Entergy and ITC Initiate Transaction Approval Process with Louisiana Public Service Commission Filing
Entergy Corporation (NYSE: ETR) and ITC Holdings Corp. (NYSE: ITC) have initiated a multi-state and federal regulatory process per an agreement announced on Dec. 5, 2011, that calls for Entergy's utility operating companies to spin off and merge their electric transmission businesses with a subsidiary of ITC. Taking the first step in the extensive process are Entergy Louisiana, LLC and Entergy Gulf States Louisiana, L.L.C., which, in conjunction with ITC and ITC Midsouth LLC, filed a joint application today with the Louisiana Public Service Commission seeking approval of the transaction.
Entergy is seeking approval to transfer approximately 15,800 miles of interconnected transmission lines at voltages of 69kV and above and the associated substations to ITC. ITC will then be one of the largest electric transmission companies in the U.S., with more than 30,000 miles of transmission lines spanning from the Great Lakes to the Gulf Coast. Meanwhile, Entergy's utility companies will continue to own and operate their respective distribution and generation businesses and will provide customer service, billing, outage reporting and restoration services to homes and businesses in the region.
"This transaction is expected to bring significant benefits to our customers as we seek to meet the challenges associated with transforming the U.S. electric grid for the 21st century and beyond," said Bill Mohl, president and chief executive officer of Entergy Louisiana and Entergy Gulf States Louisiana. "ITC's sole business is transmission, and the company possesses a demonstrated capability to own, build, and operate transmission systems at industry-leading levels. The transaction will facilitate and build on the customer benefits of joining the MISO RTO Day 2 wholesale market."
The LPSC conditionally approved Entergy Louisiana's and Entergy Gulf States Louisiana's application to join the MISO RTO in May 2012.
Joseph L. Welch, ITC chairman, president and chief executive officer agreed with Mohl's assessment. "The electric industry is evolving, and ITC is well-positioned to make the infrastructure investment required to complete the modernization of the grid," he said. "We have a track record of operational excellence, and ITC will deliver the near-term and longer-term benefits to customers that result from a high-performing, reliable transmission system and a regional planning view that promotes the benefits of the competitive electric market, all of which is in the public interest. We look forward to serving the state and entire region to meet future energy demands."
Infrastructure investment is among the many challenges that the U.S. electric industry is facing. The electric industry – and Entergy's operating companies – face growing demands to keep pace with the capital investment requirements necessary to maintain and upgrade infrastructure, meet environmental regulations and serve an energy-intensive economy. The transaction addresses these challenges head-on, providing separate, strong balance sheets that afford greater capability to finance infrastructure requirements, with ITC focused on transmission and Entergy's operating companies on generation and distribution.
Moreover, this transaction places transmission in the hands of a singularly focused, independent company with industry-leading performance in the areas of operations and maintenance of transmission assets, as well as application of broad regional planning for transmission investment designed to facilitate the delivery of low cost energy.
"We had planned to make our first filing in Louisiana last week; however, it was delayed so that we and the commission could dedicate resources to restoration following Hurricane Isaac," Mohl said. "Now that the completion of the restoration work is in sight, we are filing this application. Given the deadlines included in this transaction, it is important to stay on course with our filings in order to deliver the benefits to customers. Initiating the filing process now will allow our regulators sufficient time for their reviews."
Additional Transaction Facts and Next Steps
In addition to the miles of transmission lines and acres of substations involved in the transaction, approximately 750 Entergy employees, including key leadership personnel from Entergy's transmission business, will become employees of ITC. ITC will establish and maintain a regional headquarters in Jackson, Miss., where the headquarters of Entergy's transmission business is currently located. ITC will also have offices and warehouses throughout the service territory to ensure a local presence and timely response to stakeholder and system needs. Details regarding the transaction are provided in the Louisiana Public Service Commission filing.
ITC personnel were onsite at Entergy's system command center in Jackson last week to observe storm response operations related to Hurricane Isaac. Integration efforts to ensure storm readiness and response are among the key operational matters being addressed by the two companies.
The remaining regulatory filings for the transaction will be completed later this summer and into the fall. Subsequent filings are planned for Arkansas, Mississippi, Missouri, New Orleans and Texas as well as with the Federal Energy Regulatory Commission. The companies target a transaction close in 2013 pending receipt of all required regulatory approvals and satisfaction of other closing conditions.
The Louisiana filing will be posted to the Louisiana Public Service Commission website by the close of business on Thursday, Sept. 6. More information about the transaction can be viewed here on ITC's website, or here on Entergy's website.