By: Roger Conrad
On Jun. 20, 2012, Standard & Poor�s boosted�Entergy Corp�s�(NYSE: ETR) credit outlook to�stable.� The rater noted �sustained and consistent improvement� at regulatedoperations and �effective management� of nuclear plant relicensing.
That�s long overdue recognition. But thelikely catalyst for the upgrade was the late-May decision by the NuclearRegulatory Commission (NRC) to relicense the Pilgrim plant in Massachusetts foranother 20 years.
Combined with the appointment of a moreconciliatory NRC chairman, relicensing the Indian Point plant in New York nowseems set before 2014, when the current license expires.
The Northeast US wholesale electricityprice has fallen sharply due to cheap natural gas. As low-cost andemission-free baseload power, The utility stock�s outputis critical to the region, and CFO Leo Denault states it�s �pretty well hedgedin 2012 and 2013.� But low prices will keep a premium on cost controls.
Fortunately, the regulated utility willmore than pick up the slack, with $6 billion in targeted capital spending overthe next three years. The natural gas liquidsboom ensures industrial sales growth will be robust for some years.
And thespinout and merger of interstate transmission assets with�ITC Holdings Corp�(NYSE: ITC) is on track to provide awindfall gain of $10 per Entergy share.
Until there�s a final ruling on IndianPoint�and court challenges to the Vermont and Massachusetts nukes areresolved�Entergy shares are unlikely to reclaim their 2008 high of $124-plus.
But the balance sheet ishealthy, and the dividend is well covered with regulated utility earningsalone.
Holding:No Position Disclosure:
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