8-KOther Events

ENTERGY CORP /DE/ 8-K Report, Corporate Update (Aug 9, 2016)

Filed August 9, 2016For Securities:ETR

Summary

Entergy Corporation (ETR) announced on August 8, 2016, through its wholly-owned subsidiary Entergy Nuclear FitzPatrick, LLC (ENF), an Asset Purchase Agreement to sell the James A. FitzPatrick Nuclear Power Station (FitzPatrick) to Exelon Generation Company, LLC (Exelon). The sale price is structured with an upfront payment of $100 million, a $10 million non-refundable signing fee, and the assumption of certain liabilities by Exelon. This sale is a significant development as Entergy had previously announced its intention to shut down FitzPatrick in January 2017. The agreement allows for FitzPatrick to continue operating beyond that date, with refueling expected in early 2017. While the transaction aims to preserve the plant's operation, it is contingent upon numerous regulatory approvals, including from the NRC and NYPSC, and other conditions, with a termination date of November 23, 2016, if not closed. Entergy does not anticipate a material gain or loss from this sale. Concurrently, Entergy's subsidiary ENOI will assume decommissioning liabilities and trust funds for both FitzPatrick and Indian Point 3 from NYPA, a move that will result in the removal of a contract asset from Entergy's balance sheet.

Key Highlights

  • 1Entergy agrees to sell the FitzPatrick Nuclear Power Station to Exelon for $100 million plus a $10 million signing fee.
  • 2The sale allows FitzPatrick to continue operating beyond its previously announced January 2017 shutdown date.
  • 3Transaction completion is subject to significant regulatory approvals from the NRC, NYPSC, and others.
  • 4A termination date of November 23, 2016, is set, with key conditions related to New York's Clean Energy Standards (CES/ZEC) program needing satisfaction.
  • 5Entergy does not expect a material financial gain or loss from the sale of the plant.
  • 6Entergy Nuclear Operations, Inc. (ENOI) will assume decommissioning liabilities and trust funds for FitzPatrick and Indian Point 3 from NYPA.
  • 7The assumption of decommissioning liabilities will result in the removal of a contract asset from Entergy's balance sheet.

Frequently Asked Questions

Entergy does not expect the consummation of the sale of FitzPatrick to result in a material gain or loss in its results of operations. The primary financial impact is related to the transfer of decommissioning liabilities and trust funds from NYPA to EONI, which will lead to the removal of a contract asset from Entergy's balance sheet without a significant gain or loss.

The sale to Exelon allows FitzPatrick to continue operating beyond Entergy's previously announced January 2017 shutdown date. This is likely due to potential benefits from New York's Clean Energy Standards (CES/ZEC) program, which is a condition for the sale's completion. The sale provides an opportunity for the plant to continue generating revenue and potentially avoid immediate closure.

The sale is contingent on satisfying several closing conditions, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, receipt of various regulatory approvals (such as from the FERC, NRC, and NYPSC), and obtaining a private letter ruling from the IRS. Additionally, specific conditions related to New York's CES/ZEC program must be met by a November 17, 2016 deadline for the agreement not to terminate on November 23, 2016.

Under a prior agreement from 2000, NYPA retained the decommissioning trusts and liabilities for Indian Point 3 and FitzPatrick. The new Trust Transfer Agreement allows Entergy's subsidiary EONI to assume these decommissioning obligations and receive the associated trust funds from NYPA. This transfer will lead to Entergy removing a contract asset from its balance sheet, which represents an estimate of the net present value of decommissioning costs.