ITC and Entergy File for Transaction Approval with Federal Energy Regulatory Commission
NEW ORLEANS and NOVI, Mich., Sept. 24, 2012 -- NEW ORLEANS and NOVI, Mich., Sept. 24, 2012 /PRNewswire/ -- ITC Holdings Corp. (NYSE: ITC) and Entergy Corporation (NYSE: ETR) filed a joint application today with the Federal Energy Regulatory Commission (FERC) seeking approval for Entergy's utility operating companies to spin off and merge their electric transmission businesses into a subsidiary of ITC. Upon closing of the transaction, ITC will become one of the largest electric transmission companies in the U.S., with more than 30,000 miles of transmission lines spanning 11 states from the Great Lakes to the Gulf Coast.
The transaction provides the opportunity for a leading independent transmission company to continue to expand the grid serving a large area of the mid-South and to deliver growing benefits to customers and communities.
The FERC application seeks approval for Entergy to transfer more than 15,800 miles of interconnected transmission lines at voltages of 69kV and above and the associated substations in Arkansas, Louisiana, Mississippi, Missouri and Texas to ITC. These assets then will be placed under the functional control of the Midwest Independent Transmission System Operator or MISO, a party to today's filing. Meanwhile, Entergy's operating 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.
"The spin/merge transaction is designed to create benefits for our customers, our communities and our region," said Theo Bunting, Entergy's group president of utility operations. "With an independent transmission company owning the transmission business, we'll see greater capacity for investment, singular focus and excellence in operations."
Joe Welch, ITC chairman, president and chief executive officer, highlighted the transaction's national perspective. "Moving the Entergy transmission businesses into ITC's independent model supports FERC's vision of an efficient, inter-regional, high-performance grid—one that delivers diverse, reliable and competitively priced supplies of electricity. When the transaction is complete, ITC will be strategically positioned to participate in transmission planning efforts across the Southeast and Midwest and make the investments needed to continue modernizing our nation's electric transmission system," he said. "While ITC has successfully completed several transmission asset acquisitions since its formation in 2003 – along with developing and partnering on transmission projects – the multi-state scope and inter-regional nature of this transaction make it unique. This transaction reaffirms the sustainability and portability of our business model."
Rationale and Results
The need for more infrastructure investment is among the many challenges confronting the U.S. electric industry. The electric industry, including Entergy's operating companies, faces growing capital investment requirements to maintain and upgrade infrastructure, meet environmental regulations and serve an energy-intensive economy. The transaction addresses these challenges head-on and produces numerous benefits, including:
Independent model: Customers and other stakeholders will benefit from ITC's proven independent business model for owning and operating transmission systems. ITC's independence from all buyers and sellers of electric energy provides the highest level of confidence that improvements to the electric transmission grid are planned for the broadest public benefit.
Singular focus: The transaction results in two companies that are more specialized and focused —ITC on transmission and Entergy on generation and distribution. ITC has a demonstrated capability to operate transmission systems at industry-leading levels of safety and reliability. At the same time, the Entergy operating companies will increase their focus on their respective generation fleets and distribution systems.
Wholesale markets and a regional planning view: The transaction facilitates infrastructure investment and builds upon the benefits of the wholesale market. By structurally separating the transmission business from generation and transmission businesses, the transaction encourages greater participation in the transmission planning process and disclosure of information by third parties – leading to an improved process. Further, the independent model aligns with national policy objectives to facilitate investment in local, regional and inter-regional transmission, and advances open access initiatives.
Financial strength and flexibility: Once completed, the transaction will yield separate companies with strong balance sheets and greater capability to finance the infrastructure investment requirements of today and in the future. The Entergy operating companies reduce absolute debt levels and improve their cash positions thus increasing their financial strength to manage required investments in generation and distribution. ITC improves access to capital for the transmission business and focuses its financial resources solely on the performance of the transmission system.
Additional Transaction Information and Next Steps
Entergy and ITC initiated the multi-state and federal regulatory process with a joint application filing with the Louisiana Public Service Commission and the New Orleans City Council on Sept. 5 and Sept. 12, respectively. The remaining regulatory filings for the transaction will be completed this year in Arkansas, Mississippi, Missouri and Texas. The companies target a transaction close in 2013 pending receipt of all required regulatory approvals and satisfaction of other closing conditions.
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, Mississippi, where the headquarters of Entergy's transmission business currently is located. ITC also will have offices and warehouses throughout the service territory to ensure a local presence and timely response to stakeholder and system needs.