Entergy CEO Leonard talks nuclear, hurricanes, succession

Entergy (NYSE: ETR) Chairman and CEO Wayne Leonard spent much of the company’s third quarter earnings call Nov. 5 discussing issues ranging from nuclear plant performance to hurricanes to the company’s transition to a new management team.

Leonard has previously announced his plans to retire and noted that the call would be his last at the helm of Louisiana-based Entergy. Leonard again touted his assertion that his successor, Executive Vice President and CFO Leo Denault will be a top power company CEO right away. “He’s that good,” Leonard said.

Entergy also continues to make regulatory headway toward its goal of having its transmission unit join the Midwest ISO, Leonard said.

Fending off various regulatory and legal challenges affecting its merchant nuclear fleet continues to be a leading priority, Leonard noted.

During the call, Entergy officials noted that they expect to continue to litigate certain state tax issues concerning the company’s Vermont Yankee nuclear plant in Vermont.

The New York Independent System Operator (NY ISO) finalized the 2012 Reliability Needs Assessment, which reiterated reliability benefits of Indian Point nuclear Unit 2 and Unit 3. Two other independent reports also presented findings supporting the importance of Indian Point, Entergy said.

There are NRC hearings underway on Indian Point license renewal issues. Rulings to be made by the Atomic Safety Licensing Board (ASLB) on various contentions filed by intervening parties in Entergy’s application for a 20-year license extension, Leonard said. There have been 120 contentions filed so far.

Entergy first applied to relicense the two units in 2007.

“Only the NRC has the authority to shut down the plant,” Leonard said.

The Entergy CEO hopes that statements made by New York Mayor Michael Bloomberg in the wake of Hurricane Sandy should further make the case for Indian Point. Mayor Bloomberg’s has called for policy makers to deal with carbon emissions in the wake of Hurricane Sandy.

Entergy’s Leonard said if Indian Point closes it would result in increased fossil fuel generation in the region, which could have health impacts for New York.

Leonard spent much time discussing both the impact of Hurricane Sandy in the Northeast and the impact of Hurricane Isaac in the Southeast. The U.S. Department of Energy gave Entergy’s response to Hurricane Isaac an “A-plus.”

Company points to recent nuclear refueling outages

Several regularly-scheduled refueling and maintenance outages at the company’s Midwest and East Coast fleet did not last much more than 30 days, according to quarterly filings.

The Palisades plant in Michigan had a 34-day refueling outage in 2012, Indian Point was down for 28 days in 2012, and FitzPatrick was for 15 days through the third quarter and another 19 days in the fourth quarter of 2012, Entergy officials said.

Aside from refueling outages, there are state upcoming state commission rate cases that could affect the economic return for much of Entergy’s regulated nuclear fleet in the Southeast, Leonard said.

In addition to major component replacement costs and identified repairs, Entergy will be making capital expenditures on items should as dry cask storage for nuclear plants and wedge-wire screens for cooling water intake systems at various power plants by the end of 2015.

Entergy reported earnings of $1.89 per share on an as-reported basis and $1.95 per share on an operational basis for third quarter 2012.

In third quarter 2012, Entergy’s utility earnings were $296.2m, or $1.66 per share, on an as-reported basis and $306.8m, or $1.72 per share, on an operational basis, compared to $524.1m, or $2.95 per share, on both as-reported and operational bases in third quarter 2011. 

The quarter-over-quarter decrease was due largely to the absence of the net earnings benefit from a 2011 IRS settlement that resulted in a significant reduction in income tax expense, the majority of which was recorded at the utility, and the regulatory charge recorded to reflect the agreement to share the benefits resulting from the settlement with Entergy Louisiana’s customers, which decreased net revenue.

The average realized revenue per megawatt hour for the nuclear fleet was approximately $52, down from approximately $56 in the same period last year. While nuclear generation declined due to an increase in refueling and unplanned outage days, the effect of outage days was partially offset by the exercise of resupply options provided for in power purchase agreements whereby, under these options, Entergy Wholesale Commodities may elect to supply power from another source when the plant is not running.

Lower net revenue from Entergy Wholesale Commodities’ nuclear fleet was partially offset by net revenue from the 583-MW Rhode Island State Energy Center, which was acquired in December 2011. Higher non-fuel operation and maintenance expense also contributed to the operational adjusted EBITDA decline, driven by higher compensation and benefits costs (largely pension) and the Rhode Island plant acquisition.

Entergy closed the purchase of the 550-MW Rhode Island facility, a combined-cycle power plant located just outside Providence, R.I., in December 2011. Entergy Wholesale Commodities bought the plant for roughly $346m. Entergy plans to increase the generating capacity at the plant to 583 MW.

Entergy’s net cash flow provided by operating activities in third quarter 2012 was $1,03bn compared to $1,15bn in third quarter 2011.

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.