September 26, 2013 9:11:22 AM
JACKSON -- Entergy Corp. and ITC Holdings Corp. have refiled their merger application in Texas, indicating the companies believe they can go forward without restructuring their overall merger agreement.
The companies are pushing for Texas to make a decision by Dec. 19, and say they will ask regulators in other states to restart consideration. Other states had put the deal on hold after Entergy and ITC withdrew their application Aug. 9.
Entergy spokesman Mike Burns, though, acknowledges that the deal won't close by the end of 2013, as the companies had originally proposed.
"It's now clear that a 2013 transaction close isn't feasible, and the companies plan to take steps to accommodate a 2014 close," he wrote in an email.
In December 2011, New Orleans-based Entergy said it would transfer its high-voltage lines to ITC of Novi, Mich. That company would issue Entergy shareholders enough stock to give them a majority of ITC shares worth more than $2 billion, and ITC would also assume $1.78 billion in debt. Entergy and ITC won Federal Energy Regulatory Commission approval in June.
Entergy and ITC are offering $93 million to Texas ratepayers to offset higher rates. Because of procedural deadlines, Texas commissioners declined to consider that offer in their earlier proceeding.
"We are still enthusiastic over this transaction," Burns wrote. "The pause allowed us to enhance the application, respond concisely and concretely to key concerns and issues, and demonstrate the key customer benefits and rate protections. We're on track, and we're positive about the process."
Some observers, though, have expressed doubts that the deal will go through.
"The proposed transaction continues to face significant opposition," wrote David Cruthirds, a Houston lawyer who publishes an industry newsletter.
Louisiana, Arkansas and Mississippi all froze their proceedings after Entergy and ITC withdrew in Texas. Burns said the company is asking each of those states to restart work.
In addition to the $90 million in Texas, the companies have offered 134.4 million in rate concessions in Arkansas, $129 million in Louisiana, $90 million in Texas, $77.5 million in Mississippi and $40 million in New Orleans. The companies say this protects customers from paying more until the benefits of the deal are established, although some regulators question if the money is really enough.
Overall, concessions exceed $350 million.
Besides rates, regulators also fret about the Federal Energy Regulatory Commission taking over what transmission projects get built. Entergy and ITC say states will still approve sites for new power lines, but Texas demanded additional power before the withdrawal.
Entergy is already joining the Midcontinent Independent System Operator, a group that directs electricity movement. MISO is supposed to save Entergy customers $1.4 billion over 10 years, ensuring they get the cheapest possible electricity. Regulatory staffs have said MISO membership will bring many of the benefits ITC has promised.
Entergy has another reason to push the ITC transaction. After the Justice Department investigated whether Entergy used its transmission system to hurt competing power generators, the agency announced last November that it wouldn't sue as long as Entergy joined MISO and spun off its wires to ITC.