Friday, November 7, 2003 - Nuclear Friday

DOMINION AGREED TO PAY $220-MILLION IN CASH FOR KEWAUNEE, a 563-MW Westinghouse PWR owned by Wisconsin Public Service Corp. (WPS) and Wisconsin Power & Light (WP&L). The purchase price includes the reactor and land at the site, and $36.5-million for the nuclear fuel inventory. WPS and WP&L also will transfer about $392-million of decommissioning funds to Dominion. Dominion said it expects to close the transaction in fall 2004 after receiving the necessary federal and state regulatory approvals.

At the closing of the sale, WP&L and WPS will enter into contracts to purchase 100% of the electricity generated by Kewaunee until 2013, when the unit's operating license expires. Dominion said no decision has been made on seeking license renewal. Dominion also will take over plant operations from current operator Nuclear Management Corp. after the sale closes. A Dominion spokesman declined to comment on whether Dominion would seek further expansion of its nuclear fleet, comprised of Millstone-2 and -3, North Anna-1 and -2, and Surry-1 and -2. WPS, which owns 59% of Kewaunee, has no other nuclear assets.

WP&L has a 41% interest in Kewaunee. WP&L parent Alliant Energy said it has "no current plans" to sell its 70% share in Duane Arnold, its other nuclear asset (Platts, Nuclear News).

AmerGen Tax Assessments

- Three Mile Island -1 (TMI) is 819+ MWe PWR supplied by Babcock and Wilcox. TMI was sold for one-fifth of book value, i.e., $99/$512 million, in 1999 to AmerGen. TMI-1's present book value is estimated to be between $600 to $650 million. Exelon's offer for TMI, Clinton and Oyster Creek is $276.5 million.

TMI is in Court on the issue of RNR/PURTA valuation. Dauphin County has assessed TMI at $64.9 million as opposed to AmerGen's $5 million valuation. The Case is on appeal. AmerGen is paying $400,000 in taxes a year, compared with $1.5 million it would have to pay under the county's assessment. Lower Dauphin School District already has spent $75,000 in legal and appraisal fees to fight the appeal. In addition, capacity factors and uprates have increased the value. of the plant since 1999. Deregulation shifted power plants back to the local tax rolls under the assumption that utilities would pay at least the same amount as they would pay if they been subject to real estate taxes.

- Clinton, a 930 MWe BWR designed by General Electric, came on line in April, 1987. The plant cost Illinois Power (and the Soyland Power Coop) $4.25 billion to build, but it was sold to AmerGen for $20 million in 1999. AmerGen successfully reduced property values from $470 million, at the time of the sale, to approximately $100 million by 2005. DeWitt County taxes will be increasing by about one-third from .77 per $100 equalized assessed valuation (EAV) to 95 cents per $100 EAV. The increases are mostly attributable to AmerGen's devaluation of Clinton.

- Oyster Creek is a 619 MWe BWR designed by General Electric that came on line in December 1969. The plant is also owned and operated by AmerGen. Unlike Pennsylvania, New Jersey assesses nuclear plants by generation capacity and real estate taxes. Oyster Creek, which was purchased by AmerGen on September 19, 1999 for $10 million or $16 per megawatt of generating capacity, is currently producing $12 million in sales tax revenues. The real estate valuation of $57,342.90 yields $1,557, 443.16 (Lacey Township, Tax Collector, October, 2003.)

Exelon Rate Hike - Exelon-Illinois Power Deal Could Begin New Era

By Ken Silverstein, Director, Energy Industry Analysis, November 5, 2003

Exelon Corp. is trying to add some firepower. It expects to purchase Illinois Power Co. from Dynegy for $2.2 billion, if Illinois legislators grant it single-digit rate increases.

The transaction might be a precursor of deals to come, particularly if the Public Utility Holding Company Act (PUHCA) is repealed by Congress this year. That's not to say that those mega companies with deep pockets will just start buying up other utilities willy-nilly. The trend is likely to involve gobbling up those enterprises that not only provide valuable synergies but that also have regulated assets with steady cash flows. Corporate boards will want to know how such mergers would add value and won't be inclined to take big risks. Distribution companies like Illinois Power make good prospects.

"Deal makers are looking for a more traditional and safer way to go," says Bill Harmon, an energy lawyer for Jones Day in Chicago. "That means acquiring plain vanilla assets or integrated companies that have proven transmission, distribution and generation businesses."

Customers, of course, want reliability and good service. And if their local utility has been distressed, then having a stable enterprise take control and improve conditions might be acceptable. Investors that have such aims and enhance the local communities in which they operate are desirable. But many are holding companies, foreign utilities and non-traditional players that can't make such forays unless PUHCA is repealed.

Berkshire Hathaway, for instance, which is the single biggest investor in MidAmerican, has publicly stated its desire to invest $10-$15 billion in the utility industry if the PUHCA is repealed. Its argument is that by disallowing holding companies to buy certain assets, it works to weaken the sector. Consider that MidAmerican purchased Williams' Kern River pipeline, which is now being extended and delivering more natural gas-a venture that might not have happened if the sale had been forbidden.

Written in response to unfair business practices and other abuses by the electric holding companies of that era, PUHCA in 1935 required federal control and regulation of the companies. The aim: To ensure the financial integrity of regulated operations that are responsible for delivering power to consumers. But critics say that the wall has inhibited utility holding companies from making investments that are ancillary to their core services. In last year's failed energy bill, the Senate moved to repeal the act.

Companies like Exelon, Entergy Corp. and Dominion Resources are strong and are looking for stable companies or assets. They have the money to beef up power plants and transmission lines-investments that will require many billions. And without that capital, the risk of power shortages and reliability problems could multiply.

Artificial Constraints

Dynegy's pending sale of Illinois Power has been inevitable. While Dynegy now has gas pipelines and liquefied natural gas assets, it has gotten socked in the last two years as a result of its energy marketing business. Its stock has fallen from a high of about $57 a share in late 2000 to a price of about $4 a share now, while its bonds are rated as "junk." Because Dynegy has cut its debt by almost $9 billion to about $7 billion and dropped its trading unit, the credit rating agencies say it has a "positive" outlook.

The company admits that both it and Illinois Power would stagnate as long as the two are linked. By selling the distribution business to Exelon, Dynegy will receive $275 million in cash, a $150 million promissory note and shift another $1.8 billion in debt over to the suitor. And, Dynegy will supply Exelon with 6,000 megawatts of power under a six-year contract. For the deal to go through, however, Exelon says it needs a rate increase in 2007 when the current rate freeze ends and another one in 2009, not to exceed nine percent.

Altogether, an estimated $100 billion in all types of utility assets are up for sale. Generation assets are the toughest sell nowadays, largely because the market for power has diminished and sellers are reluctant to parlay assets at pennies on the dollar. Transmission assets and other properties that have the potential to improve cash flow might become vogue.

PUHCA, however, is perceived as a barrier to such sales. By repealing PUHCA, capital could flow to the utility sector, say some industry analysts. They add that, unlike in 1935, federal and state authorities now have expansive authority to ensure that unregulated and regulated delivery businesses don't make bad investment decisions that would harm electricity consumers. If the law is repealed, major mergers and asset acquisitions would still be subject to scrutiny by all relevant regulatory bodies.

"PUHCA imposes artificial constraints-constraints that were designed to promote policies that are not particularly relevant anymore," says Harmon, with Jones Day. "Having investors with resources that are interested in long-term, sound business practices-other things being equal-is a good thing."

Generally speaking, he says that strong domestic utilities may look to increase their regional footprints. At the same time, foreign conglomerates like German's E.ON and Britain's National Grid may seek to expand their American presence while non-traditional players such as ExxonMobil and ChevronTexaco might want to get in the game. To succeed, however, they must all remain committed to the business and the local economies. Appeasing state regulators has always been difficult, and will only become more trying if PUHCA is repealed, adds Harmon.

Some smaller companies will eventually seek to get back in the hunt too. But, they must first get their debt-to-capital ratios around the 50-50 level. That would be enough to satisfy regulators and have their bonds elevated to investment grade status.

New Era

Bigger is not always better-opponents of PUHCA reform are steadfast in that belief. Public power companies and consumer advocate groups say that government oversight is more vital now than ever. Not only is corporate indiscretion a worry but so is affordability and reliability.

In the case of the Exelon and Illinois Power combo, the Illinois attorney general's office along with the Environmental Law & Policy Center have requested that the Illinois Commerce Commission look carefully at the proposal. The general fear is over Illinois Power's health and whether it could drag down Exelon.

Exelon unit Commonwealth Edison, for example, has said that Illinois Power is "financially challenged." The assimilation of the two and the expected results are not yet clear. And those questions caused Standard & Poor's to put Exelon on notice that its bonds could be downgraded, if the integrated company fails to deliver.

"The repeal of PUHCA would have devastating consequences for consumers and investors by leading to more Enron-style meltdowns, further industry consolidation and the creation of complex corporate structures that reduce transparency and accountability," said Tyson Slocum, research director for Public Citizen.

Despite the anxieties, PUHCA reform might pass Congress. A new-found emphasis on modernizing infrastructure and improving reliability is palpable. If a broad energy bill makes it to the president's desk and PUHCA revisions are included, the pace of utility mergers would eventually escalate. The deals, however, would seek to minimize risks. Exelon's possible buyout of Illinois Power could be the start of a new era.

October 3, 2003 - TMIA Press Release

TMIA v. Exelon

Harrisburg, PA. - Three Mile Island Alert, a safe-energy group formed in 1977, announced its opposition to the proposed sale of British Energy's share of Three Miles Island-1.

TMI-Alert chairman Eric Epstein stated, "Although we have a working relationship with Exelon, we can not support the sale until we resolve several quality of life issues." Epstein noted, "TMIA has a well documented record of reconciliation and constructive engagement, and we would like to address staffing levels and community investment without litigation."

Epstein added, "However, we reserve the right to pursue legal remedies."

1 - The Pennsylvania Public Utility Commission is intimately involved in security and power plants and supporting and protecting infrastructure throughout PA. Although AG is a "deregulated" facility, sales above certain MW qualify for PUC review .

During that review TMIA will raise the following issues: necessary staffing levels to maintain security; minimum staffing levels needed to maintain security absent the National Guard and state police; minimal staffing levels necessary to maintain the EOF; minimal staffing levels to maintain and support staffing at TMI-2 which is owned by FENOC but staffed by AG/Exelon; minimal staffing levels and resources necessary to maintain communications, emergency preparedness and siren testing with local officials; minimal staffing levels needed to maintain T& D capabilities including PUC regulated bridges on and off of TMI.

Remedy: Ensure adequate staffing to meet the PSP, PA PUC and Pennsylvania's Homeland Security mandates and regulations through verifiable measures which include annual audits and unannounced inspections.

2 - TMI is in Court on the issue of RNR/PURTA valuation. Dauphin County has assessed TMI at $64.9 million as opposed to AmerGen's $5 million valuation. The Case is on appeal. AmerGen is paying $400,000 in taxes a year, compared with $1.5 million it would have to pay under the county's assessment. Lower Dauphin School District already has spent $75,000 in legal and appraisal fees to fight the appeal. In addition, capacity factors and uprates have increased the value of the plant since 1999.

Deregulation shifted power plants back to the local tax rolls under the assumption that utilities would pay at least the same amount had they been subject to real estate taxes (Fair Market Assessment of Utility Reality, Pennsylvania's Public Utility Realty Tax Act , as amended, 72 P.S. §§ 8101-A to 8110-A).

Remedy: Institute an "income valuation approach" to reflect the plant's current value as opposed to the depreciated transition book value of 1998 and 1999. The 1999 plant sale was based on the deflated value of megawatt generating capacity used prior to the sale of Fitzpatrick ($543 cost per megawatt; March 10, 2000) , Nine Mile Point 2 ($652 cost per megawatt; December 12, 2000) Indian Point 3 ($543 cost per megawatt; March 10, 2000) or Palo Verde ($444 cost per megawatt; April 28, 2000).

Exelon should acknowledge Dauphin County's assessment or pay an RNR assessment based on double the value of the sale price*.

* Note: TMI was sold for one-fifth of book value, i.e., $99/$512 million, in 1999. TMI-1's present value is estimated to be between $600 to $650 million. FPL Energy's offer for TMI, Clinton and Oyster Creek is $276.5 million.

October 2, 2003 - Michael Harrison, UK Independent Ltd.

British Energy nuclear stations could go for £1 each

British Energy's eight nuclear stations will be taken over by the Government for a nominal payment of £1 each should yesterday's £4bn rescue of the embattled company fail to secure its future.

The deal, finally clinched after all-night negotiations with bondholders, will see shareholders emerge with just 2.5 per cent of British Energy and the company's £3.9bn in nuclear liabilities offloaded onto the taxpayer.

Creditors owed £1.2bn will receive £425m in new British Energy bonds and 97.5 per cent of the equity. The lion's share of the bonds, £170m worth, will go to the banks which financed British Energy's ill-fated purchase of the Eggborough coal-fired power station. But bondholders will emerge with 52.3 per cent of the equity.

Although formal agreement has been reached with a number of bondholders, British Energy is still short of the 75 per cent backing it needs and has been given until the end of this month to obtain the necessary consents. A spokesman said it was confident of meeting the deadline.

The restructuring deal then needs to be approved by the European Commission under its state aid rules - a process which is expected to take until the middle of next year.

Patricia Hewitt, Secretary of State for Trade and Industry, struck a cautious note, saying there remained "significant milestones ahead" and that the Government remained ready to put British Energy into administration.

"In addition, if the Government is not satisfied that British Energy will be viable in all reasonably foreseeable conditions, or if there is a material adverse change in British Energy's position, the Government has reserved its right to withdraw its support for the restructuring," she added. This would involve the withdrawal of a £200m credit facility, plunging the company into insolvency.

In return for shouldering all its liabilities, the Government will also have the right to 65 per cent of British Energy's cashflow or 65 per cent of its equity. However, at the insistence of creditors, it has agreed to limit its share of voting rights to 29.9 per cent.

Friends of the Earth's energy campaigner, Roger Higman, said: "This agreement may save ministers' blushes but it shouldn't hide their shame. This whole sorry episode highlights the economic madness of nuclear power."

Tim Yeo, the frontbench Conservative trade and industry spokesman, called on the Government to end the "dithering" over the future of nuclear power. "Until ministers decide whether there is a role for nuclear power in Britain's long-term electricity generation needs, expertise will drift away and British Energy will operate in a climate of uncertainty," he said.

Vince Cable, the Liberal Democrats' trade and industry spokesman, said the deal might yet be blocked by Brussels and accused the Government of "double standards" by lobbying against unfair state aid elsewhere and then demanding it for the UK.

October 2, 2003 - Bloomberg News

British Energy in Agreement on Bailout

British Energy, Britain's biggest power generator, on Wednesday agreed with creditors on a £1.5 billion ($2.5 billion) government bailout and a plan to swap some debt for equity that will help the company avoid filing for bankruptcy protection.

Bondholders owning 75 percent of the debt need to sign the package by the end of October, the company said in a statement. Existing shareholders will get about 2.5 percent of the company if they approve the plan.

The government had said it would let the company seek court protection if creditors like the Royal Bank of Scotland Group did not back the plan. A 40 percent drop in power prices after Britain opened its energy markets left the utility, whose nuclear plants generate 20 percent of the country's power, unable to pay its bills last year.

The bailout needs European Union approval before it is put in place.

"There was so much at stake from everyone's side it was always likely a deal would be done," said Iain Turner, an equity analyst at Deutsche Bank in London. "They still have the whole European Commission process to sort out."

The government last year agreed to lend British Energy £650 million and assume some liability after the company said it might go bankrupt without financial help. Those liabilities included costs of at least £150 million a year to shut down nuclear power plants.

Banks and bondholders in February gave preliminary backing to the plan, under which the company will sell £550 million of new bonds and give creditors as much as 97.5 percent of the equity in British Energy.

Britain also plans to change the terms of contracts British Energy has with the government-owned British Nuclear Fuels to trim the more than £300 million a year that British Energy pays for buying fuel and having waste recycled.

European Commission antitrust regulators in July opened a formal investigation of the bailout. The European competition commissioner, Mario Monti, recommended the investigation because of concern the rescue package may jeopardize competition in the British power market. The company expects the inquiry to be over by the middle of 2004.

"The formal investigation process is entirely between the E.C. and the U.K. government," the company said. "British Energy is not directly involved in these discussions and therefore cannot comment on the likelihood of success."

European Commission antitrust regulators will probably demand asset sales and other divestments in return for approval. Under European Union rules, companies receiving government aid must reduce their presence on the market and cannot gain excessive competitive advantage from the assistance.

The environmental group Greenpeace has asked the European Union to reject the bailout on the grounds that paying for British Energy's nuclear liabilities and renegotiating the contract with British Nuclear Fuels constitute government aid that breaches European Union competition rules, said Jim Footner, a spokesman in London.

The British Department of Trade and Industry said it had planned to take control of the company and keep its nuclear power stations running if the restructuring plan fails.

"If any of the restructuring conditions are not met, the government has contingency plans ready for the administration of the company," the department said in a statement.

September 25, 2003 - Reuters

Exelon seeks permit for possible Ill. nuke project

SAN FRANCISCO, Sept 25 (Reuters) - Exelon Generation Co. said on Thursday it asked federal regulators for an "early site permit" to possibly build a nuclear power plant on land next to an existing Exelon reactor in Illinois.

Exelon Generation, a unit of Chicago-based Exelon Corp. EXC.N , said it has no immediate plans to build a new plant, and it has made no decision on a reactor design should the company choose to build on the site adjacent to its Clinton nuclear plant in Clinton, Illinois.

The permit, which would be issued by the Nuclear Regulatory Commission, doesn't authorize plant construction but is the first of a two-part licensing process under commission rules on site suitability, environmental impact and emergency planning.

Exelon said the NRC's review and approval process could take up to 33 months or more. If granted, the permit would be good for 20 years and renewable for another 20, allowing Exelon to "bank" the land for future use.

No new nuclear power plants have been put in service in the United States since 1996, when the Tennessee Valley Authority's Watts Bar 1 plant went on the grid.

New construction has been halted by safety worries in the wake of the Three Mile Island accident in Pennsylvania in 1979 and the deadly explosion at the Chernobyl reactor in 1986 in Ukraine.

Opponents of nuclear power also point to hazards raised by long-term storage of spent radioactive fuel.

New nuclear plant construction is gaining some support in utility and government circles, however, due to rising prices for fossil-fueled plants and concerns about the impact of their emissions on the environment.

Exelon, which operates a fleet of nuclear stations in the Midwest, said the Clinton site originally was designed for two units but only one was built, and it is close to the Midwest region's transmission grid.

Source: http://reuters.com/financeNewsArticle.jhtml?type=governmentFilingsNews&storyID=3509955

September 12, 2003 - TMIA Press Release

TMI-Alert to Contest Sale of TMI to FPL Energy

Harrisburg, PA. - Three Mile Island Alert, a safe-energy group formed in 1977, announced its opposition to the proposed sale of Three Miles Island to FPL Energy.

TMI-Alert chairman Eric Epstein stated, "We plan to vigorously oppose the sale until we are able to resolve several issues that threaten the quality of life for area residents."

Mr. Epstein noted that he apprised Exelon and the Nuclear Regulatory Commission of TMIA's opposition to the sale after earlier bids for British Energy's assets were rejected.

TMI Alert identified the issues it will litigate before regulatory bodies charged with approving sale:

Staffing Levels at TMI-1
- Since the sale of TMI from GPU to AmerGen AG there has decreased staffing levels by 25% from 802 to 598.*

Relicensing
- TMI-1's license expires in 2014 and requires a complete steam generator replacement valued at $100 million.

PURTA/RNR valuation
Dauphin County has assessed TMI at $64.9 million as opposed to AmerGen's $5 million valuation. The Case is on appeal. AmerGen is paying $400,000 in taxes a year,compared with $1.5 million it would have to pay under the county's assessment.

FPL's Unfair Competitive Advantage
FPL Energy's corporate organization, a vertically integrated GENCO, allows for cross-subsidies from Florida rate payers and gives the Company an unfair competitive advantage over Pennsylvania-based generating companies.

* Note: TMI was sold for one-fifth of book value, i.e., $99/$512 million, in 1999. TMI-1's present value is estimated to be between $600 to $650 million. FPL Energy's offer for TMI, Clinton and Oyster Creek is $276.5 million.

September 11, 2003 - Nuclear News Flashes

FPL Energy to buy BE's share in AmerGen

FPL Energy announced today it has reached an agreement to buy British Energy's (BE) 50% ownership in AmerGen for $276.5-million. AmerGen, a joint venture with PECO Energy (now Exelon), owns Clinton, a 1,077-MW BWR; Three Mile Island-1, a 926-MW PWR; and Oyster Creek, a 670-MW BWR. Under terms of the agreement, an affiliate of FPL Energy will purchase 100% of the outstanding stock in British Energy US Holdings Inc., which owns the AmerGen interest.

FPL Energy is the independent power producer subsidiary of FPL Group, which already owns four PWRs in Florida (the 872-MW St. Lucie-1 and the 882-MW unit 2; and Turkey Point-3 and -4, rated at 760-MW each). In November 2002, FPL Energy completed acquisition of a controlling interest in Seabrook, a 1,194-MW PWR in New Hampshire, for about $800-million.

Under terms of the partnership agreement and associated power purchase agreements, Exelon is obligated to purchase 100% of the output not already under contract from the AmerGen plants through the expiration of their current operating licenses (2026 for Clinton, 2009 for Oyster Creek, and 2014 for Three Mile Island-1).

Exelon has a 30-day right of first refusal to elect to purchase BE's 50% interest in AmerGen, at the same price and on the same terms and conditions as specified in the agreement with FPL Energy. If Exelon exercises its right of first refusal and purchases the BE shares, FPL Energy will receive a transaction fee.

Also, FPL said that under the partnership agreement, Exelon has the right (the "tag-along right) to participate in the sale of BE's interest in AmerGen on the same timetable and terms and conditions as the right of first refusal. If Exelon were to exercise its tag-along right, the consideration offered by FPL Energy for BE's 50% interest in AmerGen would be applied pro rata to the interests of BE and Exelon, leaving each with a 25% interest in AmerGen.

Subject to Exelon's right of first refusal, FPL Energy expects to close the acquisition in first quarter 2004 as soon as all regulatory approvals have been obtained.

SALE OF TMI; REFUELING OUTAGE; Possible License Extension

AmerGen (50% owner) will be opening bids in the next two weeks on the sale of Three Mile Island-1...

After the last sale, real estate taxes plummeted at Three Mile Island nuclear power plant. Dauphin County assessed the facility, scene of the nation's worst nuclear accident, at $64.9 million. AmerGen, the Exelon partner that owns it, put its worth at $5 million. While the appeal is pending, AmerGen is paying $400,000 in taxes a year, compared with $1.5 million it would have to pay under the county's assessment. Lower Dauphin School District already has spent $75,000 in legal and appraisal fees to fight the appeal.

TMI has also cut staffing at the plant during this period

Year	AmerGen	+ Contractor	= Total Number of Employees
1998	804
1999	704
2000	579	65	644
2001	517	81	598-618*
2002	532-540	103	643
*Includes an additional 16 security guards from Wackenhut

Note: The Nuclear Regulatory Commission does not track the number of employees at TMI.

The refueling outage in October,2003, is scheduled to last about 35 days. A week longer than normal, but two weeks shorter than other reactors replacing reactor vessel heads.

The new reactor head ($12-14 million) arrives in September, 2003. It was just pressure tested in France under the watchful eye of TMI engineers. They'll bring another 1000 people onto the island for this and they all have to go through that elaborate security entrance to get into the reactor.

Problems during last outage in 2001:

October 9- December 8, 2001 - TMI resumed operation after a 58 day refueling outage that cost the company over $100 million in lost revenues, replacement energy, and planned and unplanned repairs, and upgrades. Among the "big-ticket" items: replacement of the turbine generator and four main transformers; repairs of cracks in six control-rod drive mechanisms; trouble shooting on chronic emergency feed water problems; and, experimental steam tube generator repairs which led to the "unplugging" of 870 tubes and taking 266 tubes out-of-service.

License extension of TMI-1 will be dictated by economics, i.e., replacement of both damaged steam generators... The estimated cost is around $100 million. TMI has more plugged tubes than any other commercial reactor in America. (As of, January 4, 2000 - The total number of tubes plugged in OTSG-A is 1,336 or 8.6% of the 15,531 tubes.)

The total number of plugged tubes in OTSG-B is 404 or 2.6% of the 15,531 tubes."

The total number of in-service "sleeved tubes": A = 248   B = 253

April 4, 2001 - Deborah Circelli, Palm Beach Post

RANCOR OF FPL, ENTERGY BRASS SPILL OUT

Executives shock analysts by going public with feelings rarely expressed in the business world.

Energy analysts said Tuesday the breakup of the FPL-Entergy deal saw one of the most shocking displays of bitterness between managements they've ever seen.

A day after FPL Group and Entergy Corp. announced they were ending the $15.8 billion deal to create the nation's largest electric company, analysts are still trying to get over what they heard.

"The Entergy people aired more dirty laundry than I've ever heard on a conference call in 10 years. I was sitting here in complete astonishment, said Fred Schultz, analyst with Raymond James and Associates in Houston.

Juno Beach-based FPL Group (NYSE: FPL) and New Orleans-based Entergy (NYSE:* ETR) agreed Monday to end the deal, announced July 31. It would have created a company with 6.3 million customers in five states.

FPL blamed Entergy for the breakup, saying Entergy gave FPL "significantly"* higher earnings projections than Entergy gave its own board and investment bankers. Entergy countered that it uses several sets of different financial forecasts, and pointed instead to management conflicts with FPL Chairman and CEO James Broadhead.

Entergy CEO Wayne Leonard said Broadhead wanted to fire him and Entergy CFO* John Wilder.

Entergy's stock rose $1 Tuesday, closing at $39 after the company announce that its earnings for the first quarter of 2001 would beat estimates by 10 to 15 percent. FPL's stock closed Tuesday at $61.46, up 25 cents.

Analysts said it is clear the companies have completely different management styles - FPL's more conservative, Entergy's more aggressive. The styles have served each company well, analysts said, but didn't mesh.

Leonard said Monday corporate culture differences started to become an issue in February. Leonard said Broadhead called Entergy's culture "chaotic," and told FPL and Entergy directors in a March 22 meeting that Leonard was not up to the job of CEO, and that Wilder should be fired.

Analysts say if that is true, it's odd, because FPL would have had eight board members to Entergy's seven after the deal was done, and could have ousted Leonard and Wilder later.

But Leonard said Broadhead criticized every part of Entergy's business, saying the company gave too much in corporate donations, and that it should kill a severance program for employees who would lose their jobs during the consolidation.

"I've never seen that behavior in my 28 years in the business," Leonard told analysts Monday. "I've never had anyone question my confidence level like Mr. Broadhead did. FPL's distrust in Entergy seemed to apply universally to all personnel."

FPL spokeswoman Mary Lou Kromer said Tuesday the utility didn't want to get into a "war of words," but that FPL began to lose confidence in Entergy managers when they refused to explain discrepancies in financial forecasts.

Analysts and industry experts say many deals fail because of cultural differences, though many companies try to put a positive spin on the fallout.

"In most cases parties tend to hide any severe difficulties to protect themselves. I thought the statements of both sides seemed a little intemperate," said Jonathan Cole, a managing partner with the Edwards & Angell law firm in Palm Beach, which has handled several consolidations.