered such representations, warranties, covenants, opinions, certificates and other documents as the Owner Participant shall reasonably request or as shall be required by the Collateral Trust Indenture or the Trust Indenture Act in connection with the issuance of Additional Bonds.

Section 9. Event of Loss; Deemed Loss Event.

(a) Damage or Loss. In the event that an Event of Loss shall occur, or Unit 1 or any substantial part thereof shall suffer destruction, substantial damage, loss, condemnation, confiscation, theft or seizure for any reason whatsoever, such fact shall promptly, and in any case within five Business Days after such event, be reported by the Lessee to the Lessor and the Owner Participant.

(b) Repair. The Lessee shall promptly make any and all payments required of it under the provisions of the Plant Agreements relating to damage, destruction or the like to Unit 1 or any portion thereof.

(c) Payment of Casualty Value. Following the occurrence of an Event of Loss, on the date specified in a notice from the Lessor to the Lessee, the Lessee shall pay to the Lessor (A) an amount equal to the excess of (i) Casualty Value, determined as of the date such payment is due, if such date is a Basic Rent Payment Date, or the next succeeding Basic Rent Payment Date, in all other cases (except if such Event of Loss occurs on a Basic Rent Payment Date, in which event the Casualty Value shall be determined as of such Basic Rent Payment Date), over (ii) the unpaid principal amount of the Notes Outstanding on such date and assumed by the Lessee on such date, after giving effect to the payment, if any, of the principal installment due and




payable and paid in respect of such Notes on such date, together with (B) any other amounts of Supplemental Rent then due. If the Lessee shall have made such payment and shall have assumed all obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9 (b) of the Indenture, the Lessor shall, as long as no Default or Event of Default shall have occurred and be continuing (and at any time after the occurrence of an Event of Loss the Lessor may) Transfer the Undivided Interest, subject to the Lien of the Indenture, to the Lessee, or an Affiliate thereof, as may be designated by the Lessee in the Lessee’s Notice in effect immediately prior to such Transfer, or if no Lessee’s Notice shall then be in effect, to the Lessee.

If, following the occurrence of an Event of Loss, the Lessor or the Owner Participant shall have received an amount equal to Net Casualty Value and the Lessor and the Owner Participant shall have received all other amounts due and owing to them by the Lessee hereunder and under the other Transaction Documents, but the Lessee shall not have assumed the obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Owner Participant shall effect the Special Transfer, in which case, without further act on the part of the Lessor or the Lessee, the obligation of the Lessee to pay further Basic Rent shall be reduced to an amount, payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount of principal of and premium, if any, and accrued interest then payable on, all Notes then Outstanding.
(d) Payment of Special Casualty Value. If events giving rise to a Deemed Loss Event shall occur, the party hereto having knowledge thereof shall promptly notify the other party of the occurrence thereof (provided that the failure by the Lessor to furnish to the Lessee the foregoing notice shall not impair the rights of the Lessor referred to below) and at any time thereafter, the Lessor may demand, by written notice to the Lessee, that the Lessee pay, and the Lessee shall pay, on the date specified in such notice, to the Lessor (A) an amount equal to the excess of (i) Special Casualty Value, determined as of the date such payment is due, if such date is a Basic Rent Payment Date, or the immediately succeeding Basic Rent Payment Date, in all other cases (except that if such Deemed Loss Event occurs on a Basic Rent Payment Date, the Special Casualty Value shall be determined as of such Basic Rent Payment Date), over (ii) the unpaid principal amount of the Notes Outstanding on such date and assumed by the Lessee on such date, after giving effect to the payment, if any, of the principal installment due and payable and paid in respect of the Notes on such date, together with (B) any other amounts of Supplemental Rent then due. If the Lessee shall have made such payment and shall have assumed all obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture, the Lessor shall, so long as no Default or Event of Default shall have occurred and be continuing (and at any time after the occurrence of a Deemed Loss Event the Lessor may), Transfer the Undivided Interest, subject to the Lien of the Indenture, to the Lessee or an Affiliate thereof, as may be designated in the Lessee’s Notice in effect immediately prior to such Transfer, or if no Lessee’s Notice shall then be in effect, to the Lessee.

If following the occurrence of a Deemed Loss Event, the Lessor or the Owner Participant shall have received Net Special Casualty Value and the Lessor and the Owner Participant shall have received all other amounts due and owing to them by the Lessee hereunder and under the other Transaction Documents, but the Lessee shall not have assumed all obligations and liabilities of the Owner Trustee under the Indenture and Notes pursuant to Section 3.9(b) of the Indenture, the Owner Participant shall effect the Special Transfer, in which case, without further act on the part of the Lessor or the Lessee, the obligation of the Lessee to pay further Basic Rent shall be reduced to an amount, payable on each Basic Rent Payment Date thereafter, equal to the aggregate amount of principal, premium, if any, and accrued interest then payable on all Notes Outstanding.




(e) Requisition of Use. In the case of a requisition of use not constituting an Event of Loss, this Facility Lease shall continue, and each and every obligation of the Lessee hereunder and under each Transaction Document shall remain in full force and effect. So long as no Default or Event of Default shall have occurred and be continuing, the Lessee shall be entitled to all sums received by reason of any such requisition of use for the period ending on the Lease Termination Date, and the Lessor shall be entitled to all sums received by reason of any such requisition of use for the period after the Lease Termination Date.

(f) Termination of Lease Term. Upon (but only upon) a Transfer by the Lessor pursuant to Section 9(c) or 9(d) to the Lessee, the assumption by the Lessee of all remaining obligations and liabilities of the Owner Trustee under the Indenture and the Notes pursuant to Section 3.9(b) of the Indenture and payment of the amounts specified in the Indenture, the Notes and this Facility Lease, the Lease Term shall end and the Lessee’s obligation to pay further Basic Rent shall cease, but the Lessee shall continue to be required to make all payments of Supplemental Rent when due. In all other cases, the Lease Term shall continue and this Facility Lease shall remain in full force and effect.

(g) Application of Payments on an Event of Loss. Any payments received at any time by the Lessor or the Lessee (other than insurance placed by the Owner Trustee or the Owner Participant pursuant to Section 10(b)) from any Governmental Authority, insurer or other Person (except the Lessee) as a result of the occurrence of an Event of Loss (without deduction of any amount which was set off or deducted therefrom as a result of a claim by any Person against the Lessee) shall be applied as follows:

(i) all such payments shall be promptly paid to the Lessor for application pursuant to the following provisions of this Section 9(g), except that the Lessee may retain any amounts that would at the time be payable to the Lessee as reimbursement under the provisions of clause (ii) below;

(ii) so much of such payments as shall not exceed the amount required to be paid by the Lessee pursuant to Section 9(c) shall be applied in reduction of the Lessee’s obligation to pay such amount if not already paid by the Lessee or, if already paid by the Lessee, shall be applied to reimburse the Lessee for its payment of such amount; and

(iii) the balance, if any, of such payments in the case of payments from insurance carried by or on - behalf of the Lessee shall be paid to the Lessee or in the case of any other payments shall be divided between the Lessor and the Lessee as their respective interests may appear.

(h) Application of Payments Not Relating to an Event of Loss. Payments received (without deduction of any amount which was set off or deducted therefrom as a result of a claim by any Person against the Lessee) at any time by the Lessor, the Lessee or the Owner Participant (other than insurance placed by the Lessor or the Owner Participant pursuant to Section 10(b)) from any insurer or other Person with respect to any event giving rise to receipt of an amount referred to in the second sentence of Section 6(c) or the second sentence of Section 8(c), or to any destruction, damage, loss, condemnation, confiscation, theft, seizure of or requisition of title to the Undivided Interest or any part thereof, in each case not constituting an Event of Loss, shall be applied first to reimburse the Lessee for all amounts expended by it pursuant to Section 9(b) and second, the balance, if any, of such payments shall, in the case of payments from insurance carried by or on behalf of the Lessee, be paid to the Lessee or, in the case of other payments, be divided between the Lessor and the Lessee as their respective interests may appear.

(i) Other Dispositions. Notwithstanding the foregoing provisions of this Section 9, if a Default or an Event of Default shall have occurred and be continuing, any amount that would otherwise be payable




to or for the account of, or that would otherwise be retained by, the Lessee pursuant to Section 10 or this Section 9 relating to the Undivided Interest or the Ground Lease Property shall be paid to the Lessor as security for the obligations of the Lessee under this Facility Lease and, at such time thereafter as no Default or Event of Default shall be continuing, such amount shall be paid promptly to the Lessee unless this Facility Lease shall have theretofore been declared to be in default, in which event such amount shall be disposed of in accordance with the provisions hereof, of the Indenture (to the extent then in effect) and of the Trust Agreement.

Section 10. Insurance.

(a) Required Insurance. The Lessee shall provide and maintain at least the following insurance coverage with respect to the Undivided Interest, Unit 1 and the Plant Site with insurers of recognized responsibility; provided, however, in the case of all insurance described in Section 10(a)(i) hereof, that any such insurance is commercially available at a commercially reasonable cost; provided further, however, that no determination shall be made that any such insurance is not commercially available at a commercially reasonable cost unless such issue shall have first been discussed with the Owner Participant and the Owner Participant shall have been given an opportunity to present information to the contrary. Any such insurance coverage may be carried and maintained by the Lessee or jointly with respect to other owners of the Plant or with respect to ownership interests in the Plant other than the Undivided Interest.

In the event of any payment of loss in respect of Unit 1 or the Plant Site, the Lessee shall request reinstatement of insurance from insurers to the extent available on commercially reasonable terms and at a commercially reasonable cost, it being understood that no determination as to the non-availability on commercially reasonable terms of such insurance shall be made until the Owner Participant shall have had the opportunity to discuss such issue with the Lessee and to present information to the contrary.
(i) Non-Nuclear Insurance.

(A) The Lessee shall maintain “all risk” property insurance (excluding flood and earthquake) covering physical loss with respect to Unit 1 in such an amount and with such other terms as are consistent with the Lessee’s normal practice in respect of those other owned, leased or operated nuclear electric generating units with respect to which the Lessee determines or controls the determination of the amount and other terms of such insurance and which, in any event, shall be consistent with Applicable Law and Prudent Utility Practice. Subject to Section 10(a)(vi), the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(i)(A) to be endorsed to provide, or to otherwise provide, that:

(1) losses shall be adjusted and proceeds paid as provided in Section 10(a)(v);

(2) (m)the Corporate Owner Trustee and the Owner Participant (the “Additional Insureds”) are included as additional insureds, as their interests may appear, and (n) any obligation imposed upon any insured (including without limitation the liability to pay premiums) shall be the sole obligation of the Lessee and not that of any Additional Insured;

(3) the insurer thereunder waives all rights of subrogation against the Additional Insureds with respect to their respective interests in Unit 1;





(4) such insurance shall be primary without right of contribution of any other insurance carried by or on behalf of any Additional Insured with respect to its interest in Unit 1; and

(5) if such insurance is cancelled for any reason whatsoever including nonpayment of premium or any material change is made in the coverage which adversely affects the interest of the Additional Insureds, such cancellation or change shall not be effective as to the Additional Insureds for thirty days after receipt by the Lessor for itself and as agent for the other Additional Insureds, of written notice from such insurer of such cancellation or change.

The Lessee will use its best efforts to cause the applicable insurer to deliver the written notice referred to in clause (5) above with respect to such cancellation or change to the Owner Participant, the Corporate Owner Trustee and the Corporate Indenture Trustee as soon as practicable alter the event giving rise to such cancellation or change.
Any such insurance may insure other properties owned or leased by the Lessee and need not be amended to provide that the Undivided Interest shall have priority to insurance proceeds in the event of losses; provided, however, that the Additional Insureds shall have an equal right to their proportionate share of insurance proceeds in any case in which the Undivided Interest is affected.
(B) The Lessee shall maintain bodily injury and property damage liability insurance (including product liability, completed operations and personal injury insurance) covering claims arising out of the ownership, operation, maintenance, condition or use of Unit 1. The amount and other terms of such insurance, including self insurance amounts and deductibles, shall be in accordance with the Lessee’s normal practice in respect of those other owned, leased or operated nuclear electric generating units with respect to which the Lessee determines or controls the determination of the amount and other terms of such insurance and which, in any event, shall be consistent with Applicable Law and Prudent Utility Practice. Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(i)(B) to be endorsed to provide, or to otherwise provide, as set forth in sub-paragraphs (2), (3), (4), and (5) of Section 10(a)(i)(A).
With respect to this Section 10(a)(i), the Lessee hereby waives any right of recovery it may have against the Additional Insureds, including any right to which another may be subrogated.
(ii) Nuclear Insurance.

(A) The Lessee shall maintain nuclear property insurance in amounts and with other such terms, including deductibles, as are consistent with the normal practice of the Lessee in respect of those other owned, leased or operated nuclear electric generating units for which the Lessee determines or controls the determination of the amount and other terms of such insurance as required by Applicable Law and consistent with Prudent Utility Practice. Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(ii)(A) to be endorsed to provide, or to otherwise provide, as set forth in subparagraphs (1), (2), (3), (4) and (5) of Section 10(a)(i)(A).

(B) The Lessee shall maintain nuclear liability insurance in such an amount and with other such terms as are consistent with the normal practice of the Lessee in respect of its other owned, leased or operated nuclear electric generating units for which the Lessee determines or controls the determination of the amount and other terms of such insurance, which insurance shall in any event




comply with Applicable Law and Prudent Utility Practice. The Lessee shall also maintain (x) supplier’s and transporter’s insurance and (y) nuclear worker occupational exposure insurance, in each case in amounts consistent with Prudent Utility Practice and Applicable Law. Nuclear liability insurance shall be maintained pursuant to this Section 10(a)(ii)(B), whether or not the Lease Termination Date shall have occurred (but at the expense of the Owner Participant after the Lease Termination Date), until the Lessee shall have been notified by the Owner Participant that neither the Lessor nor the Owner Participant have any further liability in connection with the ownership, operation, maintenance, condition or use of the Undivided Interest. Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts to cause any insurance carried in accordance with this Section 10(a)(ii)(B) to be endorsed to provide or to otherwise provide, as set forth in subparagraphs (2), (3), (4) and (5) of Section 10(a)(i)(A).

With respect to this Section 10(a)(ii), the Lessee hereby waives any right of recovery it may have against the Additional Insureds, including any right to which another may be subrogated.
(iii) Subject to Section 10(a)(vi) hereof, the Lessee shall use its best efforts at all times to obtain an endorsement providing that the respective interests of the Additional Insureds shall not be invalidated by any breach of any warranty by the Lessee or SMEPA contained in such policies on all insurance referred to in this Section 10.

(iv) Annual Reports and Certificates. On the Closing Date and as soon as practicable after the end of each fiscal year of the Lessee commencing with the end of fiscal year 1989, and in any event within 120 days thereafter, the Lessee shall deliver to the Lessor and the Indenture Trustee (A) an Officers’ Certificate of the Lessee setting forth the insurance obtained pursuant to this Section 10 and as then in effect, stating whether, in the opinion of such officers, such insurance policies comply with the requirements of this Section 10, whether all premiums then due thereon have been paid and whether such policies are in full force and effect, and (B) certification of all insurance required to be maintained under this Section 10, executed by each insurer, or by an authorized representative of each insurer, identifying underwriters, the type of insurance, the insurance limits (including applicable deductibles) and the policy term, and the other material policy terms (including an indication of the endorsements in place as required by this Facility Lease). Upon request, the Lessee will provide the Owner Participant and, if the Lien of the Indenture shall then be in effect, the Indenture Trustee, with copies of all insurance policies, binders and cover notes or other evidence of such insurance in respect of all insurance required to be maintained pursuant to this Section 10, certified by authorized representatives of the insurers.

(v) Proceeds. All insurance proceeds paid in respect of or pursuant to paragraphs (i) and (ii) above shall (A) be applied as provided in Section 9(g), (h) or (i), as the case may be, and (B) be adjusted with the insurance companies or otherwise collected, including the filing of appropriate proceedings, by the Lessee, subject, however, to any priority allocations of such proceeds to Decommissioning, decontamination and debris removal and to any obligations to pay such proceeds to a separate trust as may be established for the purpose of paying the costs of Decommissioning, decontamination and debris removal in each case as may be set forth in the insurance policies or required under Applicable Law.

(vi) Notwithstanding the provisions of this Section 10(a) requiring the Lessee to utilize its best efforts to cause insurance carried in accordance with this Section 10(a) to be endorsed to provide, or to otherwise provide, as set forth above, (x) the Lessee shall in all events be unconditionally obligated to cause insurance carried in accordance with this Section 10(a) to be endorsed to provide,




or to otherwise provide, as set forth in subparagraph (2)(m) of Section 10(a)(i)(A), and (y) if the Lessee shall have knowledge, or shall have been notified in writing by the Owner Participant (with sufficient information to enable the Lessee to confirm such notification), that any such endorsement (other than any of those described in clause (x) of this paragraph (vi)) for such insurance is then available from the provider of such insurance to the Lessee (or, in the case of nuclear liability insurance, from any provider of such insurance), the Lessee shall cause such insurance to be so endorsed or to so otherwise provide.

(b) Other Insurance. Nothing in this Section 10 shall prohibit the Lessor or the Owner Participant from placing at its expense other insurance on or with respect to Unit 1, the Undivided Interest, the Plant Site or the operation of Unit 1, naming the Lessor or the Owner Participant as insured and/or loss payee, unless such insurance would conflict with or otherwise limit the insurance to be provided or maintained in accordance with Section 10(a).

Section 11. Rights to Assign or Sublease.

(a) Assignment or Sublease by the Lessee. The Lessee may, without the prior consent of the Lessor, assign, sublease, transfer or encumber its rights and obligations under the Facility Lease and the other Transaction Documents; provided, however, that (i) such assignment, sublease, transfer or encumbrance shall not (A) permit the early termination of the Letter of Credit (such condition to be deemed waived if the Issuing Bank shall have waived its right to terminate the Letter of Credit in a manner satisfactory to the Owner Participant) or (B) result in any Tax Loss, and (ii) the Lessee shall remain the primary obligor under this Facility Lease and the other Transaction Documents to which it is a party.

(b) Assignment by Lessor as Security for Lessor’s Obligations. To secure the indebtedness evidenced by the Notes, the Lessor will assign to the Indenture Trustee (i) its right, title and interest (not including, in any event, any Excepted Rights) in and to this Facility Lease, including the right to receive certain payments of Rent (not including, in any event, Excepted Payments), to the extent provided in the Indenture and (ii) its right, title and interest in the Undivided Interest. The Lessee hereby (v) agrees it will not assert against the Indenture Trustee any claim or defense it may have against the Lessor, (w) consents to such assignment and to the terms of the Indenture, (x) agrees to pay directly to the Indenture Trustee at the Indenture Trustee’s Office (so long as the lien of the Indenture has not been satisfied and discharged and the Lessor is obligated thereunder) all amounts of Rent (other than Excepted Payments) due or to become due to the Lessor, (y) agrees that the right of the Indenture Trustee to any such payments shall be absolute and unconditional and shall not be affected by any circumstances whatsoever, including, without limitation, those circumstances set forth in Section 4, and (z) agrees that, to the extent provided in the Indenture and until the Indenture is discharged in accordance with its terms, the Indenture Trustee shall have all the rights of the Lessor hereunder (other than Excepted Rights and the right to receive Excepted Payments) as if the Indenture Trustee had originally been named herein as the Lessor. Following any transfer to, or purchase by, the Lessee of the Undivided Interest, the Undivided Interest shall (unless the Notes shall have been paid in full) remain subject to the lien of the Indenture and such lien shall not be impaired in consequence thereof.

Section 12. Lease Renewal.

(a) Subject to the notice requirements set forth in Section 13(a), at the end of the Basic Lease Term, provided that no Default or Event of Default shall have occurred and be continuing, no Event of Loss or Deemed Loss Event shall have occurred in respect of which the Lessor has demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected, and all Notes shall have been paid in full, the Lessee shall have the option to renew the term of this Facility Lease




for a single period of a number of years (not less than two) selected by the Lessee (such renewal period or such shorter period as shall extend to the expiration of the Facility Lease being herein referred to as the “Fixed Rate Renewal Term”); provided, however, that the Lessee, at the time of the exercise of its renewal option as provided in this subsection (a), shall have furnished an appraisal of an independant appraiser as to the useful life of Unit 1, which appraiser and appraisal shall be reasonably satisfactory to the Lessor, and which appraisal shall indicate that at the end of the proposed Fixed Rate Renewal Term the residual value of the Undivided Interest will be equal to at least 20% of Facility Cost for the Undivided Interest (without taking into account inflation or deflation that has occurred or will have occurred from the Closing Date to the end of the proposed Fixed Rate Renewal Term), and that the proposed Fixed Rate Renewal Term does not extend the Lease Term beyond 80% of the economic useful life of Unit 1 as established by such appraisal.

(b) Subject to the notice requirements set forth in Section 13(a), at the end of the Basic Lease Term or any Renewal Term, provided that no Default or Event of Default shall have occurred and be continuing, no Event of Loss or Deemed Loss Event shall have occurred in respect of which the Lessor has demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected, and all the Notes have been paid in full, the Lessee shall have the option to renew the term of this Facility Lease for one or more periods of three years or such shorter period as shall extend to the expiration of the License (each such renewal period being herein referred to as a “Fair Market Renewal Term”).

Section 13.
Notices for Renewal or Purchase; Purchase Options; Determination of Fair Market Value.
(a) Expiration of Basic Lease Term. Not earlier than five nor later than two years prior to the expiration date of the Basic Lease Term, the Lessee shall give to the Lessor written notice of its election either to (i) return the Undivided Interest to the Lessor pursuant to Section 5 or (ii) exercise one of the renewal options permitted by Section 12 or the purchase option permitted by Section 13 (c). If the notice specified in clause (ii) of the preceding sentence is given, then not later than 18 months prior to the expiration date of the Basic Lease Term, the Lessee will give the Lessor written notice of its election to exercise either (x) the purchase option permitted by Section 13(c), (y) the option to renew this Facility Lease for the Fixed Rate Renewal Term or (z) the option to renew this Facility Lease for the Fair Market Renewal Term. Such election shall be irrevocable as to the Lessee, but shall not be binding on the Lessor if, on the effective date thereof, an Event of Default shall have occurred and be continuing or an Event of Loss or a Deemed Loss Event shall have occurred and the Lessor shall have demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected.

(b) Expiration of Renewal Term. Not later than two years prior to the expiration of any Renewal Term, if elected, the Lessee shall give to the Lessor written notice of its election to (i) return the Undivided Interest to the Lessor pursuant to Section 5, (ii) exercise the purchase option permitted by Section 13(c) or (iii) exercise the renewal option permitted by Section 12(b). Such election shall be irrevocable as to the Lessee, but shall not be binding on the Lessor, if, on the effective date thereof, an Event of Default shall have occurred and be continuing or an Event of Loss or Deemed Loss Event shall have occurred and the Lessor shall have demanded payment under Section 9(c) or 9(d), as the case may be, or in response to which a Special Transfer has been effected.

(c) Purchase Option at Expiration of the Lease Term. Subject to the notice requirements set forth in Section 13(a) or 13(b) and the provisions of Article V of the Assignment and Assumption Agreement, as the case may be, provided that no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing, and the Notes shall have been paid in full, the Lessee (or any Affiliate thereof) shall have the right to purchase the Undivided Interest on the date of the expiration of the Basic




Lease Term or any Renewal Term (if elected), for a purchase price equal to the Fair Market Sales Value thereof.

(d) Purchase of the Undivided Interest; Payment, Etc. If the Lessee (or any Affiliate thereof) shall have elected to purchase the Undivided Interest pursuant to Section 13(c), payment by the Lessee (or such Affiliate) of the purchase price therefor shall be made in immediately available funds, whereupon the Lessor shall Transfer the Undivided Interest to the Lessee, or such Affiliate, as the case may be, all subject, however, to the provisions of Article V of the Assignment and Assumption Agreement.

(e) Determination of Fair Market Value. Not later than two years and six months prior to the expiration date of the Basic Lease Term and any Renewal Term, if elected, the Lessee and the Owner Participant shall agree on the Fair Market Sales Value and the Fair Market Rental Value of the Undivided Interest as of the expiration of the Basic Lease Term or such Renewal Term, as the case may be, and the estimated Fair Market Sales Value as of the expiration of the Renewal Term, if any, which would follow the expiration of the Basic Lease Term or such Renewal Term, as the case may be or if the Lessee and the Owner Participant are unable to agree upon such Fair Market Values by such time, such Fair Market Values shall be determined by the Appraisal Procedure.

(f) Purchase Option for Significant Expenditures. So long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing, the Lessee shall have the option to terminate this Facility Lease on any Basic Rent Payment Date occurring on or after January 15, 1999 on at least 90 days prior written notice to the Lessor, the Owner Participant and the Indenture Trustee to the effect that a Significant Expenditure in respect of a Project is planned or required. On such Basic Rent Payment Date the Lessee shall pay to the Lessor an amount equal to the higher of the Fair Market Sales Value of the Undivided Interest and the Casualty Value, in each case determined as of such Basic Rent Payment Date, together with any other amounts of Supplemental Rent then due. To the extent the Lessee has assumed the Outstanding Notes pursuant to, and in accordance with, Section 3.9(b) of the Indenture as of such Basic Rent Payment Date, the amount determined pursuant to the immediately preceding sentence shall be reduced by the principal amount of the Notes so assumed, taking into account any amounts paid on such date in respect of principal installments then due. Upon compliance in full by the Lessee with the foregoing provisions of this Section 13(f), the Lessor shall (so long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing) Transfer the Undivided Interest (subject, however, in the case in which the Outstanding Notes have been assumed in accordance with Section 3.9(b) of the Indenture, to the Lien of the Indenture) to the Lessee, or an Affiliate thereof, as designated by the Lessee in its notice to the Lessor, the Owner Participant and the Indenture Trustee given pursuant to this Section 13(f).

As used in this Section 13(f), the term “Significant Expenditure” shall mean expenditures in respect of Nonseverable Capital Improvements to Unit 1 (other than those required by Section 8(a) (i), (ii) or, to the extent of compliance with Governmental Actions not significantly more onerous than those in effect on the Closing Date, Section 8(a)(iii)) and which (i) for the period to and including the twentieth anniversary of the Closing Date, shall exceed $250,000,000, as such amount may be adjusted on each anniversary of the Closing Date by the percentage change in the Consumer Price Index issued from time to time by the U.S. Department of Labor, Bureau of Labor Statistics, for the region which includes the Plant Site and in respect of which the Owner Trustee or the Owner Participant shall not permit the cost thereof to be financed through the Lessor and (ii) for the period from the day next succeeding the last day of the period specified in clause (i) above to the end of the Lease Term, shall exceed $100,000,000, as such amount may be adjusted on each anniversary of the Closing Date by the percentage change in the Consumer Price Index issued from time to time by the U.S. Department of Labor, Bureau of Labor Statistics, for the region which includes the Plant Site. The term “ Project ” , as used in this Section 13(f), shall mean either (x) an addition, betterment or improvement to Unit




1 which, in the opinion of an engineer selected by the Lessee and reasonably acceptable to the Owner Participant, would involve no more than a single major component and work integral thereto of Unit 1 or (y) a series of additions, betterments or improvements to Unit 1 which are required by Governmental Action taken within a period of 6 months and which relate to matters of public health, safety or the environment.
(g) Periodic Purchase Option. So long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing, the Lessee shall have the option to terminate this Facility Lease on the Basic Rent Payment Date immediately succeeding each of the tenth, fifteenth or twentieth anniversaries of the Closing Date on at least 90 days prior written notice to the Lessor, the Owner Participant and the Indenture Trustee. On such Basic Rent Payment Date the Lessee shall pay to the Lessor an amount equal to the higher of the Fair Market Sales Value of the Undivided Interest and the Casualty Value, in each case determined as of such Basic Rent Payment Date, together with any other amounts of Supplemental Rent then due. To the extent the Lessee has assumed the Outstanding Notes pursuant to, and in accordance with, Section 3.9(b) of the Indenture as of such Basic Rent Payment Date, the amount determined pursuant to the immediately preceding sentence shall be reduced by the principal amount of the Notes so assumed, taking into account any amounts paid on such date in respect of principal installments then due. Upon compliance in full by the Lessee with the foregoing provisions of this Section 13(g), the Lessor shall (so long as no Default in respect of Section 15(i), (v), (ix) or (x) or Event of Default shall have occurred and be continuing) Transfer the Undivided Interest (subject, however, in the case in which the Outstanding Notes have been assumed in accordance with Section 3.9(b) of the Indenture, to the Lien of the Indenture) to the Lessee, or an Affiliate thereof, as designated by the Lessee in its notice to the Lessor, the Owner Participant and the Indenture Trustee given pursuant to this Section 13(g).

Section 14. Optional Termination.

(a) Termination Notice. Unless a Default or an Event of Default shall have occurred and be continuing or an Event of Loss or a Deemed Loss Event shall have occurred in respect of which the Lessor shall have demanded payment under Section 9(c) or 9(d), the Lessee shall have the option, exercisable by the giving of at least 360 days’ prior written notice (a “Termination Notice”) to the Lessor, the Owner Participant and the Indenture Trustee (provided that the Lessee shall have delivered to the Lessor an Officers’ Certificate to the effect that the Board of Directors of the Lessee - has adopted and there are in effect resolutions determining that Unit 1 as to the Lessee is economically obsolete for any reason and that the Lessee should seek to dispose of all of its interest (owned or leased) in Unit 1) to terminate this Facility Lease on any Basic Rent Payment Date on or after the tenth anniversary of the Closing Date (the “Termination Date”). If the Lessee shall give the Lessor a Termination Notice, the Lessee shall, as agent for the Lessor, use its best efforts to obtain cash bids for the purchase of the Undivided Interest. The Lessor shall also have the right to obtain such cash bids, either directly or through agents other than the Lessee. The Lessee shall certify to the Lessor within ten days after the Lessee’s receipt of each bid (and, in any event, prior to the Termination Date) the amount and terms thereof and the name and address of the party (which shall not be the Lessee or any Affiliate or agent thereof) which submitted such bid.

(b) Events on the Termination Date. On the Termination Date the Lessor shall (but only upon receipt of the sale price and all additional payments specified in the next sentence) Transfer the Undivided Interest for cash to the bidder (which shall not be the Lessee or an Affiliate or agent thereof) that shall have submitted the highest bid on or before the Termination Date. The total sale price realized at such sale shall be retained by the Lessor (subject, however, to the terms of the Indenture and the requirement that on the Termination Date there shall have been paid to the Indenture Trustee an amount sufficient to pay in full the unpaid principal amount of all Notes Outstanding on the Obsolescence Redemption Date and all premium,




if any, and interest accrued and unpaid on such Outstanding Notes as of the Termination Date and to accrue on the Outstanding Notes from such date to the Obsolescence Redemption Date) and, in addition, on the Termination Date the Lessee shall pay to the Lessor (i) the excess, if any, of the Special Casualty Value as of the Termination Date over the net sale price of the Undivided Interest and (ii) an amount equal to any premium payable on the Outstanding Notes as of the Obsolescence Redemption Date and any interest to accrue on the Outstanding Notes from and including the Termination Date to the Obsolescence Redemption Date, and shall pay to the Person or Persons entitled thereto all Supplemental Rent then due (other than Special Casualty Value). Upon compliance by the Lessee with the applicable provisions of this Section 14, the obligation of the Lessee to pay Basic Rent due hereunder for any period after the Termination Date shall cease and the Basic Lease Term shall end on the Termination Date; but the obligation of the Lessee to pay Supplemental Rent when and as due shall continue in full force and effect and shall not be impaired by reason of any such termination. If on or as of the Termination Date no such sale shall occur or the Lessee shall not have complied in full with this Section 14, this Facility Lease shall continue in full force and effect in accordance with its terms, subject to the continuing rights of the Lessee under this Section. The Lessor shall be under no duty to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise take any action in connection with any such sale other than to Transfer the Undivided Interest to the purchaser named in the highest bid certified by the Lessee to the Lessor or obtained by the Lessor, against receipt of the payments provided for herein.

(c) Early Termination Notice. In the event that the Lessee shall fail to exercise either a Renewal Option or the purchase option permitted by Section 13(c) within the time limits provided by Section 13(a) or Section 13(b), the Lessor shall have the option, on any Basic Rent Payment Date thereafter, on at least one year’s prior written notice (an “ Early Termination Notice ”) to the Lessee and the Indenture Trustee, to terminate this Facility Lease on the Basic Rent Payment Date specified in such notice (the “ Early Termination Date ”). Such Early Termination Notice may be revoked by the Lessor at any time on or prior to the 30th day preceding the Early Termination Date (the “ Early Termination Commitment Date ”), after which day the Lessor shall be irrevocably committed to terminate this Facility Lease on the Early Termination Date. On or prior to the Early Termination Commitment Date, the Lessor shall deposit with the Indenture Trustee cash in an amount (or a letter of credit for such amount of any bank whose long-term unsecured debt securities are rated not less than A2 by Moody’s or, so long as any Bonds rated by Standard & Poor’s are then Outstanding, whose unsecured debt securities are assigned a rating by Standard & Poor’s which is not less than the rating then assigned by Standard & Poor’s to any debt securities of the Lessee then outstanding) equal to the unpaid principal amount of all Notes Outstanding on such date and all premium, if any, and interest accrued and to accrue on and as of the Early Termination Date. On the Early Termination Date, the Lessee shall pay to the Lessor any Basic Rent due or accrued, as the case may be, to and including the Early Termination Date, and shall pay to the Person or Persons entitled thereto all Supplemental Rent (excluding from such Supplemental Rent any amount due and owing with respect to principal of, and premium, if any, on the Notes being prepaid on such date, other than any amount of principal which would have been paid on such date if such Notes were not being prepaid), whereupon the obligation of the Lessee to pay any Basic Rent for any period after the Early Termination Date shall cease and the Lease Term shall end, but the obligations of the Lessee to pay Supplemental Rent when and as due shall continue in full force and effect and shall not be impaired by reason of any such termination.

Section 15. Events of Default.

The term Event of Default, wherever used herein, shall mean any of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary, or come about or be effected by operation of law, or be pursuant to or in compliance with any Applicable Law or Governmental Action):





(i) the Lessee shall fail to make, or cause to be made, (A) any payment of Casualty Value, Special Casualty Value or Basic Rent within five Business Days after the same shall become due or (B) any payment of Supplemental Rent (other than Casualty Value or Special Casualty Value) including, without limitation, any payments due under the Tax Indemnification Agreement, within 20 days after the same shall become due or be demanded, as the case may be; or

(ii) (x) the Lessee shall fail (A) to perform or observe any covenant, condition or agreement to be performed or observed by it under Section 10(b)(3)(i) or 10(b)(3)(ii) of the Participation Agreement or Section 11 of this Facility Lease or (B) to make the payments required to be made by the penultimate paragraph of Section 10(b)(3)(ix) of the Participation Agreement or the penultimate paragraph of Section 5(b) hereof, in each case on the dates therein specified, or (y) the Event of Default referred to in the last paragraph of Section 5(b) hereof;

(iii) the Lessee shall fail to perform or observe any covenant, condition or agreement (other than those referred to in clauses (i), (ii), (vii), (ix) and (x) of this Section 15) to be performed or observed by it under this Facility Lease or any other Transaction Document (other than under the Tax Indemnification Agreement or under Section 13(b) or 19(c) of the Participation Agreement as it relates to the Owner Participant or any Affiliates thereof), and such failure shall continue for a period of 30 days after there shall have been given to the Lessee by the Lessor or the Owner Participant a notice specifying such failure and requiring it to be remedied; provided, however, that the continuation of such failure for a period of 30 days or more after such notice has been so given (but in no event for a period which is greater than one year after such notice has been given) shall not constitute an Event of Default if (a) such failure can be remedied but cannot be remedied within such 30 days, (b) the Lessee is diligently pursuing a remedy of such failure and (c) such failure does not impair in any material respect the Lessor’s interest in Unit 1 or the mortgage and security interest created by the Indenture; or

(iv) any representation or warranty made by the Lessee in this Facility Lease, any other Transaction Document (other than the Tax Indemnification Agreement or Section 19(b) of the Participation Agreement) or any agreement, document or certificate delivered by the Lessee in connection herewith or therewith shall prove to have been incorrect in any material respect when such representation or warranty was made or given if such representation or warranty continues to be material and remains materially incorrect at the time in question; provided, however, that such failure of such representation or warranty to be correct shall not constitute an Event of Default if (a) the facts or circumstances making such representation or warranty incorrect can be remedied or changed so that such representation or warranty will thenceforth be correct in all material respects, (b) the Lessee is diligently pursuing such a remedy or change, (c) such remedy or change is, in fact, accomplished within a period of one year from the time that the Lessee has been notified of such misrepresentation or breach of warranty and (d) such facts or circumstances do not impair in any material respect the Lessor’s interest in Unit 1 or the mortgage and security interest created by the Indenture; or

(v) the Lessee shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking of possession by any such official in an involuntary




case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall take any corporate action to authorize any of the foregoing; or an involuntary case or other proceeding shall be commenced against the Lessee seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed or unstayed for a period of 60 consecutive days; or

(vi) final judgment for the payment of money in excess of $10,000,000 shall be rendered against the Lessee and the Lessee shall not have discharged the same or provided for its discharge in accordance with its terms or bonded the same or procured a stay of execution thereof within 60 days from the entry thereof; or

(vii) the Lessee (A) shall fail, at any time, to provide or maintain a Letter of Credit which complies with all of the terms and conditions of Section 10(b)(3)(ix) of the Participation Agreement, whether or not the Lessee has used best efforts to obtain and maintain such Letter of Credit or (B) shall fail to provide a renewal or replacement Letter of Credit so complying (1) by the 15th day prior to the stated termination date of an Existing Letter of Credit, (2) if the Issuing Bank of an Existing Letter of Credit shall have delivered notice, in accordance with the terms thereof, that such Existing Letter of Credit will be terminated prior to its stated termination date and if such Issuing Bank was required to give at least 30 days’ notice of such early termination, by the 15th day prior to the date of such early termination or (3) if the Issuing Bank of an Existing Letter of Credit shall have delivered notice, in accordance with the terms thereof, that such Existing Letter of Credit will be terminated prior to its stated termination date and if such Issuing Bank was not required to give at least 30 days’ notice of such early termination, by the later of (x) the time of the effectiveness of such notice and (y) the 15th day prior to the date of such early termination; or

(viii) the exercise of remedies upon the occurrence and continuance of an event of default under any other lease under which the Lessee is the lessee of equipment or facilities (other than fuel) which equipment or facilities (A) were owned or leased by the Lessee on the Closing Date and (B) were purchased by the lessor at an original purchase price not less than $100,000,000 (considering the property subject to each such lease individually and not together with the property subject to any other such lease); or

(ix) any suspension, revocation or termination of insurance required to be maintained pursuant to Section 10(a)(i) hereof, and such suspension, revocation or termination shall continue for more than five Business Days from the effective date of such suspension, revocation or termination unless such insurance is reinstated or replaced; or

(x) any suspension, revocation or termination of insurance required to be maintained pursuant to Section 10(a)(ii) or 10(a)(iii) hereof; provided, however, that such suspension, revocation or termination shall not constitute an Event of Default if the applicable insurer has failed to comply with applicable notice termination provisions of the pertinent policy; and provided, further, that the foregoing proviso shall cease to apply upon the earlier of (x) five Business Days following receipt by the Lessee of actual notice of such suspension, revocation or termination or (y) the applicable termination date of such policy assuming that the insurer had complied with its notice obligations under the pertinent policy; or





(xi) so long as any Initial Series Notes shall remain Outstanding, any of the events specified in Section 19(d) of the Participation Agreement.

Anything herein to the contrary notwithstanding, so long as any Initial Series Notes shall remain Outstanding (x) the provisos contained in clauses (iii) and (iv) above shall have no force or effect and (y) a failure by the Lessee to perform or observe the covenants and agreements contained in Section 7 hereof shall constitute an immediate Event of Default, without notice or lapse of time.
Section 16. Remedies.

(a) Remedies. Upon the occurrence of any Event of Default and so long as the same shall be continuing, the Lessor may, to the extent permitted by Applicable Law, exercise one or more of the following remedies, except as hereinbelow expressly otherwise set forth, as the Lessor in its sole discretion shall elect:

(i) the Lessor may declare this Facility Lease to be in default by written notice to such effect given to the Lessee, or may, by notice to the Lessee, rescind or terminate this Facility Lease;

(ii) the Lessor may (A) demand that the Lessee, and thereupon the Lessee shall, return possession of the Undivided Interest promptly to the Lessor in the manner and condition required by, and otherwise in accordance with the provisions of, this Facility Lease as if the Undivided Interest were being returned at the end of the Lease Term and the Lessor shall not be obligated to reimburse the Lessee for any costs and expenses incurred by the Lessee in connection therewith and (B) take all actions required to enable it to, and, thereafter, enter upon the Plant Site and take immediate possession of (to the exclusion of the Lessee) the Undivided Interest, by summary proceedings or otherwise, all without liability to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise;

(iii) subject to the rights of first refusal, if any, of any owner of an undivided interest in the Plant other than the Lessee under Section 6.02 of the Ownership Agreement and Section 6.01 of the Operating Agreement, the Lessor may sell the Undivided Interest or any part thereof, together with any interest of the Lessor under the Assignment and Assumption Agreement and the Ground Lease at public or private sale, as the Lessor may determine, free and clear of any rights of the Lessee in the Undivided Interest and without any duty to account to the Lessee with respect to such action or inaction or any proceeds with respect thereto (except to the extent required by clause (v) or (vi) below if the Lessor shall elect to exercise its rights thereunder), in which event the Lessee’s obligation to pay Basic Rent hereunder for periods commencing after the date of such sale shall be terminated or proportionately reduced, as the case may be (except to the extent that Basic Rent is to be included in computations under clause (v) or (vi) below if the Lessor shall elect to exercise its rights thereunder);

(iv) the Lessor may hold, keep idle or lease to others all or any part of the Undivided Interest, as the Lessor in its sole discretion may determine, free and clear of any rights of the Lessee and without any duty to account to the Lessee with respect to such action or inaction or for any proceeds with respect to such action or inaction, except that the Lessee’s obligation to pay Basic Rent for periods commencing after the Lessee shall have been deprived of use of the Undivided Interest pursuant to this clause (iv) shall be reduced by an amount equal to the net proceeds, if any, received by the Lessor from leasing the Undivided Interest to any Person other than the Lessee for the same periods or any portion thereof;





(v) the Lessor may, whether or not the Lessor shall have exercised or shall thereafter at any time exercise its rights under clause (i), (ii), (iii) or (iv) above, demand, by written notice to the Lessee specifying a payment date which shall be a Basic Rent Payment Date not earlier than 10 days after the date of such notice, that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor, on the Basic Rent Payment Date specified in such notice, as liquidated damages for loss of a bargain and not as a penalty (in lieu of the Basic Rent accrued after the Basic Rent Payment Date specified in such notice), any unpaid Rent (other than Basic Rent already included in the applicable Casualty Value payment as contemplated by Section 3(a) hereof) accrued through the Basic Rent Payment Date specified in such notice plus whichever of the following amounts the Lessor, in its sole discretion, shall specify in such notice (together with interest on such amount at the interest rates specified in Section 3(b)(iii) from the Basic Rent Payment Date specified in such notice to the date of actual payment):

(A) an amount equal to the excess, if any, of (1) Casualty Value, computed as of the Basic Rent Payment Date specified in such notice over (2) the Fair Market Rental Value of the Undivided Interest (determined on the basis of the then actual condition of Unit 1) until the end of the remaining useful life of Unit 1, after discounting such Fair Market Rental Value semi-annually to present value as of the Basic Rent Payment Date specified in such notice at an annual rate of interest equal to 2% per annum in excess of the Prime Rate then in effect;

(B) an amount equal to the excess, if any, of (1) such Casualty Value over (2) the Fair Market Sales Value of the Undivided Interest (determined on the basis of the then actual condition of Unit 1) as of the Basic Rent Payment Date specified in such notice;

(C) an amount equal to the excess, if any, of (1) the present value as of the Basic Rent Payment Date specified in such notice of all installments of Basic Rent until the end of the Basic Lease Term or the Renewal Term, as the case may be, discounted semi-annually at an annual rate of interest equal to 2% per annum in excess of the Prime Rate then in effect, over (2) the present value as of such Basic Rent Payment Date of the Fair Market Rental Value of the Undivided Interest (determined on the basis of the then actual condition of Unit 1) until the end of the Basic Lease Term or the Renewal Term, as the case may be, discounted, semi-annually at an annual rate of interest equal to 2% per annum in excess of the Prime Rate then in effect; or

(D) an amount equal to the highest of (1) such Casualty Value, (2) such discounted Fair Market Rental Value and (3) such Fair Market Sales Value and, in this event, upon full payment by the Lessee of all sums due hereunder, the Lessor shall, at its option, either Transfer the Undivided Interest to the Lessee, or promptly sell the Undivided Interest and pay over to the Lessee the net proceeds thereof up to the amount set forth in (1), (2) or (3) above actually paid by the Lessee to the Lessor;

(vi) if the Lessor shall have sold all the Undivided Interest pursuant to clause (iii) above, the Lessor, in lieu of exercising its rights under clause (v) above with respect to the Undivided Interest may, if it shall so elect, demand that the Lessee pay to the Lessor, and the Lessee shall pay to the Lessor on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (in lieu of Basic Rent due for periods commencing after the next Basic Rent Payment Date following the date of such sale), any unpaid Rent (other than Basic Rent already included in the applicable Casualty Value payment as contemplated by Section 3(a) hereof) accrued through such Basic Rent Payment Date, plus the amount of any deficiency between the Sale Proceeds and Casualty Value,




computed as of such Basic Rent Payment Date, together with interest at the interest rates specified in Section 3(b)(iii) on the amount of such Rent and such deficiency from the date of such sale until the date of actual payment; or

(vii) without affecting any rights the Lessor may have in respect of any other provisions of the Transaction Documents, the Lessor may exercise any other right or remedy that may be available to it under any Applicable Law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof.

(b) No Release. No rescission or termination of this Facility Lease, in whole or in part, or repossession of the Undivided Interest or exercise of any remedy under subsection (a) of this Section 16 shall, except as specifically provided therein, relieve the Lessee of any of its liabilities and obligations hereunder. In addition, the Lessee shall be liable, except as otherwise provided above, for any and all unpaid Rent due hereunder before, after or during the exercise of any of the foregoing remedies, including all reasonable legal fees and other costs and expenses incurred by the Lessor or the Owner Participant by reason of the occurrence of any Event of Default or the exercise of the Lessor’s remedies with respect thereto. At any sale of the Undivided Interest, or any part thereof pursuant to this Section 16, the Owner Participant, the Lessor or the Indenture Trustee may bid for and purchase such property.

(c) Remedies Cumulative. Except as expressly set forth therein, no remedy under paragraph (a) of this Section 16 is intended to be exclusive, but each shall be cumulative and in addition to any other remedy provided under such paragraph (a) or otherwise available to the Lessor at law or in equity. No express or implied waiver by the Lessor of any Default or Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future or subsequent Default or Event of Default. The failure or delay of the Lessor in exercising any right granted it hereunder upon any occurrence of any of the contingencies set forth herein shall not constitute a waiver of any such right upon the continuation or recurrence of any such contingencies or similar contingencies and any single or partial exercise of any particular right by the Lessor shall not exhaust the same or constitute a waiver of any other right provided herein. To the extent permitted by Applicable Law, the Lessee hereby waives any rights now or hereafter conferred by statute or otherwise which may require the Lessor to sell, lease or otherwise use the Undivided Interest or Unit 1 in mitigation of the Lessor’s damages as set forth in paragraph (a) of this Section 16 or which may otherwise limit or modify any of the Lessor’s rights and remedies provided in this Section 16.

(d) Exercise of Other Rights or Remedies. In addition to all other rights and remedies provided in this Section 16, the Lessor may exercise any other right or remedy that may be available to it under Applicable Law or proceed by appropriate court action to enforce the terms hereof or to recover damages for the breach hereof.

Section 17. Notices.

All communications and notices provided for in this Facility Lease shall be in writing and shall be given in person or by means of telex, telecopy, or other wire transmission, or mailed by registered or certified mail, addressed as provided in the Participation Agreement. All such communications and notices given in such manner shall be effective (x) if sent by telex, telecopy or other wire transmission, on the date of transmission thereof, or (y) if sent by mail, three Business Days after being mailed.




Section 18. Successors and Assigns.

This Facility Lease, including all agreements, covenants, indemnities, representations and warranties, shall be binding upon and inure to the benefit of the Lessor and its successors and permitted assigns, and the Lessee and its successors and, to the extent permitted hereby, assigns.
Section 19. Right to Perform for Lessee.

If the Lessee shall fail to make any payment of Rent to be made by it, or shall fail to perform or comply with any of its other agreements contained herein, or shall fail to make any payment to be made by it under the Plant Agreements, or shall fail to perform or comply with any of its other agreements contained in the Plant Agreements, either the Lessor or the Owner Participant may, but shall not be obligated to, to the extent not prohibited by Applicable Law, (i) tender such payment, or (ii) in the case of the Plant Agreements, to the extent not expressly prohibited thereby, effect such performance or compliance, and the amount of such payment and the amount of all costs and expenses (including, without limitation, attorneys’ and other professionals’ fees and expenses) of the Lessor or the Owner Participant, as the case may be, incurred in connection with such payment or the performance of or compliance with the Plant Agreements, as the case may be, together with interest thereon at the Overdue Interest Rate, shall be deemed Supplemental Rent, payable by the Lessee upon demand. The foregoing provisions of this Section 19 shall not, however, be read into the Indenture in derogation of the limitation upon the rights of the Lessor and/or the Owner Participant to cure Defaults or Events of Default as provided in Section 6.8 of the Indenture.
Section 20. Additional Covenants.

The Lessee agrees to comply with and to pay as Supplemental Rent, all amounts payable by it under the provisions of Section 13 of the Participation Agreement and under the provisions of the Tax Indemnification Agreement, which provisions are incorporated herein by this reference as fully as if set forth in full at this place. The Lessee agrees to comply with its covenants and agreements set forth in Sections 10(b), 14 and 16 of the Participation Agreement and Articles II, III, IV and V of the Assignment and Assumption Agreement which covenants and agreements are incorporated herein by this reference as fully as if set forth in full at this place.
Section 21. Ground Lease.

The Lessee hereby assumes and will duly and punctually observe and perform, at its expense, all covenants, terms and conditions imposed upon Lessor, as tenant under the Ground Lease (including without limitation the payment of all rents and other sums), to the end that the Lessor, as tenant under the Ground Lease, shall have no responsibility for compliance with the provisions of the Ground Lease and shall be indemnified against all liability, loss, cost and expenses resulting from nonperformance thereunder and the acts of the Lessee, as ground lessor.
Section 22. Amendments and Miscellaneous.

(a) Amendments in Writing. The terms of this Facility Lease may not be waived, altered, modified, amended, supplemented or terminated in any manner whatsoever except by written instrument signed by the Lessor and the Lessee. It is expressly understood by the parties hereto that any waiver, alteration, modification, amendment, supplement or termination of this Facility Lease that requires the consent of the Indenture Trustee or the Holders of all or any portion of the Notes (in each case as provided in Section 10.2 of the Indenture) shall not be effective unless and until such consent shall have been obtained as provided in said Section 10.2.





(b) Survival. (1) All indemnities, representations and warranties contained in this Facility Lease and the other Transaction Documents and the Financing Documents and in any agreement, document or certificate delivered pursuant hereto or thereto or in connection herewith or therewith shall survive, and continue in effect following, the execution and delivery of this Facility Lease and the expiration or other termination of this Facility Lease.

(1) The obligations of the Lessee to pay Supplemental Rent and the obligations of the Lessee under Sections 5, 16, 19, 20 and this subsection 22(b)(2) shall survive the expiration or termination of this Facility Lease. The extension of any applicable statute of limitations by the Lessor, the Indenture Trustee, the Lessee, the Owner Participant, any Loan Participant or any Indemnitee shall not affect such survival. The obligations of the Lessee under Section 20 are expressly made for the benefit of, and shall be enforceable by, any Indemnitee, separately or together, without declaring this Facility Lease to be in default and notwithstanding any assignment by the Lessor of this Facility Lease or any of its rights thereunder or any disposition of all or any part of any interest in the Undivided Interest, Unit 1 or any other property referred to in this Facility Lease, any other Transaction Document or Financing Document. All payments required to be made pursuant to Section 20 shall be made directly to, or as otherwise requested by, the Indemnitee entitled thereto upon written demand by such Indemnitee.

(2) It is the intention of the Lessor and the Lessee that, notwithstanding any Special Transfer or the Lessee’s becoming successor Owner Trustee as contemplated by Section 7(b)(4) of the Participation Agreement (subject, however, to the provisions of Section 9.01(f) of the Trust Agreement) and in view of the rights and interests of the Loan Participants, until the conditions set forth in Section 3.9(b) of the Indenture shall have been satisfied, this Facility Lease and the Lessee’s obligations hereunder shall not be extinguished but shall remain in full force and effect and shall be enforceable by the Indenture Trustee and the Loan Participants, in accordance with its terms and the terms of the Indenture; provided, however, that, after the Lessee shall be deemed to have assumed, and shall be obligated to pay, the Notes as provided in Section 7(b)(4)(H) of the Participation Agreement, the obligation of the Lessee to make any payment of Rent under this Facility Lease shall be satisfied to the extent of the corresponding payment by the Lessee of principal of or premium, if any, or interest on the Notes then Outstanding.

(c) Severability of Provisions. Any provision of this Facility Lease which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Applicable Law, the Lessee hereby waives any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

(d) True Lease. This Facility Lease is intended as, and shall constitute, an agreement of lease, and a true lease for Federal income tax purposes, and nothing herein shall be construed as conveying to the Lessee any right, title or interest in or to the Undivided Interest except as lessee only.

(e) Original Lease. The single executed original of this Facility Lease marked “THIS COUNTERPART IS THE ORIGINAL COUNTERPART” and containing the receipt of the Indenture Trustee thereon shall be the “Original” of this Facility Lease. To the extent that this Facility Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Facility Lease may be created through the transfer or possession of any counterpart other than the “Original”.





(f) Governing Law. This Facility Lease shall be governed by and construed in accordance with the laws of the State of New York except to the extent that the laws of other jurisdictions are mandatorily applicable.

(g) Headings. The division of this Facility Lease into sections, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Facility Lease.

(h) Concerning the Owner Trustee. MTC and Stephen M. Carta are entering into this Facility Lease solely as Owner Trustee under the Trust Agreement and not in their individual capacities. Anything herein to the contrary notwithstanding, all and each of the representations, warranties, undertakings and agreements herein made on the part of the Owner Trustee are made and intended not as personal representations, warranties, undertakings and agreements by or for the purpose or with the intention of binding MTC and Stephen M. Carta personally but are made and intended for the purpose of binding only the Trust Estate, and this Facility Lease is executed and delivered by the Owner Trustee solely in the exercise of the powers expressly conferred upon it as trustee under the Trust Agreement; and no personal liability or responsibility is assumed hereunder by or shall at any time be enforceable against MTC and Stephen M. Carta or any successor in trust or the Owner Participant on account of any representation, warranty, undertaking or agreement hereunder of the Owner Trustee, either expressed or implied, all such personal liability, if any, being expressly waived by the Lessee, except that the Lessee or any Person claiming by, through or under it, making a claim hereunder, may look to the Trust Estate for satisfaction of the same and the Owner Trustee or its successor in trust, as applicable, shall be personally liable for its own gross negligence or willful misconduct. If a successor owner trustee is appointed in accordance with the terms of the Trust Agreement, such successor owner trustee shall, without any further act, succeed to all the rights, duties, immunities and obligations of the Owner Trustee hereunder and the predecessor owner trustee shall be released from all further duties and obligations hereunder.

(i) Lien of the Indenture. The Lessee hereby agrees that any transfer of all or any part of the property which is subject to the lien of the Indenture, to the extent such lien cannot be released, shall be transferred subject to such lien.

(j) Counterpart Execution. This Facility Lease may be executed in any number of counterparts and by each of the parties hereto or thereto on separate counterparts, all such counterparts together constituting but one and the same instrument. Although this Facility Lease is dated as of the date first above written for convenience, the actual date of execution hereof by the parties hereto is the Closing Date and this Facility Lease shall be executed on, and shall not be binding on any party hereto until, the Closing Date.








IN WITNESS WHEREOF , each of the parties hereto has caused this Facility Lease to be duly executed by an officer thereunto duly authorized.
ATTEST:
MERIDIAN TRUST COMPANY,
not in its individual capacity but
solely as Corporate Owner Trustee
 
 
/s/ Joseph Barry
By: /s/ Stephen M. Carta
Name:Stephen M. Carta
Title:Vice President
 
 
 
/s/ Stephen M. Carta
Stephen M. Carta, not in his individual capacity but solely as Individual Owner Trustee
 
 
ATTEST:


/s/ Mary Ball Ellett
SYSTEM ENERGY RESOURCES INC.


By: /s/  G. E. Harder
Name:G. E. Harder
Title:Vice President and Treasurer








No. 2
STATE OF NEW YORK     
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for the said County and State, on this 24th day of December, 1988, within my jurisdiction, the within named Stephen M. Carta, who acknowledged that he is Vice President of Meridian Trust Company, a Pennsylvania trust company, Corporate Owner Trustee under that certain Trust Agreement No. 2, dated as of December 1, 1988 among Lease Management Realty Corporation IV, as Owner Participant, Meridian Trust Company, as Corporate Owner Trustee, and Stephen M. Carta, as Individual Owner Trustee, and that for and on behalf of the said trust company, and as its act and deed in said capacity as Corporate Owner Trustee and its having been duly authorized so to do, he executed the above and foregoing instrument after first having been duly authorized by said trust company so to do.

/s/ Jo Ann Nagell     
Notary Public



My Commission Expires:
/s/ Jo Ann Nagell     
Jo Ann Nagell
NOTARY PUBLIC, State of New York
No. 31-4836362
Certificate Filed in New York County
Commission Expires November 30, 1989
(SEAL)






No. 2
STATE OF NEW YORK     
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for the said County and State, on this 24th day of December, 1988, within my jurisdiction, the within named Stephen M. Carta, who acknowledged that he is the Individual Owner Trustee under that certain Trust Agreement No. 2 dated as of December 1, 1988 among Lease Management Realty Corporation IV, as Owner Participant, Meridian Trust Company, as Corporate Owner Trustee, and Stephen M. Carta, as Individual Owner Trustee, and that in his capacity as Individual Owner Trustee he executed the above and foregoing instrument, after first having been duly authorized by said corporation so to do.

/s/ Jo Ann Nagell     
Notary Public



My Commission Expires:
/s/ Jo Ann Nagell     
Jo Ann Nagell
NOTARY PUBLIC, State of New York
No. 31-4836362
Certificate Filed in New York County
Commission Expires November 30, 1989
(SEAL)







STATE OF NEW YORK     
COUNTY OF NEW YORK
Personally appeared before me, the undersigned authority in and for the said County and State, on this 24th day of December, 1988, within my jurisdiction, the within named G.E. Harder, who acknowledged that he is a Vice President and the Treasurer of System Energy Resources, Inc., an Arkansas corporation, and that for and on behalf of the said corporation, and as its act and deed he executed the above and foregoing instrument, after first having been duly authorized by said corporation so to do.

/s/ Jo Ann Nagell     
Notary Public



My Commission Expires:
/s/ Jo Ann Nagell     
Jo Ann Nagell
NOTARY PUBLIC, State of New York
No. 31-4836362
Certificate Filed in New York County
Commission Expires November 30, 1989
(SEAL)







APPENDIX A
DEFINITIONS

The terms defined herein relate to the Participation Agreement (as defined below) and certain Transaction Documents executed, or to be executed, in connection with the Participation Agreement. Such terms include the plural as well as the singular. Any agreement defined or referred to below shall include each amendment, modification and supplement thereto and waiver thereof as may become effective from time to time, except where otherwise indicated. Any term defined below by reference to any agreement shall have such meaning whether or not such document is in effect. The terms “hereof”, “herein”, “hereunder” and comparable terms refer to the entire agreement with respect to which such terms are used and not to any particular article, section or other subdivision thereof.
If, and to the extent that, the Participation Agreement shall be amended from time to time pursuant to the terms thereof, this Appendix and the Appendix to each Transaction Document which incorporates this Appendix shall be, or be deemed to have been, amended concurrently with the execution and delivery of each such amendment of the Participation Agreement in order to conform the definitions herein and therein to the new or amended definitions set forth in or required by each such amendment to the Participation Agreement.
Actual Method Decommissioning Cost shall mean the Decommissioning Cost as determined in accordance with the actual method of Decommissioning ultimately approved by the NRC or such other Governmental Authority or Governmental Authorities as shall have jurisdiction or, until such a method has been so approved, in accordance with the Estimated Cost of Decommissioning.
Additional Bonds shall mean Bonds in addition to the initial series of Bonds.
Additional Equity Investment shall have the meaning specified in Section 8(f) of the Facility Lease.
Additional Insureds shall mean the Corporate Owner Trustee and the Owner Participant.
Additional Notes shall have the meaning set forth in the fourth recital to the Indenture, which Additional Notes shall be issued, if at all, pursuant to Section 3.5 of the Indenture.
Affiliate shall mean, with respect to any Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with such Person. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise.
After-Tax Basis shall mean, with respect to any payment received or accrued or deemed to have been received or accrued by any Person, the amount of such payment supplemented by a further payment to that Person so that the sum of the two payments shall, after deduction of all taxes and other charges (without regard to Section 13(b)(2) of the Participation Agreement, but taking into account any credits or deductions arising therefrom and the timing thereof) computed at the highest marginal statutory tax rate resulting from the receipt (actual or constructive) or accrual of such two payments imposed under any Applicable Law or by any Governmental Authority, be equal to such payment received or accrued or deemed to have been received or accrued.




After-Tax Earnings, with respect to any Decommissioning Trust Fund shall mean the projected earnings, as estimated in accordance with the provisions of Section 10(b)(3)(viii) of the Participation Agreement, from the investment of amounts contributed to any such fund, net of any tax or taxes thereon. The interest rate to be used in computing such earnings shall be the Assumed Decommissioning Interest Rate.
Applicable Law shall mean all applicable laws, statutes, treaties, rules, codes, ordinances, regulations, permits, certificates, orders, interpretations, licenses and permits of any Governmental Authority and judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other judicial or quasi-judicial tribunal of competent jurisdiction (including those pertaining to health, safety, the environment or otherwise).
Appraisal Procedure shall mean a procedure whereby two independent appraisers, one chosen by the Lessee and one by the Lessor, shall mutually agree upon the value, period, amount or determination then the subject of an appraisal. If either the Lessor or the Lessee, as the case may be, shall determine that a value, period, amount or determination to be determined under the Facility Lease or any other Transaction Document cannot timely be established by mutual agreement, it or they, as the case may be, shall appoint its or their appraiser and deliver a written notice thereof to the other party or parties, as the case may be. Such other party or parties shall appoint its or their appraiser within 30 days after receipt from the other party or parties of the foregoing written notice. If within 60 days after appointment of the two appraisers, as described above, the two appraisers are unable to agree upon the value, period, amount or determination in question, a third independent appraiser shall be chosen within ten days thereafter by the mutual consent of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser within such period, such appointment shall be made by the American Arbitration Association, or any organization successor thereto, from a panel of arbitrators having familiarity with nuclear electric generating plants and a familiarity with equipment used or operated in connection therewith. The decision of the third appraiser so appointed and chosen shall be given within 60 days after the selection of such third appraiser. If three appraisers shall be so appointed and the determination of one appraiser is disparate from the middle determination by more than twice the amount by which the third determination is disparate from the middle determination, then the determination of such appraiser shall be excluded, the remaining two determinations shall be averaged and such average shall be binding and conclusive on the Lessor and the Lessee; otherwise the average of all three determinations shall be binding and conclusive on the Lessor and the Lessee. The fees and expenses of appraisers incurred in connection with any Appraisal Procedure relating to any transaction contemplated by any provision of any Transaction Document shall be divided equally between the Lessor, on the one part, and the Lessee, on the other part (except pursuant to Section 13 or 16 of the Facility Lease, which shall be paid solely by the Lessee).
Appraiser shall mean Ebasco Business Consulting Company.
Approved Amounts shall have the meaning set forth in Section 10(b)(3)(viii)(C)II(1) of the Participation Agreement.
Approved Transferee shall mean the Person identified as such on the concluding page of this Appendix A.
Assigned Payments shall have the meaning specified in Section 2.1(2) of the Indenture.
Assignment and Assumption Agreement shall mean the Assignment, Assumption and Further Agreement No. [See Additional Information], dated as of December 1, 1988, among the Owner Trustee, the Lessee and SMEPA.




Assumed Decommissioning Interest Rate shall mean, as of the determination thereof, an interest rate determined by the Lessee subject to the approval of the Owner Participant as being an appropriate market rate of interest over the period in question, and in the case of a disagreement between the Lessee and the Owner Participant, such rate shall be determined by an independent financial advisor mutually acceptable to the Lessee and the Owner Participant. In the event that the Lessee and the Owner Participant cannot agree on such financial advisor, the rate shall be determined by the Appraisal Procedure.
Assumed Inflation Rate shall mean, as of the determination thereof, an inflation rate, determined by the Lessee subject to the approval of the Owner Participant, as being the average rate of inflation over the period in question, and, in case of a disagreement between the Lessee and the Owner Participant, such rate shall be determined by an independent financial advisor mutually acceptable to the Lessee and the Owner Participant. In the event that the Lessee and the Owner Participant cannot agree on such financial advisor, the rate shall be determined by the Appraisal Procedure.
Assumption Agreement shall mean the Assumption Agreement substantially in the form of Exhibit B to the Indenture.
Assumption Event shall mean and include (A) a Deemed Loss Event or an Event of Loss in respect of which demand for payment has been made under Section 9(c) or 9(d) of the Facility Lease or in response to which a Special Transfer has been effected and (B) each of the events giving rise to the exercise of the purchase options referred to in Sections 13(f) and 13(g) of the Facility Lease and Section 10(b)(3)(ix) of the Participation Agreement in respect of which the Lessee shall have given notice of its election to exercise any such option.
Assumptions shall mean the Pricing Assumptions and the Tax Assumptions.
Atomic Energy Act shall mean the Atomic Energy Act of 1954, as amended, and regulations from time to time issued, published or promulgated pursuant thereto.
Authorized Officer shall mean, with respect to the Corporate Indenture Trustee, any officer of the Corporate Indenture Trustee assigned to the Corporate Trust Office of the Corporate Indenture Trustee, including any vice president, assistant vice president, trust officer or any other officer performing functions similar to those performed by the persons who, at the time, shall be such officers, and any other officer of the Corporate Indenture Trustee to whom such matter is referred because of his knowledge and familiarity with the subject, and who shall be duly authorized by appropriate corporate action to authenticate a Note or to execute any Transaction Document and shall mean, with respect to the Corporate Owner Trustee, any officer of the Corporate Owner Trustee who shall be duly authorized by appropriate corporate action to execute any Transaction Document.
Bankruptcy Code shall mean the Bankruptcy Reform Act of 1978, as amended, and any law with respect to bankruptcy, insolvency, liquidation, moratorium, reorganization, or similar laws affecting creditors’ rights generally.
Basic Lease Term shall mean the initial term of the Facility Lease, which shall begin on the Closing Date and end on July 15, 2015, unless earlier terminated as provided in the Facility Lease.
Basic Rent shall have the meaning set forth in Section 3(a) of the Facility Lease.
Basic Rent Payment Dates shall mean and include January 15 and July 15 of each year thereafter commencing July 15, 1989, and ending July 15, 2015, and, if one or more Renewal Terms shall be permitted under the Facility Lease and the Lessee shall elect one or more Renewal Terms, each January 15 and July




15 of each year during such Renewal Terms and the day next succeeding the last day of each such Renewal Term.
Bill of Sale shall mean the Deed, Bill of Sale, Instrument of Transfer and Severance Agreement No. [See Additional Information], dated the Closing Date, between the Lessee and the Owner Trustee.
Bill of Sale and Assignment shall mean the Bill of Sale and Assignment substantially in the form of Schedule 3 to the Participation Agreement.
Bonds shall mean all bonds, notes and other evidences of indebtedness from time to time issued and outstanding under the Collateral Trust Indenture.
BTC shall mean Bankers Trust Company in its individual capacity, and its successors and assigns.
Business Day shall mean any day other than a Saturday or Sunday or other day on which banks in New Orleans, Louisiana, New York, New York or, so long as any Notes are Outstanding, the city in which the Indenture Trustee’s Office is located, are authorized or obligated to be closed.
Capital Improvement shall mean (a) the addition, betterment or enlargement of any property constituting part of Unit 1 or the replacement of any such property with other property, irrespective of whether (i) such replacement property constitutes an enlargement or betterment of the property which it replaces, (ii) the cost of such addition, betterment, enlargement or replacement is or may be capitalized, or not charged to maintenance or repairs, in accordance with the Uniform System of Accounts or (iii) such addition, betterment or enlargement is or is not included or reflected in the plans and specifications for Unit 1, as built, and (b) any alteration, modification, addition or improvement to Unit 1; provided, however, that, where the context so requires, reference to a Capital Improvement shall mean the Lessor’s Undivided Interest Percentage in such Capital Improvement.
Casualty Value, as of any date during the Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite such date (or the Basic Rent Payment Date next succeeding such date) in Schedule 2 to the Facility Lease. Casualty Value as of any Basic Rent Payment Date during any Renewal Term shall mean the amount determined by amortizing ratably the Fair Market Sales Value of the Undivided Interest as of the commencement of such Renewal Term in semi-annual steps to the amount estimated as of such commencement date to be the Fair Market Sales Value of the Undivided Interest as of the last day of such Renewal Term, together with amounts of Basic Rent then due.
Chief Financial Officer shall mean the Person who is the chief financial officer of the Lessee.
Claims shall mean liabilities, obligations, losses, damages, penalties, claims (including, without limitation, claims involving liability in tort, strict or otherwise), actions, suits, judgments, costs, interest, expenses and disbursements, whether or not any of the foregoing shall be founded or unfounded (including, without limitation, legal fees and expenses and costs of investigation) of any kind and nature whatsoever without any limitation as to amount.
Closing shall mean the proceedings and transactions which occur on the Closing Date, as contemplated by the Participation Agreement.
Closing Date shall mean the date specified as such in the Notice of Closing.
Code shall mean the Internal Revenue Code of 1986, as amended, or any comparable successor law.




Collateral Trust Indenture shall mean a Collateral Trust Indenture, in form and substance satisfactory to Owner Participant, among the Lessee, Funding Corporation and the Collateral Trust Trustee.
Collateral Trust Indenture Supplement shall mean a supplement to the Collateral Trust Indenture.
Collateral Trust Trustee shall mean the bank or trust company acting as trustee under the Collateral Trust Indenture, and the successors or assigns of such trustee.
Common Facilities shall have the meaning set forth in Schedule Ul to the Bill of Sale.
Corporate Indenture Trustee means Bankers Trust Company, not in its individual capacity, but solely as Indenture Trustee under the Indenture.
Corporate Owner Trustee means Meridian Trust Company, not in its individual capacity, but solely as trustee under the Trust Agreement.
Decommissioning shall have the meaning set forth in Section 10(b)(3)(viii)(A) of the Participation Agreement.
Decommissioning Beneficiaries shall have the meaning set forth in Section 10(b)(3)(viii)(B) of the Participation Agreement.
Decommissioning Cost shall have the meaning set forth in Section 10(b)(3)(viii)(B) of the Participation Agreement.
Decommissioning Date shall mean the date, determined by the Decommissioning Expert, upon which Decommissioning is estimated to begin (based on the Decommissioning method selected in accordance with Section 10(b)(3)(viii)(C)VII of the Participation Agreement).
Decommissioning Expert shall have the meaning set forth in Section 10(b)(3)(viii)(C)VII of the Participation Agreement.
Decommissioning Proportionate Interest shall mean, as of the date of computation, the aggregate percentage interest of the Lessee or any of its Affiliates in Unit 1, whether owned, leased or otherwise controlled (directly or indirectly).
Decommissioning Trust Agreement shall mean the Existing Decommissioning Trust Agreement, as amended and supplemented from time to time, or any other trust agreement dedicated to the administration, investment, maintenance and/or application of the Decommissioning Trust Funds.
Decommissioning Trust Funds shall have the meaning set forth in Section 10(b)(3)(viii)(C)I of the Participation Agreement.
Decommissioning Trustee shall mean the trustee under the Decommissioning Trust Agreement.
Deemed Loss Event shall mean any of the following events (unless and until waived in writing by the Owner Participant):
(1)      Utility Regulation. If, at any time from and including the Closing Date and before the Lease Termination Date, the Lessor or the Owner Participant, solely by reason of the acquisition or ownership of the Undivided Interest or any part thereof by the Lessor (or any beneficial interest therein by the Owner Participant) or the lease of the Undivided Interest to the Lessee or any of the other transactions




contemplated by the Transaction Documents (the “Transaction Role”) and not in whole or in part as a result of the business activities, other than the Transaction Role, of the Lessor, the Owner Participant or any of their Affiliates, shall be deemed by any Governmental Authority having jurisdiction to be, or shall become subject to regulation (other than Non-Burdensome Regulation) as, an electric utility, a public utility or a holding company of an electric utility or public utility under any Applicable Law or as a consequence of any Governmental Action and the effect thereof on the Lessor or the Owner Participant would be, in the sole judgment of the Owner Participant, acting on the advice of outside counsel, adverse, except that if the Lessee, at its sole cost and expense, is contesting diligently and in good faith any Governmental Action which would otherwise constitute a Deemed Loss Event under this clause (1), such Deemed Loss Event shall be deemed not to have occurred so long as in the sole judgment of the Owner Participant (a) such contest does not involve any danger of the foreclosure, sale, forfeiture or loss of, or the creation of any Lien on, the Undivided Interest, or any part thereof or any interest therein, (b) such contest does not adversely affect the Undivided Interest or any part thereof or any other property, assets or rights of the Lessor or the Owner Participant or the lien of the Indenture thereon, (c) the Lessee shall have furnished the Owner Participant with an opinion of independent counsel reasonably satisfactory to the Owner Participant to the effect that (x) there exists a reasonable basis for contesting such determination or (y) in the case of any action arising from or relating to the Lessor or the Owner Participant under the Holding Company Act, it is more likely than not that the Lessee will successfully contest such determination without the need for any appeal (except appeal from determinations by the SEC staff), (d) such determination shall be effectively stayed or withdrawn during such contest (and shall not in the sole judgment of the Owner Participant be subject to retroactive application at the conclusion of such contest) in a manner satisfactory to the Owner Participant, and the Owner Participant shall have determined in its sole judgment that such contest and the Lessor’s continued ownership of the Undivided Interest during the pendency of such contest will not adversely affect its business or the business of any of its Affiliates, and (e) the Lessee shall have indemnified the Lessor and the Owner Participant in a manner satisfactory to the Owner Participant for any liability or loss which any thereof may incur.
(2)      Change in Applicable Law. Any change in, or new interpretation by a Governmental Authority having jurisdiction relating to Applicable Law, including, without limitation, the Price-Anderson Act, the Atomic Energy Act, the Nuclear Waste Act or the regulations of the NRC, in each case as in effect on the Closing Date, as a result of which, in the opinion of independent counsel to the Owner Participant: (i) the Lessor or the Owner Participant would become liable or responsible in any capacity (including, without limitation, through assessments imposed by a Governmental Authority) for payments owed in respect of the Nuclear Waste Fund (as such term is used in Section 302 of the Nuclear Waste Act) or in respect of the handling or disposal of nuclear waste, decontamination, storage, transportation or safekeeping of radioactive or hazardous materials or any other obligation in the nature of the foregoing; or (ii) the Lessor or the Owner Participant would be prohibited from asserting any material right, protection or defense available under Applicable Law as of the Closing Date with respect to civil or criminal actions brought in connection with a Nuclear Incident. Without limiting the generality of the foregoing, independent counsel to the Owner Participant shall be entitled to conclude that the Lessor or the Owner Participant is prohibited from asserting a material right, protection or defense referred to in clause (ii) above in the event that there is in effect a decision by a court of competent jurisdiction in which the Owner Trustee, the Owner Participant, a Person having an interest in a nuclear generating unit similar to that of the Owner Trustee or the Owner Participant (such person being hereinafter referred to as a “Similar Person”) or any owner or holder of notes or other debt securities issued in connection with the financing of a nuclear generating unit (or any trustee or mortgagee relating thereto) has been held to be liable in respect of a Nuclear Incident relating to, or otherwise to have liability arising out of its interest in, or investment relating to, a nuclear generating unit under circumstances in which the Owner Trustee, the Owner Participant, such Similar Person or such owner, holder, trustee or mortgagee, as the case may




be, has taken steps to defend itself against such alleged liability; provided, however, that in the case of any such decision of a court other than a United States federal court, no Deemed Loss Event shall be deemed to have occurred if such decision has been effectively stayed pending appeal.
(3)      License. Any expiration, revocation, suspension, or amendment of the License or new interpretation by any Governmental Authority of the License or any other change in Applicable Law or Governmental Action, as a result of which, in the opinion of independent counsel to the Owner Participant, prior to the Lease Termination Date, either the Lessor or the Owner Participant is (i) required to be or become a licensee under the Atomic Energy Act with respect to Unit 1 (unless, in the reasonable opinion of the Owner Participant, the liabilities and obligations imposed upon such a licensee would be non-burdensome), (ii) subject to the obligations or liabilities imposed, as of the Closing Date or thereafter, on licensees under the Atomic Energy Act with respect to Unit 1 (unless, in the reasonable opinion of the Owner Participant, the liabilities and obligations imposed upon such a licensee would be non-burdensome), or (iii) otherwise subject to significant regulation relating to nuclear energy, environmental or safety matters by reason of its Transaction Role. Without limiting the generality of the foregoing, independent counsel to the Owner Participant shall be entitled to conclude that a Deemed Loss Event of the type described in this clause (3) has occurred on the basis of (x) a regulation, order, interpretation or other action of the NRC or other federal governmental regulatory authority, or (y) there being in effect a decision by a court of competent jurisdiction in which the Owner Trustee, the Owner Participant, or Similar Person or any owner or holder of notes or other debt securities issued in connection with the financing of a nuclear generating unit (or any trustee or mortgagee relating thereto) has been required to take the action or held to be subject to the liabilities, obligations or regulation described in the preceding clauses (i) through (iii) arising out of its interest in, or investment relating to, a nuclear generating unit under circumstances in which the Owner Trustee, the Owner Participant, such Similar Person or such owner, holder, trustee or mortgagee, as the case may be, has taken steps to defend itself in respect thereof; provided, however, that in the case of any such decision of a court other than a United States federal court, no Deemed Loss Event shall be deemed to have occurred if such decision has been effectively stayed pending appeal.
(4)          Certain Other Events. Any change in Applicable Law or any Governmental Action the effect of which is (i) to (a) cause or make the transactions contemplated by the Transaction Documents illegal or contrary to Applicable Law; (b) impede (x) the exercise by the Lessor or the Owner Participant of any right or remedy under any Transaction Document relating to a Special Transfer by the Owner Participant of its beneficial interest in the Undivided Interest in accordance with the provisions of Section 7(b)(4) of the Participation Agreement or the transfer by the Owner Trustee of its interest in the Undivided Interest or (y) the assertion of claims for rent or monetary damages; provided, however, that for as long as the Lessor or the Owner Participant has the right, to the exclusion of all other remedies, to assert a claim for monetary damages, no Deemed Loss Event shall occur under this subclause (b)(y); or (c) cause the Lessor or the Owner Participant to be or become liable in any capacity in respect of Decommissioning, or (ii) to constitute an assertion to the effect that (a) the exercise by the Lessor or the Owner Participant of any right (irrespective of the event giving rise to such right) under any Transaction Document would constitute impermissible control over Unit 1 or the licensees of Unit 1, other than an assertion consistent with the second sentence of Section 184 of the Atomic Energy Act and the NRC’s regulations thereunder, including, without limitation, 10 C.F.R. Section 50.81, as now in effect, or (b) the acquisition or transfer of the Undivided Interest was, or any transaction contemplated by the Transaction Documents would be, in violation of, or otherwise contrary to, Applicable Law.
Default shall mean an event or condition which, with the giving of notice or lapse of time, or both, would constitute an Event of Default.




Directive shall mean an instrument in writing executed in accordance with the terms and provisions of the Indenture by the Holders, or their duly authorized agents or attorneys-in-fact representing a Majority in Interest of Holders of Notes, directing the Indenture Trustee to take or refrain from taking the action specified in such instrument or otherwise advising the Indenture Trustee; provided, however, that, except in the case of the Initial Series Notes, each Holder of Notes then Outstanding, or its duly authorized agent or attorney-in-fact, shall be entitled to direct the Indenture Trustee as herein provided only with respect to the aggregate unpaid principal amount of Notes (or portion thereof) issued and Outstanding which are registered in the name of such Holder and which are certified by such Holder or its duly authorized agent or attorney-in-fact to be (i) held by it for its own account and not pledged as collateral for any of its obligations or (ii) pledged as collateral for one or more of its obligations, or obligations with respect to which it is acting as trustee under a related indenture, but in respect of which it has received a directive, satisfactory in form and substance to the Indenture Trustee, given by the holder or holders of a proportionate interest in the obligations secured by such Notes in accordance with the instrument governing such obligations. More than one directive can be given by a registered Holder of Notes or its duly authorized agent or attorney-in-fact pursuant to clause (ii) of the preceding sentence, and such directives may be contradictory or inconsistent, so long as each directive to take or refrain from taking the action specified therein or otherwise advising the Indenture Trustee meets the requirements of said clause (ii).
Disclosure Documents shall have the meaning specified in Section 10(a)(11) of the Participation Agreement.
Discretionary Special Transfer Event shall mean a Special Transfer Event referred to in clause (b) or (c) of the definition thereof.
Early Termination Commitment Date shall have the meaning set forth in Section 14(c) of the Facility Lease.
Early Termination Date shall have the meaning specified in Section 14(c) of the Facility Lease.
Early Termination Notice shall have the meaning specified in Section 14(c) of the Facility Lease.
Earnings shall mean the product of the after-tax accounting yield and the outstanding net investment in leveraged lease as defined in Financial Accounting Standards Board Statement No. 13 as such terms are defined as of the Closing Date.
Eligible Bank shall mean a commercial bank, trust company in the nature of a bank or a foreign bank, in each case maintaining a United States branch or agency, or submitting irrevocably to jurisdiction in the United States or any state thereof (as used herein, a “Letter of Credit Bank”) not related to the Owner Participant or the Lessee at the time of issuance of any Letter of Credit which, unless otherwise consented to in writing by the Owner Participant, shall be (i) in the case of the Initial Letter of Credit, The Fuji Bank, Limited, acting through its New York branch or (ii) any Letter of Credit Bank (x) whose long-term unsecured senior debt securities, or if it has no long-term unsecured senior debt securities, its long-term deposits, are rated not less than A2 by Moody’s (it being understood that, in the case of a Letter of Credit Bank which is part of a holding company structure, the failure of such Letter of Credit Bank’s parent holding company to have a rating not less than A2 by Moody’s in respect of its long-term unsecured senior debt securities shall have no bearing on whether or not such Letter of Credit Bank is an Eligible Bank), and (y) which has capital and surplus of not less than $1 billion; provided, however, that any Letter of Credit issued by a Letter of Credit Bank that is not incorporated in the United States shall provide that all payments shall be in United States dollars and shall be made in a city in the United States. A Letter of Credit Bank which, at the time of its designation by the Lessee (which shall occur no earlier than one year prior to the stated expiration date




of an Existing Letter of Credit), meets the above criteria shall remain an Eligible Bank from the date of such designation through the stated expiration date of the Letter of Credit which it has been designated to renew or replace (such period, the “Eligible Period”); provided, however, that such Letter of Credit Bank shall cease to be an Eligible Bank 180 days following a notice from the Owner Participant to the Lessee of a reduction in the rating of such Bank’s senior long-term unsecured debt securities or, if it has no senior long-term unsecured debt securities, its long-term deposits, as the case may be, during the Eligible Period to a rating less than A3.
Equity Portion of Rent shall mean (i) in the case of any payment of Basic Rent, the amount of Basic Rent payable under the Facility Lease (taking into account any Rent Differential) reduced by the principal and interest then due and payable on the Notes, (ii) in the case of any payment of Casualty Value or Special Casualty Value, the amount thereof reduced by the principal amount of and accrued interest on the Outstanding Notes or (iii) in the case of any other payment of Supplemental Rent, the amount thereof payable to the Owner Participant.
ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.
Estimated Cost of Decommissioning shall have the meaning set forth in Section 10(b)(3)(viii)(C)VII of the Participation Agreement.
Estimated Decommissioning Period shall mean, as of the determination thereof, the period over which Decommissioning is estimated to occur by the Decommissioning Expert (based on the Decommissioning method selected in accordance with Section 10(b)(3)(viii)(C)VII of the Participation Agreement).
Event of Default shall have the meaning set forth in Section 15 of the Facility Lease.
Event of Loss shall mean any of the following events: (a) a Final Shutdown, (b) a Requisition of Title, (c) a Requisition of Use or (d) a failure by the Lessee to satisfy any of its obligations under Sections 5.01, 5.02, 5.03 or 5.04 of the Assignment and Assumption Agreement within the time periods prescribed therein.
Excepted Payments shall mean (i) all indemnity payments (including, without limitation, payments under the Tax Indemnification Agreement) to which the Owner Trustee or the Owner Participant, or any of their respective Affiliates (or the respective successors, assigns, agents, officers, directors or employees of the Owner Trustee (in their individual capacities or otherwise), the Owner Participant, or any of their respective Affiliates), is entitled, (ii) any amounts payable under any Transaction Document to reimburse the Lessor or the Owner Participant, or any of their respective Affiliates (including the reasonable expenses of the Lessor or the Owner Participant incurred in connection with any such payment), for performing or complying with any of the obligations of the Lessee under and as permitted by any Transaction Document, (iii) any amount payable to or upon the order of the Owner Participant or the Original Owner Participant as the purchase price of the Owner Participant’s or the Original Owner Participant’s interest in the Trust Estate, (iv) any insurance proceeds or other payments received from any Governmental Authority or other Person (except the Lessee) with respect to an Event of Loss in excess of amounts then due and owing to reimburse the Indenture Trustee for any Trustee’s Expenses and to pay the reasonable remuneration of the Indenture Trustee plus amounts then due and owing in respect of the principal of, and premium, if any, and interest on all Notes Outstanding, (v) any insurance proceeds (or payments with respect to risks self-insured) under liability policies and any insurance proceeds in respect of insurance maintained pursuant to Section 10(b) of the Facility Lease, (vi) all payments of Secured Obligations by the Lessee, (vii) if the Letter of Credit has been terminated or has expired, the portion, if any, of Casualty Value or Special Casualty Value as of any date (before taking into account the effect of Section 3(i) of the Facility Lease) equal to the amount by which Net Casualty Value as of such date exceeds the sum of all amounts drawn under the Letter of Credit and not reinstated and (viii)




any payments in respect of interest to the extent attributable to payments referred to in clauses (i) through (vii) above.
Excepted Rights shall mean all rights with respect to Excepted Payments of the Person entitled thereto and all rights and interests with respect to the Letter of Credit and any amounts paid or payable under the Letter of Credit.
Excess Amount shall have the meaning set forth in Section 20(f) of the Participation Agreement.
Existing Decommissioning Trust Agreement shall mean the Decommissioning Trust Agreement, dated as of September 21, 1987, between the Lessee and Irving Trust Company, as amended, supplemented or modified to the Closing Date, but excluding any amendments, supplements or modifications made after the Closing Date.
Existing Letter of Credit shall mean any Letter of Credit which, at the time of determination, is in full force and effect.
Existing Mortgage shall mean the Mortgage and Deed of Trust, dated as of June 15, 1977, of the Lessee to United States Trust Company of New York and Malcolm J. Hood, trustees.
Expenses shall mean liabilities, obligations, losses, damages, taxes (other than taxes on net income), claims, actions, suits, costs, interest, expenses and disbursements (including legal fees and expenses) of any kind and nature whatsoever.
Facility Cost shall mean the Purchase Price plus the sum of (x) all Supplemental Financing Amounts and (y) all Additional Equity Investment amounts.
Facility Lease shall mean the Facility Lease No. [See Additional Information], dated as of December 1, 1988, between the Lessee and the Owner Trustee.
Fair Market Renewal Term shall have the meaning set forth in Section 12 of the Facility Lease.
Fair Market Rental Value or Fair Market Sales Value of any property or service shall mean the value, which shall not in any event be less than zero, of such property or service for lease or sale determined on the basis of an arm’s-length transaction for cash between an informed and willing lessee or buyer or purchaser (under no compulsion to lease or purchase) and an informed and willing lessor or seller (under no compulsion to lease or sell), and shall take into account the Lessor’s rights and obligations under the Assignment and Assumption Agreement and the Ground Lease and rights under the Bill of Sale, provided that the determination of Fair Market Rental Value and Fair Market Sales Value of the Undivided Interest shall take into account the existence of the Decommissioning Trust Funds and the rights afforded by Section 10(b)(3)(viii) of the Participation Agreement to the parties identified therein and shall in any event assume that the Lessee shall have complied with its obligations under Sections 2.01(f), 5.01, 5.02 and 5.03 of the Assignment and Assumption Agreement to vest in the Lessor the right of first refusal and to cause to be delivered the agreement pertaining to the use of the Unit 1 Retained Assets, the transmission agreement and the substitute power agreement, in each case therein referred to. With respect to any Transfer of the Undivided Interest to the Lessee or to an Affiliate of the Lessee, Fair Market Sales Value shall be reduced by the amount which would otherwise be payable to the Lessee pursuant to Section 10(b)(3)(viii) of the Participation Agreement if such Transfer were to a third party. Except pursuant to Section 16 of the Facility Lease, Fair Market Rental Value and Fair Market Sales Value of the Undivided Interest shall be determined on the assumption that (i) Unit 1 has been maintained in accordance with, and the Lessee has complied with, the requirements of the Facility Lease and the other Transaction Documents, (ii) the Lessee is otherwise in compliance with the




requirements of all Transaction Documents, (iii) an owner of the Undivided Interest will have rights and obligations under the Plant Agreements to the extent set forth in the Assignment and Assumption Agreement, (iv) in the case of a proposed purchase by the Lessee pursuant to Section 13(f) of the Facility Lease, the Fair Market Sales Value of the Undivided Interest equals the Fair Market Sales Value after the contemplated Capital Improvements are made minus the Undivided Interest Percentage of the estimated cost of making such Capital Improvements and (v) the Undivided Interest is encumbered by the Facility Lease. For purposes of the preceding clause (v) in the case of a proposed purchase pursuant to Section 13(g) of the Facility Lease, “encumbered” by the Facility Lease shall, with respect to Fair Market Sales Value, mean the Fair Market Sales Value increased or decreased, as the case may be, to take into account the benefits and burdens of the Facility Lease and the Lien of the Indenture. Fair Market Rental Value shall be determined on the assumption that Basic Rent will be payable in equal semi-annual installments in arrears.
Federal Power Act shall mean the Federal Power Act, as amended.
Federal Securities shall have the meaning set forth in Section 2.4(c) of the Indenture.
FERC shall mean the Federal Energy Regulatory Commission of the United States of America or any successor agency.
Final Determination shall have the meaning set forth in Section 13(b)(7) of the Participation Agreement.
Final Shutdown shall mean the occurrence of any of the following:
(1)      the permanent suspension, revocation or expiration of the License relating to Unit 1, or any portion thereof, with the result that the operation of Unit 1 or the possession by the Lessee of the Undivided Interest in Unit 1 is no longer permitted;
(2)      (A) any order or direction (or series of orders or directions) by the NRC or other Governmental Authority that Unit 1 suspend operations for reasons of radiological health and safety for a period exceeding 24 consecutive months (or any such order or direction (or series of orders or directions) that results in the suspension of operations of Unit 1 for a period exceeding 24 consecutive months) or (B) any cessation of operation of Unit 1 for a period of 24 consecutive months if the resumption of operations requires the concurrence of the NRC or any other Governmental Authority;
(3)      the occurrence of a Nuclear Incident at Unit 1 or Unit 2 as a result of which Unit 1 ceases to operate (or if Unit 1 is not in operation immediately prior to such Nuclear Incident, the failure to resume operation as a result of such Nuclear Incident) for a period of 18 consecutive months;
(4)      damage to Unit 1 and the failure to complete restoration or reconstruction of Unit 1 within three years of such damage, or in the case of damage occurring less than three years prior to the date of expiration of the Lease Term, on or before the expiration of the Lease Term; and
(5)      the destruction of Unit 1.
Financing Documents shall mean the Collateral Trust Indenture and the Underwriting Agreement.
Fixed Rate Notes shall mean any non-recourse promissory notes which are issued by the Owner Trustee and authenticated by the Indenture Trustee on any Refunding Date to refund an Outstanding series of Notes, in whole or in part.




Fixed Rate Renewal Term shall have the meaning set forth in Section 12 of the Facility Lease.
Form U-7D shall mean the certificate to be filed by the Owner Participant and the Owner Trustee pursuant to Rule 7(d) under the Holding Company Act.
Funding Corporation shall mean GG1A Funding Corporation, a Delaware corporation.
General Decommissioning Amount shall mean an amount sufficient, together with (x) the Undivided Interest Amount and (y) After-Tax Earnings on such amount and such Undivided Interest Amounts through the Estimated Decommissioning Period to provide for the full funding, when required, of the Actual Method Decommissioning Cost of the Decommissioning Proportionate Interest through the Estimated Decommissioning Period.
General Decommissioning Funds shall mean all Decommissioning Trust Funds other than the Undivided Interest Funds.
Governmental Action shall mean all authorizations, consents, approvals, waivers, exceptions, variances, orders, licenses, exemptions, publications, filings, notices to and declarations of or with any Governmental Authority (other than routine reporting requirements the failure to comply with which will not affect the validity or enforceability of any of the Transaction Documents or have a material adverse effect on the transactions contemplated by any Transaction Document or any Financing Document or any material right, power or remedy of any Person thereunder or any other action in respect of any Governmental Authority) and shall include, without limitation, all siting, environmental and operating permits and licenses which are required for the use and operation of Unit 1, including the Undivided Interest.
Governmental Authority shall mean any Federal, state, county, municipal, foreign, international, regional or other governmental authority, agency, board, body, instrumentality or court.
Granting Clause Documents shall have the meaning specified in Section 2.1(2) of the Indenture.
Ground Lease shall mean Ground Lease No. [See Additional Information], dated as of December 1, 1988, between the Lessee and the Owner Trustee.
Ground Lease Property shall have the meaning set forth in Section 2.01(b) of the Ground Lease.
Ground Lease Term shall have the meaning specified in Section 2.01(a) of the Ground Lease.
Ground Lease Termination Date shall have the meaning specified in Section 2.01(a) of the Ground Lease.
Holders shall mean the registered holders of the Notes.
Holding Company Act shall mean the Public Utility Holding Company Act of 1935, as amended.
Indemnitees shall mean the Owner Participant, the Owner Trustee, each in their individual and fiduciary capacities, the Original Loan Participants, Funding Corporation, the stockholders of Funding Corporation and its officers and directors, the Corporate Indenture Trustee and the Individual Indenture Trustee, each in their individual and fiduciary capacities, each Holder of a Note from time to time Outstanding, the Collateral Trust Trustee, the Trust, the Trust Estate, the Lease Indenture Estate, the indenture estate under the Collateral Trust Indenture, any Affiliate of any of the foregoing and the respective successors, assigns, agents, shareholders, officers, directors or employees of any of the foregoing.




Indemnity Payment shall mean any payment made or to be made pursuant to the Tax Indemnification Agreement.
Indenture shall mean the Trust Indenture, Deed of Trust, Mortgage, Security Agreement and Assignment of Facility Lease No. [See Additional Information], dated as of December 1, 1988, between the Owner Trustee and the Indenture Trustee.
Indenture Default shall mean an event which, after giving of notice or lapse of time, or both, would become an Indenture Event of Default.
Indenture Event of Default shall mean any of the events specified in Section 6.2 of the Indenture.
Indenture Trustee shall mean Bankers Trust Company, a New York banking corporation, not in its individual capacity, but solely as Corporate Indenture Trustee or Indenture Trustee under the Indenture and each successor trustee and co-trustee thereunder; provided, however, that for purposes of Section 6.4(g) of the Indenture, Indenture Trustee shall mean Stanley Burg, not in his individual capacity but solely as Individual Indenture Trustee and Indenture Trustee under the Indenture, and any successor trustee thereunder.
Indenture Trustee’s Counsel shall mean White & Case, 1155 Avenue of the Americas, New York, New York 10036, or such other counsel as shall be selected by the Indenture Trustee.
Indenture Trustee’s Liens shall mean Liens against the Lease Indenture Estate which result from acts of, or any failure to act by, or as a result of claims against, the Indenture Trustee, in its individual capacity, unrelated to the transactions contemplated by the Transaction Documents.
Indenture Trustee’s Office shall mean the office of the Corporate Indenture Trustee located at Four Albany Street, New York, New York, 10015, Attention: Corporate Trust & Agency Group, or such other office as may be designated by the Indenture Trustee to the Owner Trustee and each Holder of a Note Outstanding under the Indenture.
Individual Indenture Trustee shall mean Stanley Burg, not in his individual capacity, but solely as Individual Indenture Trustee under the Indenture, and any successor trustee thereunder.
Individual Owner Trustee shall mean Stephen M. Carta, not in his individual capacity, but solely as trustee under the Trust Agreement, and any successor trustee thereunder.
Initial Funding Date shall mean the earlier to occur of (x) the License Expiration Date or (y) the Decommissioning Date.
Initial Letter of Credit shall have the meaning set forth in Section 10(b)(3)(ix) of the Participation Agreement.
Initial Series Notes shall mean the non-recourse promissory notes, substantially in the form of Exhibit A to the Indenture, to be issued by the Owner Trustee and authenticated by the Indenture Trustee on the Closing Date to finance a portion of the Purchase Price.
Investment shall have the meaning set forth in Section 3(a) of the Participation Agreement and shall be subject to adjustment in accordance with Sections 3(b) and 3(c) of the Participation Agreement and Section 8(f) of the Facility Lease.
Investment Company Act shall mean the Investment Company Act of 1940, as amended.




Investment Percentage shall mean the percentage set forth in Item 1 of Schedule 5 to the Participation Agreement.
IRS shall mean the Internal Revenue Service of the United States Department of the Treasury or any successor agency.
Issuing Bank shall mean, with respect to the Initial Letter of Credit, The Fuji Bank, Limited, acting through its New York branch, and with respect to each other Letter of Credit, the issuing bank thereof.
Lease Indenture Estate shall have the meaning set forth in Section 2.1 of the Indenture.
Lease Term shall mean the aggregate of the Basic Lease Term, each elected Renewal Term and any extension of any thereof pursuant to Section 5(b) of the Facility Lease.
Lease Termination Date shall mean the last day of the Lease Term (whether occurring by reason of a termination or expiration of the Lease Term).
Lessee shall mean System Energy Resources, Inc., an Arkansas corporation, and its respective successors and assigns, as lessee under the Facility Lease and as party to the other Transaction Documents and Financing Documents to which it is a signatory.
Lessee’s Counsel shall mean Wise, Carter, Child & Caraway, Professional Association, 600 Heritage Building, Congress at Capitol, Jackson, Mississippi 39201, or such other counsel as shall be selected by the Lessee.
Lessee’s Notice shall mean a notice given by the Lessee to the Owner Trustee and the Owner Participant which specifies, in the event of a Special Transfer or a Transfer pursuant to the provisions of Sections 9(c) or 9(d) of the Facility Lease, whether such Special Transfer or Transfer shall be made to (i) the Lessee or (ii) any Affiliate of the Lessee. Each such Lessee’s Notice shall be effective, as to any party, on the date of receipt thereof by such party, and shall supersede any prior Lessee’s Notice.
Lessee’s NRC Counsel shall mean Bishop, Cook, Purcell & Reynolds, 1400 L Street, N.W., Washington 20005, or such other counsel expert in matters relating to the NRC as shall be selected by the Lessee.
Lessee’s Special Arkansas Counsel shall mean Friday, Eldredge & Clark, First National Bank Building, Little Rock, Arkansas 72201, or such other counsel as shall be selected by the Lessee.
Lessee’s Special Counsel shall mean Reid & Priest, 40 West 57th Street, New York, New York 10019, or such other counsel as shall be selected by the Lessee.
Lessee’s Special Louisiana Counsel shall mean Jones, Walker, Waechter, Poitevent, Carrere & Denegre, 201 St. Charles Avenue, New Orleans, Louisiana 70170, or such other counsel as shall be selected by the Lessee.
Lessor shall mean the Owner Trustee, as lessor under the Facility Lease, and its successors and assigns as such lessor.
Lessor Possession Date shall mean the earlier of the date on which the Undivided Interest is returned to the Lessor pursuant to and in accordance with the terms of Section 5(a) of the Facility Lease and the date of the loss by the Lessee of the use or possession of the Undivided Interest pursuant to Section 16 of the Facility Lease.




Lessor’s Liens or Owner Trustee’s Liens shall mean Liens against the Trust Estate or the Lease Indenture Estate which result from acts of, or any failure to act by, or as a result of claims against, MTC, unrelated to the Owner Trustee’s ownership of the Undivided Interest, the administration of the Trust Estate or the transactions contemplated by the Transaction Documents.
Lessor’s Percentage shall have the meaning set forth in Section 14(a) of the Participation Agreement.
Letter of Credit shall have the meaning set forth in Section 10(b)(3)(ix) of the Participation Agreement.
Letter of Credit Bank shall have the meaning set forth in the definition of Eligible Bank.
License shall mean NRC Facility Operating License No. NPF-29, as the same may be amended, modified, extended, renewed or superseded from time to time.
License Expiration Date shall mean June 16, 2022, or such later date or earlier date as the License shall expire or be terminated.
Lien shall mean any mortgage, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof or the filing of, or agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.
Loan shall have the meaning set forth in Section 2(a) of the Participation Agreement.
Loan Participants shall mean the Original Loan Participants, so long as the Initial Series Notes are Outstanding, and each other Holder of a Note from time to time.
Loan Percentage shall mean, in respect of each Original Loan Participant, the percentage set forth opposite the name of such Original Loan Participant in Schedule 1-B to the Participation Agreement.
Majority in Interest of Holders of Notes shall mean Holders of a majority in principal amount of all Notes Outstanding under the Indenture at the time of any determination thereunder; provided , however, that for purposes of any determination with respect to the Initial Series Notes, such term shall mean Holders of not less than 66⅔% in principal amount at the time of such determination.
Mandatory Special Transfer Event shall mean a Special Transfer Event referred to in clause (a) of the definition of Special Transfer Event.
Maximum Letter of Credit Amount shall mean the maximum credit amount in any Letter of Credit.
Moody’s shall mean Moody’s Investors Service, Inc., and any successor thereto which is issuing nationally accepted securities ratings.
Morgan Stanley shall mean Morgan Stanley & Co. Incorporated.
Mortgage Release shall mean the release under and with respect to the Existing Mortgage releasing, among other things, the Undivided Interest and the Ground Lease Property from the lien of the Existing Mortgage.
MTC shall mean Meridian Trust Company in its individual capacity, and its successors and assigns.




Net Casualty Value shall mean Casualty Value reduced by the principal amount of and accrued interest on the Outstanding Notes, as set forth in Schedule 4 to the Facility Lease.
Net Economic Return shall mean:
(i)      the net after-tax economic yield originally expected by the Owner Participant on the Closing Date with respect to the Undivided Interest, calculated using the Assumptions and the initial computations of Basic Rent, Casualty Values and Special Casualty Values derived from the Assumptions (the “Closing Schedules and Assumptions”) as such yield shall be adjusted pursuant to and in accordance with Section 3 of the Facility Lease; and
(ii)      the sum of after-tax cash flow over the Basic Lease Term at least equal to that originally expected by the Owner Participant on the Closing Date calculated using the Closing Schedules and Assumptions; and
(iii)      in connection with adjustments to Basic Rent provided for in the Facility Lease the sum of all after-tax Earnings in the period beginning on the Closing Date to and including the Owner Participant’s fiscal year which includes December 31, 1999 at least equal to that expected by the Owner Participant on the Closing Date calculated using the Closing Schedules and Assumptions.
Notwithstanding the above, nothing in this definition shall be construed to obligate the Lessee to restore any portion of a reduction in Earnings where such portion of the reduction is due to events other than changes in Basic Rent provided for in the Facility Lease, including, by example, changes in Financial Accounting Standards Board Statement No. 13 occurring after the Closing Date.
For the purposes of this definition, the Assumptions shall be deemed to include the assumptions that (i) the Owner Participant is fully taxable during the entire Basic Lease Term, provided, however, that nothing in this definition or the Participation Agreement shall be construed to be a representation by the Owner Participant as to the actual residual value assumed by the Owner Participant for purposes of calculating its earnings according to Financial Accounting Standards Board Statement No. 13 accounting or for any other purpose and (ii) none of the Investment is comprised of borrowed funds.
Net Special Casualty Value shall mean Special Casualty Value reduced by the principal amount of and accrued interest on the Outstanding Notes, as set forth in Schedule 5 to the Facility Lease.
Net Transaction Expenses shall have the meaning set forth in Section 3(a) of the Participation Agreement.
Net Worth shall mean the aggregate consolidated common stockholders’ equity, preference and preferred stock of any Person and its respective subsidiaries, taken as a whole (but excluding any preference or preferred stock which is redeemable at the option of the holder thereof), but does not include intangibles determined by such Person’s auditors on the basis of generally accepted accounting principles.
No-Action Letter shall mean the response of the Staff of the Division of Investment Management of the SEC to the letters of Lessee’s Special Counsel, dated November 9, and December 19, 1988, regarding the application of Section 2(a)(3) of the Holding Company Act to the transactions contemplated by the Transaction Documents.
Non-Burdensome Regulation shall mean (i) ministerial regulatory requirements which do not impose limitations or regulatory requirements on the business or activities of the Owner Participant and which are deemed, in the reasonable discretion of the Owner Participant, not to be burdensome, (ii) assuming redelivery




of the Undivided Interest in accordance with Section 5(a) of the Facility Lease, regulation resulting from any possession of the Undivided Interest on or after the Lease Termination Date or (iii) regulation of the Owner Trustee which would be terminated by the appointment of a successor Owner Trustee or a Co-Trustee pursuant to the terms of the Trust Agreement.
Nonseverable, when used with respect to any Capital Improvement, shall mean any Capital Improvement which is not a Severable Capital Improvement.
Noteholder shall mean any Holder from time to time of a Note Outstanding under the Indenture.
Notes shall mean the Initial Series Notes and any Additional Notes.
Notice of Closing shall have the meaning set forth in Section 5(a) of the Participation Agreement.
NRC shall mean the Nuclear Regulatory Commission of the United States of America or any successor agency.
Nuclear Incident shall have the meaning set forth in the Atomic Energy Act, as in effect as of the Closing Date; provided, that if the Atomic Energy Act shall be amended to expand the definition of “nuclear incident”, the term “Nuclear Incident” shall be similarly expanded.
Nuclear Waste Act shall mean the Nuclear Waste Policy Act of 1982, as amended, or any comparable successor law.
Obligor shall have the meaning set forth in Section 3.9(b) of the Indenture.
Obsolescence Redemption Date shall mean the Termination Date .
Offered Trust Interest shall have the meaning set forth in Section 15(b) of the Participation Agreement.
Officers’ Certificate shall mean a certificate signed by the President or any Vice President and by the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Person with respect to which such term is used.
Operating Agreement shall mean the Operating Agreement, dated as of May 1, 1980, between the Lessee and SMEPA, as amended.
Original Loan Participants shall mean the financial institutions listed in Schedule 1-B of the Participation Agreement under the heading “Original Loan Participants”.
Original Loan Participants’ Counsel shall mean Cravath, Swaine & Moore, or such other counsel as shall be selected by the Original Loan Participants.
Original of the Facility Lease shall mean the fully executed counterpart of the Facility Lease, marked “THIS COUNTERPART IS THE ORIGINAL COUNTERPART”, pursuant to Section 22(e) of the Facility Lease and containing the receipt of the Indenture Trustee.
Original Owner Participant shall mean the Person identified as such on the concluding page of this Appendix A.
Outstanding when used with respect to Notes, shall mean, as of the date of determination, all such Notes theretofore issued, authenticated and delivered under the Indenture, except (a) Notes theretofore




cancelled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation, (b) Notes or portions thereof deemed to have been paid within the meaning of Section 2.4(c) of the Indenture, (c) Notes or portions thereof which have been pledged as collateral for any obligations of the obligor thereof to the extent that an amount sufficient to make full payment of such obligations when due has been deposited with the pledgee of such Notes for the purpose of holding such amount in trust for the payment of such obligations in accordance with the indenture or agreement under which such obligations are secured and (d) Notes in exchange for, or in lieu of, which other Notes have been issued, authenticated and delivered pursuant to the Indenture; provided, however, that any Note owned by the Lessee, the Owner Participant or the Owner Trustee or any Affiliate of any thereof shall be disregarded and deemed not to be Outstanding for the purpose of any Directive.
Overdue Interest Rate shall mean the weighted average rate per annum of interest payable with respect to overdue payments of principal on the Notes Outstanding, computed as set forth in such Notes.
Owner Participant shall mean the Original Owner Participant and each successor or permitted assign of such Person.
Owner Participant’s Liens shall mean Liens against the Trust Estate or the Lease Indenture Estate and which result from acts of, or any failure to act by, or as a result of claims against, the Owner Participant unrelated to the transactions contemplated by the Transaction Documents but not Liens against the Owner Participant’s beneficial interest in the Trust Estate.
Owner Participant’s NRC Counsel shall mean Shaw, Pittman, Potts & Trowbridge, 1880 M Street, N.W., Washington, D.C. 20036, or such other counsel expert in matters relating to the NRC as shall be selected by the Owner Participant.
Owner Participant’s Special Counsel shall mean Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038, or such other counsel as shall be selected by the Owner Participant.
Owner Participant’s Special Mississippi Counsel shall mean Butler, Snow, O’Mara, Stevens & Cannada, 210 East Capital Street, Jackson, Mississippi, 39205 or such other counsel as shall be selected by the Owner Participant.
Owner Participant’s Special Tax Counsel shall mean Mudge Rose Guthrie Alexander & Ferdon, 180 Maiden Lane, New York, New York 10038, or such other counsel as shall be selected by the Owner Participant.
Owner Trustee shall mean, unless otherwise specified, collectively, the Corporate Owner Trustee and the Individual Owner Trustee, not in their individual capacities, but solely as Owner Trustee under the Trust Agreement, and each successor as trustee, separate trustee and co-trustee thereunder; provided, however, that the term Owner Trustee, as used in the Trust Agreement, shall mean Meridian Trust Company and Stephen M. Carta in their individual capacities.
Owner Trustee’s Counsel shall mean Haight, Gardner, Poor & Havens, 195 Broadway, New York, New York 10007 or such other counsel as shall be selected by the Owner Trustee.
Owner Trustee’s Entitlement Share shall mean a share of the capacity of, and energy generated by, Unit 1 equal to the Undivided Interest Percentage.
Ownership Agreement shall mean the Joint Construction, Acquisition and Ownership Agreement, dated as of May 1, 1980, between the Lessee and SMEPA, as amended.




Partial Draw shall have the meaning set forth in Schedule I to the Initial Letter of Credit, and thereafter shall include similar events in any subsequent Reimbursement Agreement with respect to any Initial Letter of Credit.
Participation Agreement shall mean the Participation Agreement No. [See Additional Information], dated as of December 1, 1988, among the Owner Trustee, the Indenture Trustee, Funding Corporation, the Original Loan Participants, the Owner Participant and the Lessee.
Penalty Rate shall mean the higher of (x) 2% per annum in excess of the Prime Rate and (y) 2% per annum in excess of the Overdue Interest Rate.
Permitted Investments shall mean (i) direct obligations of the United States of America which are taken into consideration for purposes of the public debt limit, or (ii) obligations the principal of and interest on which are fully guaranteed by the United States of America, or (iii) obligations of a state or local government which are rated Al by Moody’s or the equivalent by Standard & Poor’s, which are not in default as to principal or interest and the interest on which is exempt from tax under Code section 103(a), or (iv) certificates of deposit by, or bankers’ acceptances of, or time deposits with, any bank, trust company or national banking association incorporated or doing business under the laws of the United States of America or one of the States thereof having a combined capital and surplus of at least $1,000,000,000 and the unsecured debt securities of which shall be rated at least Aa3 by Moody’s or the equivalent thereof by Standard & Poor’s (or, if neither such organization shall rate such unsecured debt securities at any time, by any nationally recognized statistical rating organization in the United States of America) (including the Decommissioning Trustee if such conditions are met), or (v) commercial paper of companies incorporated or doing business under the laws of the United States of America or one of the States thereof (including the Decommissioning Trustee if the other conditions herein are met) and in each case having a rating assigned to such commercial paper by Standard & Poor’s or Moody’s (or, if neither such organization shall rate such commercial paper at any time, by any nationally recognized statistical rating organization in the United States of America) equal to the highest rating assigned by such organization, or (vi) repurchase agreements fully collateralized by an obligation of the type described in clause (i) or (ii) above, pursuant to which a bank, trust company or national banking association referred to in clause (iv) above or another financial institution having a net worth of at least $1,000,000,000 and the unsecured debt securities of which shall be rated at least Aa3 by Moody’s or the equivalent thereof by Standard & Poor’s is obligated to repurchase any such obligation not later than 90 days after the purchase of any such obligation, or (vii) such other investments as shall be proposed by the Lessee and consented to in writing from time to time by the Owner Participant. The term “Permitted Investments” shall not include any securities or other obligations of the Lessee or any other owner of an interest in Unit 1 or any Affiliate of any thereof. Permitted Investments shall have maturity dates not later than the earlier of the June 16, 2022 and the Decommissioning Date; provided, however, that Permitted Investments made after (x) the date when the Lessee determines to use a particular method of Decommissioning and (y) the approval of such method by the NRC and other Governmental Authorities having jurisdiction, may have maturity dates not later than the dates when the proceeds thereof are reasonably expected to be needed to pay the Undivided Interest Percentage of the Actual Method Decommissioning Cost.
Permitted Liens shall mean (i) the respective rights and interests of the Lessee, the Owner Participant, the Owner Trustee, the Loan Participants and the Indenture Trustee, as provided in the Transaction Documents and the Financing Documents; (ii) the rights of any sublessee or assignee under a sublease or an assignment permitted by the terms of the Facility Lease; (iii) the Lien of the Existing Mortgage and “Excepted Encumbrances” (as defined in Section 1 of the Reimbursement Agreement relating to the Initial Letter of Credit) on the leasehold estate under the Facility Lease and on the Retained Assets and the Unit 1 Retained Assets and on the Lessee’s interest in the Plant Site (other than the Ground Lease Property); (iv) Liens for




taxes either not yet delinquent or which are being contested in good faith and by appropriate proceedings diligently conducted, so long as such proceedings shall not (x) involve any danger of the sale, forfeiture or loss of the Undivided Interest or any part thereof or interest therein, (y) interfere with the use, possession or disposition of the Undivided Interest or any part thereof or interest therein or (z) impair payment of Rent; (v) inchoate materialmen’s, mechanics’, workmen’s, repairmen’s, employees’, carriers’, warehousemen’s, or other like Liens arising in the ordinary course of business for the Plant or Liens of such sort which are not inchoate and which aggregate not in excess of $20 million with respect to Unit 1 and the Ground Lease Property, so long as such Liens, individually or in the aggregate, shall not involve any material danger of the sale, forfeiture or loss of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not materially interfere with the use or disposition of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not adversely affect the Trust Estate or the Lease Indenture Estate and shall not impair in any material respect the Lien of the Indenture; (vi) Lessor’s Liens, Owner Participant’s Liens and Indenture Trustee’s Liens; (vii) Liens that have been bonded for the full amount in dispute or as to which other security arrangements satisfactory to the Lessor and the Owner Participant shall have been made and which are being contested diligently by the appropriate party in good faith and by appropriate proceedings so long as such proceedings shall not violate clause (x), (y) or (z) of clause (iv) above; (viii) Liens of any of the types described in clause (v) above that have been bonded for the full amount in dispute or as to which other security arrangements satisfactory to the Lessor and the Owner Participant shall have been made and which arise out of judgments or awards and with respect to which (A) an appeal or proceeding for review is being prosecuted in good faith and for the payment of which adequate reserves shall have been provided as required by generally accepted accounting practice and (B) there shall have been secured a stay of execution pending such appeal or proceeding for review, so long as such proceedings shall not violate clause (x), (y) or (z) of clause (iv) above; (ix) the rights and interests of the Lessee under the Assignment and Assumption Agreement, the Plant Agreements and the Ground Lease; (x) the rights of the NRC under the License; (xi) the rights of Persons other than the Lessee and the Owner Trustee under the Plant Agreements and under instruments contemplated thereby; (xii) Liens on the undivided ownership interests in Unit 1 other than the Undivided Interest; (xiii) the reservations, encumbrances and title defects described in the title report referred to in Section 11(a)(30) of the Participation Agreement; and (xiv) easements, servitudes, licenses and rights of way arising with respect to the Plant Site after the Closing Date, so long as such Liens, individually or in the aggregate, shall not involve any material danger of the sale, forfeiture or loss of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not materially interfere with the use or disposition of the Ground Lease Property or the Undivided Interest or any part thereof, title thereto or any interest therein, and shall not adversely affect the Trust Estate or the Lease Indenture Estate and shall not impair in any material respect the Lien of the Indenture.
Person shall mean any individual, partnership, corporation, trust, unincorporated association or joint venture, a government or any department or agency thereof, or any other entity.
Plant shall mean the Grand Gulf Nuclear Station consisting of Unit 1 and Unit 2, which station is located in Claiborne County, Mississippi.
Plant Agreements shall mean the Ownership Agreement and the Operating Agreement.
Plant Site shall mean the site of the Plant as more fully described in Schedule PS to the Ground Lease.
Price-Anderson Act shall mean the Price-Anderson Act, Pub. L. No. 85-256, 71 Stat. 576 (1957), as amended from time to time.




Pricing Assumptions shall mean the pricing assumptions set forth in Schedule 5 to the Participation Agreement.
Prime Rate shall mean the rate of interest publicly announced from time to time by the banking facilities of the Owner Trustee at its principal office as its prime, base or reference lending rate, or if the Owner Trustee shall not quote a prime, base or reference lending rate on the date in question, then the prime, base or reference lending rate publicly announced from time to time by the Indenture Trustee at its principal place of business. Any change in the Prime Rate shall be effective on the date such change in the Prime Rate is announced.
Project shall have the meaning set forth in Section 13(f) of the Facility Lease.
Prudent Utility Practice shall mean, at a particular time, any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry at such time or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at the lowest reasonable cost consistent with good business practices, reliability, safety and expedition. Prudent Utility Practice is not intended to be limited to the optimum practice, method or act to the exclusion of all others, but rather to a spectrum of possible practices, methods or acts having due regard for, among other things, manufacturers’ warranties, the requirements of governmental agencies and authorities of competent jurisdiction and the requirements of the Transaction Documents.
Purchase Documents shall mean the Bill of Sale and such other documents as the Owner Participant, the Owner Trustee, the Indenture Trustee, the Original Loan Participants or their respective counsel shall deem necessary or desirable to convey good and marketable title to the Undivided Interest to the Owner Trustee.
Purchase Price shall mean the purchase price to be paid for the Undivided Interest as set forth on the concluding page of this Appendix A.
Reasonable Basis for a position shall exist if tax counsel may properly advise reporting such position on a tax return in accordance with Formal Opinion 85-352 issued by the Standing Committee on Ethics and Professional Responsibility of the American Bar Association.
Refunding Bonds shall mean any series of bonds of Funding Corporation issued, authenticated and delivered under the Collateral Trust Indenture, as supplemented, if necessary, by a Refunding Supplemental Indenture, the proceeds of which will be used to refund the Initial Series Notes or any Additional Notes.
Refunding Date shall mean any date on which Refunding Bonds are issued.
Refunding Loan shall have the meaning set forth in Section 2(d) of the Participation Agreement.
Refunding Supplemental Indenture shall mean any Refunding Bond Supplemental Indenture among the Lessee, Funding Corporation and the Collateral Trust Trustee, supplementing the Collateral Trust Indenture and providing, among other things, for the issuance of Refunding Bonds.
Registration Statement shall mean a registration statement, including all exhibits and all documents incorporated in such Registration Statement by reference, filed with the SEC under the Securities Act in connection with the offer, issue and sale of any Refunding Bonds.




Regulations shall mean the income tax regulations issued, published or promulgated under the Code, or under the Internal Revenue Code of 1954, as amended.
Reimbursement Agreement shall mean, with respect to the Initial Letter of Credit, the Reimbursement Agreement dated as of December 1, 1988, among the Lessee, The Fuji Bank, Limited, acting through its New York branch, and Chemical Bank as administrating bank, and the participating banks named therein, and with respect to any subsequent Letter of Credit, the reimbursement agreement governing the rights and obligations of the Lessee and the Issuing Bank.
Reimbursement Default, while the Initial Letter of Credit is outstanding, shall have the meaning set forth in Section 1 of the Reimbursement Agreement relating to the Initial Letter of Credit and thereafter shall include similar events in any subsequent Reimbursement Agreement with respect to a subsequent Letter of Credit.
Reimbursement Event of Default, shall mean, while the Initial Letter of Credit is outstanding, either a Reimbursement Event of Default or a Prepayment Event, in each case as defined in Section 1 of the Reimbursement Agreement relating to the Initial Letter of Credit and thereafter shall include similar events in any subsequent Reimbursement Agreement with respect to a subsequent Letter of Credit.
Releveraging Amount shall mean the proceeds of any Additional Notes issued in accordance with Section 2(c) of the Participation Agreement.
Releveraging Loan shall have the meaning specified in Section 2(c) of the Participation Agreement.
Releveraging Note shall mean a Note, or that portion thereof, evidencing a Releveraging Loan.
Renewal Option shall mean the option to elect an extension of the Facility Lease for any Renewal Term.
Renewal Term shall mean any Fixed Rate Renewal Term or Fair Market Renewal Term.
Rent shall mean Basic Rent, Supplemental Rent and amounts payable by the Lessee pursuant to Section 3(j) of the Facility Lease.
Rent Differential shall have the meaning set forth in Section 3(h) of the Facility Lease.
Rental Period shall have the meaning set forth in Section 3(a) of the Facility Lease.
Reoptimization Date shall mean the date of a reoptimization in accordance with Section 2(e) of the Participation Agreement.
Required Rent Payment Amount shall mean the Equity Portion of Rent in respect of the following amounts payable as Supplemental Rent by the Lessee through the Indenture Trustee (i) in the case of Special Transfer Events based upon Deemed Loss Events, Special Casualty Value as of the Basic Rent Payment Date on which occurs the Special Transfer, or if the date on which the Special Transfer occurs is not a Basic Rent Payment Date, the Basic Rent Payment Date next succeeding the Special Transfer, (ii) in the case of Special Transfer Events based upon Events of Loss, Casualty Value as of the Basic Rent Payment Date next succeeding the Special Transfer except that if such Event of Loss occurs on a Basic Rent Payment Date, Casualty Value shall be as of such Basic Rent Payment Date and (iii) in the case of Special Transfer Events based upon Events of Default, the amount set forth in Section 16(a)(v)(D) of the Facility Lease, together, in each case, with interest thereon, if any in accordance with Section 3(b)(iii) of the Facility Lease.




Requisition of Title shall mean any circumstance or event in consequence of which Unit 1 or the Undivided Interest, or any portion of the Common Facilities or the Plant Site the loss of which would result in the practical inability to operate Unit 1 or the Undivided Interest, shall be condemned or seized or title thereto shall be requisitioned or taken by any Governmental Authority under power of eminent domain or otherwise, where such condemnation, seizure or requisition shall be for a stated period which shall, or for an indefinite period which is reasonably expected to, exceed the lesser of (i) the remaining portion of the Lease Term and (ii) 60 months; provided, that a Requisition of Title shall not be deemed to have occurred if the Lessee is contesting diligently and in good faith such action and (i) the duration of such contest has not exceeded 6 months without the entry of a judicial determination staying the effect of such action and such stay shall remain in effect, (ii) the Lessee shall have furnished the Owner Participant with an opinion of independent counsel reasonably satisfactory to the Owner Participant to the effect that there exists a reasonable basis for contesting such action and that it is more likely than not that the Lessee will successfully contest such action, (iii) such action and contest shall not adversely affect Lessee’s payment obligations under the Facility Lease and other Transaction Documents and (iv) such contest shall be successfully concluded within the earlier of 36 months from the date on which action is first taken by a Governmental Authority with respect to such condemnation, seizure or requisition or the period ending on the day prior to the last Basic Rent Payment Date.
Requisition of Use shall mean any circumstance or event other than a Requisition of Title in consequence of which the use of Unit 1 or the Undivided Interest, or any portion of the Common Facilities or the Plant Site the loss of which would significantly interfere with the use of Unit 1 or the Undivided Interest, shall be requisitioned or taken by any Governmental Authority under power of eminent domain or otherwise, where such requisition or taking shall be for a stated period which shall, or for an indefinite period which is reasonably expected to, exceed the lesser of (i) the remaining portion of the Lease Term and (ii) 60 months; provided, that a Requisition of Use shall not be deemed to have occurred if the Lessee is contesting diligently and in good faith such requisition or taking and (i) such contest has not exceeded 6 months without the entry of a judicial determination staying the effect of such action and such stay shall remain in effect, (ii) the Lessee shall have furnished the Owner Participant with an opinion of independent counsel reasonably satisfactory to the Owner Participant to the effect that there exists a reasonable basis for contesting such action and that it is more likely than not that the Lessee will successfully contest such action, (iii) such action and contest shall not adversely affect Lessee’s payment obligations under the Facility Lease and other Transaction Documents and (iv) such contest shall be successfully concluded within the earlier of 36 months from the date on which action is first taken by a Governmental Authority with respect to such requisition or taking or the period ending on the day prior to the last Basic Rent Payment Date.
Responsible Officer shall mean, with respect to the subject matter of any covenant, agreement or obligation of any party contained in any Transaction Document, the President, any Vice President, Assistant Vice President, Treasurer, Assistant Treasurer or any other officer who in the normal performance of his operational responsibility would have knowledge of such matter and the requirements with respect thereto.
Retained Assets shall mean (i) the Lessee’s interest in the Plant other than the Undivided Interest and (ii) Severable Capital Improvements or any interest therein title to which is retained by the Lessee in accordance with Section 8(e) of the Facility Lease.
Revenue Measures shall mean any liability or obligation for any tax, fee, assessment or other charge asserted against any Indemnitee under the Price-Anderson Act, the Atomic Energy Act, or any successor legislation thereto, as a result of such Indemnitee’s interest in Unit 1.
Revised Rent Amounts shall have the meaning set forth in Section 3(f)(i) of the Facility Lease.




Sale Proceeds shall mean, with respect to any sale of the Undivided Interest by the Lessor to any Person, the gross proceeds of such sale paid in cash, less all costs and expenses whatsoever incurred by the Lessor and the Owner Participant in connection therewith.
SEC shall mean the Securities and Exchange Commission of the United States of America or any successor agency.
Section 6(c) Application shall mean Funding Corporation’s Application for an Order under Section 6(c) of the Investment Company Act of 1940 exempting Funding Corporation from all provisions of such Act, as filed with the SEC on November 16, 1988, as amended from time to time with the approval of the Owner Participant.
Secured Obligations shall have the meaning set forth in Section 7(b)(4)(C) of the Participation Agreement.
Securities Act shall mean the Securities Act of 1933, as amended.
Securities Exchange Act shall mean the Securities Exchange Act of 1934, as amended.
SERI shall mean System Energy Resources, Inc., an Arkansas corporation, and its permitted successors and assigns.
Severable, when used with respect to any Capital Improvement, shall mean any Capital Improvement which can be readily removed from Unit 1 without materially damaging Unit 1 or materially diminishing or impairing the value, utility, condition or useful life of Unit 1.
Share shall mean a percentage equal to the Undivided Interest Percentage.
Significant Expenditure shall have the meaning set forth in Section 13(f) of the Facility Lease.
Similar Person shall have the meaning set forth in paragraph (2) of the definition of Deemed Loss Event.
SMEPA shall mean the South Mississippi Electric Power Association, a Mississippi corporation.
Special Casualty Value, as of any date during the Basic Lease Term, shall mean the percentage of Facility Cost set forth opposite such date (or the Basic Rent Payment Date next succeeding such date) in Schedule 3 to the Facility Lease. Special Casualty Value, as of any Basic Rent Payment Date during any Renewal Term, shall mean the amount determined by amortizing ratably the Fair Market Sales Value of the Undivided Interest as of the first day of such Renewal Term in semi-annual steps to the amount estimated as of such first day to be the Fair Market Sales Value of the Undivided Interest as of the last day of such Renewal Term, together with amounts of Basic Rent then due.
Special Transfer shall have the meaning set forth in Section 7(b)(4)(A) of the Participation Agreement.
Special Transfer Event shall mean (a) if a Deemed Loss Event or Event of Loss shall have occurred and the Lessee or, if applicable, an Affiliate thereof shall not have assumed the Notes as contemplated by Section 3.9(b) of the Indenture, the receipt by the Owner Participant of the payments to be made by the Lessee as provided in Section 9(c) or 9(d) of the Facility Lease as the case may be; (b) the occurrence of an Event of Loss or a Deemed Loss Event; or (c) the occurrence and continuance of an Event of Default.




Standard & Poor’s shall mean Standard & Poor’s Corporation and any successor thereto which is issuing nationally accepted securities ratings.
Supplemental Financing shall mean a financing of the Supplemental Financing Amount of Capital Improvements made pursuant to Section 8(f) of the Facility Lease.
Supplemental Financing Amount shall mean the Undivided Interest Percentage of the cost of a Capital Improvement less the amount of the related Additional Equity Investment of the Lessor, if any.
Supplemental Rent shall have the meaning set forth in Section 3(b) of the Facility Lease.
Surviving Lessee shall have the meaning specified in Section 10(b)(3)(ii) of the Participation Agreement.
Tax shall mean any and all fees (including, without limitation, documentation, recording, license and registration fees), taxes (including, without limitation, net income, franchise, value added, ad valorem, gross income, gross receipts, sales, use, property (personal and real, tangible and intangible) and stamp taxes), levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever, general or special, ordinary or extraordinary, together with any and all penalties, fines, additions to tax and interest thereon.
Tax Assumptions shall mean the assumptions set forth in the Tax Indemnification Agreement with respect to the Federal income tax consequences of the transactions contemplated by the Transaction Documents.
Tax Indemnification Agreement shall mean the Tax Indemnification Agreement No. [See Additional Information], dated as of December 1, 1988 , between the Lessee and the Owner Participant.
Tax Law Change shall have the meaning set forth in Section 3(e) of the Facility Lease.
Tax Loss shall have the meaning set forth in the Tax Indemnification Agreement.
Tax Rate Change shall have the meaning set forth in Section 3(d) of the Facility Lease.
Tax Rates shall have the meaning set forth in Section 3(d) of the Facility Lease.
Termination Date shall have the meaning set forth in Section 14(a) of the Facility Lease.
Termination Event shall mean any early termination of the Facility Lease in accordance with Section 14 thereof.
Termination Notice shall have the meaning set forth in Section 14(a) of the Facility Lease.
Transaction Documents shall mean the Participation Agreement, the Facility Lease, the Ground Lease, the Trust Agreement, the Indenture, the Existing Decommissioning Trust Agreement, any other Decommissioning Trust Agreement, the Tax Indemnification Agreement, the Assignment and Assumption Agreement, each Purchase Document and the Notes.
Transaction Expenses shall have the meaning set forth in Section 14(a) of the Participation Agreement.
Transaction Role shall have the meaning set forth in clause (1) of the definition of Deemed Loss Event.




Transfer shall mean the transfer, by bill of sale or otherwise, by the Lessor of all the Lessor’s right, title and interest in and to the Undivided Interest and under the Assignment and Assumption Agreement on an “as is, where is with all faults” basis, (but subject to the Lien of the Indenture if and to the extent it attaches) but otherwise without recourse, representation or warranty (including an express disclaimer of representations and warranties in a manner comparable to that set forth in the second sentence of Section 6(b) of the Facility Lease), together with the due assumption by the transferee of, and the due release of the Lessor from, all the Lessor’s obligations under the Assignment and Assumption Agreement by an instrument or instruments satisfactory in form and substance to the Lessor and the Owner Participant.
Transferee shall have the meaning assigned thereto in Section 15(a) of the Participation Agreement.
Trust shall mean the trust created by the Trust Agreement.
Trust Agreement shall mean the Trust Agreement No. [See Additional Information], dated as of December 1, 1988, between the Owner Participant, Stephen M. Carta and MTC.
Trust Estate shall have the meaning set forth in Section 2.02 of the Trust Agreement.
Trust Indenture Act shall mean the Trust Indenture Act of 1939, as amended.
Trustee’s Expenses shall mean any and all liabilities, obligations, costs, compensation, fees, expenses and disbursements (including, without limitation, legal fees and expenses) of any kind and nature whatsoever (other than such amounts as are included in Transaction Expenses) which may be imposed on, incurred by or asserted against the Indenture Trustee or any of its agents, servants or personal representatives, in any way relating to or arising out of the Indenture, the Lease Indenture Estate, the Participation Agreement or the Facility Lease, or any document contemplated thereby, or the performance or enforcement of any of the terms thereof, or in any way relating to or arising out of the administration of such Lease Indenture Estate or the action or inaction of the Indenture Trustee under the Indenture; provided, however, that such amounts shall not include any Taxes or any amount expressly excluded from the Lessee’s indemnity obligation pursuant to Section 13(a) or 13(b) of the Participation Agreement.
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code as in effect in any applicable jurisdiction.
Underwriting Agreement shall mean an agreement among Funding Corporation, the Lessee, and the underwriter or underwriters for any Refunding Bonds relating to the purchase, sale and delivery of such Refunding Bonds.
Undivided Interest shall mean the Owner Trustee’s undivided ownership interest in Unit 1 as a result of the transactions contemplated by the Participation Agreement and other Transaction Documents which, when expressed as a percentage of all undivided ownership interests in Unit 1, shall be equal to the Undivided Interest Percentage; the owner of the Undivided Interest shall be a tenant-in-common with the owners (including the Lessee, if it should be such an owner) of all other undivided interests in Unit 1.
Undivided Interest Amount shall have the meaning set forth in Section 10(b)(3)(viii)(C)III(1) of the Participation Agreement.
Undivided Interest Funds shall mean that portion of the Decommissioning Trust Funds to be used for funding the Decommissioning Cost allocable to the Undivided Interest.




Undivided Interest Percentage shall mean, as of the Closing Date, the undivided interest percentage specified as such on the concluding page of this Appendix A; the Undivided Interest Percentage may change from time to time as a result of a disposition or acquisition of an undivided ownership interest in Unit 1.
Uniform System of Accounts shall mean the Uniform System of Accounts prescribed for Public Utilities and Licensees subject to the provisions of the Federal Power Act (Class A and Class B), 10 C.F.R. Section 101, as in effect on the date of execution of the Participation Agreement, as amended or modified from time to time after such date.
Unit 1 shall mean the 1250 megawatt class nuclear generating unit commonly known as Grand Gulf 1, as more fully described in Schedule Ul to the Bill of Sale, together with all Capital Improvements thereto.
Unit 1 Retained Assets shall have the meaning set forth in Schedule Ul to the Bill of Sale.
Unit 2 shall mean Unit 2 of the Plant, the construction of which unit has not been completed as of the Closing Date.
User shall mean a Person unrelated to the Lessee (within the meaning of Section 318 of the Code) possessing the Undivided Interest after the Lease Termination Date.
Value Schedules shall mean the schedules of Casualty Values, Special Casualty Values, Net Casualty Values and Net Special Casualty Values attached to the Facility Lease.






No. 2
ADDITIONAL INFORMATION:
1.
The Original Owner Participant is Lease Management Realty Corporation IV, a Delaware corporation.
2.
The Undivided Interest Percentage is 3.02920793%.
3.
The number in the name of each Transaction Document pertaining to the Undivided Interest is 2.
4.
The Purchase Price is $100,000,000.
5.
The Approved Transferee is Textron Financial Corporation.






Exhibit 10(b)15
REALLOCATION AGREEMENT
AMONG
ARKANSAS POWER & LIGHT COMPANY
LOUISIANA POWER & LIGHT COMPANY
MIDDLE SOUTH ENERGY, INC.
MISSISSIPPI POWER & LIGHT COMPANY
NEW ORLEANS PUBLIC SERVICE INC.

THIS REALLOCATION AGREEMENT, dated as of the 28th day of July, 1981 among Arkansas Power & Light Company (AP&L), Louisiana Power & Light Company (LP&L), Middle South Energy, Inc. (MSE), Mississippi Power & Light Company (MP&L), and New Orleans Public Service Inc. (NOPSI), covers and pertains to the rights, benefits and obligations of the Parties with respect to the MSE share of the Grand Gulf Nuclear Project (Project) and in particular Section 4 of the Second Amendment to Availability Agreement dated June 15, 1981, and Section 3 of the Power Purchase Advance Payment Agreement dated June 15, 1981,
WITNESSETH THAT:
WHEREAS, pursuant to the intent espoused in the Second Amendment to Availability Agreement regarding the capacity and energy available to MSE from Unit No. 1 and Unit No. 2 of the Project, AP&L, LP&L, MP&L, and NOPSI (System Companies) desire to allocate such capacity and energy and operating expenses associated therewith on a fixed percentage basis rather than in accordance with the System Agreement; and
WHEREAS, it is desirable for each of the System Companies to have available to it for the benefit of its customers base generating units fueled with solid fuel (i.e., nuclear or coal) in order to provide reliable service at reasonable costs and reduce the degree of dependence on scarce and high cost petroleum and natural gas as boiler fuel; and
WHEREAS, AP&L, now and for the foreseeable future, has a greater proportion of base generating capacity fueled with coal and nuclear in relation to its customers’ needs than the other System Companies; and
WHEREAS, the System Companies have entered into a Memorandum of Understanding dated July 21, 1980 which established fixed allocation percentages from Unit No. 1 and Unit No. 2 of the Project that differ from the percentage allocations established in Section 4 of the Second Amendment to the Availability Agreement, and Section 3 of the Power Purchase Advance Payment Agreement; and
WHEREAS, it is intended that the System Companies that will, under the terms of this Agreement, have allocations of MSE’s share of the capacity and energy from Unit No. 1 and Unit No. 2 of the Project are willing to undertake to fulfill, in proportion to such allocations, any responsibilities and obligations of AP&L, which will have no allocation of capacity and energy from the Project; and
WHEREAS, AP&L is willing to relinquish any rights, benefits and interest in the Project.
NOW THEREFORE, in consideration of the terms and conditions hereinafter set forth, the Parties hereto agree with each other as follows:




1.
All of the capacity and energy available to MSE from both Unit No. 1 and Unit No. 2 of the Project will be allocated to LP&L, MP&L and NOPSI according to the following percentages:

 
Unit No. 1
Unit No. 2
LP&L
38.57%
26.23%
MP&L
31.63%
43.97%
NOPSI
29.80%
29.80%
 
100.00%
100.00%

These allocations of capacity and energy available from Unit No. 1 and Unit No. 2 of the Project, as between the companies holding such allocations, may be changed by mutual agreement of such companies.
2.
An agreement between LP&L, MSE, MP&L and NOPSI will be executed in form for filing with the Federal Energy Regulatory Commission in accordance with Part 35 of the Commission's Regulations establishing the terms, conditions and rates for the sale of capacity and energy from MSE to LP&L, MP&L and NOPSI.
3.
LP&L, MP&L and NOPSI, in consideration of their increased allocations of the capacity and energy available to MSE from the Project, hereby agree severally and not jointly to assume and discharge in proportion to their respective new allocations any responsibilities and obligations of AP&L contained in the Availability Agreement dated June 21, 1974 as amended June 30, 1977 and June 15, 1981; the Power Purchase Advance Payment Agreement dated June 15, 1981; the First, Fourth and Fifth Assignments of Availability Agreement, Consent and Agreement, dated respectively, as of June 30, 1977, March 20, 1980, and June 15, 1981, each between MSE, the System Companies and Manufacturers Hanover Trust Company as Agent for various banks; the Second and Third Assignments of Availability Agreement, Consent and Agreement, dated respectively, as of June 30, 1977 and January 1, 1980, each between MSE, the System Companies and United States Trust Company and Malcolm J. Hood, as Trustees; and hereby agree to hold AP&L harmless from such responsibilities and obligations.
4.
AP&L hereby relinquishes any and all rights, benefits and interest it may have now or in the future with respect to the Project and capacity and energy from it.
5.
In the event LP&L, MP&L or NOPSI fail to fulfill the obligations and responsibilities of AP&L to MSE, assumed hereunder, AP&L shall fulfill such obligations and responsibilities to MSE, but in such event AP&L shall then be entitled to any and all rights, benefits and interest with respect to the Project which any such company would have had but for such company’s failure to fulfill such obligations and responsibilities assumed hereunder.
6.
For System Agreement purposes, all capacity available to MSE from the Project and allocated hereunder will be counted as “Capability” under the System Agreement but neither Unit No. 1 nor Unit No. 2 of the Project will be classified as a “Participation Unit” inasmuch as such Units do not qualify under the definition for this term as it is set forth in the System Agreement.




7.
The effectiveness of this Agreement is subject to the receipt of all necessary regulatory approvals.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be signed in its name and on its behalf by its President, attested by its Secretary or an Assistant Secretary, both being duly authorized.
Attest:
ARKANSAS POWER & LIGHT COMPANY
/s/    R. J. Estrada                 
Assistant Secretary
by: /s/   Jerry Maulden                          
                   President
 
 
Attest:
LOUISIANA POWER & LIGHT COMPANY
/s/    R. J. Estrada                 
Assistant Secretary
by: /s/   J. M. Wyatt                              
                   President
 
 
Attest:
MIDDLE SOUTH ENERGY, INC.
/s/    D. E. Stapp                     
Secretary
by: /s/   F. W. Lewis                             
                   President
 
 
Attest:
MISSISSIPPI POWER & LIGHT COMPANY
/s/    R. J. Estrada                 
Assistant Secretary
by: /s/   D. C. Lutken                           
                   President
 
 
Attest:
NEW ORLEANS PUBLIC SERVICE INC.
/s/    R. J. Estrada                 
Assistant Secretary
by: /s/    James M. Cain                       
                   President






Exhibit 10(b)2
FIRST AMENDMENT TO
AVAILABILITY AGREEMENT
Between
MIDDLE SOUTH ENERGY, INC.
And
ARKANSAS POWER & LIGHT COMPANY,
ARKANSAS-MISSOURI POWER COMPANY,
LOUISIANA POWER & LIGHT COMPANY,
MISSISSIPPI POWER & LIGHT COMPANY, and
NEW ORLEANS PUBLIC SERVICE INC.
THIS FIRST AMENDMENT, dated as of the 30th day of June, 1977, between Middle South Energy, Inc. (MSE), and Arkansas Power & Light Company (AP&L), Arkansas-Missouri Power Company (Ark-Mo), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L) and New Orleans Public Service Inc. (NOPSI), to the Availability Agreement, dated as of the 21st day of June, 1974, between MSE and AP&L, Ark-Mo, LP&L, MP&L and NOPSI (Availability Agreement), WITNESSETH THAT:
WHEREAS, pursuant to the provisions of Section 5 of the Availability Agreement, it has been agreed that Unit No. 2 of the Project shall be deemed to be in operation no later than December 31, 1982 for purposes of calculating the date of commencement of the accrual of depreciation and amortization with respect to Unit No. 2 of the Project; and
WHEREAS, the commencement of commercial operation of Unit No. 2 has been deferred to a date subsequent to December 31, 1982 but is expected to occur not later than December 31, 1986; and
WHEREAS, it is now appropriate and necessary to revise the provisions of Section 5 of the Availability Agreement accordingly.
Now, THEREFORE, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree with each other as follows:
1.      For the purposes of this First Amendment to Availability Agreement, any term used herein which has a defined meaning in the Availability Agreement shall have the same meaning herein.
2.      Section 5 of the Availability Agreement is hereby deemed amended so that the last reference in Section 5 to “December 31, 1982” shall be changed to read “December 31, 1986”.
3.      All other provisions of the Availability Agreement shall be deemed to continue in full force and effect.




IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to Availability Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
Arkansas Power & Light Company              Mississippi Power & Light Company

By      Arch P. Pettit                      By D. C. Lutken
President                      President

Arkansas-Missouri Power Company              New Orleans Public Service Inc.

By      F. G. Smith                      By William McCollam, Jr.
President                      President

Louisiana Power & Light Company              Middle South Energy, Inc.

By      J. M. Wyatt                      By D. J. Winfield
President                      Vice President, Finance





Exhibit 10(b)3
SECOND AMENDMENT TO
AVAILABILITY AGREEMENT
BETWEEN
MIDDLE SOUTH ENERGY, INC.
AND
ARKANSAS POWER & LIGHT COMPANY,
LOUISIANA POWER & LIGHT COMPANY,
MISSISSIPPI POWER & LIGHT COMPANY, and
NEW ORLEANS PUBLIC SERVICE INC.
THIS SECOND AMENDMENT, dated as of the 15th day of June, 1981, between Middle South Energy, Inc. (MSE) and Arkansas Power & Light Company (AP&L), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L) and New Orleans Public Service Inc. (NOPSI), to the Availability Agreement, dated as of the 21st day of June, 1974, between MSE and AP&L, Arkansas-Missouri Power Company (Ark-Mo), LP&L, MP&L and NOPSI, as amended by the First Amendment thereto dated as of June 30, 1977 (Availability Agreement), WITNESSETH THAT:
WHEREAS, pursuant to the provisions of Section 3 of the Availability Agreement, it has been agreed that on or before the date on which Unit No. 1 of the Project is placed in commercial operation MSE and the Parties will join in executing such document or documents as may be necessary for MSE to become a party to the System Agreement and that MSE will make available to the Parties under the then applicable provisions of the System Agreement (or any agreement substituted therefor) all Power available from time to time at any MSEI Generating Unit; and
WHEREAS, pursuant to the provisions of Section 4 of the Availability Agreement, it has been agreed that the Parties shall be entitled, subject to the then applicable requirements of the System Agreement (or any agreement substituted therefor), to receive all Power available from time to time at any MSEI Generating Unit and shall be responsible for certain of the operating expenses of such Units apportioned in accordance with the formula set forth in Section 4; and
WHEREAS, Unit No. 1 and Unit No. 2 of the Project are MSEI Generating Units, and MSE and the Parties desire to allocate the Power available to MSE from time to time from these MSEI Generating Units and the operating expenses associated therewith on a fixed percentage basis rather than in accordance with the System Agreement; and
WHEREAS, pursuant to the provisions of Section 5 of the Availability Agreement, it has been agreed that both Unit No. 1 and Unit No. 2 of the Project shall be deemed to be in operation no later than December 31, 1982 for purposes of commencing the accrual of depreciation and amortization with respect to such Units and that, if Unit No. 1 of the Project has been placed in operation on or prior to December 31, 1982, Unit




No. 2 of the Project shall be deemed to be in operation no later than December 31, 1986 for purposes of commencing the accrual of depreciation and amortization with respect to such Unit; and
WHEREAS, the commencement of commercial operation of Unit No. 1 has been deferred to a date subsequent to December 31, 1981 but currently is expected to occur not later than December 31, 1982, and the commencement of commercial operation of Unit No. 2 has been deferred to a date subsequent to December 31, 1985 but currently is expected to occur not later than December 31, 1986; and
WHEREAS, MSE and the Parties deem it desirable that there be an approximate two‑year interval between the presently expected commercial operation dates of the Units and the dates on which the Units shall be deemed to be in operation under the Availability Agreement for purposes of commencing the accrual of depreciation and amortization with respect to such Units; and
WHEREAS, MSE and the Parties have determined that it would be preferable if Power available from any MSEI Generating Unit could be sold either pursuant to the then applicable provisions of the System Agreement or pursuant to the terms of another or other agreements; and
WHEREAS, effective January 1, 1981, the electric properties of Ark-Mo were consolidated with those of AP&L and Ark-Mo was dissolved, and AP&L assumed all of the obligations of Ark-Mo under the Availability Agreement; and
WHEREAS, MSE, AP&L, Ark-Mo, LP&L, MP&L and NOPSI have entered into (i) a First and Fourth Assignment of Availability Agreement, Consent and Agreement, dated as of June 30, 1977 and March 20, 1980, respectively, with Manufacturers Hanover Trust Company, as agent for certain banks, and (ii) a Second and Third Assignment of Availability Agreement, Consent and Agreement, dated as of June 30, 1977 and January 1, 1980, respectively, with United States Trust Company of New York and Malcolm J. Hood, as trustees; and
WHEREAS, it is now appropriate and necessary to revise the provisions of Sections 3, 4 and 5 of the Availability Agreement accordingly.
Now, THEREFORE, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree with each other as follows:
1.      For the purposes of this Second Amendment to Availability Agreement, any term used herein which has a defined meaning in the Availability Agreement shall have the same meaning herein.
2.      Sections 3, 4 and 5 of the Availability Agreement are hereby amended to read as follows:
“3.      On or before the date on which Unit No. 1 of the Project is placed in commercial operation, AP&L, LP&L, MP&L and NOPSI (Participating Parties) will (a) join with MSEI in executing an agreement which will set forth in detail the terms and provisions for the sale by MSEI to the Participating Parties of Power available to MSEI from Unit No. 1 and Unit No. 2 of the Project (Power Purchase Agreement), or (b) join (together with all other Parties) in executing such document or documents as may be necessary for MSEI to become a party to the System Agreement in such a manner as will cause the Power from the Project to be sold under the terms thereof. MSEI shall, subject to the provisions of this Agreement and the then applicable provisions of the Power Purchase Agreement (or, if applicable, the System Agreement), make available, or cause to be made available, to the Participating Parties all Power available to MSEI from time to time from the Project. On or before the date on which any MSEI Generating Unit other than Unit No. 1 and Unit No. 2 of the




Project (Additional MSEI Generating Unit) is placed in commercial operation, MSEI and the Parties will either (a) join in executing such document or documents as may be necessary for MSEI to become a party to the System Agreement in such a manner as will cause the Power from such Additional MSEI Generating Unit to be sold under the terms thereof or (b) enter into an agreement or agreements which will set forth in detail the terms and provisions for the sale by MSEI to the Parties of Power available to MSEI from such Additional MSEI Generating Unit (Other MSEI Power Agreement). Notwithstanding (a) that MSEI may be a party to the System Agreement at the time it enters into an Other MSEI Power Agreement, or (b) that MSEI may be a party to the Power Purchase Agreement at such time as it joins in the System Agreement, neither MSEI nor the Parties shall have any rights or duties under the System Agreement with respect to the Additional MSEI Generating Units which are subject to any Other MSEI Power Agreement or with respect to Unit No. 1 and Unit No. 2 of the Project if they are then subject to the Power Purchase Agreement. No generating unit or portion thereof owned by MSEI will become an “MSEI Generating Unit” for purposes of this Agreement until it has been designated as such hereunder. MSEI and the Parties will also join in executing at an appropriate time such document or documents as may be necessary for others who become parties to (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement to join in and become parties to this Agreement. MSEI shall, subject to the provisions of the then applicable requirements of Section 6 of this Agreement and (a) the Power Purchase Agreement, (b) the System Agreement (or any agreement substituted therefor), or (c) any Other MSEI Power Agreement, make available, or cause to be made available, to the Parties all Power available to MSEI from time to time at arty MSEI Generating Unit.
“4.      The Parties shall, subject to the provisions of the then applicable requirements of Section 7 of this Agreement and (a) the Power Purchase Agreement, (b) the then applicable requirements of the System Agreement (or any agreement substituted therefor) or (c) any Other MSEI Power Agreement be entitled to receive all Power available to MSEI from time to time at any MSEI Generating Unit: provided, that (i) should any Party terminate its participation in (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement, then it is agreed that MSEI, such Party and the other Parties shall enter into a separate agreement whereby such Party shall continue to be entitled to receive Power, and obligated to take Power, available to MSEI at any MSEI Generating Unit which has been designated as being subject to this Agreement at the time such Party shall exercise its right to terminate such participation, in such amounts and for such consideration calculated from time to time as if such Party had remained a party to (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement, and (ii) should (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement be cancelled or terminated, then it is agreed that MSEI and all such Parties shall enter into a separate agreement whereby such Parties shall continue to be entitled to receive Power, and obligated to take Power, available to MSEI at any MSEI Generating Unit at the time of cancellation or termination of (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement, in such amounts and for such consideration calculated from time to time as if (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement had remained in effect and MSEI and such Parties were parties thereto. Notwithstanding such withdrawal from, or cancellation or termination of, (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement, each Party shall remain bound by the terms of this Agreement with respect to any MSEI Generating Unit which has been designated as being subject to this Agreement at the time of such withdrawal, cancellation or termination. The Power available to MSEI from both Unit No. 1 and Unit No. 2 of the Project will be allocated to the Participating Parties according to the following percentages:




AP&L
17.1%
LP&L
26.9%
MP&L
31.3%
NOPSI
24.7%

The percentage applicable to any Participating Party is hereinafter called its “Allocable Share”. Notwithstanding such fixed allocation, the Participating Parties may, pursuant to the Power Purchase Agreement or otherwise, freely assign and transfer all or any portion of their respective Allocable Shares. No such transfer or assignment will change the percentage Allocable Share of any Participating Party hereunder. In consideration of MSEI’s commitment to undertake construction of the Project and, its other obligations hereunder and of the right of the Parties to receive Power available to MSEI at any MSEI Generating Unit under the terms of (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement, the Parties agree to pay to MSEI, commencing on the date on which a particular MSEI Generating Unit is deemed to be in operation for the purposes of this Agreement, such amounts from time to time as, when added to amounts received by MSEI from any other source, including, but not limited to, amounts (if any) received by MSEI with respect to such MSEI Generating Unit under the terms of (a) the Power Purchase Agreement, (b) the System Agreement or (c) any Other MSEI Power Agreement, shall be at least equal to MSEI’s total operating expenses and interest charges with respect to such MSEI Generating Unit, including (without limitation), for the purposes of this Agreement, (i) all expenses, deductions, charges and other items properly chargeable to the applicable Income Accounts 400 to 435, inclusive, of the Uniform System of Accounts prescribed by the Federal Energy Regulatory Commission for Class A and Class B Public Utilities and Licensees, as in effect on April 1, 1980 (Uniform System of Accounts), or, if such MSEI Generating Unit is not in service for any reason, all expenses, deductions, charges and other items which would be chargeable to the above Accounts if such MSEI Generating Unit were in service; it being agreed that when a particular generating unit is designated as being subject to this Agreement by MSEI and the Parties, then, solely for the purposes of determining MSEI’s total operating expenses under this Section 4, such MSEI Generating Unit shall be deemed to be in operation on the date, and the accrual of depreciation as an operating expense with respect to the MSEI Generating Unit shall be deemed to commence on the date, at the rate and in the manner and continue for the duration, as is specified in the document so designating such generating unit as an MSEI Generating Unit subject to this Agreement, whether or not such MSEI Generating Unit is actually in operation on such date, and (ii) such expenses as might be incurred in connection with permanent shut-down of any MSEI Generating Unit which is nuclear-fueled and, in the event of any such shut-down, for perpetual maintenance and surveillance of any such facility in accordance with, and as required by, all applicable regulations established by any governmental authority having jurisdiction. Payments of all such expenses, deductions, charges, and other items to be made pursuant to this Section 4 shall be made monthly and (a) with respect to Unit No. 1 and Unit No. 2 of the Project shall be apportioned severally and not jointly among the Participating Parties, in accordance with the Allocable Share of each Participating Party, and (b) with respect to any Additional MSEI Generating Unit shall be apportioned among the Parties whose Company Capability is less than their Capability Responsibility, as such terms are defined in the System Agreement and as determined in accordance with Section 10 of the System Agreement, in the ratio of each such Party’s deficiency to the sum of the deficiencies of all such deficient Parties; provided, however, that if in any month no Party has such a deficiency then the payments for such month shall be apportioned among the Parties in accordance with the ratio of their then respective Capability Responsibilities, as such term is defined in the System Agreement. For the purpose of this Agreement, the Capability of all MSEI Generating Units shall be included in the System Capability, as such terms are defined in the System Agreement. In the event the System Agreement is not then in effect, or has been amended or interpreted so that




at least one or more of the Parties is not obligated to make the entire payment herein provided, then the Parties agree to make payments hereunder with respect to any Additional MSEI Generating Unit in accordance with the ratio of their then respective “Capability Responsibilities”, as such term is defined in Appendix A attached hereto and made a part hereof and not as defined in the System Agreement. Payments made by any Participating Party to MSEI pursuant to this Section 4 with respect to Unit No. 1 and Unit No. 2 of the Project shall be applied as a credit to such Participating Party’s liability for payments to MSEI under the Power Purchase Agreement or the System Agreement, as the case may be. Payments made by any Party to MSEI pursuant to this Section 4 with respect to any Additional MSEI Generating Unit shall be applied as a credit to such Party’s liability for payments to MSEI under (a) the System Agreement or (b) any Other MSEI Power Agreement.
“5.      For the purpose of determining MSEI’s expenses and the Participating Parties’ obligations under Section 4 of this Agreement with respect to Unit No. 1 and Unit No. 2 of the Project, it is hereby agreed that both Unit No. 1 and Unit No. 2 of the Project shall be deemed to be in operation on the earlier of December 31, 1984 (whether or not such Units, or either of them, are then completed or in operation) or the date on which either of such Units is first placed in commercial operation as determined under the Power Purchase Agreement, and the accrual of depreciation and amortization with respect to the Project shall be deemed to commence on the earlier of such dates; that such accrual of depreciation and amortization shall be at the rate of 3.65% per annum of the aggregate amount properly chargeable (prior to the deduction therefrom of any depreciation and amortization) at the time with respect to the Project to Balance Sheet Accounts 101, 102, 103, 104, 105, 106, 107 (the aforementioned accounts being exclusive of land and land rights), 118, 120 (.1 through .5), 121, 123, 123.1, 124, 151, 152, 153, 154, 155, 156, 157, 163, 182, 183, 184, 185, 186, 187, and 188 of the Uniform System of Accounts and such other accounts as are properly subject to depreciation or amortization at the time pursuant to such Uniform System of Accounts; and that such accrual shall continue during each of the first 27.4 years after the date of commencement of such accrual hereunder whether or not such Units, or either of them, shall ever commence operation and/or remain in operation; provided, however, that if Unit No. 1 is placed in commercial operation prior to December 31, 1984 and Unit No. 2 is not completed and ready for service at such time, then until December 31, 1988 or the date Unit No. 2 is placed in commercial operation, whichever date occurs earlier, expenditures included in Account 107 which are identified exclusively with the construction of Unit No. 2 may be excluded from the calculation of the aggregate amount subject to the accrual of depreciation and amortization pursuant to this paragraph.”
3.      All other provisions of the Availability Agreement shall be deemed to continue in full force and effect.





IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Availability Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year above written.
MIDDLE SOUTH ENERGY, INC.
LOUISIANA POWER & LIGHT COMPANY
 
 
By:/s/ Edwin A. Lupberger
Senior Vice Presiden
By: /s/ J. M. Wyatt
President and
Chief Executive Officer
 
 
ARKANSAS POWER & LIGHT COMPANY
MISSISSIPPI POWER & LIGHT COMPANY
 
 
By:/s/ Jerry L. Maulden
President and
Chief Executive Officer
By: /s/ D. C. Lutken
President and
Chief Executive Officer
 
 
NEW ORLEANS PUBLIC SERVICE INC.
 
 
 
By:/s/ James M. Cain
President and
Chief Executive Officer
 






Exhibit 10(b)4
THIRD AMENDMENT TO
AVAILABILITY AGREEMENT
Between
MIDDLE SOUTH ENERGY. INC.
And
ARKANSAS POWER & LIGHT COMPANY,
LOUISIANA POWER & LIGHT COMPANY,
MISSISSIPPI POWER & LIGHT COMPANY, and
NEW ORLEANS PUBLIC SERVICE INC.
This Third Amendment, dated as of the 28th day of June, 1984, between Middle South Energy, Inc. (MSE), and Arkansas Power & Light Company (AP&L), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L) and New Orleans Public Service Inc. (NOPSI ), to the Availability Agreement, dated as of the 21st day of June, 1974, between MSE and AP&L, Arkansas-Missouri Power Company (Ark-Mo), LP&L, MP&L and NOPSI, as amended by the First Amendment thereto dated as of June 30, 1977 and the Second Amendment thereto dated as of June 15, 1981 (Availability Agreement), Witnesseth That:
Whereas, pursuant to the provisions of Section 5 of the Availability Agreement, it has been agreed that both Unit No. 1 and Unit No. 2 of the Project shall be deemed to be in operation no later than December 31, 1984 for the purposes of commencing the accrual of depreciation and amortization with respect to such Units and that, if Unit No. l of the Project has been placed in operation on or prior to December 31, 1984, Unit No. 2 of the Project shall be deemed to be in operation no later than December 31, 1988 for purposes of commencing the accrual of depreciation and amortization with respect to such Unit; and
Whereas, commercial operation of Unit No. 1 is currently scheduled to commence in the first quarter of 1985; and
Whereas, MSE and the Parties deem it desirable that there be a reasonable interval between the presently expected commercial operation date of Unit No. 1 and the date on which Unit No. 1 shall be deemed to be in operation under the Availability Agreement for purposes of commencing the accrual of depreciation and amortization with respect to Unit No. 1 and Unit No. 2 of the Project; and
Whereas, effective January 1, 1981, the electric properties of Ark-Mo were consolidated with those of AP&L and Ark-Mo was dissolved, and AP&L assumed all of the obligations of Ark-Mo under the Availability Agreement; and
Whereas, MSE, AP&L, LP&L, MP&L and NOPSI have entered into (i) a First, Fourth, Fifth and Eighth Assignment of Availability Agreement, Consent and Agreement, dated as of June 30, 1977, March 20, 1980, June 15, 1981 and June 30, 1983, respectively, with Manufacturers Hanover Trust Company, as agent for certain banks, (ii) a Second and Third Assignment of Availability Agreement, Consent and




Agreement, dated as of June 30, 1977 and January 1, 1980, respectively, with United States Trust Company of New York and Malcolm J. Hood, as trustees, (iii) a Sixth and Seventh Assignment of Availability Agreement, Consent and Agreement, dated as of February 5, 1982 and February 18, 1983, respectively, with Credit Suisse First Boston Limited, as agent for certain banks, and (iv) a Ninth Assignment of Availability Agreement, Consent and Agreement, dated as of December 1, 1983, with Citibank, N.A. and Deposit Guaranty National Bank, as Trustee; and
Now, Therefore, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree with each other as follows:
1.      For the purposes of this Third Amendment to Availability Agreement, any term used herein which has a defined meaning in the Availability Agreement shall have the same meaning herein.
2.      Section 5 of the Availability Agreement is hereby deemed amended so that the two references in Section 5 to "December 31, 1984" shall he changed to read "December 31, 1985".
3.      All other provisions of the Availability Agreement shall be deemed to continue in full force and effect.
In Witness Whereof, the parties hereto have caused this Third Amendment to Availability Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
Arkansas Power & Light Company
Mississippi Power & Light Company
 
 
By: /s/ Jerry L. Maulden
Jerry L. Maulden,
President
By: /s/ D.C. Lutken                              
D.C. Lutken,
Chairman of the Board and
Chief Executive Officer
 
 
Louisiana Power & Light Company
New Orleans Public Service Inc.
 
 
By: /s/ James M. Cain                          
James M. Cain,
President
By: /s/ James M. Cain                          
James M. Cain,
President
 
Middle South Energy, Inc.
 
 
 
By: /s/ F.W. Lewis                                
F.W. Lewis,
President






Exhibit 10(b)5
FOURTH AMENDMENT TO
AVAILABILITY AGREEMENT
Between
SYSTEM ENERGY RESOURCES, INC.
And
ARKANSAS POWER & LIGHT COMPANY,
LOUISIANA POWER & LIGHT COMPANY,
MISSISSIPPI POWER & LIGHT COMPANY, and
NEW ORLEANS PUBLIC SERVICE INC.
This Fourth AMENDMENT, dated as of the 1st day of June, 1989, between System Energy Resources, Inc. (System Energy), and Arkansas Power & Light Company (AP&L), Louisiana Power & Light Company (LP&L), Mississippi Power & Light Company (MP&L) and New Orleans Public Service Inc. (NOPSI), to the Availability Agreement, dated as of the 21st day of June, 1974, between Middle South Energy, Inc. and AP&L, Arkansas-Missouri Power Company, LP&L, MP&L and NOPSI, as amended by the First Amendment thereto dated as of June 30, 1977, the Second Amendment thereto dated as of June 15, 1981 and the Third Amendment thereto dated as of June 28, 1984 (Availability Agreement), WITNESSETH THAT:
WHEREAS, a special group of officials have conducted an evaluation and review of Unit No. 2 of the Project; and
WHEREAS, System Energy and the Parties deem it desirable that, for purposes of the Availability Agreement, any of System Energy’s investment associated with Unit No. 2 which it will not be permitted to charge its customers in wholesale rates, and the obligations of the Parties to pay such investment to System Energy, be amortizable at the rate of 3.65% of such investment over a period of 27.4 years; and
WHEREAS, effective December 20, 1986, System Energy’s name was changed from Middle South Energy, Inc. to System Energy Resources, Inc.; and
WHEREAS, System Energy, AP&L, LP&L, MP&L and NOPSI have entered into (i) a Sixteenth Assignment of the Availability Agreement, Consent and Agreement, dated as of May 1, 1986, with United States Trust Company of New York and Malcolm J. Hood, as Trustees, (ii) a Fourteenth and Fifteenth Assignment of the Availability Agreement, Consent and Agreement, dated as of June 15, 1985 and May 1, 1986, respectively, with Deposit Guaranty National Bank, United States Trust Company of New York and Malcolm J. Hood, as Trustees, (iii) a Seventeenth, Eighteenth, Nineteenth, Twentieth and Twenty-first Assignment of the Availability Agreement, Consent and Agreement, dated as of September 1, 1986, September 1, 1986, September 1, 1986, November 15, 1987 and December 1, 1987, respectively, with United States Trust Company of New York and Gerard F. Ganey, as Trustees, and (iv) a Twenty-second Assignment of the Availability Agreement, Consent and Agreement, dated as of December 1, 1988, with




Chemical Bank as Agent, pursuant to which the following terms of this Fourth Amendment have been consented to; and
WHEREAS, it is now appropriate and necessary to revise Section 4 of the Availability Agreement accordingly.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree with each other as follows:
1.      For the purposes of this Fourth Amendment to Availability Agreement, any term used herein which has a defined meaning in the Availability Agreement shall have the same meaning herein.
2.      Section 4 of the Availability Agreement is hereby amended to add the following to the end of such Section:
Notwithstanding anything to the contrary in this Section 4, in the event that any portion of the Project is Abandoned prior to its Completion, the portion of System Energy’s investment which it is not permitted to charge to its customers in wholesale rates (“disallowed investment”) and the obligations of the Parties to pay such disallowed investment to System Energy, shall be amortizable from the date on which System Energy is obligated by applicable generally accepted accounting principles to eliminate the disallowed investment from the asset side of its balance sheet no less rapidly than at the rate of 3.65% of the disallowed investment per annum for a period of 27.4 years. Any portion of the Project that is Abandoned shall no longer be subject to this Availability Agreement except that Section 4 and 5 hereof shall remain applicable to System Energy’s investment (including the disallowed investment) in the Project.
“Abandoned” shall mean the good faith decision by System Energy to abandon any material portion of the Project as evidenced by a resolution of the Board of Directors of System Energy followed by a cessation of all operations (other than preservative maintenance) of such material portion for a period of ninety (90) days certified to in a certificate signed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of System Energy (Officers’ Certificate).
“Completion”, when applied to Unit No. 2, shall mean the first date on which all of the following have occurred: the necessary permits and operating licenses have been issued; the critical tests for the major components have been completed; Unit No. 2 has been placed in the control of System Energy by the principal contractor; Unit No. 2 has been synchronized into the power grid of the Parties for its function in the business of generating electric energy for the production of income; Unit No. 2 is available for commercial operation; and an Officers’ Certificate to such effect shall have been delivered to all necessary parties.
3.      All other provisions of the Availability Agreement shall be deemed to continue in full force and effect.




IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to Availability Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
SYSTEM ENERGY RESOURCES, INC.
By:
/s/ William Cavanaugh, III
William Cavanaugh, III
President

ARKANSAS POWER & LIGHT COMPANY
By:
/s/ John J. Harton
John J. Harton
Vice President - Financial
Services, Treasurer and
Assistant Secretary

MISSISSIPPI POWER & LIGHT COMPANY
By:
/s/ G. A. Goff
G. A. Goff
Senior Vice President,
Chief Financial Officer and
Secretary

LOUISIANA POWER & LIGHT COMPANY
By:
/s/ M. H. McLetchie
M. H. McLetchie
Senior Vice President -
Accounting & Finance, and
Treasurer

NEW ORLEANS PUBLIC SERVICE INC.
By:
/s/ M. H. McLetchie
M. H. McLetchie
Senior Vice President -
Accounting & Finance, and
Treasurer





Exhibit 10(b)8
CAPITAL FUNDS AGREEMENT
THIS AGREEMENT dated as of June 21, 1974 by and between Middle South Utilities, Inc. (Middle South) and Middle South Energy, Inc. (Company);
W I T N E S S E T H :
Whereas, Mississippi Power & Light Company (MP&L), a subsidiary of Middle South, is presently undertaking the Grand Gulf Nuclear Electric Station project (Project), a two unit nuclear-fueled electric generating plant having an expected aggregate capacity of 2,500,000 KW and to be located near Port Gibson, Mississippi, the first unit of which is presently expected to be placed in commercial operation in 1980 and the second unit of which is presently expected to be placed in commercial operation in 1982, or later; and
Whereas, MP&L proposes to transfer such assets (consisting chiefly of land, engineering and design work and licensing costs) as comprise the Project at the time of transfer, and to assign all related contracts for the construction of the Project, to the Company pursuant to the terms of the Sales Agreement dated as of June 21, 1974 between MP&L and the Company (Sales Agreement), and in consideration thereof receive from the Company in cash an amount determined in accordance with Section 2 of the Sales Agreement; and
Whereas, the Company proposes, prior to such transfer of the Project by MP&L to the Company, to issue and sell to Middle South, and Middle South proposes to purchase from the Company, 40,000 shares of the common stock, no par value, of the Company at the price of $1,000 cash per share, for an aggregate cash purchase price of $40,000,000; and
Whereas, the Company proposes, upon acquisition by the Company of the Project, to complete the construction thereof and, upon completion of such construction, to have the Project operated and to make available all power (and the energy associated therewith) available at the Project pursuant to the terms of the Availability Agreement between the Company and Arkansas Power & Light Company, Arkansas-Missouri Power Company, Louisiana Power & Light Company, MP&L, New Orleans Public Service Inc. and Middle South Services, Inc. dated as of June 21, 1974 and the System Agreement referred to in the Availability Agreement; and
Whereas, Middle South proposes to supply or cause to be supplied to the Company certain amounts of additional capital under the circumstances herein described; and
Whereas, the Company proposes to issue and sell from time to time, such amounts of debt securities, and to the extent necessary or desirable, preferred stock, to banks, institutions and the public as may be necessary, together with capital supplied to the Company by Middle South and other funds available to the Company, to construct the Project, to enable the Project to be operated upon the completion of the construction thereof and for other corporate purposes;
Now, Therefore, in consideration of the terms and of the agreements hereinafter set forth, the parties hereto agree with each other as follows:
1.1      The Company shall issue and sell and, at the request of the Company, Middle South will purchase 40,000 shares of the common stock, no par value, of the Company at a price of $1,000 per share, for an aggregate cash purchase price of $40,000,000; proceeds from the sale of such stock will be applied, to the extent necessary, to the payment of the purchase price of the Project pursuant to the Sales Agreement.




1.2      The Company shall, subsequent to the date on which the Company shall acquire the Project from MP&L pursuant to the Sales Agreement, use its best efforts to construct the Project and place it and maintain it in commercial operation and, in connection therewith, take such action under this agreement and before all governmental regulatory authorities as shall be necessary to enable the Company to do so.
1.3      Middle South shall, subsequent to the date on which MP&L shall transfer the Project to the Company pursuant to the Sales Agreement, supply or cause to be supplied to the Company:
(a) such amounts of capital as may be required from time to time by the Company in order to maintain that portion of the capitalization, as hereinafter defined, of the Company as shall be represented by the aggregate of the par value of, or stated capital represented by, the outstanding shares of all classes of capital stock and the surplus of the Company, paid in, earned and other, if any, at an amount equal to at least 35% of the capitalization, as hereinafter defined, of the Company or at such higher percentage as governmental regulatory authorities having jurisdiction in the premises may require; and

(b) such amounts of capital (in addition to (i) the capital made available to the Company by Middle South in exchange for shares of its common stock pursuant to Section 1.1 of this agreement, and (ii) the capital made available to the Company at any time in question pursuant to the Bank Loan Agreement (as hereinafter defined) through the issuance by the Company of its Notes thereunder) as shall be required in order for the Company to continue to own, and to complete construction of, the Project, to provide for pre-operating expenses and interest charges of the Company, to permit the commercial operation of the two nuclear-fueled electric generating units of the Project, to permit the continuation of such commercial operation after the commencement of such commercial operation, and to pay in full at their stated maturity dates all Notes of the Company issued pursuant to the Bank Loan Agreement (as hereinafter defined), it being understood and agreed that, in connection with the capital requirements of the Company, nuclear fuel leasing and the entering into by the Company of industrial development revenue bond financing with respect to pollution control facilities and the issuance and sale by the Company of debt securities, and, to the extent necessary or desirable, preferred stock, to banks, institutions and the public shall constitute some of the means by which required capital can be made available to the Company.

As used in this Section 1.3 (i) the term “capitalization” of the Company shall mean, as of any particular time, an amount equal to the sum of the total principal amount of all indebtedness for borrowed money of the Company, (exclusive of Short Term Debt) secured or unsecured, then outstanding, and the aggregate of the par value of, or stated capital represented by, the outstanding shares of all classes of capital stock of the Company and the surplus of the Company, paid in, earned and other, if any, and (ii) the terms “indebtedness for borrowed money of the Company” and “Short Term Debt” shall have the respective meanings set forth in Subsection 1.1 of the Bank Loan Agreement hereinafter defined. If, with respect to any amount of capital which Middle South shall, at any time in question, be obligated to supply directly to the Company, Middle South and the Company shall fail to agree on the type, or terms, of any particular security to be issued by the Company and sold to Middle South, then and in such event, Middle South shall supply such capital to the Company in the form of a cash capital contribution.
2.1      The performance of the obligations of the Company hereunder shall be subject to the receipt and continued effectiveness of all authorizations of governmental regulatory authorities at the time necessary to permit the Company to perform its duties and obligations hereunder, including the receipt and continued effectiveness of all authorizations of governmental regulatory authorities at the time necessary to permit the Company to construct that portion of the Project then being constructed, to operate the Project or to have the




Project operated for it (to the extent the Project is then operable), and to issue and to sell securities then to be issued and sold by the Company to Middle South or to others for the purpose of securing required capital. The Company shall use its best efforts to secure and maintain all such authorizations of governmental regulatory authorities.
2.2      The performance of the obligations of Middle South hereunder shall be subject to the receipt and continued effectiveness of all authorizations of governmental regulatory authorities necessary at the time to permit Middle South at the time to perform its duties and obligations then to be performed hereunder, including the receipt and continued effectiveness of all authorizations of governmental regulatory authorities necessary at the time to permit Middle South at the time to supply or cause to be supplied to the Company capital pursuant to the provisions of Section 1.3 of this agreement or to permit Middle South at the time to acquire securities issued and sold to Middle South by the Company or to permit the making by Middle South at the time of cash capital contributions to the Company. Middle South shall use its best efforts to secure and maintain all such authorizations of governmental regulatory authorities. Middle South shall be unconditionally obligated to perform its duties and obligations hereunder, subject to the foregoing provisions of this Section 2.2, (a) whether or not the Company shall have received all authorizations of governmental regulatory authorities necessary at the time to permit the Company to perform its duties and obligations under this agreement, (b) whether or not any such authorizations, continue, at the time, in effect, and (c) whether or not, at any time in question, the Company shall have performed its duties and obligations under this agreement.
3.      To the extent that it may legally do so, Middle South and the Company each hereby irrevocably waives any defense based on the adequacy of a remedy at law which may be asserted as a bar to the remedy of specific performance in any action brought against it for specific performance of this agreement by Middle South, by the Company, by any of the parties to the Bank Loan Agreement dated as of June 21, 1974 among the Company, the banks named therein and Manufacturers Hanover Trust Company, as Agent, as the same may from time to time be amended or supplemented (Bank Loan Agreement), by a trustee under any mortgage or other debt instrument which Middle South or the Company may, subject to requisite regulatory authority, enter into, or by any receiver or trustee appointed for Middle South or the Company under the bankruptcy or insolvency laws of any jurisdiction to which Middle South or the Company is or may be subject; provided, however, that nothing herein contained shall be deemed to constitute a representation or warranty by Middle South or the Company that the respective obligations of Middle South or the Company under this agreement are, as a matter of law, subject to the equitable remedy of specific performance.
4.      Middle South shall not be entitled to set off against any obligation under Section 1.3 of this agreement to supply capital or to cause capital to be supplied to the Company (i) any indebtedness of the Company to Middle South or (ii) the amount of any claim by Middle South against the Company, whether or not arising under this agreement. The foregoing, however, shall not affect in any other way any rights and remedies of Middle South with respect to any amounts owed to it by the Company or any such claim by Middle South against the Company.
5.      The invalidity or unenforceability of any provision of this agreement shall not affect the remaining provisions hereof.
6.      This agreement shall become effective forthwith and shall continue until all of the Notes issued by the Company under the Bank Loan Agreement, together with all accrued interest thereon, shall have been paid in full.




7.      This agreement shall be binding upon the parties hereto and their respective successors and assigns, but no assignment hereof, or of any right to any funds due or to become due under this agreement, shall in any event relieve either Middle South or the Company of their respective obligations hereunder.
8.      The agreements herein set forth have been made for the benefit of Middle South, the Company, the banks which are parties to the Bank Loan Agreement, and their respective successors and assigns, and no other person shall acquire or have any right under or by virtue of this agreement.
9.      Middle South and the Company may, subject to the provisions of this agreement, enter into a further agreement or agreements between Middle South and the Company, setting forth detailed terms and provisions relating to the performance by Middle South and the Company of their respective obligations under this agreement. No agreement entered into under this Section 9 shall, however, alter to any substantive degree the obligations of either party to this agreement in any manner inconsistent with any of the foregoing sections of this agreement.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
Middle South Utilities, Inc.
By:       /s/ Donald J. Winfield
Donald J. Winfield
Vice President
Middle South Energy, Inc.
By:        /s/ D.C. Lutken
D. C. Lutken
Vice President






Exhibit 10(b)9
FIRST AMENDMENT TO
CAPITAL FUNDS AGREEMENT
Between
ENTERGY CORPORATION
and
SYSTEM ENERGY RESOURCES, INC.

THIS First AMENDMENT, dated as of the 1st day of June, 1989, between Entergy Corporation (Entergy) and System Energy Resources, Inc. (System Energy), to the Capital Funds Agreement, dated as of June 21, 1974, between Middle South Utilities, Inc. and Middle South Energy, Inc. (Capital Funds Agreement), WITNESSETH THAT:
WHEREAS, a special group of officials have conducted an evaluation and review of Unit No. 2 of the Project; and
WHEREAS, Entergy and System Energy deem it desirable to terminate their respective obligations with respect to Unit No. 2 of the Project; and
WHEREAS, effective May 19, 1989, Entergy’s name was changed from Middle South Utilities, Inc. to Entergy Corporation; and
WHEREAS, effective December 20, 1986, System Energy’s name was changed from Middle South Energy, Inc. to System Energy Resources, Inc.; and
WHEREAS, Entergy and System Energy have entered into (1) a Sixteenth Supplementary Capital Funds Agreement and Assignment, dated as of May 1, 1986, with United States Trust Company of New York and Malcolm J. Hood, as Trustees, (ii) a Fourteenth and Fifteenth Supplementary Capital Funds Agreement and Assignment, dated as of June 15, 1985 and May 1, 1986, respectively, with Deposit Guaranty National Bank, United States Trust Company of New York and Malcolm J. Hood, as Trustees, (iii) a Seventeenth, Eighteenth, Nineteenth, Twentieth and Twenty-first Supplementary Capital Funds Agreement and Assignment, dated as of September 1, 1986, September 1, 1986, September 1, 1986, November 15, 1987 and December 1, 1987, respectively, with United States Trust Company of New York and Gerard F. Ganey, as Trustees, and (iv) a Twenty-second Supplementary Capital Funds Agreement and Assignment, dated as of December 1, 1988, with Chemical Bank as Agent, pursuant to which the following terms of this First Amendment have been consented to; and
WHEREAS, it is now appropriate and necessary to revise the Capital Funds Agreement accordingly.
NOW, THEREFORE, in consideration of the terms and conditions hereinafter set forth, the parties hereto agree with each other as follows:
1.      For purposes of this First Amendment to the Capital Funds Agreement, any term used herein which has a defined meaning in the Capital Funds Agreement shall, except as provided herein, have the same meaning herein.
2.      In the event that any portion of the Project is Abandoned prior to its Completion, the Capital Funds Agreement shall be amended so that all references in such Agreement to the “Project” shall be deemed to exclude all portions of the Project that are Abandoned.




“Abandoned” shall mean the good faith decision by System Energy to abandon any material portion of the Project as evidenced by a resolution of the Board of Directors of System Energy followed by a cessation of all operations (other than preservative maintenance) of such material portion for a period of ninety (90) days certified to in a certificate signed by the President or a Vice-President and the Treasurer or an Assistant Treasurer of System Energy (Officers’ Certificate).
“Completion”, when applied to Unit No. 2, shall mean the first date on which all of the following have occurred: the necessary permits and operating licenses have been issued; the critical tests for the major components have been completed; Unit No. 2 has been placed in the control of System Energy by the principal contractor; Unit No. 2 has been synchronized into the power grid of the Parties for its function in the business of generating electric energy for the production of income; Unit No. 2 is available for commercial operation; and an Officers’ Certificate to such effect shall have been delivered to all necessary parties.
3.      All other provisions of the Capital Funds Agreement, including without limitation Section 1.3(a) of the Capital Funds Agreement, shall be deemed to continue in full force and effect notwithstanding such amendment.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to the Capital Funds Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.
ENTERGY CORPORATION

By:
/s/ H. Stuart Ball
H. Stuart Ball
Treasurer

SYSTEM ENERGY RESOURCES, INC.

By:
/s/ William Cavanaugh, III
William Cavanaugh, III
President





Exhibit 10(c)1
AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT
This AMENDMENT TO LIMITED LIABILITY COMPANY AGREEMENT (this “ Amendment ”) is dated and effective as of May 26, 2017 (the “ Effective Date ”) and amends the Fourth Amended and Restated Limited Liability Company Agreement of Entergy Holdings Company LLC (the “ Company ”), effective as of September 19, 2015 (the “ LLC Agreement ”). Capitalized terms used but not defined in this Amendment have the respective meanings assigned to such terms in the LLC Agreement.

RECITAL

WHEREAS, this Amendment is executed by Entergy International LTD LLC (“EIL”) and Entergy Utility Holding Company, LLC (“EUH”), as the holders of the issued and outstanding Class A Common Membership Interests, in accordance with Section 17.9 of the LLC Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the terms and conditions stated herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the following is hereby agreed to:
1. Amendment . Section 9.1(viii) of the LLC Agreement is amended and restated in its entirety as follows:

“After all the distributions to the holders of the Class C Preferred Membership Interests provided for in clauses (vi) and (vii) of this Section 9.1 , with respect to the then-current Distribution Period and all preceding Distribution Periods, have been paid in full, or have been declared in full and funds set apart for the payment of such distributions, the Class D Preferred Membership Interests shall be entitled to receive, if, when, and as declared by the Directors after such time, out of funds legally available for the payment of distributions and in preference to the Common Interests, cumulative cash distributions with respect to each Class D Preferred Membership Interest owned in an amount equal to 5.0% of the Class D Preferred Liquidation Price per annum. Such distributions shall be payable quarterly on March 15, June 15, September 15, and December 15 of each year, or if any such date is not a Business Day on the next succeeding Business Day (each such distribution, and each distribution payable to holders of Class D Preferred Membership Interests pursuant to Section 9.1(viii) , a “ Distribution Payment ”, each such date a “ Distribution Payment Date ” and each such quarter a “ Distribution Period ”), beginning on June 15, 2017, to holders of record of the Class D Preferred Membership Interests as of a date to be fixed by the Board not exceeding sixty (60) days and not less than ten (10) days preceding the applicable distribution payment date. For the avoidance of doubt, the Distribution Payment due on June 15, 2017 shall include distributions on the Class D Preferred Membership Interests that are payable for the first and second quarters of 2017. Such distributions shall be made by the Company by mailing a check or sending a wire transfer, in the amount of such distribution, to such holder’s last registered address listed in the transfer records of the Company, in the case of a check, or to an account specified by such holder at least ten (10) days prior to the applicable distribution payment date, in the case of a wire transfer.”

2. Effect of Amendment . Except as expressly set forth herein, this Amendment shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or




agreements contained in the LLC Agreement, all of which are ratified and affirmed in all respects and shall continue in full force and effect. After the Effective Date, any reference in the LLC Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import, and each reference to the LLC Agreement, “thereunder”, “thereof”, “therein” or words of like import in any other agreement between or among the Company and any of the Members or between or among any of the Members, shall be deemed a reference to the LLC Agreement as modified hereby.

[Remainder of page intentionally left blank]





IN WITNESS WHEREOF, and intending to be legally bound hereby, the undersigned holders of the issued and outstanding Class A Common Membership Interests have executed and delivered this Amendment in accordance with Section 17.9 of the LLC Agreement as of the Effective Date.


ENTERGY INTERNATIONAL LTD LLC


By:         
Name: Steven C. McNeal
Title: Vice President and Treasurer


ENTERGY UTILITY HOLDING COMPANY, LLC

By:         
Name: Steven C. McNeal
Title: Vice President and Treasurer







 
 
 
 
 
Exhibit 12(a)
 
 
 
 
 
 
 
 
 
 
 
Entergy Arkansas, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
 
 
  Total Interest Charges

$91,318

 

$93,921

 

$105,622

 

$115,311

 

$122,075

  Interest applicable to rentals
5,350

 
4,539

 
5,109

 
3,210

 
3,036

 
 
 
 
 
 
 
 
 
 
Total fixed charges, as defined
96,668

 
98,460

 
110,731

 
118,521

 
125,111

 
 
 
 
 
 
 
 
 
 
Preferred dividends, as defined (a)
11,310

 
11,310

 
11,310

 
8,672

 
2,350

 
 
 
 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined

$107,978

 

$109,770

 

$122,041

 

$127,193

 

$127,461

 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
  Net Income

$161,948

 

$121,392

 

$74,272

 

$167,212

 

$139,844

  Add:
 
 
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
 
 
       Total
91,787

 
83,629

 
40,541

 
107,773

 
93,804

    Fixed charges as above
96,668

 
98,460

 
110,731

 
118,521

 
125,111

 
 
 
 
 
 
 
 
 
 
Total earnings, as defined

$350,403

 

$303,481

 

$225,544

 

$393,506

 

$358,759

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.62

 
3.08

 
2.04

 
3.32

 
2.87

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 
 
 
 preferred dividends, as defined
3.25

 
2.76

 
1.85

 
3.09

 
2.81

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
 
 
 
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
      requirement by one hundred percent (100%) minus the income tax rate.
 
 







 
 
 
 
 
Exhibit 12(b)
 
 
 
 
 
 
 
 
 
 
 
Entergy Louisiana, LLC
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Distributions
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
 
 
Total Interest

$234,647

 

$253,455

 

$259,894

 

$273,283

 

$275,185

  Interest applicable to rentals
5,445

 
5,238

 
5,534

 
4,041

 
5,649

     
 
 
 
 
 
 
 
 
 
Total fixed charges, as defined
240,092

 
258,693

 
265,428

 
277,324

 
280,834

     
 
 
 
 
 
 
 
 
 
Preferred distributions, as defined (a)
12,638

 
12,672

 
9,325

 
—

 
—

 
 
 
 
 
 
 
 
 
 
Combined fixed charges and preferred distributions, as defined

$252,730

 

$271,365

 

$274,753

 

$277,324

 

$280,834

 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
  Net Income

$414,126

 

$446,022

 

$446,639

 

$622,047

 

$316,347

  Add:
 
 
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
 
 
Total income taxes
138,696

 
185,052

 
178,671

 
89,734

 
485,298

    Fixed charges as above
240,092

 
258,693

 
265,428

 
277,324

 
280,834

     
 
 
 
 
 
 
 
 
 
Total earnings, as defined

$792,914

 

$889,767

 

$890,738

 

$989,105

 

$1,082,479

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.30

 
3.44

 
3.36

 
3.57

 
3.85

     
 
 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 
 
 
preferred distributions, as defined
3.14

 
3.28

 
3.24

 
3.57

 
3.85

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
 
 
 
(a) "Preferred distributions," as defined by SEC regulation S-K, are computed by dividing the preferred distribution
      requirement by one hundred percent (100%) minus the income tax rate.
 
 





 
 
 
 
 
Exhibit 12(c)
 
 
 
 
 
 
 
 
 
 
 
Entergy Mississippi, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
 
 
  Total Interest

$59,031

 

$57,002

 

$57,842

 

$57,114

 

$51,260

  Interest applicable to rentals
1,148

 
1,498

 
1,765

 
1,269

 
1,440

 
 
 
 
 
 
 
 
 
 
Total fixed charges, as defined
60,179

 
58,500

 
59,607

 
58,383

 
52,700

 
 
 
 
 
 
 
 
 
 
Preferred dividends, as defined (a)
4,580

 
4,580

 
4,580

 
3,956

 
1,543

 
 
 
 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined

$64,759

 

$63,080

 

$64,187

 

$62,339

 

$54,243

 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Income

$82,159

 

$74,821

 

$92,708

 

$109,184

 

$110,032

  Add:
 
 
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
 
 
    Total income taxes
49,757

 
55,710

 
61,872

 
63,854

 
73,919

    Fixed charges as above
60,179

 
58,500

 
59,607

 
58,383

 
52,700

 
 
 
 
 
 
 
 
 
 
Total earnings, as defined

$192,095

 

$189,031

 

$214,187

 

$231,421

 

$236,651

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
3.19

 
3.23

 
3.59

 
3.96

 
4.49

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 
 
 
 preferred dividends, as defined
2.97

 
3.00

 
3.34

 
3.71

 
4.36

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_______________
 
 
 
 
 
 
 
 
 
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
      requirement by one hundred percent (100%) minus the income tax rate.





 
 
 
 
 
Exhibit 12(d)
 
 
 
 
 
 
 
 
 
 
 
Entergy New Orleans, LLC
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
 
 
  Total Interest

$16,892

 

$16,820

 

$17,312

 

$21,061

 

$21,281

  Interest applicable to rentals
635

 
620

 
676

 
422

 
955

 
 
 
 
 
 
 
 
 
 
Total fixed charges, as defined
17,527

 
17,440

 
17,988

 
21,483

 
22,236

 
 
 
 
 
 
 
 
 
 
Preferred dividends, as defined (a)
1,569

 
1,569

 
1,569

 
1,569

 
1,367

 
 
 
 
 
 
 
 
 
 
Combined fixed charges and preferred dividends, as defined

$19,096

 

$19,009

 

$19,557

 

$23,052

 

$23,603

 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Net Income

$12,608

 

$31,030

 

$44,925

 

$48,849

 

$44,553

  Add:
 
 
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
 
 
     Total
2,277

 
13,450

 
25,190

 
28,705

 
33,278

    Fixed charges as above
17,527

 
17,440

 
17,988

 
21,483

 
22,236

 
 
 
 
 
 
 
 
 
 
Total earnings, as defined

$32,412

 

$61,920

 

$88,103

 

$99,037

 

$100,067

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined (b)
1.85

 
3.55

 
4.90

 
4.61

 
4.50

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to combined fixed charges and
 
 
 
 
 
 
 
 
 
 preferred dividends, as defined
1.70

 
3.26

 
4.50

 
4.30

 
4.24

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
_________________
 
 
 
 
 
 
 
 
 
(a) "Preferred dividends," as defined by SEC regulation S-K, are computed by dividing the preferred dividend
      requirement by one hundred percent (100%) minus the income tax rate.
 
 





 
 
 
 
 
Exhibit 12(e)
 
 
 
 
 
 
 
 
 
 
 
Entergy Texas, Inc. and Subsidiaries
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Combined Fixed Charges and Preferred Dividends
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
 
 
  Total Interest charges

$92,156

 

$88,049

 

$86,024

 

$87,776

 

$86,719

  Interest applicable to rentals
1,918

 
1,782

 
1,794

 
1,145

 
1,421

 
 
 
 
 
 
 
 
 
 
Total fixed charges, as defined

$94,074

 

$89,831

 

$87,818

 

$88,921

 

$88,140

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
  Net Income

$57,881

 

$74,804

 

$69,625

 

$107,538

 

$76,173

  Add:
 
 
 
 
 
 
 
 
 
    Income taxes
30,108

 
49,644

 
37,250

 
63,097

 
48,481

    Fixed charges as above
94,074

 
89,831

 
87,818

 
88,921

 
88,140

 
 
 
 
 
 
 
 
 
 
Total earnings, as defined

$182,063

 

$214,279

 

$194,693

 

$259,556

 

$212,794

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
1.94

 
2.39

 
2.22

 
2.92

 
2.41

 
 
 
 
 
 
 
 
 
 





 
 
 
 
 
Exhibit 12(f)
 
 
 
 
 
 
 
 
 
 
 
System Energy Resources, Inc.
Computation of Ratios of Earnings to Fixed Charges and
Ratios of Earnings to Fixed Charges
 
 
 
 
 
 
 
 
 
 
 
Twelve Months Ended
 
December 31,
 
2013
 
2014
 
2015
 
2016
 
2017
 
 
 
 
 
 
 
 
 
 
Fixed charges, as defined:
 
 
 
 
 
 
 
 
 
  Total Interest

$38,173

 

$58,384

 

$45,532

 

$37,529

 

$37,141

  Interest applicable to rentals
974

 
799

 
1,091

 
654

 
853

 
 
 
 
 
 
 
 
 
 
Total fixed charges, as defined

$39,147

 

$59,183

 

$46,623

 

$38,183

 

$37,994

 
 
 
 
 
 
 
 
 
 
Earnings as defined:
 
 
 
 
 
 
 
 
 
  Net Income

$113,664

 

$96,334

 

$111,318

 

$96,744

 

$78,596

  Add:
 
 
 
 
 
 
 
 
 
    Provision for income taxes:
 
 
 
 
 
 
 
 
 
      Total
68,853

 
83,310

 
53,077

 
71,061

 
69,969

    Fixed charges as above
39,147

 
59,183

 
46,623

 
38,183

 
37,994

 
 
 
 
 
 
 
 
 
 
Total earnings, as defined

$221,664

 

$238,827

 

$211,018

 

$205,988

 

$186,559

 
 
 
 
 
 
 
 
 
 
Ratio of earnings to fixed charges, as defined
5.66

 
4.04

 
4.53

 
5.39

 
4.91

 
 
 
 
 
 
 
 
 
 



Exhibit 21

Subsidiaries of Entergy Corporation as of December 31, 2017

Certain subsidiaries, which if considered in the aggregate as a single subsidiary would not constitute a significant subsidiary as of December 31, 2017, have been omitted.

Name of Company
 
State of Incorporation
 
 
 
Entergy Corporation
 
Delaware
  Entergy Arkansas, Inc.
 
Arkansas
    System Fuels, Inc.
 
Louisiana
    Arkansas Power & Light Company, LLC
 
Arkansas
    Entergy Arkansas Restoration Funding, LLC
 
Delaware
  Entergy Utility Affiliates Holdings, LLC
 
Texas
    Entergy Utility Affiliates, LLC
 
Texas
      Entergy Utility Holding Company, LLC
 
Texas
        Entergy Holdings Company LLC
 
Delaware
        Entergy Louisiana, LLC
 
Texas
          Entergy Holdings Company LLC
 
Delaware
          Prudential Oil & Gas L.L.C.
 
Texas
          Gulf States Utilities Company
 
Texas
          Varibus L.L.C.
 
Texas
          Southern Gulf Railway LLC
 
Texas
          Entergy Louisiana Investment Recovery Funding I, L.L.C.
 
Louisiana
        Louisiana Power & Light Company, LLC
 
Delaware
          Entergy New Orleans, LLC
 
Texas
            Entergy New Orleans Storm Recovery Funding I, L.L.C.
 
Louisiana
            New Orleans Public Service, Inc.
 
Louisiana
  Entergy Utility Assets Holdings, LLC
 
Texas
    Entergy Louisiana Properties, LLC
 
Texas
      System Fuels, Inc.
 
Louisiana
    Entergy Utility Assets, LLC
 
Texas
      Entergy Utility Holding Company, LLC
 
Texas
        Entergy Holdings Company LLC
 
Delaware
        Entergy Louisiana, LLC
 
Texas
          Entergy Holdings Company LLC
 
Delaware
          Prudential Oil & Gas L.L.C.
 
Texas
          Gulf States Utilities Company
 
Texas
          Varibus L.L.C.
 
Texas
          Southern Gulf Railway LLC
 
Texas
          Entergy Louisiana Investment Recovery Funding I, L.L.C.
 
Louisiana
        Louisiana Power & Light Company, LLC
 
Delaware
          Entergy New Orleans, LLC
 
Texas
            Entergy New Orleans Storm Recovery Funding I, L.L.C.
 
Louisiana
            New Orleans Public Service, Inc.
 
Louisiana
  Entergy Utility Group, Inc.
 
Texas
    System Fuels, Inc.
 
Louisiana
    Entergy Utility Holding Company, LLC
 
Texas
      Entergy Holdings Company LLC
 
Delaware
      Entergy Louisiana, LLC
 
Texas
        Entergy Holdings Company LLC
 
Delaware


        Prudential Oil & Gas L.L.C.
 
Texas
        Gulf States Utilities Company
 
Texas
        Varibus L.L.C.
 
Texas
        Southern Gulf Railway LLC
 
Texas
        Entergy Louisiana Investment Recovery Funding I, L.L.C.
 
Louisiana
      Louisiana Power & Light Company, LLC
 
Delaware
        Entergy New Orleans, LLC
 
Texas
          Entergy New Orleans Storm Recovery Funding I, L.L.C.
 
Louisiana
          New Orleans Public Service, Inc.
 
Louisiana
  Entergy Utility Holding Company, LLC
 
Texas
    Entergy Holdings Company LLC
 
Delaware
    Entergy Louisiana, LLC
 
Texas
      Entergy Holdings Company LLC
 
Delaware
      Prudential Oil & Gas L.L.C.
 
Texas
      Gulf States Utilities Company
 
Texas
      Varibus L.L.C.
 
Texas
      Southern Gulf Railway LLC
 
Texas
      Entergy Louisiana Investment Recovery Funding I, L.L.C.
 
Louisiana
    Louisiana Power & Light Company, LLC
 
Delaware
      Entergy New Orleans, LLC
 
Texas
        Entergy New Orleans Storm Recovery Funding I, L.L.C.
 
Louisiana
        New Orleans Public Service, Inc.
 
Louisiana
  Entergy Mississippi, Inc.
 
Mississippi
    System Fuels, Inc.
 
Louisiana
    Jackson Gas Light Company
 
Mississippi
    Entergy Power & Light Company
 
Mississippi
    The Light, Heat and Water Company of Jackson, Mississippi
 
Mississippi
    Mississippi Power & Light Company
 
Mississippi
  Entergy Texas, Inc.
 
Texas
    Entergy Texas Restoration Funding, LLC
 
Delaware
    Entergy Gulf States Reconstruction Funding I, LLC
 
Delaware
    Prudential Oil & Gas L.L.C.
 
Texas
    Southern Gulf Railway LLC
 
Texas
    GSG&T, Inc.
 
Texas
  System Energy Resources, Inc.
 
Arkansas
  Entergy Services, Inc.
 
Delaware
  Entergy Operations, Inc.
 
Delaware
  Entergy Enterprises, Inc.
 
Louisiana
  Entergy Nuclear, Inc.
 
Delaware
    TLG Services, Inc.
 
Connecticut
    Entergy Nuclear PFS Company
 
Delaware
    Entergy Nuclear Potomac Company
 
Delaware
  Entergy Finance Holding, Inc.
 
Arkansas
  Entergy Nuclear Holding Company # 1
 
Delaware
    Entergy Nuclear Generation Company
 
Massachusetts
    Entergy Nuclear New York Investment Company, LLC
 
Delaware
      Entergy Nuclear Indian Point 3, LLC
 
Delaware
      Entergy Nuclear FitzPatrick, LLC
 
Delaware
  Entergy Nuclear Holding Company # 2
 
Delaware
    Entergy Nuclear Operations, Inc.
 
Delaware
    Entergy Nuclear Fuels Company
 
Delaware
  Entergy Nuclear Vermont Finance Company
 
Delaware


  Entergy Nuclear Holding Company, LLC
 
Delaware
    Entergy Nuclear Midwest Investment Company, LLC
 
Delaware
      Entergy Nuclear Palisades, LLC
 
Delaware
    Entergy Nighthawk GP, LLC
 
Delaware
      Entergy Nighthawk LP, LLC
 
Delaware
    Entergy Nuclear Holding Company # 3, LLC
 
Delaware
      Entergy Nuclear Indian Point 2, LLC
 
Delaware
      Entergy Nuclear Nebraska, LLC
 
Delaware
      Entergy Nuclear Vermont Investment Company, LLC
 
Delaware
        Entergy Nuclear Vermont Yankee, LLC
 
Delaware
  Entergy Power Marketing Holding I, Inc.
 
Delaware
    Entergy Power Marketing Properties, LLC
 
Delaware
      Entergy Power Marketing Development, LLC
 
Delaware
        Entergy Nuclear Power Marketing, LLC
 
Delaware
  Entergy Power Marketing Holding II, Inc.
 
Delaware
  Entergy Amalgamated Competitive Holdings, LLC
 
Delaware
    Entergy Power Operations U.S. Inc.
 
Delaware
    Entergy Power Gas Operations, LLC
 
Delaware
      EWO Wind II, LLC
 
Delaware
      Entergy Power Ventures, LLC
 
Delaware
        EWO Marketing, LLC
 
Delaware
      EAM Nelson Holding, LLC
 
Delaware
      EK Holding III, LLC
 
Delaware
    Entergy Power Investment Holding, Inc.
 
Delaware
      Entergy Asset Management, Inc.
 
Delaware
        Entergy Power, LLC
 
Delaware
  Entergy International Holdings, LLC
 
Delaware
    Entergy Global, LLC
 
Arkansas
    Entergy International LTD LLC
 
Delaware



                                    

                                    

Exhibit 24



February 26, 2018



TO:          Alyson M. Mount
Daniel T. Falstad

Re:          Power of Attorney - Form 10-K


Entergy Corporation, referred to herein as the Company, will file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2017, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

The Company and the undersigned persons, in their respective capacities as directors and/or officers of the Company, as specified in Attachment I, do each hereby make, constitute and appoint Alyson M. Mount and Daniel T. Falstad and each of them, their true and lawful Attorneys (with full power of substitution) for each of the undersigned and in his or her name, place and stead to sign and cause to be filed with the Securities and Exchange Commission the aforementioned Annual Report on Form 10-K and any amendments thereto.

Yours very truly,

ENTERGY CORPORATION



By: /s/ Leo P. Denault     
Leo P. Denault     
Chairman of the Board, Director
and Chief Executive Officer

    





/s/ Maureen S. Bateman
 
/s/ Donald C. Hintz
Maureen S. Bateman
 
Donald C. Hintz
Director
 
Director
 
 
 
 
 
 
/s/ Patrick J. Condon
 
/s/ Stuart L. Levenick
Patrick J. Condon
 
Stuart L. Levenick
Director
 
Director
 
 
 
 
 
 
/s/ Leo P. Denault
 
/s/ Blanche L. Lincoln
Leo P. Denault
 
Blanche L. Lincoln
Director, Chairman of the Board,
and Chief Executive Officer
 
Director
 
 
 
 
 
 
/s/ Kirkland H. Donald
 
/s/ Karen A. Puckett
Kirkland H. Donald
 
Karen A. Puckett
Director
 
Director
 
 
 
 
 
 
/s/ Philip L. Frederickson
 
/s/ W. J. Tauzin
Philip L. Frederickson
 
W. J. “Billy” Tauzin
Director
 
Director
 
 
 
 
 
 
/s/ Alexis M. Herman
 
/s/ Andrew S. Marsh
Alexis M. Herman
 
Andrew S. Marsh
Director
 
Executive Vice President and Chief Financial Officer








ATTACHMENT I

Entergy Corporation

Chairman of the Board and Chief Executive Officer - Leo P. Denault (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors - Maureen S. Bateman, Patrick J. Condon, Leo P. Denault, Kirkland H. Donald, Philip L. Frederickson, Alexis M. Herman, Donald C. Hintz, Stuart L. Levenick, Blanche L. Lincoln, Karen A. Puckett, and W. J. “Billy” Tauzin





February 26, 2018


TO:          Alyson M. Mount .
Daniel T. Falstad

Re:          Power of Attorney - Form 10-K

Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, LLC, Entergy Texas, Inc. and System Energy Resources, Inc. (collectively referred to herein as the Companies) will each file with the Securities and Exchange Commission its Annual Report on Form 10-K for the year ended December 31, 2017, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

The Companies and the undersigned persons, in their respective capacities as directors and/or officers of the Companies, as specified in Attachment I, do each hereby make, constitute and appoint Alyson M. Mount and Daniel T. Falstad and each of them, their true and lawful Attorneys (with full power of substitution) for each of the undersigned and in his or her name, place and stead to sign and cause to be filed with the Securities and Exchange Commission the aforementioned Annual Report on Form 10-K and any amendments thereto.

Yours very truly,

ENTERGY ARKANSAS, INC.
ENTERGY LOUISIANA, LLC
ENTERGY MISSISSIPPI, INC.
ENTERGY NEW ORLEANS, LLC
ENTERGY TEXAS, INC.     
SYSTEM ENERGY RESOURCES, INC.







/s/ A. Christopher Bakken, III
 
/s/ Steven C. McNeal
A. Christopher Bakken, III
Director of System Energy Resources, Inc.
 
Steven C. McNeal
Director of System Energy Resources, Inc.
 
 
 
/s/ Haley R. Fisackerly
 
/s/ Sallie T. Rainer
Haley R. Fisackerly
Director, Chairman of the Board, President and Chief Executive Officer of Entergy Mississippi, Inc.
 
Sallie T. Rainer
Director, Chair of the Board, President and Chief Executive Officer of Entergy Texas, Inc.
 
 
 
/s/ Paul D. Hinnenkamp
 
/s/ Charles L. Rice, Jr.
Paul D. Hinnenkamp
Director of Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc. and Entergy Texas, Inc.
 
Charles L. Rice, Jr.
Director, Chairman of the Board, President and Chief Executive Officer of Entergy New Orleans, Inc.
 
 
 
/s/ Andrew S. Marsh
 
/s/ Richard C. Riley
Andrew S. Marsh
Director and Executive Vice President and Chief Financial Officer of Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc., Entergy Texas, Inc. and System Energy Resources, Inc.
 
Richard C. Riley
Director, Chairman of the Board, President and Chief Executive Officer of Entergy Arkansas, Inc.
 
 
 
/s/ Phillip R. May, Jr.
 
/s/ Roderick K. West
Phillip R. May, Jr.
Director, Chairman of the Board, President and Chief Executive Officer of Entergy Louisiana, LLC
 
Roderick K. West
Director of Entergy Arkansas, Inc., Entergy Louisiana, LLC, Entergy Mississippi, Inc., Entergy New Orleans, Inc. and Entergy Texas, Inc.
 
 
 
 
 
Director, Chairman of the Board, President and Chief Executive Officer of System Energy Resources, Inc.

        



ATTACHMENT I

Entergy Arkansas, Inc.

Chairman of the Board, President and Chief Executive Officer - Richard C. Riley (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors - Paul D. Hinnenkamp, Andrew S. Marsh, Richard C. Riley and Roderick K. West

Entergy Louisiana, LLC

Chairman of the Board, President and Chief Executive Officer - Phillip R. May, Jr. (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors - Paul D. Hinnenkamp, Andrew S. Marsh, Phillip R. May, Jr. and Roderick K. West

Entergy Mississippi, Inc.

Chairman of the Board, President and Chief Executive Officer - Haley R. Fisackerly (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors - Haley R. Fisackerly, Paul D. Hinnenkamp, Andrew S. Marsh and Roderick K. West

Entergy New Orleans, Inc.

Chairman of the Board, President and Chief Executive Officer - Charles L. Rice, Jr. (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors - Paul D. Hinnenkamp, Andrew S. Marsh, Charles L. Rice, Jr. and Roderick K. West

Entergy Texas, Inc.

Chair of the Board of Directors, President and Chief Executive Officer - Sallie T. Rainer (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors -Paul D. Hinnenkamp, Andrew S. Marsh, Sallie T. Rainer and Roderick K. West

System Energy Resources, Inc.

Chairman of the Board, President and Chief Executive Officer - Roderick K. West (principal executive officer)
Executive Vice President and Chief Financial Officer - Andrew S. Marsh (principal financial officer)

Directors - A. Christopher Bakken, III, Andrew S. Marsh, Steven C. McNeal and Roderick K. West






Exhibit 31(a)
CERTIFICATIONS
I, Leo P. Denault, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Leo P. Denault
Leo P. Denault
Chairman of the Board and Chief Executive Officer
of Entergy Corporation
Date: February 26, 2018






Exhibit 31(b)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Corporation;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and
Chief Financial Officer of Entergy Corporation
Date: February 26, 2018





Exhibit 31(c)
CERTIFICATIONS
I, Richard C. Riley, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Arkansas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Richard C. Riley
Richard C. Riley
Chairman of the Board, President, and
Chief Executive Officer of Entergy Arkansas, Inc.
Date: February 26, 2018






Exhibit 31(d)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Arkansas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Arkansas, Inc.
Date: February 26, 2018






Exhibit 31(e)
CERTIFICATIONS
I, Phillip R. May, Jr., certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Louisiana, LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Phillip R. May, Jr.
Phillip R. May, Jr.
Chairman of the Board, President, and Chief Executive
Officer of Entergy Louisiana, LLC
Date: February 26, 2018






Exhibit 31(f)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Louisiana, LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Louisiana, LLC
Date: February 26, 2018






Exhibit 31(g)
CERTIFICATIONS
I, Haley R. Fisackerly, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Mississippi, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Haley R. Fisackerly
Haley R. Fisackerly
Chairman of the Board, President, and
 Chief Executive Officer
of Entergy Mississippi, Inc.
Date: February 26, 2018






Exhibit 31(h)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Mississippi, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Mississippi, Inc.
Date: February 26, 2018






Exhibit 31(i)
CERTIFICATIONS
I, Charles L. Rice, Jr., certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy New Orleans, LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Charles L. Rice, Jr.
Charles L. Rice, Jr.
Chairman of the Board, President, and
Chief Executive Officer of Entergy New Orleans, LLC
Date: February 26, 2018






Exhibit 31(j)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy New Orleans, LLC;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer of
Entergy New Orleans, LLC
Date: February 26, 2018






Exhibit 31(k)
CERTIFICATIONS
I, Sallie T. Rainer, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Texas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Sallie T. Rainer
Sallie T. Rainer
Chair of the Board, President, and
Chief Executive Officer of Entergy Texas, Inc.
Date: February 26, 2018






Exhibit 31(l)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of Entergy Texas, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Texas, Inc.
Date: February 26, 2018






Exhibit 31(m)
CERTIFICATIONS
I, Roderick K. West, certify that:
1.
I have reviewed this annual report on Form 10-K of System Energy Resources, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Roderick K. West
Roderick K. West
Chairman of the Board, President, and Chief Executive
Officer of System Energy Resources, Inc.
Date: February 26, 2018






Exhibit 31(n)
CERTIFICATIONS
I, Andrew S. Marsh, certify that:
1.
I have reviewed this annual report on Form 10-K of System Energy Resources, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of System Energy Resources, Inc.
Date: February 26, 2018






Exhibit 32(a)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Leo P. Denault, Chairman of the Board and Chief Executive Officer of Entergy Corporation (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Leo P. Denault
Leo P. Denault
Chairman of the Board and
Chief Executive Officer
of Entergy Corporation
Date: February 26, 2018





Exhibit 32(b)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Corporation (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and
Chief Financial Officer of Entergy Corporation
Date: February 26, 2018





Exhibit 32(c)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Richard C. Riley, Chairman of the Board, President, and Chief Executive Officer of Entergy Arkansas, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Richard C. Riley
Richard C. Riley
 Chairman of the Board, President, and
 Chief Executive Officer of Entergy Arkansas, Inc.
Date: February 26, 2018





Exhibit 32(d)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Arkansas, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Arkansas, Inc.
Date: February 26, 2018





Exhibit 32(e)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Phillip R. May, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy Louisiana, LLC (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Phillip R. May, Jr.
Phillip R. May, Jr.
Chairman of the Board, President,
and Chief Executive Officer of Entergy Louisiana, LLC
Date: February 26, 2018





Exhibit 32(f)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Louisiana, LLC (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Louisiana, LLC

Date: February 26, 2018





Exhibit 32(g)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Haley R. Fisackerly, Chairman of the Board, President, and Chief Executive Officer of Entergy Mississippi, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Haley R. Fisackerly
Haley R. Fisackerly
Chairman of the Board, President, and Chief Executive
Officer of Entergy Mississippi, Inc.
Date: February 26, 2018





Exhibit 32(h)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Mississippi, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Mississippi, Inc.

Date: February 26, 2018





Exhibit 32(i)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Charles L. Rice, Jr., Chairman of the Board, President, and Chief Executive Officer of Entergy New Orleans, LLC (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Charles L. Rice, Jr.
Charles L. Rice, Jr.
Chairman of the Board, President, and
Chief Executive Officer of
Entergy New Orleans, LLC
Date: February 26, 2018





Exhibit 32(j)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy New Orleans, LLC (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy New Orleans, LLC

Date: February 26, 2018





Exhibit 32(k)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Sallie T. Rainer, Chair of the Board, President, and Chief Executive Officer of Entergy Texas, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Sallie T. Rainer
Sallie T. Rainer
Chair of the Board, President, and
Chief Executive Officer
of Entergy Texas, Inc.
Date: February 26, 2018





Exhibit 32(l)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of Entergy Texas, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of Entergy Texas, Inc.

Date: February 26, 2018





Exhibit 32(m)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Roderick K. West, Chairman of the Board, President, and Chief Executive Officer of System Energy Resources, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Roderick K. West
Roderick K. West
Chairman of the Board, President, and Chief Executive
Officer of System Energy Resources, Inc.
Date: February 26, 2018





Exhibit 32(n)
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew S. Marsh, Executive Vice President and Chief Financial Officer of System Energy Resources, Inc. (the “Company”), certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1)
The Annual Report on Form 10-K of the Company for the year ended December 31, 2017 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the Report.

/s/ Andrew S. Marsh
Andrew S. Marsh
Executive Vice President and Chief Financial Officer
of System Energy Resources, Inc.

Date: February 26, 2018