Entergy Corporation (ETR)

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Entergy (ETR)

Q4 2010 Earnings Call

February 08, 2011 11:00 am ET


Gary Taylor - President of Utility Operations

J. Leonard - Chairman, Chief Executive Officer and Chairman of Executive Committee

Leo Denault - Chief Financial Officer and Executive Vice President

Richard Smith - President of Entergy Wholesale Commodity Business

Paula Waters - Vice President of Investor Relations


Michael Lapides - Goldman Sachs Group Inc.

Greg Gordon - Morgan Stanley

Paul Patterson - Glenrock Associates

Ashar Khan - SAC Capital

Marc de Croisset - FBR Capital Markets & Co.

Steven Fleishman - BofA Merrill Lynch



Good day, everyone, and welcome to the Entergy Corporation Fourth Quarter 2010 Earnings Release Conference Call. [Operator Instructions] At this time, for introductions and opening comments, I would like to turn the call over to Vice President of Investor Relations, Ms. Paula Waters. Please go ahead, ma'am.

Paula Waters

Good morning and thank you for joining us. We'll begin this morning with comments from Entergy's Chairman and CEO, Wayne Leonard; and then Leo Denault, Entergy's CFO, will review results. In an effort to accommodate everyone with questions this morning, we request that each person ask no more than two questions. After the Q&A session, I will close with the applicable legal statement. Wayne?

J. Leonard

Okay, thanks, Paula. I'll begin today with our most frequently asked question, what's the latest in New York and Vermont?

Starting in Vermont, at the end of October, the Atomic Safety and Licensing Board denied a late filed contention on hard-to-access electric cables, finding that reopening the case was not likely to lead to a different outcome. The petitioner, the New England Coalition, appealed that decision to the Nuclear Regulatory Commission. In parallel, we continued to supply the NRC staff information on related issues to assure the safety valuation report remains complete as time continues to pass. And as you know, we are over five years since our original filing.

Regardless, once the expected supplement to that safety valuation report is issued, we're expecting a positive decision from the NRC on VY [Vermont Yankee] license renewal application. Importantly, NRC regulations allow for the commission to issue the license during a pending appeal.

We are committed to maintaining open and timely communications in Vermont, however great the challenge is for gaining public support in disproving the negative put in the public's mind that the age of the plant is determinant of its condition. That is essentially the position Governor Shumlin took last month when he said, "It was designed to be shut down in 2012, and that 40 years is up in 2012." He went on to say, "It's old, it's tired, and it should be retired." In fact, he has encouraged New York to take the same position.

States or governors are certainly free to voice their opinions, but the NRC, which has jurisdiction on these matters, must deal with the facts. The truth is, what those in the industry already know to be true, that the 40-year license was based on the expected economic life, not the physical life, the nuclear plants were designed for. Recognizing this fact, the NRC set two principals in reviewing license renewal applications. First, that all operating plans provide and maintain an acceptable level of safety; and secondly, each plant's licensing basis is required to be maintained during the renewal term in the same manner and to the same extent as during the original licensing term. To that point, with the constant replacement of equipment and design upgrades, most of the 1970s vintage plants are in excellent operating condition, and Vermont Yankee's operating records certainly supports that fact.

For example, during the first 30 years of its life, Vermont Yankee's average capacity factor was below 78% and it never had a breaker-to-breaker run. Over the last five years, the capacity factor has been above 94% and it has had two breaker-to-breaker runs. In fact, Vermont Yankee has been evaluated in the excellent category as compared to its peers.

Efforts also continue to secure a new power purchase agreement with the Vermont Utilities. Negotiations had been ongoing for some time now, and we have made progress toward reaching agreement on key terms and conditions that would provide citizens of Vermont continued access to clean and affordable power. However, while we would certainly prefer to sell power in state, that is not a necessary condition, of course. We expect to have clarity by around the middle of 2011 on all the open issues we are pursuing, including but not limited to securing a PPA with the local utilities.

Importance of Vermont Yankee's continued operations to Vermont was highlighted in a presentation given last month by ISO-New England to a Vermont incentive committee. The system operators' assessment of reliability of the Vermont electric system found what you would expect; that with that amount without Vermont Yankee, existing state reliability risks increase. ISO-New England studies on the performance and costs of transmission solution alternatives to VY are expected in first half of 2011.

But not only would reliability likely deteriorate, studies have shown power rates would also rise as supply is reduced. To that point, on January 26, 2011, IBM, the major employer in Vermont, said, "It takes about $35 million a year in power to power its Vermont facility, and the company estimates those costs will go up by 25% if Vermont Yankee goes offline." And in an open letter to Governor Shumlin on February 3, 2011, community leaders representing industry, labor and energy stakeholders expressed concern that the window of opportunity was closing to allow the Public Service Board to complete its docket of Vermont Yankee's continued operations beyond 2012 and emphasized the serious economic consequences for Vermont if the plant is not allowed to operate under a renewed license.

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