Entergy answers employees’ merger related questions

Entergy Corp. (NYSE:ETR) has answered questions raised by employees regarding the company’s proposed transaction with ITC Holdings Corp. (NYSE: ITC), according to a Form 425 filed June 4.

Under the agreement, Entergy will spin off its transmission business into Mid South TransCo, which will subsequently merge into ITC.

The company received a lot of questions related to transmission, distribution operations, legal issues and employee/human resources.

Regarding when the company will split its transmission and distribution assets, Entergy said that the actual split will occur upon the close of the transaction, which currently is scheduled for 2013.

“The timeline for the selection of employees to go to the new independent Transco versus those that remain with Entergy has not been established; however, a joint human resources team is working on developing a timeline and the selection process will be discussed with collective bargaining representative, as applicable,” the company said in the filing.

Employees also raised a question about new grid interconnections after the merger.

According to Entergy, ITC will continue to plan the transmission system to meet all applicable reliability standards as well as to comply with the various requirements of the open access transmission tariff (OATT). ITC will continue to participate in the Midwest ISO (MISO) planning process, which includes the evaluation of economic projects and new grid interconnections.

In response to a question regarding the timeframe to move from the analysis phase to the design phase, Entergy stated that it expects to be in the pre-design phase for about four weeks (May), during which the results of the analysis phase will be synthesized and guidance given by the project management office to each implementation team for the design phase.

The design phase will be about 12 weeks, from June through August.

The implementation phase, which will begin in September, will include execution of the Day 1 activities as well as the detailed planning for Day 2, which is defined as the end of the transition phase. The implementation phase will last through the close of the transaction, with various activities staged between September and close in 2013, and may include no regrets activities consistent with the guiding principal of minimizing implementation costs until approval timing is clear, Entergy said.

The transition phase will last 12 to 18 months following the spin-off and merger, during which the remainder of the separation activities will be completed, the company added.

In addition, employees submitted a question regarding who will set the rates for transmissios.

Entergy said that ITC will have a formula-based transmission rate, which will be subject to FERC jurisdiction for approval.

The inputs to the formula transmission rate, including the transmission revenue requirement, are updated annually pursuant to the procedures outlined in the MISO tariff, the company said.