Entergy in Talks to Sell FitzPatrick Nuclear Plant to Exelon

  • Companies are aiming to complete discussions by mid-August
  • Deal may hinge on New York state clean energy subsidies

Entergy Corp. said it’s in talks with Exelon Corp. to sell a nuclear plant that was slated for shutdown next year, a sign that New York’s proposal to keep upstate reactors operating is already yielding fruit.

The companies aim to complete discussions about the James A. FitzPatrick plant near Oswego by mid-August, Entergy said in a statement Wednesday. If no agreement is reached, Entergy will move forward with plans to shut and decommission FitzPatrick. The company has said that the reactor would cease operations in January 2017.

Reactor operators have announced a raft of closures as a flood of natural gas supply sent prices for the fuel plummeting, displacing nuclear power amid weak demand and rising costs. New York said last week it could provide about $965 million in subsidies over two years to help support struggling nuclear plants as part of a plan to promote clean energy.

"In keeping with our corporate strategy to move away from merchant power and toward a pure-play utility, we are working with Exelon to come to commercial terms on a sale transaction that depends largely on the final terms and timeliness of the New York State Clean Energy Standard," Bill Mohl, president of Entergy’s wholesale commodities unit, said in the statement.

A deal would be positive for both companies, analysts with Tudor Pickering Holt & Co. said in a note to clients Wednesday. Entergy would become a more regulated utility by selling FitzPatrick, while Exelon would boost economies of scale by adding the plant to its other New York reactors, Nine Mile Point and Ginna.

Deal Value

Buying FitzPatrick gives Exelon “a free option to make money off the plant and the ability to move around some of the potential nuke retirements to improve power prices in the region,” the analysts said.

“The value of the plant depends completely on the Clean Energy Standard and whatever else the state is going to do,” said Kit Konolige, an analyst at Bloomberg Intelligence in New York. “It’s really a three-way negotiation between Entergy, Exelon and the state.”

Exelon may pay as much as $946 million for FitzPatrick, but is likely to pay less, Shahriar Pourreza, an analyst with Guggenheim Securities LLC in New York, said in a note to clients Wednesday. Exelon will only buy the plant if subsidies are approved, Pourreza said.

Entergy shut its Vermont Yankee reactor in 2014, and the company said its Pilgrim nuclear plant south of Boston will close in 2019. Exelon has announced plans to close its Clinton and Quad Cities plants. Fitch Ratings said in June that Ginna is also at risk of early retirement.

“These discussions potentially could lead to continued long-term operation of all three upstate nuclear plants, preserve the economic and environmental benefits those units bring to all New Yorkers and help New York achieve its clean energy and economic development goals,” Exelon spokeswoman Lacey Dean said in an e-mail.

Entergy fell 18 cents or 0.2 percent to $80.88 at 2:18 p.m. in New York. Exelon climbed 6 cents to $36.49.

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