News Flash: FERC approves Entergy/ITC transaction

FERC on June 20 approved the spinoff of Entergy’s (NYSE:ETR) transmission assets to ITC Holdings (NYSE:ITC).

The commission approved the transaction under Section 203 of the Federal Power Act (FPA), which applies to holding companies’ acquisition of public utilities or their securities; determined the deal was consistent with Section 305(a) (FERC Docket No. EC12-145) of the FPA, which relates to officers or directors benefitting from the sale of issued securities and to interlocking directorates; approved the formula rates to be charged by the new ITC operating companies (ER12-1681-000) and certain jurisdictional agreements as part of the application; and approved other necessary service filings that will govern the operation of the new ITC operating companies within the Midcontinent ISO (MISO) (ER-12-2682-000, ER12-2693-000). 

The companies had said they anticipated a FERC decision in early summer.

ITC’s acquisition of Entergy’s transmission business requires state regulatory approval from Arkansas, Louisiana, Mississippi, Missouri, as well as approval from the New Orleans City Council. The companies have said that from regulatory staff testimony submitted, there have been no unexpected reactions to the transaction. Louisiana, Arkansas and New Orleans raised concerns about the transaction in FERC filings in January.

ITC shareholders approved the transaction in April. 

The companies expect all regulatory decisions by the fall, and the transaction to close before the end of 2013.

ITC and Entergy on Dec. 5, 2011, announced that ITC would acquire Entergy’s transmission business in a reverse Morris trust transaction.

The terms of the transaction agreement calls for Entergy to divest its electric transmission business to a newly formed entity, Mid South TransCo, and distribute this newly formed entity to its shareholders in the form of a tax-free spin-off. Mid South TransCo will then merge with and into a newly created merger subsidiary of ITC in an all-stock, reverse Morris trust transaction.

The merger will result in Entergy shareholders receiving 50.1% of the shares of pro forma ITC in exchange for their shares of Mid South TransCo, with existing ITC shareholders owning the remaining 49.9% of the combined company.

The transaction will add 28,000 MW of load to ITC’s existing 26,000 MW, making it the largest load-serving transmission company in the United States, and add 15,700 miles to its 15,100 miles of transmission lines, making it the second largest transmission company on a miles-served basis.

Check back on TransmissionHub for in-depth analysis of FERC’s rulings.

About Rosy Lum 525 Articles
Rosy Lum, Analyst for TransmissionHub, has been covering the U.S. energy industry since 2007. She began her career in energy journalism at SNL Financial, for which she established a New York news desk. She covered topics ranging from energy finance and renewable policies and incentives, to master limited partnerships and ETFs. Thereafter, she honed her energy and utility focus at the Financial Times' dealReporter, where she covered and broke oil and gas and utility mergers and acquisitions.