Less than two weeks after it scored a big legal victory to keep the plant open, Entergy (NYSE:ETR) said Aug. 27 that it will close the 600-MW Vermont Yankee nuclear plant in 2014.
“This was an agonizing decision and an extremely tough call for us,” said Leo Denault, who is in his first year as Entergy’s chairman and CEO. “We recognize that closing the plant on this schedule was not the outcome they had hoped for, but we have reluctantly concluded that it is the appropriate action for us to take under the circumstances,” Denault said.
Entergy cited a combination of financial factors that led to the decision to permanently shut down the facility.
The transformation in the natural gas market by plentiful U.S. shale gas; a high cost structure for Vermont Yankee – with $400m invested in this small nuclear unit since 2002 – and “artificially low” energy and capacity prices in the region.
The current market price signals in the region “do not provide adequate compensation to merchant nuclear plants for the fuel diversity benefits they provide,” Entergy said in a statement.
Once the plant is shut down, workers will de-fuel the reactor and place the plant into SAFSTOR, a process whereby a nuclear facility is placed and maintained in a condition that allows it to be safely secured, monitored and stored.
The station is expected to cease power production after its current fuel cycle and move to safe shutdown in the fourth quarter of 2014. The station will remain under the oversight of the Nuclear Regulatory Commission (NRC) throughout the decommissioning process, Entergy said.
In its Aug. 27 statement, Entergy made no mention of well-entrenched opposition to the Vermont Yankee nuclear plant in Vermont. Observers will now watch to see what, if anything, this means for other embattled Northeast nuclear plants like Energy’s Indian Point 2 and 3 in New York.
Entergy is still one of the nation’s largest nuclear operators and said that it remains committed to nuclear power.
The announcement continues a drumbeat of bad news for nuclear power in 2013. Over the past year or so, the Dominion (NYSE:D) Kewaunee plant in Wisconsin; the Duke Energy (NYSE:DUK) Crystal River 3 plant in Florida and the Edison International (NYSE:EIX) San Onofre units 2 and 3 in Southern California have all announced plans to permanently retire.
Vermont Gov. Peter Shumlin, a long-time foe of the nuclear plant, promptly scheduled a press conference Aug. 27 to discuss the Vermont Yankee shutdown.
Entergy to take after-tax charge in 4Q
Entergy plans to recognize an after-tax impairment charge of approximately $18m in the third quarter of 2013 related to the decision to shut down the plant at the end of this current operating cycle. In addition to this initial charge, Entergy expects to recognize charges totaling approximately $55m to $60m associated with future severance and employee retention costs through the end of next year. These charges will be classified as special items, and therefore, excluded from operational results.
The company noted that the estimated operational earnings contribution from Vermont Yankee was expected to be around breakeven in 2013, and generally declining over the next few years. As a result of this decision and based on continuing operations into fourth quarter 2014, the estimated operational earnings change, excluding these special items, is expected to be modestly accretive within two years after shutdown, and cash flow is expected to increase approximately $150m to $200m in total through 2017, compared to Vermont Yankee’s continued operation.
Regarding decommissioning, assuming end of operations in fourth quarter 2014, the amount required to meet the NRC minimum for decommissioning financial assurance for license termination is $566m. The Vermont Yankee decommissioning trust had a balance of approximately $582m as of July 31, 2013, excluding the $40m guarantee by Entergy to satisfy NRC requirements following the 2009 review of financial assurance levels. Filings with the NRC for planned shutdown activities will determine whether any other financial assurance may be required and will specifically address funding for spent fuel management, which will be required until the federal government takes possession of the fuel and removes it from the site, per its current obligations.
Vermont Yankee, a single unit boiling water reactor, began commercial operation in 1972. Entergy acquired the plant from Vermont Yankee Nuclear Power Corp. in 2002. In March 2011, the NRC renewed the station’s operating license for an additional 20 years, until 2032.