ITC CEO Girding for ‘Ransom’ as States Review $1.8 Billion Deal

Entergy Corp. and ITC Holdings, the largest independent U.S. owner of high-voltage power lines, face negotiations “for ransom” as five states and the city of New Orleans review the planned sale of Entergy’s high-voltage power lines to Novi, Michigan-based ITC.

The companies are trying to settle differences ahead of July hearings in Arkansas and Louisiana, where commission staff members oppose the deal because it will cost state regulators oversight of line upgrades and capital spending.

“What you’re really dealing with is a hostage situation, and the hostage in this case is the transaction,” Joseph Welch, ITC’s chairman and chief executive officer, said in an interview today at Bloomberg’s New York office. “We have just entered, finally, into the negotiation phase for ransom.”

ITC Holdings agreed in December 2011 to acquire Entergy’s transmission system for $1.78 billion in assumed debt. If the deal is completed, ITC will own more than 30,000 miles of high-voltage lines from the Great Lakes to the Gulf Coast.

The transaction isn’t in the public interest, according to the Arkansas and Louisiana commissions, since it would shift oversight of Entergy’s high-voltage lines from state to federal regulators. ITC is regulated by the Federal Energy Regulatory Commission.

Julien Dumoulin-Smith, a New York-based utilities analyst with UBS Securities LLC, rated the deal’s chances of approval at less than 50 percent and “near impossible without some sort of economic concession,” in an April 30 research report. He rates shares of New Orleans-based Entergy a “sell.”

“In these negotiations, money is an easy thing to evaluate: Either we can do it or we can’t do it,” Welch said. “The harder ones are the emotional issues, like loss of jurisdiction. The states will have more input, more knowledge, more clarity and more visibility with what’s going on with the transmission grid with us as an owner than they ever had with Entergy.”