Entergy pushes ahead with Enexus spin-off


Saturday, May 9
BRATTLEBORO -- By the end of July, Entergy Nuclear hopes to have an answer from New York and Vermont on whether the spin-off of six nuclear reactors into a separate holding company will be allowed to go ahead.

"We continue to see value in pursuing a spin-off of Enexus, which will have our non-utility nuclear assets," said J. Wayne Leonard, Entergy's chief executive officer, during an earnings call on May 4.

Vermont Yankee nuclear power plant, which is owned and operated by Entergy, is one of the six reactors Entergy wants to spin off into a new company called Enexus.

Those six reactors are called "merchant plants" or "standalone assets" because they sell power to the open market.

Other reactors owned by Entergy Nuclear, and which will remain under its umbrella, produce power with a cost that is regulated by a government entity.

Entergy needs a certificate of public good from Vermont's Public Service Board to include Vermont Yankee in the spin-off. But if the board listens to the Department of Public Service, it won't get the certificate.

"We do not support the transaction, primarily because Entergy is investment grade and Enexus is not," said Sarah Hofmann, public advocate for DPS. "Why would we want to go with a lesser company? We don't believe the transaction would promote the public good."

Rating agencies, such as Moody's and Standard & Poor's, rate companies to give people an idea of how much risk they might take on if they make an investment. Though a company might be below investment grade, it doesn't mean investors will lose money -- it just means the risk that they could lose money is greater than if they invested in a company that is rated AAA or BBB.

Entergy has come back to the department a number of times, said Hofmann, asking what it can do to receive DPS' approval, but so far has failed to sway DPS.

The spin-off is meant as a way "to create value for owners ..." said Leonard.

Most notably, more than $4.5 billion that will be used to pay off Entergy's outstanding debt and to pay back shareholders. Enexus itself would have no assets besides the reactors themselves, which would be leveraged to raise the $4.5 billion.

Entergy has received approval from both the NRC and the Federal Energy Regulatory Commission to go ahead with the spin off.

The state of New York, said Richard Smith, Entergy's president and chief operating officer, is reviewing Entergy's application for the spin-off. In New York, Indian Point 1 and 2, on the Hudson River, are included in Entergy's spin-off plans.

"They're checking Entergy Corp. against Enexus and really the financial viability, are they losing a little something as they move from Entergy Corp. to Enexus?" said Smith, during the May 4 earnings call. "And we've been working through those issues with them."

Entergy is currently in settlement negotiations with New York, said Smith.

"We've done a lot of work with them over the last couple of months providing them really stressful scenarios around Enexus and how the liquidity is as strong going forward as it has been with Entergy in the past."

The same goes for Vermont, said Smith.

"We've made quite a bit of progress with both the staffs over the last couple of months, and we're honing in on some key issues with both of them that I think at the end of the day will satisfy their concerns."

Smith said it would take a few more months to finish talking with both states.

"We hope to reach some resolution with both of them that will be able to be filed with both commissions."

The end of July is "a fair date" when he hopes negotiations will be wrapped up, he said.

Despite the economic downturn, said Leonard, Entergy is prepared to "act on opportunities particularly during distressed times."

"We will be relentless in seeking value and managing risk and we will be well-prepared to seize whatever opportunities may ultimately come our way in these uncertain times."

Entergy is also in the market to purchase nuclear or fossil-fueled-fired power plants, he said.

"We believe today's environment is more ripe for potential acquisition opportunities," said Leonard. "Our interest in acquiring generation assets both nuclear and fossil is one of those timeless opportunities and we transact when the timing is right, meaning necessary criteria for investment are satisfied."

Entergy has applied to the Nuclear Regulatory Commission to extend the plant's operating license from 2012 to 2032. The NRC has indicated it has found no safety or environmental reasons that would prevent the plant from operating for another 20 years.

Entergy also needs a certificate of public good from the Public Service Board and approval from the state Legislature to continue operating Yankee past 2012.

Bob Audette can be reached at raudette@reformer.com, or 802-254-2311, ext. 273.


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