Entergy (ETR) Sells Vermont Yankee Nuclear Plant to NorthStar
Entergy Corporation ETR recently wrapped up the sale of its Vermont Yankee nuclear power plant to the subsidiaries of NorthStar Group Services, which will now decommission the Nuclear Power Station site. With this deal, the company completed its first step toward reducing the risk and volatility associated with its Entergy Wholesale Commodities (EWC) business.
A Brief Note on the Sale Deed
In October 2018, the U.S. Nuclear Regulatory Commission approved Entergy’s agreement to transfer its operating license to NorthStar Group, the sale agreement being actually announced in 2016.
Last month, the Vermont Public Utility Commission finally issued an order approving the sale of Entergy Nuclear Vermont Yankee to NorthStar Group. The sale is a first of its kind in the nuclear power industry, involving a permanent ownership and license transfer to a company that will perform decommissioning and site restoration.
Our View
The EWC business segment includes the ownership and operation of six nuclear power plants located in the northern United States, and sale of the electric power plant to wholesale customers. Of late, Entergy came up with
plans to shut down its nuclear reactors under this business. The divestiture was led by a few factors that caused America’s nuclear power plant construction industry to almost stagnate a couple of years back.
In this backdrop, Entergy decided to transfer itself to a pure play utility company, as regulated spending offers a secured rate of return, and many U.S. reactors were struggling, given the low natural gas and power prices in competitive markets. The company began this process by closing Vermont Yankee plant in 2014 and announcing its scheduled sell-off by 2018-end, which it has achieved duly.
Going forward, the company plans to shut down its Palisades power plant in October 2019 and its Pilgrim plant in May 2019. Finally, in April 2020 and April 2021, the company will close Indian Point Units 2 and 3. Once the company closes its EWC business, we may expect Entergy to expand its utility operations in more regions. The company is also putting efforts to expand in the clean energy space. To this end, with approximately 1,000 MW in various stages of development, the company remains committed toward providing renewable power options.
Price Movement
In a year’s time, shares of Entergy Corporation have rallied 14.1% compared with the industry’s 8.1% growth.
Zacks Rank & Other Stocks to Consider
Entergy Corporation currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the same space are Ameren Corp. AEE, CMS Energy Corporation CMS and Idacorp Inc. IDA.
While Ameren Corp. sports a Zacks Rank #1 (Strong Buy), CMS Energy and Idacorp carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ameren Corp has an estimated long-term earnings growth rate of 6.8%. It surpassed the Zacks Consensus Estimate for earnings in the trailing four quarters by average of 15.40%.
CMS Energy has an estimated long-term earnings growth rate of 6.2%. It outpaced the Zacks Consensus Estimate for earnings in the trailing four quarters by average of 6.37%.
Idacorp has an estimated long-term earnings growth rate of 2.60%. It exceeded the Zacks Consensus Estimate for earnings in the trailing four quarters by average of 11.69%.
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