Lawmakers, Regulators Question Yankee Spin Off
12/03/09 7:34AM By John Dillon
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(Host) Lawmakers and state utility regulators are asking tough questions about a plan to spin off Vermont Yankee into a new company.
They want to know if the new corporation is taking on too much debt. And they're asking whether the company will have enough money to make major repairs and dismantle the nuclear plant after it's shut down.
VPR's John Dillon reports:
(Dillon) First the background: Entergy, the Louisiana company that owns Vermont Yankee, wants to create a new company that would own the reactor in Vernon and five other nuclear plants.
This new spin-off corporation is called Enexus. And it would control the part of Entergy's nuclear fleet that sells power to the wholesale market.
Enexus would borrow $4 billion to complete the spin off. And that worries many in the Legislature, who have questioned the financial viability of the new entity.
Entergy Vice President Jay Thayer tried to reassure skeptical members of the House and Senate at a hearing this week.
(Thayer) "I think it's good for Vermont Yankee. I think it's good for the employees of Vermont Yankee. I could make the case that Enexus would have more debt capacity that Entergy. On paper, they're probably about the same."
(Dillon) But Richard Saudek, a former chairman of the Public Service Board, says the high level of debt is troubling.
Saudek was hired by the Legislature to analyze the deal. He said the transaction may be good for shareholders. But he said it will leave the new owners of Vermont Yankee in a more precarious financial situation.
(Saudek) "Apparently Mr. Thayer feels more confident in Enexus than he does in Entergy, I guess he said. You don't get that confidence in the debt picture."
(Dillon) Saudek pointed to financial documents that Enexus filed with the U.S. Securities and Exchange Commission. He said the company was required to disclose potential risks to the investment in the proposed spin off.
(Saudek) "They say all six - all six - of our operating nuclear plants began commercial operations in the 1970s. Older equipment may require capital expenditures, and so, that's pretty obvious."
(Dillon) Lawmakers wanted to know how Enexus - the new company - would come up with the money to make repairs or dismantle the plant.
The decommissioning fund is now about $400 million short. Enexus has obtained a $100 million line of credit to cover unexpected costs. But Washington Senator Anne Cummings - who chairs the Senate Finance Committee - questioned whether that was enough.
(Cummings) "When that plant closes, all it has once it's not producing, is the decommission fund, is that correct? Plus now you'll have some letters of credit."
(Dillon) Entergy has said the decommissioning fund will grow over time, especially if it's allowed to operate for another 20 years.
But the Public Service Board - which is reviewing the deal - has asked some 38 detailed questions about this new, highly leveraged company. The last question seemed to sum up the issue.
"Please address concerns of the public," the board said, "about the advisability of transferring an aging Vermont nuclear plant to a company with ‘junk bond' credit rating that seeks a 20-year" license extension.
For VPR News, I'm John Dillon in Montpelier.