[Federal Register Volume 69, Number 44 (Friday, March 5, 2004)]
[Notices]
[Pages 10490-10492]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-4831]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27804]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

February 27, 2004.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendment(s) is/are available for public 
inspection through the Commission's Branch of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by March 22, 2004, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in the case of an attorney at law, 
by certificate) should be filed with the request. Any request for 
hearing should identify specifically the issues of facts or law that 
are disputed. A person who so requests will be notified of any hearing, 
if ordered, and will receive a copy of any notice or order issued in 
the matter. After March 22, 2004 the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

System Energy Resources, Inc. (70-10182)

    System Energy Resources, Inc. (``SERI''), 1340 Echelon Parkway, 
Jackson, Mississippi 39213, an electric utility subsidiary of Entergy 
Corporation, a registered holding company, has filed a declaration 
under sections 6(a), 7, 9(a), 10, 12(b) and 12(d) of the Act and rules 
44, 45 and 54 under the Act.
    By prior Commission order dated December 23, 1988 (HCAR No. 24791), 
SERI was authorized to sell and lease back from certain trusts acting 
as lessors (``Lessors''), on a long-term net lease basis, all 
approximate 11.5% aggregate ownership interest (``Undivided 
interests'') in Unit No. 1 of the Grand Gulf Steam Electric Generating 
Station (``Grand Gulf 1'') in two substantially identical, but entirely 
separate, transactions. SERI now has an approximate 78.5% undivided 
ownership interest and an approximate 11.5% leasehold interest in Grand 
Gulf I. The remaining 10% of Grand Gulf I is owned by an electric 
cooperative, South Mississippi Electric Power Association. The purchase 
price of the Undivided Interests was $500 million, of which 
approximately $64,898,000 was provided by the equity contributions of 
two owner participants in the two Lessor trusts and approximately 
$435,102,000 was provided by loans from a group of interim lenders 
(``Interim Borrowings'').
    By subsequent order dated April 13, 1989 (HCAR No. 24861), SERI's 
financing subsidiary, GG1A Funding Corporation (``Funding 
Corporation''), was authorized to issue $435,102,000 of Secured Lease 
Obligation Bonds (``Original Bonds'') in an underwritten public 
offering in two series, consisting of $163,666,000, principal amount 
due 2004, Series 11.07% Bonds and $271,436,000, principal amount due 
2014, Series 11.50% Bonds. The proceeds from the sale of the Original 
Bonds were applied to refunding of the Interim Borrowings.
    Finally, by order dated January 14, 1994 (HCAR No. 25974), a new 
SERI financing subsidiary, GG1B Funding Corporation (``New Funding 
Corporation''), was authorized to issue an additional $435,102,000 
million of Secured Lease Obligation Bonds (``Original Refunding 
Bonds'') in an underwritten public offering in two series, consisting 
of $356,056,000, principal amount due 2011 (``Series 7.43% Bonds'') and 
$79,046,000, principal amount due 2014 (``Series 8.20% Bonds''). The 
proceeds from the sale of the Original Refunding Bonds were applied to 
refund the Original Bonds.
    SERI now proposes to cause New Funding Corporation or a comparable 
entity to issue not in excess of $293,093,025 of additional Secured 
Lease Obligation Bonds in one of more separate series (``New Refunding 
Bonds''), through December 31, 2005 (``Authorization Period''). The New 
Refunding Bonds will be issued under the New Funding Corporation's 
Collateral Trust Indenture dated as of January 1, 1994, as amended 
(``Indenture''), among New Funding Corporation, SERI and Deutsche Bank 
Trust Company Americas, as trustee (``Trustee''), or a comparable 
instrument in order to refund the Original Refunding Bonds. Likewise 
the New Refunding Bonds will be structured and issued under the 
documents and procedures applicable to the issuance of the Original 
Refunding Bonds.
    The proceeds from the sale of the New Refunding Bonds, together 
with funds provided by SERI and/or the Lessors, will be applied to the 
cost of redeeming the Original Refunding Bonds and may be applied to 
meet associated issuance costs. Series 7.43 Bonds were first optionally 
redeemable on January 15, 2004 at 102.477%. Series 8.20 Bonds were 
first optionally redeemable on January 15, 2004 at 104.100%.
    The New Refunding Bonds may be issued in one or more series bearing 
interest at various fixed rates. However, the interest rate on the New 
Refunding Bonds will not exceed at the time of issuance, the greater of 
(a) 500 basis points over U.S. Treasury securities having a remaining 
term comparable to the term of the New Refunding Bonds to be issued and 
(b) a spread over U.S. Treasury securities that is consistent with 
similar securities of comparable credit quality and maturities issued 
by other companies. Neither the term of the

[[Page 10491]]

New Refunding Bonds nor the amortization schedule will extend beyond 
the current term of the leases of the Undivided Interests, which expire 
on July 15, 2015. For certain purposes, however, at the time of the 
refunding of the Original Refunding Bonds, SERI may seek to extend the 
current term of the leases and adjust its lease payments as 
appropriate, provided that any extension does not exceed its operating 
license.
    The New Refunding Bonds will be subject to redemption upon certain 
terminations of the leases at a redemption price equal to the unpaid 
principal amount, plus accrued interest to the redemption date. Other 
redemption and sinking fund provisions, as well as fees and expenses, 
will be determined by negotiation. The New Refunding Bonds will be 
structured and issued under the documents and pursuant to the 
procedures applicable to the issuance of the Original Refunding Bonds 
or comparable documents having similar terms and provisions.
    The proceeds of the sale of the New Refunding Bonds will be loaned 
by the New Funding Corporation to the Lessors, and the Lessors will 
issue lessor notes (``Lessor Notes'') to the New Funding Corporation 
under the terms of two trust indentures, deeds of trust, mortgages, 
security agreements and assignments of facility leases, dated as of 
December 1, 1988 (``Lease Indentures''), as supplemented from time-to-
time. The Lessors in turn will apply the proceeds to repayment of 
similar Lessor Notes issued in 1994 to secure the Original Refunding 
Bonds, and the New Funding Corporation will repay the Original 
Refunding Bonds. SERI is unconditionally obligated to make payments 
under the Lease in amounts that will be at least sufficient to provide 
for scheduled payments of the principal of and interest on the Lessor 
Notes, which amounts, in turn, will be sufficient to provide for 
scheduled payments of the principal of, and the interest on, the New 
Refunding Bonds.
    Neither the New Refunding Bonds nor the associated Lessor Notes 
will be direct obligations of, or guaranteed by, SERI. However, under 
certain circumstances, SERI may assume all, or a portion of, the Lessor 
Notes. The New Refunding Bonds will be secured by the Lessor Notes, 
which will be held by the Trustee under the Indenture. Each Lessor 
Notes will, in turn, be secured by, among other things (a) a lien on 
and security interest in the Undivided Interest of the Lessor issuing 
the Lessor Note and (b) certain of the rights of such Lessor under its 
Lease with SERI, including the right to receive the basic rent and 
certain other amounts payable by SERI.
    Upon the occurrence of certain events of default under the 
Indenture, subject to certain exceptions, the Trustee may declare all 
New Refunding Bonds to be immediately due and payable. The New Funding 
Corporation's obligations under the Indenture may be discharged prior 
to the maturities of New Refunding Bonds in whole, or in part, by 
depositing with the Trustee sufficient funds to meet related principal, 
interest and premium obligations as they become due or paying down the 
Lessor Notes of a corresponding series of New Refunding Bonds.
    As an alternative to using New Refunding Bonds issued by a New 
Funding Corporation, SERI may choose to use a trust structure in which 
one or more pass through statutory business trusts (``Business Trust'') 
would be established to hold the Lessor Notes issued under the Lease 
Indentures. In lieu of issuing New Refunding Bonds, the trust would 
issue certificates evidencing preferred beneficial ownership interests 
in the trusts (``Trust Certificates''). If such a trust structure is 
used, concurrently with the issuance of any series of Trust 
Certificates, each Business Trust will invest the proceeds in the 
Lessor Notes, which will be the sole asset of the Business Trust, and 
payments under the Lessor Notes will be the only revenue of the 
Business Trust. The Trust Certificates will not be the direct 
obligations of, or guaranteed by SERI. However, the Trust Certificates 
will be supported by the Lessor Notes, which will be held and secured 
by the Business Trust. In addition, under certain circumstances, SERI 
may assume all, or a portion of, the Lessor Notes.
    The Trust Certificates may be issued in one or more series bearing 
dividends at various fixed rates. However, the dividend rates on any 
series of Trust Certificates will not exceed at the time of issuance 
the greater of (a) 500 basis points over the yield to maturity of a 
U.S. Treasury security having a remaining term comparable to the term 
of such series, and (b) a rate that is consistent with similar 
securities of comparable credit quality and maturities issued by other 
companies. Dividends on the Trust Certificates will be made 
periodically and to the extent funds are legally available for such 
purpose, but may be made subject to terms that allow the Business Trust 
to defer dividend payments for specified periods. The Trust 
Certificates will be subject to redemption upon certain terminations of 
the Leases at a redemption price equal to their principal amount, plus 
accrued dividends to the redemption date. Each series of Trust 
Certificates will have such other rights, preferences and priorities, 
including additional redemption provisions, as may be designated in the 
instrument creating such series and established by negotiation. Any 
associated placement, underwriting or selling agent fees, commission, 
discounts or upfront fees will also be established by negotiation.
    SERI shall not cause the sale of the New Refunding Bonds or the 
Trust Certificates unless (a) the estimated present value savings 
derived from the net difference between interest payments on a new 
issue of comparable securities and those securities refunded is, on an 
after-tax basis, greater that the present value of all redemption and 
issuing costs, assuming an appropriate discount rate, determined on the 
basis of the then estimated after-tax cost of capital of Entergy and 
its subsidiaries, consolidated, or (b) SERI shall have notified the 
Commission of the terms and conditions of the proposed refinancing 
transaction by post-effective amendment and obtained appropriate 
supplemental authorization from the Commission to consummate the 
transactions.
    SERI represents that all times during the Authorization Period, 
SERI and Entergy will each maintain common equity of at least 30% of 
total capitalization (based on the financial statements filed for the 
most recent quarterly report on Form 10-Q or annual report on Form 10-
K); and that no securities may be issued by SERI in reliance upon the 
authorization that may be granted by the Commission in this matter, 
unless (1) the security to be issued by SERI, if rated, is rated 
investment grade (``Investment Grade''); (2) all outstanding securities 
of SERI that are rated are rated Investment Grade; and (3) all 
outstanding securities of Entergy that are rated are rated Investment 
Grade (collectively, ``Investment Grade Ratings Criteria''). For 
purposes of this provisions, a security will be deemed to be rated 
``Investment Grade'' if it is rated investment grade by Moody's 
Investors Services, Standard & Poor's Fitch Ratings or any other 
nationally recognized statistical rating organization, as that term is 
used in paragraphs (c)(2)(vi)(E), (F), and (H) of rule 15c3-1 under the 
Securities Exchange Act of 1934. SERI further requests that the 
Commission reserve jurisdiction over the issuance of any security for 
which at any time one or

[[Page 10492]]

more of the Investment Grade Ratings Criteria are not satisfied.


    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-4831 Filed 3-4-04; 8:45 am]
BILLING CODE 8010-01-M