Entergy 2011 Annual Report Download - page 43

Entergy Corporation and Subsidiaries 2011
MANAGEMENT’S FINANCIAL DISCUSSION AND ANALYSIS continued
Planned Construction and Capital Investments 2012 2013 2014
Maintenance Capital:
Utility:
Generation $ 128 $ 129 $ 131
Transmission 282 273 255
Distribution 433 485 496
Other 91 89 103
Total 934 976 985
Entergy Wholesale Commodities 90 120 107
Total $ 1,024 $ 1,096 $ 1,092
Capital Commitments:
Utility:
Generation $ 1,428 $ 583 $ 358
Transmission 170 128 264
Distribution 17 11 11
Other 45 47 35
Total 1,660 769 668
Entergy Wholesale Commodities 259 241 291
Total 1,919 1,010 959
Total $2,943 $2,106 $2,051
Maintenance Capital refers to amounts Entergy plans to spend
on routine capital projects that are necessary to support reliability
of its service, equipment, or systems and to support normal
customer growth.
Capital Commitments refers to non-routine capital investments for
which Entergy is either contractually obligated, has Board approval, or
otherwise expects to make to satisfy regulatory or legal requirements.
Amounts reflected in this category include the following:
n The currently planned construction or purchase of additional
generation supply sources within the Utility’s service territory
through the Utility’s portfolio transformation strategy, including
three resources identified in the Summer 2009 Request for
Proposal that are discussed below.
n Entergy Louisiana’s Waterford 3 steam generators replacement
project, which is discussed below.
n System Energy’s planned approximate 178 MW uprate of the
Grand Gulf nuclear plant. On November 30, 2009, the MPSC
issued a Certificate of Public Convenience and Necessity for
implementation of the uprate. A license amendment application
was submitted to the NRC in September 2010. After performing
more detailed project design, engineering, analysis and major
materials purchases, System Energy’s current estimate of the total
capital investment to be made in the course of the implementation
of the Grand Gulf uprate project is approximately $754 million,
including SMEPA’s share. The estimate includes spending on
certain major equipment refurbishment and replacement that
would have been required over the normal course of the plant’s
life even if the uprate were not done. The purpose of performing
this major equipment refurbishment and replacement in
connection with the uprate is to avoid additional plant outages and
construction costs in the future while improving plant reliability.
The investment estimate may be revised in the future as System
Energy evaluates the progress of the project, including the costs
required to install instrumentation in the steam dryer in response
to recent guidance from the NRC staff obtained during the review
process for certain Requests for Additional Information (RAIs)
issued by the NRC in December 2011. The NRC’s review of the
project is ongoing. System Energy is responding to the recent RAIs
and will seek to minimize potential cost effects or delay, if any, to
the Grand Gulf uprate implementation schedule.
n Transmission upgrades and spending to support the Utility’s plan
to join the MISO RTO by December 2013.
n Spending to comply with current and anticipated North
American Electric Reliability Corporation transmission planning
requirements.
n Entergy Wholesale Commodities investments associated with
specific investments such as dry cask storage, nuclear license
renewal, component replacement and identified repairs, spending
in response to the Indian Point Safety Evaluation, NYPA value
sharing, and wedgewire screens at Indian Point.
n A minimal amount of environmental compliance spending,
although Entergy continues to review potential environmental
spending needs and financing alternatives for any such spending,
and future spending estimates could change based on the results
of this continuing analysis and the implementation of new
environmental laws and regulations.
The Utility’s owned generating capacity remains short of customer
demand, and its supply plan initiative will continue to seek to
transform its generation portfolio with new or repowered generation
resources. Opportunities resulting from the supply plan initiative,
including new projects or the exploration of alternative financing
sources, could result in increases or decreases in the capital
expenditure estimates given above. Estimated capital expenditures
are also subject to periodic review and modification and may vary
based on the ongoing effects of business restructuring, regulatory
constraints and requirements, environmental regulations, business
opportunities, market volatility, economic trends, changes in project
plans, and the ability to access capital.
SUMMER 2009 LONG-TERM REQUEST FOR PROPOSAL
The 2012-2014 capital expenditure estimate includes the construction
or purchase of three resources identified in the Summer 2009 Long-
Term Request for Proposal: a self-build option at Entergy Louisiana’s
Ninemile site and agreements by two of the Utility operating
companies to acquire the 620 MW Hot Spring Energy Facility and the
450 MW Hinds Energy Facility.
Ninemile Point Unit 6 Self-Build Project
In June 2011, Entergy Louisiana filed with the LPSC an application
seeking certification that the public necessity and convenience
would be served by Entergy Louisiana’s construction of a
combined-cycle gas turbine generating facility (Ninemile 6) at
its existing Ninemile Point electric generating station. Ninemile
6 will be a nominally-sized 550 MW unit that is estimated to cost
approximately $721 million to construct, excluding interconnection
and transmission upgrades. Entergy Gulf States Louisiana joined in
the application, seeking certification of its purchase under a life-of-
unit power purchase agreement of up to 35% of the capacity and
energy generated by Ninemile 6. The Ninemile 6 capacity and energy
is proposed to be allocated 55% to Entergy Louisiana, 25% to Entergy
Gulf States Louisiana, and 20% to Entergy New Orleans. In February
2012 the City Council passed a resolution authorizing Entergy New
Orleans to purchase 20% of the Ninemile 6 energy and capacity. If
approvals are obtained from the LPSC and other permitting agencies,
Ninemile 6 construction is expected to begin in 2012, and the unit is
expected to commence commercial operation by mid-2015. The ALJ
has established a schedule for the LPSC proceeding that includes
February 27 - March 7, 2012, hearing dates.
Hot Spring Energy Facility Purchase Agreement
In April 2011, Entergy Arkansas announced that it signed an asset
purchase agreement to acquire the Hot Spring Energy Facility, a
620 MW natural gas-fired combined-cycle turbine plant located in
Hot Spring County, Arkansas, from a subsidiary of KGen Power
Corporation. The purchase price is expected to be approximately
$253 million. Entergy Arkansas also expects to invest in various
plant upgrades at the facility after closing and expects the
total cost of the acquisition, including plant upgrades, transaction
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