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ETR Gets Nod to Acquire KGen's Unit

Zacks Equity Research

Entergy Corporation’s (ETR) two of the utilities have received approval from U.S. Department of Justice for the acquisition of Hot Spring and Hinds power plants from units of KGen Power Corporation.

Entergy’s one utility Entergy Arkansas, Inc. will acquire the Hot Spring plant with a generation capacity of 620-megawatt from KGen Hot Spring LLC for approximately $277 million. The combined-cycle natural gas-fired plant is located at Hot Spring County, Arkansas and has been online since 2002.

The other utility will buy Hinds plant from KGen Hinds LLC for approximately $246 million. Located in Jackson, Mississippi, the combined-cycle natural gas-fired unit has 450-megawatt generation capacity.

The utilities had already received approval for these acquisitions from the Federal Energy Regulatory Commission and applicable state utility commissions. With this consent, the company will now be able to complete the acquisition by the end of full-year 2012, subject to customary closing conditions.

Apart from these acquisitions, the company is also in the process of divesting its electric transmission business to ITC Holdings Corporation (ITC). The company is also focused on maximizing its shareholder value through steady investment for rate base growth, as well as through its ongoing stock buyback program and incremental dividend.

Recently, in November, Entergy Corporation reported its third-quarter 2012 results. In the reported quarter, the company posted operational earnings per share of $1.95, missing the Zacks Consensus Estimate of $1.96. Earnings also came in much below the year-ago figure of $3.53 per share. Cash and cash equivalents at the end of the third quarter of 2012 were $749.7 million versus $694.4 million at year-end 2011. Long-term debt increased slightly from $10.0 billion at year-end 2011 to approximately $11.7 billion at the end of the reported quarter.

Going forward, we remain concerned regarding its tepid growth for its competitive business on account of lukewarm power demand in the Northeast, along with pending regulatory approvals and the fate of its Indian Point plant. Entergy presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.

Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including more than 10,000 megawatts of nuclear power, making it one of the nation's leading nuclear generators. Entergy delivers electricity in Arkansas, Louisiana, Mississippi and Texas.


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