Entergy Corporation (NYSE: ETR) announced today that its subsidiaries, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C. and Entergy Texas, Inc. have signed an agreement to acquire the Union Power Station near El Dorado, Arkansas. The Union Power Station is a highly efficient, natural gas-fired 1,980-megawatt (summer-rated) generating facility. The station is owned by Union Power Partners, L.P., an independent power producer and wholly-owned by Entegra TC LLC.
"Our service territory is at the heart of an industrial renaissance that is built on competitive energy costs, low electricity prices and smart economic growth policies of our state governments," said Leo Denault, Entergy's chairman and chief executive officer. "The acquisition of these highly efficient units at a price favorable to our customers will help us meet the increased demand and be a significant step in the ongoing modernization of our generating fleet."
In the U.S. Energy Information Administration's most recent regional rankings of retail electricity prices, the West South Central Region – which includes Arkansas, Louisiana, Texas and Oklahoma – had the lowest industrial rates of any region in the country.
Low electricity prices are one reason that more than 85 projects involving over $65 billion of investment and projected to create tens of thousands of new jobs and the potential addition of approximately 1,700 MW in new industrial load by 2016 have been announced, signed or are under development in Entergy's service area.
The Union Power Station, which entered commercial service in 2003, consists of four combined-cycle gas-fired generating units, or CCGTs, each rated at 495 MW. Under the Asset Purchase Agreement, Entergy Arkansas and Entergy Texas have each agreed to acquire one unit and Entergy Gulf States Louisiana has agreed to acquire two units. Entergy New Orleans will receive 20 percent of the output from the Entergy Gulf States Louisiana units via an at-cost purchase power agreement, subject to City Council of New Orleans approval.
The plant purchase price is $948.0 million ($479/kW), or $237.0 million per unit, subject to adjustments. The purchase price is approximately half the cost to build a comparable new CCGT facility.
The purchase is contingent upon, among other things, obtaining necessary approvals, including acceptable cost recovery, from the various federal and state regulatory authorities and the expiration of the waiting period under the Hart-Scott-Rodino antitrust law. The targeted closing date is late 2015.
The total investment associated with this proposed plant acquisition, including the amounts associated with the purchase price, transaction costs, contingency and future investment in the plant and transmission upgrades, was generically included in the previously disclosed preliminary 2015 through 2017 capital plan for Entergy and the affected subsidiaries. In addition, the estimated earnings implications were reflected in the financial outlook of approximately 5 to 7 percent compound annual average net income growth through 2017 (off 2013 base year) for the Utility business.