Entergy wants to spin off the nuclear plants as a new company – Enexus Energy Corp. The nuclear plants are Pilgrim in Plymouth, Massachusetts; Vermont Yankee in Vernon, Vermont; Indian Point in Westchester County, New York; Fitzpatrick in Oswego County, New York and the Palisades plant in Covert, Michigan.

Entergy plans to finish the spin-off of its non-utility nuclear power business by end of 2009. The spin-off will leave the company with five regulated utilities and other assets in the Gulf States region.

This news could not have come at a better time for Entergy. The company recently lowered its guidance for both the second quarter and the full year. It will release earnings for the quarter on August 4, 2009.

New Orleans-based Entergy is primarily engaged in electric power production and retail distribution operations. The company owns and operates power plants with approximately 30,000MW of electricity generating capacity. It delivers electricity to 2.7 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy Nuclear is the second-largest nuclear generator in the U.S., with interests in six nuclear plants. We maintain our speculative BUY recommendation on ETR.

Consolidated Edison (ED) reported earnings for the 4th quarter and fiscal year ended December 31, 2008. In the reported quarter, net income was $160 million or $0.58 per share (basic and diluted), compared with $207 million or $0.76 per share (basic and diluted) for the 4th quarter of 2007.

Excluding a gain on the sale of Con Edison Development's generation projects, discontinued operations and net mark-to-market effects of competitive energy businesses, earnings from continuing operations during the reported quarter came to $200 million or $0.72 a share, compared with $191 million or $0.71 a share in the year-ago quarter.

Operating revenue in fiscal 2008 increased marginally to $13.6 billion from $13.1 billion in fiscal 2007. For the full year 2008, the company reported earnings of $1.2 billion, or $4.38 (basic) and $4.37 (diluted) per share, compared to earnings of $929 million, or $3.49 (basic) and $3.47 (diluted) per share, in 2007.

After excluding its Northeast Utilities litigation settlement and certain other charges, earnings from continuing operations were $820 million or $3.00 a share compared with $930 million or $3.50 a share in 2007. The weighted average number of common shares was 274 million shares and 273 million shares for the quarter and year ended December 31, 2008, compared with 272 million shares and 266 million shares in the 2007 periods, respectively. The dilutive effect on earnings per share for the quarter and year ended December 31, 2008 was $0.00 and $0.11, respectively.

2009 Outlook

Consolidated Edison expects to spend $2.6 billion for capital investments, virtually all of which will be spent at the company's regulated utilities. The company also expects to issue common stock within $300 million to $550 million in addition to stock issuances under the company's dividend reinvestment and employee stock plans. The company also intends to issue long-term debt at its utility subsidiaries of $1.1 billion to $1.8 billion in addition to debt issuances for maturing securities.

Stable regulated utility operations, a gain on the sale of generation projects, a reasonably strong balance sheet, strong cash flow, and earnings from non-regulated businesses collectively make Consolidated Edison a conservative income-based investment story. ED offers an above-industry average dividend yield, competitive with Treasury yields.

However, a rising debt level and earnings dilutive stock issuances to upgrade its utility infrastructure, as well as its pending New York electric rate case continue to restrain valuation.

Company Overview

New York City-based Consolidated Edison is a diversified utility holding company with subsidiaries engaged in both regulated and unregulated businesses. ConEd's regulated businesses operate through two subsidiaries -- Consolidated Edison Company of New York (Con Edison of New York) and Orange and Rockland Utilities (O&R).

Con Edison of New York is a regulated utility that provides electricity to roughly 3.2 million customers, natural gas to 1.1 million customers, and steam services to about 1,850 customers, primarily in New York City and Westchester County. O&R serves nearly 400,000 electric and gas customers in southeastern New York State, northern New Jersey, and northeastern Pennsylvania.

ConEd's unregulated businesses operate through three subsidiaries: Con Edison Development (engaged in infrastructure development), Con Edison Energy (supplies energy in the wholesale market) and Con Edison Solutions (provides retail energy). Approximately 80% of ConEd's earnings are generated through its regulated businesses.

In the 2nd quarter of 2008, Con Edison Development and its subsidiary, CED/SCS Newington, LLC, completed the sale of their ownership interests in power generating projects (Rock Springs, Ocean Peaking Power, CEEMI, Newington and Lakewood) with an aggregate capacity of approximately 1,706 MW to North American Energy Alliance, LLC. The sale resulted in total cash proceeds, net of estimated taxes and transaction expenses, of $1,075 million, and an after-tax gain, net of all transaction expenses, of $404 million.

Read the full analyst report on ED