Entergy purchase of gas plants delayed by DOJ investigation

The Entergy (NYSE: ETR) purchase of two gas-fired power plants from KGen Power is being held up while the U.S. Justice Department conducts an investigation into competitive issues.

While neither Entergy nor KGen knows when the investigation will conclude, KGen has said it needs to complete the sale of the two combined-cycle power plants so it can close its business operations.

Entergy units have received state approvals to purchase the Hot Spring combined-cycle plant in Arkansas as well as the Hinds combined-cycle plant in Mississippi. The tentative deal was announced in July 2011 and has received all the standard approvals, Entergy spokesperson Michael Burns said Oct. 10.

But completion of the sale is being held up during an ongoing Justice investigation and Burns would not speculate on when the issue would be resolved.  

Burns did say in an email to GenerationHub that DOJ is conducting “an ongoing civil investigation of competitive issues of the utility operating companies.” The probe has been going on since the fall of 2010.

“The civil investigation involves competitive issues concerning certain generation procurement/dispatch and transmission system practices of Entergy’s utility companies,” Burns said.

KGen has said in public filings that it hopes to clear up any DOJ concerns as soon as possible so it can proceed with disbanding the KGen company.

Entergy does not know when Justice will complete the probe and its spokesperson declined to speculate what would occur if the inquiry drags on.

“Entergy believes that its business practices, which have been subject to thorough review and regulation by the Federal Energy Regulatory Commission, state electric utility regulatory commissions and local regulators, have satisfied all applicable laws and regulations,” Burns said in the email.

KGen wants to complete deal, close its books

Both Hinds and Hot Spring are connected to the Entergy Services’ transmission grid under long-term interconnection agreements with Entergy Mississippi and Entergy Arkansas respectively.

KGen is liquidating its assets following an April 2011 decision by its board of directors to approve a “complete liquidation” of the company’s assets, KGen said in a financial statement from June 30 of this year. The KGen financial filing said the Houston-based company wants to close out the sale of the two gas plants so it can proceed with the “dissolution” of the company.

“Although the mandatory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act, applicable to the transaction has expired, at the request of the Antitrust Division of the U.S. Department of Justice, or DOJ, made in connection with the DOJ’s ongoing review of the Hinds and Hot Spring transactions, we and Entergy agreed to delay closing of the transaction,” KGen said in a June 30 financial statement.

Entergy is buying Hot Spring for roughly $253m. The company was planning to close the transaction by Aug. 1, a deadline which has now been missed.

Hot Spring is a 620-MW generating facility. Hinds has a capacity of roughly 450 MW. Entergy has said that it was buying the Hinds plant for $206m.

“We are focused on working with Entergy to satisfy the conditions to complete these transactions as soon as possible. Our objective is to maximize the cash available for distribution to our stockholders,” KGen said in its financial filing.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.