Entergy files motion in New York requesting action on nuclear spin-off

first_imgThe owner of the Entergy Vermont Yankee nuclear plant in Vernon and four other such plants has met with New York regulators to make a more attractive financial offer in its effort to spin off those reactors into a new company called Enexus. The new proposal, which the company said would reduce the debt of the new company by $1 billion, while increasing capitalization by $350 million, would likely require further federal and Vermont regulatory approval. The other plants are Pilgrim (Plymouth, MA), Indian Point 1&2 (New York), FitzPatrick (New York), and Palisades (Michigan).In a press release issued yesterday, Entergy Corporation (NYSE: ETR) and subsidiaries (Entergy Nuclear FitzPatrick, LLC, Entergy Nuclear Indian Point 2, LLC, Entergy Nuclear Indian Point 3, LLC, NewCo (Enexus Energy Corporation) and Entergy Nuclear Operations, Inc. (collectively,  Entergy )) filed a motion Monday with the New York Public Service Commission (NYPSC) in connection with the company s proposed spin-off, announced in November 2007, of its non-utility nuclear business to be named Enexus Energy Corporation. The motion requests procedures and a schedule to enable the report of the Presiding Administrative Law Judges (ALJs) to be issued in time for the NYPSC to issue a final order no later than its regularly scheduled meeting in November so that the proposed reorganization can be completed by the end of this year, with closing to take place on a month end. The details of the proposed procedures and schedule, including enhancements to the proposed reorganization, are included in this release.New York ProcessIn January 2008, Entergy filed a petition requesting either a declaratory ruling that the NYPSC need not review its proposed spin-off or, in the alternative, approval of the reorganization and its associated financing. In May 2008, the NYPSC issued an order finding that because the reorganization involved nuclear facilities that play an important role in supporting reliable electric service in New York, there needed to be a limited review of its potential to harm captive New York utility ratepayers. The NYPSC emphasized that the public interest inquiry was tightly bounded , allowed 60 days for discovery, and assigned ALJs to establish further procedures. After a series of filings and rulings by the ALJs, in October 2008 the judges notified all active parties that an adequate record had been established and no further formal proceedings were warranted.In December 2008, based on comments and reply comments presented in the above process suggesting that a settlement might be reached, a Notice of Impending Settlement Negotiation was then filed and settlement discussions began with the trial staff of the NYPSC and the other parties. Settlement discussions, viewed by the company as productive, continued throughout the first half of 2009 until recently terminated. The primary focus of comments filed by the trial staff concerned the relative credit ratings of Entergy and Enexus for long-term unsecured bonds and the possibility thatEnexus lower rating might adversely affect its financial capability to ensure the reliable operation ofthe New York nuclear plants.During the course of the settlement discussions, Entergy endeavored to address and resolve those concerns. Despite the termination of settlement discussions, Entergy has developed further enhancements to the reorganization proposal that it believes resolve any concerns. Accordingly, Entergy is proposing to file an amended petition reflecting these enhancements for the NYPSC s consideration.Entergy believes that with these enhancements and Enexus financial strengths described in the original petition, the reorganization proposal should fully satisfy the concerns raised by the NYPSC about the adequacy of Enexus financial resources to operate the New York facilities as reliably as Entergy. The amended petition will also include Entergy s analysis showing how there will be adequate funding for both radiological and non-radiological decommissioning of the New York plant sites. The following table briefly outlines a few of the most salient aspects of the enhancements that will be described in more detail in the amended petition:Procedures and Schedule Proposed by EntergyEntergy has proposed the following procedures and schedule in order to permit the ALJs toissue a report in time for the NYPSC to issue a final order no later than its regularly scheduledmeeting in November so that the proposed reorganization can be completed by the end of this year: After settlement discussions ended, Entergy met with trial staff and other parties to discusshow the case should proceed going forward. Some of the parties took the position that there shouldbe a full hearing process, including the filing of testimony, preceded by up to six months ofadditional discovery. They also provided lists of issues that they want to be included in testimonyand a hearing. The issues raised by trial staff and other parties could delay resolution of this case bya year or more by interjecting issues far outside the scope to which the NYPSC and the ALJs haveprescribed for the case. In its petition, Entergy requests that the ALJs continue to enforce the scopethat the NYPSC imposed in its May 23, 2008 Order and preclude trial staff and other parties fromlitigating these broader issues.Benefits of the TransactionEntergy believes that the spin-off of its non-utility nuclear business is in the best interests ofits stakeholders, as well as the customers of the load serving entities in the regions in which itsnuclear facilities sell power. Accordingly, Entergy remains vigilant in seeking regulatory approval ofthe spin-off transaction.Entergy recognizes that the financial flexibility and strength of Enexus is of paramount importance. Ensuring the financial strength and flexibility of Enexus has been a critical area of focus for Entergy as it has prepared for Enexus to operate as a separate, independent company. Entergy believes its initially proposed terms for the spin-off afforded Enexus financial flexibility and strength that were more than adequate to meet the legal standard established for the regulatory approval of the reorganization. Nonetheless, in an effort to remove any possible basis for concern, further enhancements are being provided. Given these enhancements to the already robust financial attributes of Enexus, Entergy strongly believes that the separation of Enexus from Entergy will be good for New York and for the other states in which its facilities are located. Further, for purposes of reliably operating the New York facilities, Enexus will be positioned to be at least the financial equivalent of Entergy given Enexus significant financial resources and its singular focus on the merchant generation business.Entergy Corporation 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 megawatts of electric generating capacity, and it is the second-largest nuclear generator in the United States. Entergy delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $13 billion and approximately 14,700 employees.Source: Entergy. New Orleans, La. July 14, 2009.last_img read more