Business Context and Reporting Period
This Form 8-K, dated December 9, 2025, reports a material definitive agreement entered into by Entergy Texas, Inc. (a Texas corporation) and Entergy Corporation. The filing details the execution of agreements related to the construction and leasing of the Legend Power Station, a planned 754-megawatt combined cycle gas power plant in Jefferson County, Texas.
Key Financial Metrics and Obligations
- Project Cost: Construction costs funded under the Participation Agreement are expected not to exceed $1.450 billion.
- Lease Term: The lease is expected to commence approximately 26 months from the filing date and will run for a term of up to 58 months.
- Debt Covenant: The Participation Agreement requires Entergy Texas to maintain a consolidated debt ratio of 65% or less of its total capitalization.
- Financial Structure: Entergy Texas acts as the Construction Agent and Lessee. Construction advances and capitalized yield will accrue into a Lease Balance. Rent payments will cover yield incurred on this balance.
Material Changes and Transaction Details
The filing represents a new capital project and financing arrangement rather than a change in historical financial performance. Key transaction mechanics include:
- Parties Involved: Entergy Texas (Lessee/Construction Agent), BA Leasing BSC, LLC (Lessor), and Bank of America, N.A. (Administrative Agent).
- Ownership Structure: The Facility will be constructed on property owned by Entergy Texas, which is leased to the Lessor (BAL) under a ground lease.
- Operating Costs: Entergy Texas is responsible for all operating costs, including insurance, taxes, utilities, repairs, and modifications during the lease term.
Outlook, Options, and Risks
Future Options:
- Early Purchase Option: Entergy Texas may purchase the Facility at any time after lease commencement for an amount equal to the Lease Balance plus accrued rent and other costs. If exercised within two years of commencement, the purchase will be financed by the Participants via a secured, non-amortizing note.
- End-of-Term Options: Upon expiration of the 58-month term, Entergy Texas must elect to: (a) extend the lease for five years (with consent); (b) purchase the property; or (c) arrange a third-party sale.
Risks and Contingencies:
- Events of Default: Obligations may be accelerated or rights terminated upon non-payment, breach of covenant, bankruptcy, material judgments, or if Entergy Corporation ceases to own at least 80% of Entergy Texas common stock.
- Covenants: The agreement includes customary restrictions on asset pledges and asset sales.
Investor Verification Checklist
- Verify the final construction cost against the $1.450 billion cap.
- Monitor Entergy Texas's consolidated debt ratio to ensure compliance with the 65% covenant.
- Review the full text of Exhibits 10.1, 10.2, and 10.3 for specific terms regarding rent calculation and breakage costs.
- Track the 26-month timeline for lease commencement and the subsequent 58-month term.
- Assess the impact of the "Early Purchase Option" financing terms on future liquidity if exercised within the first two years.