Entergy and New York Power Authority Reach Definitive Agreement on Value Sharing for Nuclear Plants
Entergy Corporation (NYSE: ETR) 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.
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