By Susan Smallheer
Staff Writer | January 06,2013
— A financial analyst who follows the nuclear industry said that while
financial information on the Vermont Yankee nuclear plant indicates it
is not making money for owner Entergy Nuclear, the company may be leery
of shutting the 41-year-old reactor down because it would set a
dangerous political precedent.
Julien Dumoulin-Smith of UBS
Securities LLC said likewise that Entergy may have calculated that
shutting it down would cost more than keeping it running.
“The issue is what’s the alternative and what is the liability to retire it? Is it better to run it as a loss?” he said Friday.
said that Entergy, and the nuclear industry as a whole, were closely
watching the Vermont regulatory fight, but that the bigger issue was the
future of the Indian Point nuclear plant, which is located on the
Hudson River about 40 miles north of New York City. Indian Point is also
owned by Entergy Nuclear.
“It’s really all about Indian Point; Indian Point is what matters more,” he said.
nuclear industry is being adversely affected by the “revolution” in
shale gas, and the growth in the natural gas industry, he said.
Entergy spokesman Robert Williams issued a statement in response to the UBS report, and declined further comment.
nuclear units are important sources of clean, reliable power, and we
remain fully focused on the safe operation of the plants,” he said. “As a
matter of policy, Entergy does not comment on the financial performance
of individual plants.”
Dumoulin-Smith issued a report last
week that raised serious questions about the future operation of Vermont
Yankee, given its low cash flow, and he said that Entergy’s wholesale
nuclear fleet showed “modest to negative cash flows” until 2016. Vermont
Yankee is a member of Entergy’s wholesale fleet.
recommendation to potential Entergy investors, Dumoulin-Smith wrote: “We
believe both its New York Fitzpatrick and Vermont Yankee plants are at
risk of retirement given their small size.”
Dumoulin-Smith’s report remained officially “neutral” on a recommendation to buy Entergy stock.
Yankee’s legal future will be debated next week at two court hearings:
first Jan. 14 at the Second Circuit Court of Appeals in New York City,
and two days later at the Vermont Supreme Court. Vermont’s high court
will take up a motion by the New England Coalition, an anti-nuclear
group, to shut down Yankee because it is operating without a current
state certificate of public good.
Yankee’s financial health
has recently posed a big question mark, as Entergy Corp. chief executive
officer Wayne Leonard said in 2011 during a quarterly earnings call
with analysts that Yankee wasn’t even covering its capital costs.
Entergy is known to be facing a major investment in the future when it
comes to Yankee in the form of its aging condenser, a large piece of
equipment estimated to cost about $100 million to replace.
Dumoulin-Smith said his report didn’t take into account the condenser issue in its financial calculations.
did take into consideration about $80 million to be spent at the
Pilgrim nuclear plant in Massachusetts for dry cask storage and
re-licensing, and $130 million for wedge wire screens at Indian Point.
York environmental officials have been battling with Entergy over the
environmental effects of Indian Point’s water withdrawals from the
Hudson River, with state officials saying cooling towers were needed to
mitigate the environmental impacts of such large water withdrawals.
said the continuing low price for natural gas and the explosion of the
shale gas industry was spelling financial doom for the nuclear industry,
particularly the smaller, marginally profitable nuclear plants such as
And while Dumoulin-Smith put Entergy’s other
small nuclear plant, the Fitzpatrick plant in upstate New York, in the
same financial category as Vermont Yankee, politics could keep
Fitzpatrick online if push comes to shove.
that property taxes in New York are much higher — and thus more
important — to their host communities, and those communities would fight
harder to keep the plants online.
He said the new generation
tax, adopted by the 2012 Vermont Legislature and being fought by Entergy, could push Yankee over the financial edge.
lost the first round in its court battle over the new $12 million tax,
but has appealed a ruling by U.S. District Court Judge Christina Reiss.
“We’re looking for what creates value for Entergy shareholders,” said Dumoulin-Smith.
question of viability of nuclear is in doubt for small units like
Vermont. Vermont Yankee is one of the smallest operating nukes in the
country,” he said. “Natural gas is clearly overtaking coal, and nuclear
is the next wave of potential victims.”
He added: “Nuclear is under attack.”