Three of Entergy Corporation's (ETR) subsidiaries, Entergy Arkansas, Inc., Entergy Gulf States Louisiana, L.L.C. and Entergy Texas, Inc., have entered into an agreement to acquire Union Power Station, an independent power producer.
Union Power Station, a wholly owned subsidiary of Entegra Power Group LLC, is located in Union County near El Dorado, AR. Spread across 330 acres, Union Power has four combined cycle gas turbines (CCGT) and has the capacity to produce 1,980 MW of electricity. The CCGT technology is growing in popularity as it is both sustainable as well as energy efficient.
Entergy struck the deal at a good price as at $948 million (subject to changes) it is almost half the cost required to construct a comparable new CCGT facility.
The Arkansas economy is on a recovery with its unemployment rate falling below the long-term average. Per the Energy Information Administration's (“EIA”) recent statistics, industrial rates in Arkansas, Louisiana, Texas and Oklahoma (also the service territories of Entergy) are some of the lowest in the country. This bodes well for the electric utilities as it attracts a number of industrial projects in these regions, thereby boosting industrial sales.
With this acquisition, Entergy Corporation will be able to meet the growing demand for power in its service territories and also modernize its generation fleet. The acquisition is subject to approvals from federal and state regulatory authorities and is expected to close by the end of 2015.
In the third quarter 2014, Entergy Corporation's operational earnings of $1.68 per share were in line with the Zacks Consensus Estimate. Total operating revenues of $3,458.1 million surpassed the Zacks Consensus Estimates by 8.6%.
Zacks Rank
Entergy Corporation currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the electric utility space include Black Hills Corporation (BKH), PG&E Corporation (PCG) and ALLETE, Inc. (ALE). While Black Hills and PG&E sport a Zacks Rank #1 (Strong Buy), ALLETE carries a Zacks Rank #2 (Buy).
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