February 11, 2010 / 11:23 PM / 10 years ago

UPDATE 1-Entergy nuclear spinoff hits roadblock at NY PSC

* NY PSC staff says deal not in public interest

* PSC says considering other options

* Spinoff already has federal approvals

(Adds Entergy comment, paragraphs 3-6)

NEW YORK, Feb 11 (Reuters) - New York’s utility regulator said on Thursday its staff found Entergy Corp’s (ETR.N) plan to spin off six nuclear power units, including three reactors in New York, to a new company, Enexus Energy Corp, was not in the public interest.

The New York State Public Service Commission said in a release it was considering other options, including changes to the transaction to improve the financial stability of the three New York reactors and provide benefits to ratepayers.

The staff concluded that the level of debt needed to finance the Enexus spinoff “is excessive when the business risks of this new merchant nuclear plant enterprise are considered,” the agency said.

Entergy officials declined to comment, saying that details of conditions under consideration by the staff do not appear to be fully developed.

Entergy expects the spin-off to be discussed early next month at a special PSC meeting.

New Orleans-based Entergy wants to transfer the James A. FitzPatrick nuclear station in Oswego County and the two-unit Indian Point nuclear station in Westchester County to Enexus.

Entergy shareholders would eventually receive all of Enexus’s capital stock and receive cash and reductions in outstanding debt worth about $3.5 billion. Upon completion of the transaction, the shares of Entergy and Enexus would trade independently.

The PSC said it would look at staff recommendations and hear from interested parties before bringing the matter back “for final deliberations at the earliest possible Commission session.”

Entergy announced the spinoff in November 2007. In January 2008, Entergy sought a ruling that the New York PSC need not review the proposal. But in May 2008, the PSC said it would review the transaction because of its potential to harm captive New York utility ratepayers.

After review by administrative law judges and months of negotiations, Entergy in July 2009 requested the PSC take action no later than November so the proposed spinoff could be completed by the end of 2009.

In addition to New York approval, transfer of the nuclear units requires authorization from the U.S. Federal Energy Regulatory Commission (FERC), the Nuclear Regulatory Commission (NRC) and the Vermont Public Service Board.

FERC and the NRC gave initial approval on June 12, 2008, and July 28, 2008, respectively. Hearings in the Vermont case were completed in August 2008. Final action has not been taken by the Vermont Public Service Board.

Entergy wants to spinoff six reactors: FitzPatrick, Indian Point 2 and 3, Pilgrim in Massachusetts, Palisades in Michigan and Vermont Yankee in Vermont. (Reporting by Scott DiSavino in New York and Eileen O’Grady in Houston; Editing by David Gregorio)

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