NEW ORLEANS, Oct. 4 /PRNewswire-FirstCall/ -- Entergy Corporation announced that it has reached a definitive agreement with the New York Power Authority (NYPA) on revisions to value sharing terms entered into in 2000 at the time of the purchase of the Indian Point 3 and James A. FitzPatrick nuclear units. The agreement will clarify and amend certain provisions of the original terms included in the purchase transaction.
The agreement includes the following key provisions: -- Annual payments will be made by Entergy's Indian Point 3 and FitzPatrick nuclear units to NYPA for the period 2007-2014 based on MWh output of the plants with annual payments not to exceed $72 million; the first payment to be due by January 15, 2008 -- Entergy will pay NYPA $6.59 per MWh for power sold from Indian Point 3, up to an annual cap of $48 million and $3.91 per MWh for power sold from FitzPatrick, up to an annual cap of $24 million -- The annual payments terminate after January, 2009 if Entergy, or an Entergy affiliate, ceases to own the plants -- Entergy and NYPA waive all present and future claims under the previous value sharing terms, including but not limited to those currently pending before an arbitrator and will move to dismiss respective claims in arbitration
"The agreement achieved provides clarity to Entergy while also creating valuable flexibility going forward," said Leo Denault, Entergy's executive vice president and chief financial officer. "Entergy now has the ability to transact with more certainty and with the confidence that the economic upside produced by positive market conditions will fully accrue to the company's benefit."
Entergy will record the liability as power is generated and sold by the plants, in accordance with generally accepted accounting principles. An amount equal to the liability will be recorded to the plant asset account as contingent purchase price consideration for Indian Point 3 and FitzPatrick. This amount will be depreciated over the expected remaining useful life of the plants. Entergy estimates that the total acquisition costs of Indian Point 3 and FitzPatrick now approximate $373/KW and $310/KW, respectively. These estimates reflect adjusting the original acquisition costs of the plants for the present value of the expected payments associated with this agreement.
Background
The original purchase agreements with NYPA for the acquisition of the Indian Point 3 and FitzPatrick plants included value sharing terms. In accordance with these terms, to the extent the average annual price of the energy sales from each of the two plants exceeded specified strike prices, Entergy would be required to pay 50 percent of the amount exceeding the strike prices to NYPA. The value sharing terms were effective from 2005 through 2014. Entergy calculated that no payments were due to NYPA under these agreements for the years 2005 and 2006, while NYPA issued a notice of dispute claiming an amount was due for the year 2005. Subsequently, NYPA invoked arbitration, and later filed an amended demand for arbitration to include its calculation of amounts owed for calendar year 2006. The total claim filed by NYPA with the arbitrator for the years 2005 and 2006 was approximately $144 million. The disputes before the arbitrator had gone through both a hearing and briefing and a decision was expected in the near-term.
Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, and it is the second-largest nuclear generator in the United States. The Entergy System delivers electricity to 2.6 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $10 billion and approximately 14,500 employees.
Entergy's online address is http://www.entergy.com/
In this release, Entergy makes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. Many factors could cause the actual results to differ materially than the forward-looking information provided. These factors are discussed in more detail in Entergy Corporation's 2006 Annual Report on Form 10-K including (a) Forward-Looking Information, (b) Item 1A. Risk Factors, and (c) Item 7. Management's Financial Discussion and Analysis and in subsequent SEC filings.
