Entergy to buy a natural gas plant in Arkansas in a $1 billion deal

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Entergy announced on December 9 that it would purchase a bankrupt natural gas power plant in El Dorado, Arkansas. The plant is about a three-hour drive south of Arkansas Nuclear One. But it’s not a done deal yet . . . .

According to the article, Entergy said the bankruptcy wasn’t a factor:

Hugh McDonald, president and CEO of Entergy Arkansas, said in an interview that the bankruptcy did not play a role in the company’s decision to buy the plant. He said Entergy received an unsolicited offer from Entegra to buy the plant months ago and had leased power from the facility in the past.

Nevertheless, Entergy’s press release explained that the $948 million purchase price of Union Power Station is half of what it would cost to build a comparable unit. This probably was a factor.

The natural gas plant has four units, each rated at 495 megawatts. This is a group deal: Entergy Arkansas and Entergy Texas each get one unit, and Entergy Gulf States Lousiana gets two. That means Entergy, through its subsidiaries, will add 1980 megawatts to its grid.

But it’s not over yet. The state and federal regulators still have to agree to the transaction. Entergy expects to gain their approval in late 2015.

Entegra power, who owned the natural gas plant, filed for bankruptcy in August, when gas prices were around $4 per million BTU.

Natural gas prices bottomed in 2002 at around $2.5 per million BTU. The plant went online in 2003. Prices climbed steadily, doubling to around $5 per million BTU, until 2007 where they soared to around $13 in the middle of 2008. They then collapsed, along with the oil market, back down to $2.5 during the Great Recession. Prices bottomed out in May of 2012 at under $2 per million BTU.

Continue reading on www.arkansasbusiness.com . . . .