8-KMaterial AgreementsRegulation FDOther Events+1

ENTERGY CORP /DE/ 8-K Report, Material Agreement (Oct 30, 2023)

Filed October 30, 2023For Securities:ETR

Summary

Entergy Corporation has announced a significant strategic divestiture of its regulated natural gas distribution businesses in New Orleans and East Baton Rouge, Louisiana, to affiliates of Bernhard Capital Partners. This transaction, structured into two phases and contingent upon various regulatory approvals, aims to streamline Entergy's operations and focus on its core utility businesses, primarily regulated electric utilities and competitive non-regulated businesses. The sale is expected to generate approximately $483.5 million in base purchase price, subject to customary adjustments. While this move signals a shift in Entergy's portfolio, investors should monitor the progress and conditions associated with obtaining necessary regulatory approvals from local and state bodies, as well as Hart-Scott-Rodino clearance. The completion timelines are extensive, with potential termination dates extending to October 2025, indicating a lengthy approval process. The financial implications, including potential reverse termination fees and transition costs, are detailed in the filing, providing transparency on potential downside risks.

Key Highlights

  • 1Entergy Corporation is selling its regulated natural gas distribution businesses in New Orleans and East Baton Rouge, Louisiana.
  • 2The buyers are affiliates of Bernhard Capital Partners.
  • 3The total base purchase price for both businesses is approximately $483.5 million ($285.5 million for New Orleans and $198 million for East Baton Rouge), subject to adjustments.
  • 4The transaction is divided into two phases and requires significant regulatory approvals, including from the City Council of New Orleans and the Louisiana Public Service Commission.
  • 5The closing of the transactions is subject to customary conditions, including regulatory approvals, Hart-Scott-Rodino clearance, and the concurrent closing of both transactions.
  • 6The PSAs include termination provisions with potential financial liabilities for both buyers (reverse termination fees) and sellers (transition costs).
  • 7The transaction is not subject to a financing condition for the buyers.

Frequently Asked Questions

Entergy Corporation, through its subsidiaries Entergy New Orleans, LLC and Entergy Louisiana, LLC, is selling its regulated natural gas local distribution company businesses. This includes the business serving customers in the Parish of Orleans (New Orleans) and the business serving customers in the Parish of East Baton Rouge (Baton Rouge).

The buyer is two separate affiliates of Bernhard Capital Partners. The combined base purchase price for the two businesses is approximately $483.5 million, with $285.5 million for the New Orleans business and $198 million for the East Baton Rouge business, subject to certain adjustments at closing.

The transaction is subject to several conditions, including the receipt of necessary regulatory approvals from the City Council of New Orleans, the Louisiana Public Service Commission, and the Metropolitan Council for the City of Baton Rouge and Parish of East Baton Rouge. It also requires clearance under the Hart-Scott Rodino Act and the concurrent closing of both transactions. The parties will also seek a waiver of FERC's capacity release rules.

The transaction is structured in two phases: an initial phase before regulatory approvals and a second phase after regulatory approvals. The PSAs may be terminated if the second phase does not begin within 15 to 18 months of the agreement date (October 28, 2023). The closing must occur no earlier than six months after the initiation of the second phase and can be terminated by either party if not closed by October 28, 2025.