Enexus Shouldn't Include Vermont Yankee

By BOB AUDETTE

Friday March 5, 2010
BRATTLEBORO -- Take Vermont Yankee out of the deal and we'll think about it.
That was the response from the advisory staff of the New York Public Service Commission to an offer by Entergy to change the details of a proposed spin off of three nuclear reactors in the Empire State into a new company.
"Senior staff would not recommend that Yankee be included in the transaction," said PSC spokesman James Denn. "They specifically cited the Vermont Senate vote," he added, referring to the 26 to 4 vote last week in opposition to Yankee's continued operation past 2012.
The proposed spinoff -- Enexus -- also includes Vermont Yankee nuclear power plant in Vernon, Pilgrim in Massachusetts and Palisades in Michigan.
PSC staffers want Entergy to tell them what leaving Yankee out of the deal might mean to the long-term financial viability of Enexus, said Denn.
"It would be expected that Entergy provide an analysis of what it would look like without Yankee," he said.
Three PSC administrative law judges have been presiding over the Enexus hearings and will eventually make a recommendation to the five PSC commissioners on whether they should allow the spin off of the New York reactors, two at Indian Point and one at Fitzpatrick.
The judges met Thursday to discuss the proposal.
On Wednesday, they received a modified proposal from Entergy that would lower Enexus' initial debt from $3.5 billion to $3 billion.
PSC staffers responded the reduction in debt "does not reasonably address the long-term financial viability of Enexus and will likely provide a small level of ratepayer benefits."
This is not the first time Entergy has changed the details of the proposal. When it was first proposed, Enexus' initial debt would have been $4 billion.
After the PSC staffers balked, Entergy came back with $3.5 billion.
In the latest proposal, Entergy also offered to restrict shareholder payouts until Enexus receives a credit rating of at least BB+ by Standard & Poor's or Ba1 from Moody's Investors Service, or the new company obtains a debt-to-capitalization ratio of 50 percent or lower.
In addition, Entergy offered to have Enexus 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.
James Moore, the executive director of the Vermont Public Interest Research Group, said the staffers recommendation was not really a surprise, given the "falling apart" condition of Yankee.
"New York doesn't want any part of it and neither should we," said Moore.
Enexus is just Entergy's way of "passing off their mess to someone else," said Moore.
And, he said, Entergy's last minute deal offered to New York is not so different to a last-minute deal offered to Vermont one day prior to the Senate's vote.
In that offer, Entergy said it would supply 25 megawatts of reduced-price electricity to companies that created new jobs in the Green Mountain State.
"We've seen time and time again that when push comes to shove they will try to do something," said Moore. "They will try to bribe or buy off a regulatory agency...just sweeten the deal a little bit to get away with running these reactors into the ground."
An Entergy spokesman said it was in the process of reviewing the advisory staff's comments and no statement at this time.
If the spin off goes ahead, Enexus and Entergy would be separate, unaffiliated entities and shares of Entergy and Enexus would trade independently.
Indirect ownership of the power plants would be transferred to Enexus and in return, Entergy shareholders would eventually receive all of Enexus's capital stock and receive cash and reductions in outstanding debt -- $3 billion in this latest proposal.
Enexus would be saddled with $3 billion in debt on Day 1, and other than parental guarantees and letters of credit to help pay for operations or unanticipated outages, Enexus would have no other assets besides the plants themselves.
Nevertheless, Enexus does has some things going for it, stated the advisory staff.
Since Entergy took over the New York power plants, average capacity has increased to more than 90 percent and Indian Point has "significant strategic value as their continued operation moderates the downstate level of wholesale electric prices and reduces the amount of air pollutant emissions in the New York metropolitan area."
The Federal Energy Regulatory Commission and the Nuclear Regulatory Commission gave their approvals of the proposal on June 12, 2008, and July 28, 2008, respectively.
The Vermont Public Service Board completed its hearing on the proposal in August 2008 but has not yet rendered a decision.
Bob Audette can be reached at [email protected], or at 802-254-2311, ext. 273.