Entergy Louisiana LLC, one of the Entergy Corporation (ETR) companies, recently completed the acquisition of Acadia Energy Center Power Block 2 and 50% of the facility's common assets from Acadia Power Partners LLC, an independent power producer. Entergy paid nearly $300 million for these power generation assets.
Entergy Louisiana acquired the modern and efficient 580-megawatt combined-cycle gas-turbine (CCGT) generation plant, located in the heart of Acadiana, as a part of its strategy to enhance generation capacity and provide for the long-term energy needs of its customers.
Entergy pointed out that, earlier this year, Cleco Power LLC had bought Acadia Energy Center's Power Block 1 and the other 50% interest in the facility's common assets. The company said Cleco Power will serve as the operator for the entire facility.
The Acadia Energy Center, which is situated south of Eunice, Louisiana, has been in operation since 2002. The natural gas-fired plant uses modern pollution controls and CCGT technology to produce highly efficient, clean and reliable power. The plant is also well-suited for cost-effective load-following generation and base load operation.
Entergy Corp. considers the addition of the Acadia Energy Center Block 2 as significant for its generation fleet, as it will provide long-term electricity supply to its customers across the region. Also, it considers the purchase price of $300 million as attractive, because the estimated cost of setting up a similar CCGT facility will sum to more than $700 million.
Additionally, the acquired plant also enhances Entergy's position as one of the cleanest electric utilities in the country. Currently, Entergy's generation fleet emits significantly less carbon dioxide, nitrogen oxide and sulfur dioxide than the average utility in the country.
Going forward, Entergy Louisiana plans to implement several upgrades to incorporate the plant into its system, including the construction of a new natural gas pipeline solely for the Power Block 2, providing it greater operational flexibility independent of Power Block 1, and transmission improvements that will benefit Power Block 2 and the transmission system.
Entergy said some of the transmission upgrades are in progress as a part of Entergy's 2011-2013 transmission construction plans, aimed at enhancing reliability for the region. With the transmission upgrades, which are estimated to be complete by 2013, the addition of the Acadia Power Block 2 facility will help provide reliability for customers in Acadiana and across the region, as well as other users of the transmission system.
New Orleans-based Entergy Corp. is primarily engaged in power production and retail distribution of power. With 30,000MW of generating capacity, it distributes electricity to 2.6 million customers in Arkansas, Louisiana, Mississippi and Texas.
In the near-term, we retain our long-term Neutral stance on Entergy in the absence of any positive triggers, which is supported by a Zacks #3 Rank (short-term Hold rating) for the stock. The near-term cautious stance is shared by its peers like American Electric Power Company Inc. (AEP) and Southern Company (SO) also.
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