A combined Entergy Louisiana (ELL) and Entergy Gulf States Louisiana (EGSL) would have total generating capacity of 9,860 MW, broken down as 6,444 MW for ELL and 3,396 MW for EGSL.
Those are among the facts in a business combination report that the two subsidiaries of Entergy (NYSE: ETR) filed on June 4 with the Louisiana Public Service Commission. Notably the report does not constitute a request for approval of this merger. The utilities said they would be happy to participate in any technical conferences on this combination and would likely file an application covering the combination later this year.
The report points out that the two utilities, due to their proximity to each other, have traditionally operated on a consolidated basis. The utilities said a business combination between them would have several advantages, including a better financial profile with the larger company, enhanced economic development work in Louisiana and greater regulatory simplicity.
This business combination effort is in part being driven by the fact that the two utilities joined the Midcontinent ISO as of December 2013 and now participate in MISO markets. A combined approach by the companies to MISO participation would have benefits, they noted. Both utilities are also preparing to drop out of the broader Entergy system agreement that for many years has covered power interchanges between Entergy subsidiaries.
A combined company would also be able to better handle the financial needs of their power generating system in future years, including replacement of some of their aging generating capacity. It is projected that the companies will need to add 8,100 MW to 9,600 MW of new capacity over the next 20 years at a projected capital cost of up to $11.5bn.
Among the upcoming or ongoing major capital projects for ELL are:
- Ninemile Point Unit 6 construction. Ninemile 6 is a 550-MW, combined-cycle gas turbine (CCGT) project that is expected to be on-line by early 2015;
- Downstream of Gypsy (DSG) Phases I and II, which involve major reconstruction, through replacement of things like boiler parts, of the gas/oil-fired Ninemile Point Units 4 and 5; and
- Fukushima-related safety enhancements, prompted by new NRC requirements, at the nuclear Waterford Unit 3.
For EGSL, upcoming projects include:
- Fukushima response at the River Bend plant; and
- Air emissions projects, including selective non-catalytic reduction installation for NOx control, at the Big Cajun 2 coal plant, where EGSL has 146 MW of capacity.
Much of the future power development effort for the companies would be of CCGT projects in the Amite South planning region, where Ninemile Point 6 is located, and particularly the DSG planning sub-region. Further CCGT projects are in the works in this area. Much of this local need for new generation is driven by the fact that aging gas-fired facilities in the region are due to be retired in the next few years. New capacity in this region is likely to be needed every five years.
The utilities noted that a combined company would be better able to take on larger CCGT projects, around 1,000 MW in size, rather than smaller-scale projects around 500 MW in size. Larger projects offer better economies of scale, they said.