By Tom Kleckner
Entergy accelerated its march towards becoming a “pure play” utility Wednesday, announcing the sale of its Pilgrim and Palisades nuclear power facilities for their accelerated decommissioning.
Financial analysts congratulated Entergy executives on the news during the second-quarter earnings call, where the company announced adjusted earnings of $1.79/share, beating Zack’s consensus estimate of $1.26 by 42%.
CEO Leo Denault said the plants’ sale “solidifies” Entergy’s plans to fully divest itself of three of the four nuclear plants in its Entergy Wholesale Commodities (EWC) business.
Entergy’s share price jumped Wednesday by almost $2 — from $81.03/share at the market’s open to a high of $82.99 — before falling back to close at $81.82.
“This gives us a lot of capital, both financially and operationally, to focus on the growth of the utility,” Denault said.
Earlier this year, Entergy reached an agreement with Vermont state officials to sell its Vermont Yankee plant to NorthStar Group Services, which will handle the decommissioning. The plant was shuttered in 2015. The company is waiting on regulatory approvals to sell the plant’s holding company.
The transaction includes the transfer of the plants’ operating licenses, spent fuel and nuclear decommissioning trusts, to Comprehensive Decommissioning International, a newly formed joint venture between Holtec International and SNC-Lavalin.
Entergy received a “nominal” cash consideration in the deal, which must clear the Nuclear Regulatory Commission and other regulators.
“You could afford it if you could demonstrate the ability to close a nuclear plant,” CFO Drew Marsh told analysts. “The main objective was to move the risk to a party capable of [decommissioning] and doing it much quicker than we can.”
Pilgrim, located in Plymouth, Mass., is scheduled to end operations by June 2019, and Palisades, in Covert, Mich., is to close in early 2022. The two plants date back to the early 1970s. They generate almost 1.5 GW of power between them and employ 1,200 people.
Entergy’s Indian Point nuclear plant in New York will close by 2021, according to an agreement between the company and state officials. Denault said there was “nothing to read” into not including Indian Point in the deal.
The company reported earnings of $245 million ($1.34/share), excluding a one-time tax benefit of 31 cents/share for the settlement of a 2012-2013 IRS audit. That compared to $410 million and $2.27/share a year ago.
EWC reported a loss of $57 million in the quarter. Entergy affirmed its 2018 consolidated operational earnings guidance range of $6.25 to $6.85/share.
