Entergy, ITC Holdings seek U.S. OK of $1.78 bln grid transfer
HOUSTON, Sept 24 |
HOUSTON, Sept 24 (Reuters) - Entergy Corp and ITC Holdings Corp on Monday moved to seek federal approval of a Entergy's plan to divest its power transmission business in a deal valued at $1.78 billion.
New Orleans-based Entergy and ITC, based in Novi, Michigan, filed a joint application with the Federal Energy Regulatory Commission (FERC) to allow Entergy's utilities to spin off and merge their electric transmission units into a subsidiary of ITC.
The move would double the amount of high-voltage lines ITC controls to more than 30,000 miles across 11 states from the Great Lakes to the Gulf Coast.
Entergy operates 15,800 miles of transmission in Louisiana, Mississippi, Arkansas and Texas, a network built to serve its electric utilities serving 2.8 million customers.
"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," said Joe Welch, ITC's chief executive officer, in a release.
Entergy wants to exit the transmission which may need as much as $2 billion in upgrades over the next few years.
It announced a plan to spin off its transmission business to ITC last December, but ITC has said the deal is contingent on Entergy's ability to join an independent regional grid organization first. That change requires approval from four state utility commissions and the City Council of New Orleans.
After several aborted efforts to create an independent grid group, Entergy has been working to integrate its transmission operations into the Midwest Independent System Operator (MISO), a regional transmission network that ITC operates in.
This comes at the insistence of Entergy's regulators following a decade of complaints from independent power producers and others in its four-state region. Entergy also disclosed in 2010 that the U.S. Department of Justice had launched an investigation of its competitive practices, including its transmission operations.
Entergy has said MISO membership will save its customers up to $1.4 billion in the first decade and allow its utilities to focus on operations.
"The spin/merge transaction is designed to create benefits for our customers, our communities and our region," said Theo Bunting, Entergy group president of utility operations.
So far, the Louisiana Public Service Commission has given a green light to Entergy's plan to migrate to MISO. Other states are still weighing Entergy's request.
Last week, Entergy's Mississippi unit said the Mississippi Public Utilities Staff, after an independent review, entered a stipulated agreement that the move to MISO is in the public interest.
A settlement agreement has also been reached with some parties in Texas, but regulators have not acted on Entergy Texas' request to join MISO.
State regulators are watching the Arkansas Public Service Commission which is still studying certain aspects of Entergy's move to MISO. The Arkansas transmission network will be key to the savings Entergy has identified.
Under terms of the ITC deal announced last year, Entergy will divest its transmission business to a newly formed company, Mid South TransCo LLC, and distribute it to shareholders in a tax-free spin-off.
TransCo will then merge with and into a newly created unit of ITC in an all-stock, Reverse Morris Trust transaction. Entergy shareholders will get a 50.1 percent stake in ITC in exchange for their TransCo shares.
Entergy will issue nearly $1.78 billion in new debt which ITC will assume. About 750 Entergy employees will join ITC under the plan.
ITC and Entergy have already sought approval of the spin off and merger at the Louisiana PSC and New Orleans City Council. Remaining regulatory filings will be made in Arkansas, Mississippi, Missouri and Texas by the end of year, ITC said.
The companies expect to complete the spin off in 2013 and integrate Entergy's system into MISO by the end of 2013.
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