Entergy closes on $948 million purchase of Union Station power plant in El Dorado

by Wesley Brown ([email protected]) 981 views 

The 1,980-megawatt Union Power Station near El Dorado.

Entergy Corp. said it has taken a major step toward providing additional efficient, clean energy resources for new and existing customers and modernizing the company’s power generation fleet by closing on the purchase of the 1,980-megawatt Union Power Station near El Dorado.

Entergy said the deal involved three of its operating subsidiaries, including Entergy Arkansas Inc., Entergy Louisiana LLC, and Entergy New Orleans Inc. Terms of the deal, which closed on Thursday, were not disclosed by the New Orleans-based utility holding giant.

Entergy Arkansas CEO and President Hugh McDonald, who plans to retire later this year, had said in a recent interview with Talk Business & Politics that he had hoped to close the Union Power Station deal before he steps down. On Friday afternoon, McDonald said the deal closed late Thursday night (March 3) around 11 p.m.

“It’s great news for our customers, and I am glad we could get it done and appreciate the (Arkansas Public Service Commission) approving it last year,” said the Entergy Arkansas chief executive. “The (Union Power Station) is a great addition to our portfolio and will be about one-third of power generation for our Arkansas customers.”

McDonald said the natural gas-fired power plant coming online now will allow Entergy Arkansas to take advantage of the commodity price environment, which saw natural gas prices fall to a 17-year low on Thursday.

“It could not have happened at a better time when gas prices are so low,” he said.

The Union Power Station, which entered commercial service in 2003, sits on 300 acres in Union County near the South Arkansas city. The plant consists of four combined-cycle, gas-fired generating units, or CCGTs, each rated at 495 MW.

In December 2014, the company announced an agreement with Union Power Partners, L.P., an independent power producer wholly-owned by Entegra TC LLC, to acquire the units to help meet increasing resource demands in the region and as part of the company’s modernization of its generating fleet.

Entergy Arkansas and Entergy New Orleans each acquired one unit and Entergy Louisiana acquired two units. The plant purchase price is $948 million, officials said, or about $479 per kilowatt or nearly $237 million per unit, subject to adjustments. The purchase price is about half the cost to build a comparable new CCGT facility, company officials said.

On Friday morning, Entergy Arkansas officials filed a notice with the state Public Service Commission (PSC) officials concerning the Union Power Station acquisition and closing, as requested by state regulators in regards to rate case docket, No. 15-015-U. That filing also includes a copy of an order by the Federal Energy Regulatory Commission (FERC) approving the near-$1 billion transaction on Feb. 29. FERC’s four-person regulatory panel includes Commissioner Colette Honorable, former chairman of the state Public Service Commission.

In its recent rate case filing before the PSC, Entergy Arkansas made a request to recover $167 million in new revenue that it said is largely driven by costs to upgrade the power grid and purchase the utility-scale Union Power Station power plant.

In late January, the PSC heard testimony on a proposed settlement of that pending rate request, which was approved by state regulators a week ago. According to Entergy Arkansas officials, PSC staff and intervenors on the rate case docket, the joint settlement deal will raise a monthly bill for a typical residential customer using 1,000 kWhs of electricity by 8.3%, or about 27 cents a day. Entergy Arkansas officials said recently that a pending fuel cost adjustment rider by the utility largely offset the new rate hike.

Entergy, which has annual revenues of approximately $11.5 billion and more than 13,000 employees, owns and operates power plants with approximately 30,000 megawatts of electric generating capacity, including nearly 10,000 megawatts of nuclear power. Its Arkansas subsidiary, which is the state’s largest electric utility, provides power to nearly 705,000 customers in 63 counties across the state.