Enexus perplexes legislators
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By DANIEL BARLOW VERMONT PRESS BUREAU - Published: December 3, 2009
MONTPELIER – Wednesday's legislative hearing on Entergy's plans to spin off the Vermont Yankee nuclear power plant was supposed to answer some questions lawmakers had about the controversial deal.
That didn't seem to happen.
"I'm completely perplexed," said Rep. Tony Klein, D-East Montpelier, the chairman of the House Natural Resources and Energy Committee, after leaving the three-hour Statehouse session. "I didn't understand a single word they said."
Confusion did seem to rule the meeting as an Entergy official tried to explain the complex details of their plan to sell Vermont Yankee and five other nuclear plants to a new spinoff company called Enexus and state officials tried to explain their support for the deal.
Jay Thayer, the vice president of operations at Entergy Vermont Nuclear, told lawmakers that despite Enexus taking on $3.5 billion in debt to buy the six nuclear power plants, the company would be in a stronger financial position than the company that now owns the facility.
Thayer said Enexus will have access to additional bank loans that would help the new company pay for maintenance at the Vernon nuclear power plant and ensure that it has cash on hand for day-to-day operations.
"I would make the case that this deal is good for Vermont Yankee and good for the employees of Vermont Yankee," Thayer told the members of the two legislative committees at the hearing.
But in its own filings before the U.S. Securities and Exchange Commission at the end of September, Enexus officials seemed less optimistic than Thayer. The company lists nearly two dozen financial risks of the deal, including six that specifically point to Enexus' separation from Entergy.
"We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from Entergy," the document, filed Sept. 29 with the SEC, states. "We are being separated from Entergy, our parent company, and, therefore, we have no operating history as a separate, publicly-traded company."
Lawmakers openly worried that Enexus would be too saddled with debt to properly operate Vermont Yankee and that the complex corporate restructuring – or as Klein called it, the "dazzling corporate restructuring" – was nothing more than a shell game to avoid taking responsibility for the long-term cleanup costs of the Vernon facility.
"We really haven't gotten a good explanation for what they want to do other than to shift responsibility," said Sen. William Carris, D-Rutland.
Confusion continued to derail Wednesday's hearing as lawmakers and the Vermont Department of Public Service, the state organization that represents ratepayers, sparred over what exactly Entergy's full responsibility to Vermont is right now.
Rep. Tim Jerman, D-Essex, a member of the House energy committee, said Michael Dworkin, the state's previous Public Service Department commissioner, testified that Entergy Corp. based in Louisiana is financially responsible for Vermont Yankee under the terms of the 2002 sale.
"We were told we had an iron-clad guarantee," Jerman said.
But David O'Brien, the current commissioner of the Public Service Department, told lawmakers Wednesday that only Entergy Vermont Nuclear, a subsidiary of Entergy, is responsible for the facility, including its fund to shut down the plant and clean all the radioactive material away from the site.
"I disagree with his characterization," O'Brien said, referring to Dworkin's testimony. He added later, "There is a misunderstanding of Entergy's responsibilities in Vermont."
O'Brien defended his department's decision to endorse the Enexus plan after first rejecting it, saying financial enhancements to the deal ensure that it meets the standard of a public good for Vermonters. He said Enexus would have more financial responsibility for Vermont Yankee than Entergy does right now.
When Klein suggested during the meeting that the Enexus deal was "so complicated that probably no one here understands it," O'Brien took offense. He said the department closely scrutinized the deal and that he understood all aspects of the proposal.
But a short time later, when asked by another lawmaker on the House committee if Enexus is now organized as a business entity, O'Brien was stumped and said it was a better question for Thayer.
Richard Saudek, a former Public Service Department commissioner now working as a consultant for the Legislature, explained to lawmakers that Entergy wants to spin off its nuclear fleet because the rest of the company is focused on energy distribution, a highly regulated field, in the southern states.
Enexus would be a publicly traded nuclear power company and Entergy would focus on their utility business if the deal is approved, Saudek said. That makes sense since the two are different fields of the energy business, he added, and joked that Thayer "appears to have more confidence in Enexus than he does in Entergy."
That doesn't necessarily mean that Enexus will be successful. Saudek pointed out that Enexus right now has a debt to capitol ratio – an equation that shows the proportion of a company's debt to its assets – of 17.3 percent. If the spin-off deal is approved, that number jumps up to 83.5 percent, he said.
"The picture that emerges is one of a company that is saddled with a huge amount of debt," Saudek said.
The Vermont Legislature may vote next year if Vermont Yankee should be allowed to continue operating beyond 2012, when its license expires. But Vermont lawmakers do not have any authority over the Enexus deal, which is in the hands of regulators here and in New York state.
Wednesday's hearing was important because it highlights the concern that the corporate restructuring is a "shell game aimed at freeing Entergy of any liability" for Vermont Yankee, said Bob Stannard, a lobbyist for the anti-nuclear group Citizens Awareness Network.
Stannard said the deal reminded him of another corporate restructuring deal that Vermont officials endorsed – one that now has the company billions of dollars in debt and struggling through bankruptcy proceedings.
"Vermonters don't want a second FairPoint," Stannard said.
daniel.barlow@rutlandherald.com
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