Entergy Texas Inc., in conjunction with ITC Holdings Corp. and ITC Midsouth, filed a request today at the Public Utility Commission of Texas to spin off Entergy Texas’ electric transmission business and merge it into a unit of ITC.
The transaction is a step toward meeting the challenges facing the electric industry in Texas and across the country – challenges driven by the need to upgrade infrastructure, modernize equipment and meet growing environmental and compliance requirements.
Entergy is seeking approval to transfer its transmission business, including about 15,400 circuit miles of interconnected transmission lines at voltages of 69 kV and above and the associated substations, to ITC. ITC will then be one of the largest electric transmission companies in the U.S., with more than 30,000 miles of transmission lines spanning from the Great Lakes to the Gulf Coast.
Meanwhile, Entergy’s operating companies will continue to own and operate their respective distribution and generation businesses and will provide customer service, billing, outage reporting and restoration services to homes and businesses in the region.
The need for more infrastructure investment is among the many challenges confronting the U.S. electric industry. The electric industry, including Entergy Texas, faces growing capital investment requirements to maintain and upgrade infrastructure, meet environmental regulations and serve an energy-intensive economy.
The transaction enables infrastructure investment and builds upon the benefits of the wholesale market. By structurally separating the transmission business from generation and distribution businesses, the transaction encourages greater participation in the transmission planning process and disclosure of information by third parties – leading to an improved process. Further, the independent model aligns with national policy objectives to facilitate investment in local, regional and inter-regional transmission, and advances open access initiatives.
Once completed, the transaction will yield separate companies with strong balance sheets and greater capability to finance the infrastructure investment requirements of today and in the future. Entergy Texas maintains financial flexibility – reducing debt and focusing capital expenditures on generation and distribution. ITC improves access to capital for the transmission business and focuses its financial resources solely on the performance of the transmission system.
In addition to the transmission lines and substations included in the transaction, about 750 Entergy employees will become employees of ITC. ITC will establish a regional headquarters in Jackson, Miss., where the headquarters of Entergy’s transmission business currently is located. The company will have offices and warehouses throughout the Entergy service territory to ensure a local presence and timely response to stakeholder and system needs.
Integration efforts to ensure storm readiness and response are among the key operational matters being addressed by the two companies. Key ITC personnel were onsite at Entergy’s system command center in Jackson during Hurricane Isaac to observe storm response operations, and a jointly planned and executed storm drill will be held over the summer.
Entergy operating companies and ITC initiated the regulatory process on Sept. 5, 2012 with a joint application filing with the Louisiana Public Service Commission. Joint applications were subsequently filed in 2012 with the New Orleans City Council on Sept. 12, the Federal Energy Regulatory Commission on Sept. 24, and the Arkansas Public Service Commission on Sept. 28.
ITC filed a combined registration statement, proxy statement and prospectus on Form S-4 with the Securities and Exchange Commission on Sept. 25, 2012. The companies filed with the Mississippi Public Service Commission on Oct. 5, 2012 and with the Missouri Public Service Commission on Feb. 14. The companies target a transaction close this year pending receipt of all required regulatory approvals and satisfaction of other closing conditions.
Based in Novi, Michigan, ITC invests in the electric transmission grid to improve reliability, expand access to markets, lower the overall cost of delivered energy and allow new generating resources to interconnect to its transmission systems. ITC’s regulated operating subsidiaries include ITCTransmission, Michigan Electric Transmission Company, ITC Midwest and ITC Great Plains.
Through these subsidiaries, ITC owns and operates high-voltage transmission facilities in Michigan, Iowa, Minnesota, Illinois, Missouri, Kansas and Oklahoma, serving a combined peak load exceeding 26,000 MW along 15,000 circuit miles of transmission line. Through ITC Grid Development and its units, the company also focuses on expansion in areas where significant transmission system improvements are needed.
Entergy Texas provides electricity to more than 400,000 customers in 27 counties. It is a unit of Entergy Corp.
Entergy owns and operates power plants with about 30,000 MW of electric generating capacity, including more than 10,000 MW of nuclear power. Entergy delivers electricity to 2.8 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $10 billion and about 15,000 employees.