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Entergy, Shaw Group Blend Talents in Venture

Entergy, Shaw Group Blend Talents in Venture

Two Louisiana companies announced Friday they've cooked up a powerhouse gumbo, a stew that is expected to heat up the wholesale power market in regional hubs around the country. New Orleans-based utility giant Entergy and the Baton Rouge-based construction firm, The Shaw Group, are blending their talents to form Entergy-Shaw, a strategic joint venture that is expected to accelerate Entergy's goal of becoming a dominant low-cost wholesale power provider in key regional energy hubs.

The new company will provide management, engineering, procurement, construction and commissioning services to build electric power plants, and is expected to capitalize on the rapidly growing electric power generation market, offering services for Entergy Wholesale Operations' (EWO) power development plans in North America and Europe, and in the future to other power development customers. EWO is the power development, marketing and trading business unit of Entergy.

According to officials, Entergy-Shaw will use a market-driven reference plant design that is expected to significantly reduce power plant capital costs, and also reduce construction, commissioning and operating risks using EWO's gas turbine rollout program. Entergy and Shaw will each own a 50% interest in the new company.

"We're combining the skills, capabilities and expertise of two entrepreneurial organizations," said Geoff Roberts, EWO president and CEO. "The Shaw Group is to power plants what Intel is to computers," and Roberts added that the new partnership will eliminate the middleman and allow Entergy to add value to the marketplace.

"Shaw provides complementary capabilities to EWO with extensive scheduling, construction, procurement, balance-of-plant and erection experience with complex projects," said Roberts, adding that the move is consistent with Entergy's plan to build low-cost power plants. "Similar to the Entergy-Koch L.P. marketing and trading alliance, this is another major step forward in achieving our objective of being a low-cost wholesale power provider in targeted North American and European energy markets."

In April, the New Orleans-based Entergy announced a strategic partnership with Koch Industries (see NGI, May 1). Called Entergy-Koch L.P., the new venture, which will be headquartered in Houston, is expected to rank among the top U.S. energy commodity traders in combined volumes of electricity and natural gas trading.

"The combination of EWO and Shaw is a win/win for all parties involved," said J. M. Bernhard Jr., Shaw's chairman, president and CEO. He said the partnership will allow Shaw to capitalize on its "core competency," and provide his company with a "substantial stream of projects" that would both "solidify, and significantly increase, our revenue visibility over the next several years."

An eight-member board of directors, four each from Entergy and Shaw, will govern the new company, and the chairman will rotate each year, with Entergy holding the position in the first year. The new company is subject to completion of some final documentation and receipt of any requisite regulatory approvals.

Entergy is the third-largest U. S. generator of electricity with revenues in excess of $8 billion per year. It owns, manages, or invests in power plants generating nearly 30,000 MW of electricity domestically and internationally, and delivers electricity to about 2.5 million customers in portions of Arkansas, Louisiana, Mississippi and Texas. Shaw is a leading innovator of turnkey piping solutions and erection services with revenues in excess of $500 million.

Shaw supplies fabricated piping systems and services and provides solutions to the chemical processing, crude oil refining, petrochemical processing and oil and gas exploration and production industries.

In other news, Entergy's CFO C. John Wilder also said Entergy's earnings will be in the "range of $2.35 to $2.45 per share," and said 2001 goals will be between $2.90 and $3.10. Wilder, who spoke to analysts at a meeting in New Orleans, said Entergy's "strong outlook" is the result of a "stronger balance sheet" and "renewed financial flexibility" following the 1998 divestiture of London Electricity and CitiPower.

"Our strong outlook continues to reflect the successful execution of a back-to-basics strategy we outlined in August 1998," Wilder said. "Since the new management team, Entergy's 36% total shareholder return ranks third among the 29 S&P electric companies."

Carolyn Davis, Houston

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