Entergy assessing turbine strategy with rating agencies

By the OGJ Online Staff

HOUSTON, Jan. 31, 2002 — Entergy Corp. Chairman Wayne Leonard Thursday said the New Orleans energy producer and marketer is still struggling to reach a decision on what to do with 15 gas turbines scheduled for delivery in the next 3 years.

“That is one of our highest priorities in 2002,” he said during a conference call. The company also raised 2002 earnings guidance to $3.40-$3.60/share, exclusive of the impact of weather, up from a previous forecast of $3.30-$3.50/share.

Leonard said the company is examining three possibilities for the turbines. Under one scenario, Entergy could “stay the course,” on development, he said, noting the company is well into the process on five projects that could take 10 of the turbines.

Under another, Entergy is evaluating the market to sell some of the turbines and development sites. Depending on the outcome, Leonard said, this option could absorb all 15 turbines. Finally, he said, the company also is working with General Electric Co. to develop a more flexible delivery schedule.

If the company chose not to take delivery on the turbines, Leonard said the company’s exposure would range between $200 million and $250 million. C. John Wilder, Entergy chief financial officer, said the company is working with the credit ratings agencies on the best way to proceed without jeopardizing the company’s investment grade rating.

“The real issue is how much more we will build out,” he said. “Depending on the outcome, that can swing cash around quite a bit.We are working with the credit agencies on development plans. We don’t want to do anything to upset the agencies.”

He also said the company has proposed a stock buy back program to strengthen the balance sheet. But Wilder said the timing will depend on “how quickly we can work through this turbine position.”

He estimated Entergy will generate $2.5 billion that can be used for discretionary spending over the next 3 years. Leonard said the company has three primary targets of interests, including acquisition of additional nuclear power plants, gas transportation and storage facilities, and generation assets at the right price in the Midwest and Northeast.

For the 2001 fourth quarter, Entergy reported net income of $26.6 million or 9-/share, down from $50 million or 19-/share in the 2000 fourth quarter. The company earlier forecast fourth quarter earnings of 16-/share. Entergy also reported net income of $726.2 million $3.23/share for 2001, compared with $670.3 million or $2.97/share in 2000.

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The Clarion Energy Content Team is made up of editors from various publications, including POWERGRID International, Power Engineering, Renewable Energy World, Hydro Review, Smart Energy International, and Power Engineering International. Contact the content lead for this publication at Jennifer.Runyon@ClarionEvents.com.

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