DALLAS - The Louisiana State Bond Commission on Thursday selected Citi as senior underwriter and book-runner on $1.01 billion of taxable utility system revenue bonds to be issued by the Louisiana Public Facilities Authority on behalf of two units of Entergy Inc.

The bonds will provide $721 million of proceeds to Entergy Louisiana LLC and $291 million of proceeds to Entergy Gulf States Inc. The money will reimburse the utilities for the cost of restoring electrical delivery systems in Louisiana after hurricanes Katrina and Rita in 2005, and fund a restoration reserve of $250 million to repair damages from future storms.

The debt will be supported by a 10-year surcharge on electric customers in the state.

Other members of the underwriting team include co-senior manager Morgan Stanley and co-managers JPMorgan, Loop Capital Markets LLC, Stephens Inc, Doley Securities, and Dorsey & Co.

Morgan Stanley served as Entergy's financial adviser as the deal was structured, but said it would resign immediately if picked as part of the underwriting team. However the commission added the stipulation that Morgan Stanley must not serve as a financial adviser to Entergy for 10 years.

If Morgan Stanley does not agree to that provision, JPMorgan would move up to become co-senior underwriter with investment bank Barclays Capital substituted as the fifth co-manager.

The commission gave its preliminary or final approval to $1.3 billion of Gulf Opportunity Zone bonds, including $1.05 billion for projects in parishes located within the competitive capacity pool and $298 million from the capacity dedicated for parishes most affected by the two storms in 2005.

With the approvals, there is $861 million in capacity dedicated to the most affected areas, and only $12 million in the competitive capacity pool.

The drawdown on the dedicated pool included an allocation of $200 million for an ethanol project located in St. James Parish, which is not one of the most affected parishes.

Sponsors of the Tiger State Ethanol LLC project filed suit against the commission two weeks ago in state district court contending they were promised an allocation at the commission's meeting on Dec. 20, 2007. The plaintiffs agreed to drop the suit if the project received a hearing at Thursday's commission meeting.

Whitman Kling Jr., director of the Bond Commission, said it was not unprecedented to take capacity from one pool and allocate it to projects outside the area.

"This isn't the first time this has happened," Kling said. "Some of the GO Zone projects approved today were charged against the competitive pool but they are located in parishes within the dedicated pool. Even though there is money in the dedicated pool there just was no remaining capacity for that specific parish."

Projects that receive final approval for an allocation of GO Zone bonds have 120 days to sell the bonds or the capacity is returned to the appropriate pool. Kling said all the bonds with allocations set to expire June 9 have closed, as has a $250 million allocation set to expire June 22.

Projects receiving an allocation of GO Zone bonds at the meeting included $50 million for a new research and technology facility at Louisiana State University in Baton Rouge, $135 million for Dynamic Fuels LLC to develop a renewable synthetic fuel manufacturing facility in Geismar; $100 million for Cleco Power LLC to rebuild damaged utility property in Iberia, St. Mary, and St. Tammany parishes; and $100 million for REG Destrehan LLC to build a bio-diesel production facility in St. Rose.

The bond commission also approved a proposal by the Orleans Parish School Board to issues $134.2 million of general obligation bonds to refunds GO bonds issued in 1995, 1996, 1997, and 1998.


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