Nuclear Plant Extension Underwhelms Entergy (ETR, EXC, DUK)

The US Nuclear Regulatory Commission has approved a 20-year renewal of Entergy Corp.’s (NYSE: ETR) Vermont Yankee nuclear power plant. Whether that’s good news or bad for Entergy remains to be seen. The company hasn’t offered a single public comment on the approval.

Back in November, Entergy put the 650-megawatt plant up for sale, and indicated that it expected the plant to drum up considerable interest. If any interest has been generated the company has been very quiet about it.

The idea of sale really never made much sense. The plant’s operating permit expires in March 2012 and the license renewal process had been going on for five years. The newly-elected governor of Vermont had campaigned hard on a promise to close the plant when its license expired. And the plant had also been found to have leaked radioactive tritium from an underground pipe.

In February 2010, the Vermont state senate voted against an extension of Vermont Yankee’s license renewal, which actually carried some weight because Entergy knew in 2002 when it acquired the plant that the state had made state approval of the renewal a requirement for operation beyond 2012. Entergy must have figured that 10 years was enough time to get the state on its side.

The NRC’s approval casts some doubt on whether or not the state can actually follow through on its wish to close the plant. The state can’t overturn the NRC decision, but it can make life difficult for Entergy or any potential buyer the company might now be able to flush out.

For example, rather than continuing its fight, the state legislature might enact stringent rules governing the sale and transfer of Vermont Yankee to a new owner. Of course Entergy wouldn’t have to sell the plant under such rules, but the company has done virtually nothing to endear itself even to its supporters in Vermont. The company apparently has all the charm of a rattlesnake.

The NRC has approved a number of 20-year renewal licenses, including one in 2000 for the Oconee plant owned by Duke Energy Corp. (NYSE: DUK) and two in 2009 for Exelon Corp. (NYSE: EXC), one of which extended the license for the plant at Three-Mile Island.

While the license renewal could make it more difficult for the state to close Vermont Yankee in 2012, the new license doesn’t really help Entergy sell the plant. Buyers will still be wary of Entergy’s continuing battle with state government, and with the likelihood that no buyer will satisfy the state.

Entergy paid $180 million for Vermont Yankee in 2002, and one estimate for replacing the plant comes in a $4 billion. The plant provides about a third of Vermont’s electricity and if it were to close rates would certainly rise. Entergy is probably stuck with this plant until all the legal issues are sorted out, and that could be some time yet.

Entergy’s share price has barely moved today. That indicates both the company’s and shareholders’ excitement over the NRC ruling.

Paul Ausick