Decision driven by sustained low power prices
The two operating units at the Indian Point Energy Center will close in 2020-2021 after powering New York for more than four decades with clean, safe and reliable electricity. The early and orderly shutdown is part of a settlement under which New York State has agreed to drop legal challenges and support renewal of the operating licenses for Indian Point, located in the Village of Buchanan in northern Westchester County. The shutdown will complete Entergy's exit from its merchant power business because of sustained low wholesale energy prices.
"We thank our nearly 1,000 dedicated employees for operating a world-class nuclear power generating facility at top levels of safety, security and reliability, as well as the community for supporting us," said Leo Denault, Entergy's chairman and CEO. "We are committed to treating our employees fairly and will help those interested in other opportunities to relocate within the Entergy system."
"Since purchasing the plants 15 years ago, we have invested more than $1.3 billion in safety and reliability improvements. The plants have delivered hundreds of millions of megawatt hours of virtually emissions-free power to the Hudson Valley and New York City safely."
Decision Driven By Economics
"Key considerations in our decision to shut down Indian Point ahead of schedule include sustained low current and projected wholesale energy prices that have reduced revenues, as well as increased operating costs. In addition, we foresee continuing costs for license renewal beyond the more than $200 million and 10 years we have already invested," said Bill Mohl, president of Entergy Wholesale Commodities. "Record low gas prices, due primarily to supply from the Marcellus Shale formation, have driven down power prices by about 45 percent, or by about $36 per megawatt-hour, over the last 10 years, to a record low of $28 per megawatt-hour. A $10 per megawatt-hour drop in power prices reduces annual revenues by approximately $160 million for nuclear power plants such as Indian Point."
"We appreciate the efforts of our employees who have made Indian Point one of the most reliable generating stations in New York State," Mohl added.
Independent Experts Continuously Evaluate Plant Safety
Inspectors at the U.S. Nuclear Regulatory Commission, with special expertise and training in nuclear power and strict licensing and operational guidelines, ranked the plant in the agency's top regulatory column for safety following more than 6,000 hours of inspections in 2016.
Unit 2 has been online for 187 days continuously and Unit 3 for 390 days continuously. Under Entergy's ownership, Indian Point's reliability has increased significantly – to a capacity factor1 of greater than 90 percent from approximately 60 percent under prior owners. Entergy has demonstrated its commitment to the reliable operation of the facility, investing approximately $500 million in capital improvements over the last five years and a total of more than $1.3 billion since it bought the plants.
Indian Point has been safely generating power for New York since 1962 – first by Unit 1 until 1974, then Units 2 and 3, providing economic, environmental and electric grid reliability benefits for millions of New Yorkers.
Details of Settlement with New York State
Under the agreement, Indian Point Unit 2 will shut down by April 30, 2020, and Unit 3 by April 30, 2021. Other key terms include:
- Coastal Zone Management Act Consistency Certification from New York State
- Water Quality Certificate and water discharge permits from New York State
- Agreement by New York State and primary intervenor Riverkeeper to withdraw legal challenges to license renewal
- Entergy will request that the NRC shorten the term of a renewed license for Indian Point from 2033 and 2035 for Units 2 and 3, respectively, to 2024 and 2025
- Agreement by Entergy to provide $15 million as part of its continued commitment to community stakeholders and environmental stewardship
- Various inspections of Indian Point conducted by Entergy and New York State, supplemental to NRC inspections.
Company Continues to Pursue Licenses for Remaining Operating Years
Entergy filed a license renewal application for both Indian Point operating units in April 2007, and NRC Staff in its Safety Evaluation Report concluded that no issues would preclude safe operation during the period of a renewed license. Under the settlement, Entergy will continue to pursue license renewal, unopposed by the state, for the remaining operating years, and will work on plans to mitigate the economic impact of the shutdown on its employees and the surrounding community. Both units remain under the NRC's normal oversight, to which Entergy remains committed.
Corporate Strategy to Exit Merchant Power Business
With today's announcement, Entergy is providing certainty and time for stakeholders to prepare for an early and orderly shutdown. The decision follows announcements of other plant shutdowns or sales of Entergy's merchant assets that will enable the company to exit the merchant power business and focus on growing its regulated utility, including ensuring that its southern nuclear power plants continue their safe and reliable operations. Entergy's prior announcements include the planned sale of the James A. FitzPatrick nuclear power plant in upstate New York, the closure and planned sale of the Vermont Yankee nuclear plant, the sale of the Rhode Island State Energy Center natural gas-fired power plant, and the planned shutdowns of the Pilgrim nuclear plant in Massachusetts and the Palisades nuclear plant in Michigan.
As a result of its agreement to shut down Indian Point Units 2 and 3, Entergy will recognize a non-cash impairment charge of approximately $2.4 billion pre-tax and $1.5 billion after-tax in the fourth quarter of 2016. In addition to the impairment charge, through the end of 2021 Entergy expects to record additional charges totaling approximately $180 million related to severance and employee retention costs.
The impact on free cash flow from the settlement is expected to be approximately neutral through the end of operations. Impact to free cash flow includes expected contributions to the decommissioning trust funds, severance and retention payments and changes in capital expenditures and operating cash flows. The actual amount of the anticipated contribution to the decommissioning trusts will be determined later.