March 29, 2024
BANGOR DAILY NEWS (BANGOR, MAINE

FPL, Entergy merge in $7 billion power deal

NEW ORLEANS – FPL Group Inc. and Entergy Corp., Southern utilities with business ties to Maine, have agreed to combine in a $7 billion stock deal that creates the nation’s largest power utility, putting it in a prime position to survive the rapidly changing industry.

The merger of equals announced Monday will create an as yet unnamed holding company that will have 6.3 million retail power customers in five Southern states, along with large wholesale power generation and marketing businesses and at least 10 nuclear generating units.

Power companies across the country are bracing for deregulation, under which customers will be able to choose between competing suppliers and rates. Both FPL and Entergy have been emphasizing unregulated wholesale power generation and sales.

“When all is said and done, there will be only a relatively small number of power companies remaining,” said FPL chairman James L. Broadhead, who will be chairman of the new company. “The two companies are a good match.” The two are no strangers to Maine.

In a deal completed last year, FPL purchased the electric plants of Central Maine Power Co. for $846 million, or roughly three times their book value. The package included 31 hydroelectric stations, three oil-fired plants and one wood-burning plant, but did not include CMP’s stake in the defunct Maine Yankee nuclear plant.

Maine Yankee hired Entergy in February 1997 to improve the peformance of the Wiscasset reactor, then kept the company on to provide management services during the initial stage of the decommissioning.

FPL, based in Juno Beach, Fla., is the parent of Florida Power & Light Co. and has 11,350 employees. New Orleans-based Entergy, Louisiana’s largest company, has regulated power utilities in Louisiana, Arkansas, Texas and Mississippi and has 12,200 employees.

The combined company, with headquarters in Juno Beach, will have a generating capacity of more than 48,000 megawatts, including 10,000 megawatts of nuclear generating. Entergy owns six nuclear units and has deals pending to acquire two others, while FPL has four nuclear units.

Entergy chief executive Wayne Leonard will be president and chief executive officer. The 15-member board will consist of eight members from FPL Group and seven from Entergy.

If approved, the new company will be the largest utility in terms of customers, surpassing Columbus, Ohio-based American Electric Power Co., which has 4.8 million customers.

The deal, which was approved by the boards of both companies, still must receive approval from stockholders and government regulators. The companies said the merger will take about 15 months to complete.

In a Monday teleconference, Broadhead said he expected the new company to add revenue at a rate of 10 percent annually, a better performance than either company could achieve separately.

He said the companies chose a merger of equals and the formation of a new company instead of an outright acquisition of Entergy by FPL because “it’s going to take an energized and motivated work force.”

“Often, people of acquired companies view themselves as victims,” Broadhead said. “There are no victims here.” Investors weren’t as enthusiastic about the deal, pushing shares of FPL down $4.50 to $48.313 on the New York Stock Exchange, where shares of Entergy fell $3 to $27.313.

Paul Fremont, an analyst who follows Entergy for Jefferies & Company Inc., said he believed that investors might discount the deal for a time because of the estimated 15-month span it will take to complete the merger and skepticism that the companies can meet their estimate of $275 million in savings because of the merger of nonregulated businesses.

“Earlier this year, shareholders had an expectation that FPL would be acquired at a premium,” Fremont said. “Some of that weakness may show shareholder disappointment that FPL is a buyer instead of a seller in this transaction.” The companies said they would try to keep job reductions to a minimum. Although New Orleans will lose Entergy’s headquarters, Broadhead said the city would be the headquarters of the new company’s regulated utilities division. He could not say how that would affect employment.

FPL stock will be swapped on a share-for-share basis, while Entergy shareholders will receive 0.585 of a share for each share of Entergy stock. The combined company will be carrying about $10.7 billion in debt.

Both FPL Group and Entergy also authorized share repurchase programs totaling $1 billion.


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