By John Stang
Entergy Wholesale Commodities, which operates three nuclear plants in the northeastern United States, on Wednesday posted another steep loss for the fourth quarter of 2018.
The business reported a $373 million loss on an as-reported basis attributable to parent Entergy Corp., $2.04 per share. The loss on an operational basis was recorded at $158 million, or $0.87 per share.
While not pretty, the numbers represented a partial improvement from the same period of 2017. For that quarter, Entergy Wholesale Commodities cited an as-reported loss of $425 million, $2.36 per share, but earned $63 million, $0.35 per share, on an operational basis.
“As-reported” earnings encompass all financial considerations including non-recurring costs. “Operational” earnings are essentially subtracting operational expenses from operational revenue.
The latest as-reported numbers are connected to impairments and costs from Entergy’s ongoing effort to wind down its Wholesale Commodities business. Those reached $214 million, $1.17 per share, in the fourth quarter. Revising the asset retirement obligation for the closed Vermont Yankee nuclear power plant, which Entergy in January sold to NorthStar Group Services, alone generated a $173 million pretax asset impairment.
The reduction in operational earnings “was largely the result of lower returns on decommissioning trust investments during the quarter, and to a lesser extent, lower net revenue from lower nuclear volumes,” Chief Financial Officer Andrew Marsh said Wednesday in the quarterly earnings call with financial analysts. “Lower non-fuel O&M and lower income taxes helped partially offset the decrease.”
Entergy closed its single-reactor Vermont Yankee plant in December 2014 and, following federal and state regulatory approval, completed the sale more than four years later. NorthStar, a New York City-based demolition and environmental services specialist, now owns the plant’s decommissioning trust fund and all responsibility for decommissioning, site restoration, and spent fuel management at Vermont Yankee. The trust fund was valued at over $506 million as of October, and NorthStar believes it can complete most decommissioning operations as early as 2026 at a cost of roughly $495 million.
Entergy also plans to sell its Pilgrim Nuclear Power Station in Massachusetts and Palisades Power Plant in Michigan to Holtec International for decommissioning. The deal would also cover the site of the already-decommissioned Big Rock Nuclear Power Plant site in Michigan.
Pilgrim is scheduled to close by the end of May, and the companies have already submitted their license transfer application to the Nuclear Regulatory Commission. Paperwork on Palisades is anticipated closer to its anticipated shutdown in 2022.
Management expects to select a company this year to tackle decommissioning of the two reactors at its Indian Point nuclear power plant in New York, Chairman and CEO Leo Denault said during the earnings teleconference.
Denault did not elaborate on the numbers and identities of the prospective bidders for the project. He said the proposed sale to a decommissioning contractor won’t be completed until Indian Point officially shuts down in 2021.
“[We] have begun work on a transaction,” Denault said. “That, as we’ve mentioned before, we would expect to complete sometime between now and the end of the year.”
Entergy plans to shut down the Unit 2 reactor in April 2020, followed by Unit 3 in April 2021, dates that are respectively 13 and 14 years earlier than their Nuclear Regulatory Commission licenses require. Unit 1 ceased production in October 1974 after the emergency core cooling system failed to meet regulatory requirements. The 2,000-megawatt power plant is located 25 miles north of New York City.
Unit 2 has undergone its final refueling, while Unit 3 is expected to be refueled one last time “shortly,” Chief Nuclear Officer Chris Bakken said.
Denault reaffirmed that the Pilgrim plant is expected move from Column 4 to Column 1 of the Nuclear Regulatory Commission’s Action Matrix by the end of March. The regulator in 2015 downgraded Pilgrim to Category 4, the lowest safety rating allowed for an operating nuclear reactor, following multiple unplanned shutdowns and other safety concerns.
Wholesale Commodities provides energy from its plants, for a fee, to wholesale buyers. Closure of the nuclear plants is part of a wind-down of the business intended to convert New Orleans-based Entergy into a “pure play utility.”
For all of 2018, Wholesale Commodities reported a $343 million loss, $1.87 per share, on an as-reported basis. However, it earned $188 million, $1.02 per share, on an operational basis.
Company-wide, Entergy said it lost $0.36 per share on an as-reported basis in fourth-quarter 2018 and earned $0.60 per share on an operational basis. The full-year earnings were $4.63 per share on an as-reported basis and $7.31 on an operational basis.
