In a move designed to improve efficiency of the electric grid and avoid huge capital costs, power company Entergy announced it would spin off its electric transmission business and merge it with another, Michigan-based ITC Holdings Corp. The $1.78 billion deal was announced Monday.
Regulators need to approve the deal, after which Entergy plans to form Mid South TransCo LLC as part of a tax-free spinoff. The new company will merge with ITC in an all-stock transaction, according to NOLA.com, and will be one of the largest electric transmission companies in the country.
ITC plans to open a regional office in Mississippi, where Entergy opened its transmission quarters in 2009. About 750 of its employees will be integrated into the new company.
Entergy, meanwhile, is going forward with a request of the New Orleans City Council to join a regional transmission organization by the end of 2013. The energy company currently serves a 114-square-mile area in six jurisdictions covering the southeastern United States.
The spinoff and merger allow Entergy more financial flexibility, but also release it from a burdensome operation.
Entergy has faced criticism from independent power producers in Louisiana that say its power grid is inadequate and inaccessible. In addition, its operations in four states have been investigated by the Justice Department. The independent producers say that Entergy has delayed infrastructure improvements that would free up access to the grid by other energy producers. The power giant’s CEO and chairman disagrees and says that the spinoff will remove the false perception that Entergy lacks independence. He’s hopeful the independent energy producers will eventually support the transaction, which could be complete by 2013.
Source: NOLA.com, “Entergy Corp. to spin off transmission business,” Richard Thompson, Dec. 5, 2011