Entergy makes concessions for spinoff
Published: March 4,2010
NEW ORLEANS — Entergy Corp. has agreed to financial concessions in an attempt to win approval from New York regulators for its proposed spinoff of six nuclear units.
The New York State Public Service Commission is scheduled Thursday to consider whether to allow the New Orleans-based Entergy to create a separate, publicly-traded company known as Enexus Energy Corp.
Enexus would take over Entergy’s reactors that generate electricity sold on the supply-and-demand wholesale market, including the James A. Fitzpatrick station in Oswego County, N.Y., and two units at the Indian Point Energy Center in Westchester County, N.Y.
On Feb. 11, the staff of the New York commission recommended rejection of the spinoff, telling regulators Entergy’s proposal — as it now stands — is not in the public’s best interest, primarily because the new company would be saddled with too much debt.
In a Wednesday filing with the commission, Entergy said:
• Enexus’ initial long-term debt would be reduced by $500 million to no more than $3 billion.
• Dividend payouts to shareholders would be restricted until Enexus receives a credit rating of at least “BB+” by Standard & Poor’s or Ba1 by Moody’s Investors Service, or the new company obtains a debt-to-capitalization ratio of 50 percent or lower.
• Enexus will pay up to $300 million to New York’s energy efficiency fund if future power prices exceed certain levels. The fund offers a hedge to some consumers if power prices spike.
“We’re offering to cut debt, improve liquidity and share revenue,” said Entergy spokesman Mike Burns. “It will strengthen Enexus and protect the long-term interests of New York residents.”
In addition to the New York units, Enexus would own the Pilgrim Nuclear Station near Plymouth, Mass., Vermont Yankee in Vernon, Vt., and the Palisades Power Plant in Covert, Mich. Entergy bought the reactors between 1999 and 2007.
Entergy shareholders would get 80 percent of Enexus stock. The remaining 20 percent would be in a trust and shareholders could later exchange Entergy stock for Enexus stock in a tax-free deal.
The spinoff plan was announced in late 2007. Entergy also has regulated utilities in Louisiana, Mississippi, Texas and Arkansas.
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