8-KFinancial EventsRegulation FDOther Events+1

ENTERGY CORP /DE/ 8-K Report, Material Impairment (Aug 27, 2013)

Filed August 27, 2013For Securities:ETR

Summary

Entergy Corporation announced on August 27, 2013, its decision to close and decommission its Vermont Yankee Nuclear Power Station in Vernon, Vermont. The plant is slated to cease power production after its current fuel cycle, with a safe shutdown targeted for the fourth quarter of 2014. This strategic move was driven by several factors including sustained low natural gas and wholesale energy prices, the plant's high cost structure, and perceived flaws in the regional wholesale electricity market design. The immediate financial impact for Entergy includes a significant non-cash impairment charge of $287 million ($181 million after-tax) to be recognized in the third quarter of 2013. This charge reflects the reduced fair value of the Vermont Yankee assets compared to their carrying value. Additionally, Entergy anticipates recording further charges between $55 million and $60 million through the end of 2014, primarily for severance and employee retention costs.

Key Highlights

  • 1Entergy Corporation will close and decommission its Vermont Yankee Nuclear Power Station.
  • 2Power production to cease after current fuel cycle, with safe shutdown by Q4 2014.
  • 3Decision driven by low natural gas/wholesale energy prices, high plant costs, and regional market design issues.
  • 4A non-cash impairment charge of $287 million ($181 million after-tax) will be recognized in Q3 2013.
  • 5Estimated fair value of Vermont Yankee assets is $62 million versus a carrying value of $349 million.
  • 6Additional charges of $55 million to $60 million expected by year-end 2014 for severance and retention.
  • 7The increase in decommissioning cost liability is due to the change in timing expectations for cash flows.

Frequently Asked Questions

Entergy is closing Vermont Yankee due to sustained low natural gas and wholesale energy prices, the plant's high cost structure, and perceived flaws in the regional wholesale electricity market design, which have made the plant no longer economically viable.

Entergy will recognize a non-cash impairment charge of $287 million ($181 million after-tax) in the third quarter of 2013. Additionally, the company expects to incur charges of approximately $55 million to $60 million by the end of 2014 related to severance and employee retention costs.

Vermont Yankee is expected to cease power production after its current fuel cycle and move to safe shutdown in the fourth quarter of 2014.

The impairment charge was determined based on a fair value analysis using an income approach, specifically a discounted cash flow method. The estimated fair value of the plant and related assets as of July 31, 2013, was $62 million, significantly lower than its carrying value of $349 million.