Entergy Corporation (ETR) said that Entergy Nuclear Vermont Yankee LLC is in talks with Vermont Electric Cooperative Inc. to sell power from the Vermont Yankee nuclear plant.
Entergy also said that it has no intention of selling the Vermont plant, which was put up for sale last November as it reported several leaks of radioactive material from the underground pipes.
The new 20-year deal, which will supply power to Vermont Electric Co-op. customers, is contingent upon the receipt of approval from VEC’s board and a nod from state regulators regarding the functioning of the plant beyond March 2012.
On successful completion of the deal, the 605-megawatt Entergy Nuclear Vermont Yankee will provide uninterrupted energy and capacity to the Vermont Electric Cooperative’s nearly 34,000 customers in 74 towns throughout northern Vermont. Entergy has fixed the power price for the first year of the contract at $49 per megawatt hour, which is below the current market rate.
Following the first year, Entergy said the prices will be determined annually. A predetermined formula designed to protect VEC from high market prices and also allowing its members to benefit from low market prices will form the basis for deciding the price.
Entergy pointed out that the reason to end the hunt for a buyer is the uncertain political environment in Vermont and not the ongoing nuclear crisis at the Fukushima Dai-ichi nuclear plant in Japan. The political uncertainty prevents the plant from operating beyond 2012, even though the U.S. Nuclear Regulatory Commission has recently granted the plant a 20-year license renewal.
The Nuclear Regulatory Commission renewal marks the end of an extensive safety and environmental review by the NRC that spanned more than five years. Vermont Yankee has an outstanding operational track record. In the last five years, Vermont Yankee’s capacity factor has been above 94%, operating with two breaker-to-breaker runs and only one trip in about a four-and-one-half-year period.
In the first 30 years of the plant’s life before Entergy acquired it in 2002, the average capacity factor was below 78% and the plant never had a breaker-to-breaker run. In addition, Vermont Yankee has been put in the “excellence” category as compared to its peers since Entergy acquired the plant.
Now that the sale process has come to an end with Entergy still owning the Vermont Yankee plant, the company continues to seek successful resolution related to the long-term future of the plant to benefit all stakeholders as well as the plant’s workforce. Securing agreements with the local electric companies to sell power from the plant at affordable prices is one of the efforts that has been under way for quite some time.
Also, Entergy said it will continue to evaluate future opportunities for the plant should conditions change.
New Orleans-based Entergy Corp. is primarily engaged in electric power production and retail distribution of power. With 30,000MW of generating capacity, it distributes electricity to 2.7 million customers in Arkansas, Louisiana, Mississippi and Texas.
In the near-term, we retain our long-term Neutral stance on Entergy in the absence of any positive triggers, which is supported by a Zacks #3 Rank (short-term Hold recommendation) for the stock. The near-term cautious stance is also shared by its peers like American Electric Power Company Inc. (AEP) and Southern Company (SO).
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