UPDATE: Entergy Tweaks Nuclear Spin-Off; Urges NY To Approve
July 14 2009 - 12:40PM
Dow Jones News
Entergy Corp. (ETR) said Tuesday it's revising its financing
plans for a spin-off of five of its nuclear power plants and is
asking New York regulators to speed up a decision on the deal,
which it plans to close by the end of the year.
The New Orleans-based power company has been looking to create
the nation's first stand-alone nuclear power company for more than
a year and a half. The deal was stymied by the global credit freeze
as Entergy needs to access billions in new debt to create the
company, to be called Enexus Energy Corp.
A return of activity in the market for below-investment-grade
debt has Entergy again focusing on the regulatory approvals needed
for the spin-off. Merchant power companies Calpine Corp. (CPN) and
NRG Energy Inc. (NRG) have sold high-yield bonds in recent months.
Both have business models that are similar to Enexus, selling
electricity at market prices rather regulated rates.
In New York, Entergy has faced resistance from public officials
who are concerned Enexus will have too much debt and won't follow
through on past agreements to invest in the plants. The nuclear
plants in the spin-off include Indian Point and James Fitzpatrick
nuclear plants in New York.
Entergy said in a press release Tuesday that it filed a motion
with the New York Public Service Commission requesting a decision
by the board's November meeting. It also plans to file an amended
proposal by early next month with revisions to Enexus's financing
plans.
The new proposal should address the concerns of regulators,
while not damaging the benefits of the spin-off, wrote J.P. Morgan
analyst Andrew Smith in a note to clients Tuesday.
Under the new plan, Entergy said Enexus will issue $3.5 billion
in long-term bonds. Originally, the spin-off would result in Enexus
issuing $4.5 billion, with the money going to Entergy to buyback
shares and to pay off debt. Entergy spokesman Michael Burns said
further details of the plan would be discussed during the company's
earnings call next month.
Entergy also will increase the initial unrestricted cash balance
of Enexus to $750 million from $250 million, while changing how it
will distribute equity in the new company. Entergy will issue 80%
of Enexus's equity to its shareholders and hold the remaining 20%
in a trust. Entergy shareholders then will be able to exchange
their Entergy shares for shares of Enexus, distributing the new
company's remaining equity, Burns said.
Originally, Entergy had planned to distribute all of the equity
in Enexus to Entergy shareholders up front. Changes to the
financing plans came out of settlement negotiations that broke down
earlier this year.
Besides New York, Entergy also is awaiting approval from Vermont
regulators. Burns said the process continues in that state where
Entergy's Vermont Yankee plant is located, and the company expects
regulators to be pleased with the changes it will file.
Shares of Entergy, which have fallen nearly 38% over the past
year, were recently up 1.1% at $74.54.
-By Mark Peters, Dow Jones Newswires; 212-416-2457;
mark.peters@dowjones.com