Entergy Corporation (ETR) has entered into an agreement with a unit of NextEra Energy Inc. (NEE) to acquire the latter’s Rhode Island State Energy Center (“RISEC”) for approximately $346 million.
NextEra’s 550-megawatt power plant is a Siemens natural gas-fired combined-cycle generating plant. Located in Johnston, Rhode Island, the plant is currently working with Siemens to facilitate the uprate of its combustion turbines, which is scheduled for completion in November 2011. This will increase the facility's nominal capacity to 583 megawatts. The plant entered into commercial service in 2002.
NextEra Energy expects the transaction to close at the end of 2011 and expects to incur a one-time, after-tax loss of approximately $2.0 million.
The acquisition of new assets would improve the value of Entergy’sportfolio through the addition of generation in the New England market that is well positioned to benefit from expected market recovery.
Entergy is well positioned through its geographically diverse mix of regulated and merchant operations. The company is the second largest U.S. nuclear power generator after Exelon Corporation (EXC). The company is focused on maximizing shareholder value on the back of steady investment in rate base growth, an ongoing stock buyback program and incremental dividends.
Despite the positives, we are cautious about tepid growth at the company’s competitive business on account of lukewarm power demand in the Northeast, and pending regulatory approvals. The company presently retains a short-term Zacks #3 Rank (Hold) that corresponds with our long-term Neutral recommendation on the stock.
On November 1, 2011, Entergy is expected to release its third quarter results. The Zacks Consensus Estimates for third quarter 2011 and fiscal year 2011 are currently at 3.19 per share and $7.20 per share, respectively.
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, and it is the second largest nuclear generator in the United States. Entergy delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas.
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