Entergy planning to create all-nuclear company with Indian Point and others

By GREG CLARY
THE JOURNAL NEWS
(Original Publication: November 6, 2007)

Indian Point generated more than a half-billion dollars in estimated profit last year, and its owners are poised to improve their earnings with plans announced yesterday to spin off the nuclear plant and four others in the Northeast and Midwest.

The Buchanan site should continue to bolster those rosy numbers, said Paul Justice, an energy industry analyst with Morningstar Inc., a nationally known provider of independent investment research.

"The ... nuclear investments are turning out to be a gold mine," Justice said yesterday. "This is a good strategy move for Entergy to separate from the regulated utilities. We're in an environment of rising power prices and insufficient capacity, and Entergy has got one of the best situated fleets in the nation."

Entergy officials would not comment on the earnings of individual plants, but public filings show that the nonutility nuclear fleet generated 27 percent of Entergy's consolidated net income in 2006. That group, plus a newly acquired plant in Michigan, will be spun off into a separate company.

The company's announcement attributed the strong profit picture in the third quarter of this year to "increased revenues from pricing and the production available from the Palisades plant in Michigan, acquired in the second quarter of this year, and the positive effect of a lower tax rate in the current period."

Other reactors to be included in the spinoff are the James Fitzpatrick near Oswego, N.Y., Vermont Yankee in Vernon, Vt., and Pilgrim in Plymouth, Mass.

"The board of directors' decision to pursue a plan to spin off the nonutility nuclear business to shareholders reflects the same commitment to shareholder value that has produced the highest return in the industry over the last nine years," said J. Wayne Leonard, Entergy's chairman and chief executive officer.

"In addition, as reflected in earnings guidance for 2008, the company remains on track to realize its aspiration of growing earnings $1 per share per year."

Entergy's overall profits were up more than 20 percent over the same quarter last year, though non-nuclear business reported results that were essentially unchanged, the company said in its announcement.

Opponents of the plant said yesterday that they weren't surprised at the half-billion dollar profit estimate, saying they figure it even higher.

"We've used the two-million-dollars-a-day profit number when we're describing our frustration with Entergy's unwillingness to spend any money to build cooling towers, to do things that are needed," said Phillip Musegaas, policy analyst for the environmental group Riverkeeper, which has called for the plant's closing.

"Unfortunately, without the (Nuclear Regulatory Commission) requiring them to make the upgrades necessary to protect the environment, Entergy's going to pass their profits on to their shareholders."

Justice said profits in the nuclear business run on the order of $30 to $50 per megawatt hour.

In 2006, Indian Point's two reactors generated 16.96 million megawatt hours, said New York Independent System Operator, which tracks electricity production for the state.

That level of production would leave an estimated profit for Indian Point between $509 million and $848 million annually.

Indian Point generates enough electricity to power 2 million homes and Entergy officials have said in the past that since they took over in September 2001, the plant has operated in excess of 95 percent of its capacity, compared with 50 percent some years under previous ownership.

Company officials also noted they have invested hundreds of millions of dollars in the site since they took control.

Though Justice and company officials characterize the restructuring as having little impact on the day-to-day operations of individual plants, the NRC has to approve the changes.

"It's not uncommon for these companies to restructure," NRC spokesman Neil Sheehan said. "When there's a change ... we always look at whether it will affect their ability to safely operate the plant."

Sheehan said the agency verifies such things as the operator's financial ability to decommission the plant when it is closed.

He said the move would have no impact on Entergy's application to renew Indian Point's license to produce electricity an extra 20 years, into 2035.