Entergy Corporation · NYSE:ETR
Entergy — Morgan Stanley Global Electricity & Energy Conference 2003
32 slides from Entergy's conference presentation, Mar 13, 2003
Slide 1: Morgan Stanley Global Electricity & Energy Conference
Morgan Stanley Global Electricity & Energy Conference March 13, 2003 C. John Wilder == Executive Vice President and CFO — En ler BY
Slide 2: Safe Harbor
Safe Harbor The following constitutes a “Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: From time to time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are “f
Slide 3: Discussion Outline
Discussi line Flexible Strategy Provides Foundation ina | Portfolio Difficult 4 Management Environment // Balanced Financial Goals for the Future Industry Dynamics May Provide Upside Em ), Earnings, Cash | and Credit and PPA Opportunities
Slide 4: Entergy's Overall Improvement Results in Top Quartile Performance
Entergy’s Overall Improvement Results in Top Quartile Performance Financial Performance Comparison by Quartile* Entergy tracks progress in its turnaround across a broad 4st ° set of financial measures and considering both performance gna improvement and current performance level, Entergy 3rd ° leads
Slide 5: Entergy Has Outperformed the Major Indices...
Entergy Has Outperformed the Major Indices... Entergy’s total shareholder retum since new management through the end of 2002 was 130%, outperforming the S&P Electric Index (13%) and the S&P 500 (-16%). Entergy’s TSR since new management ranked 1stamong S&P Electric Companies. ETR Total Shareholder R
Slide 6: ...And Has Achieved Solid, Consistent Earnings Growth
...And Has Achieved Solid, Consistent Earnings Growth Entergy’s Operational Earnings Per Share has grown 76% since 2Q98, Eamings growth ranked 4" among the S&P Electric Companies. ETR Operational Earnings Earnings Per Share Growth vs. Per Share S&P Electrics* 12 Months Ended 2098-4002, $ 12 Months E
Slide 7: Higher Returns on Invested Capital Demonstrates New Investments Have Added Value
Higher Returns on Invested Capital Demonstrates New Investments Have Added Value Entergy’s Return on Invested Capital has improved 26% to 7.6% from 2Q98 to 4Q02. Entergy’s improvement through 3Q02 ranked 4" among the S&P Electric Companies. ETR Return on Invested Capital Return on Invested Capital 1
Slide 8: Entergy's Debt Ratio is Below Most Peers...
Entergy’s Debt Ratio is Below Most Peers... Entergy has reached its goal of maintaining a Net Debt to Net Capital ratio below 50%. Entergy’s improvement in this ratio ranked 4* among the S&P Electric Companies. ETR Net Debt to Net Capital Net Debt to Net Capital Improvement 12 Months Ended 2Q98-4Q02
Slide 9: While Entergy's FFO Interest Coverage is Above Its Peers
While Entergy’s FFO Interest Coverage is Above Its Peers Entergy’s Funds From Operations Interest Coverage ratio has improved 72% since 2Q98. This improvement ranked Entergy 1s* among the S&P Electric Companies. ETR FFO Interest Coverage FFO Interest Coverage Improvement 12 Months Ended 2Q98-4Q02, %
Slide 10: Discussion Outline
Discussi line Balanced Industry- Eiancial Industry Leading oals Dynamics Financial ide the May Provide Performance i Upside Future Em ina ) Portfolio : Earnings, Cash q : and PPA Difficult 4 Management } and Credit q Opportunities Environment // Key to
Slide 11: Entergy's Strategy Combines Operational Excellence with Smart Investing
Entergy’s Strategy Combines Operational Entergy only invests in businesses where it has the scale, scope, skills and positions to enable success. Entergy focuses on operational performance in its businesses to ensure solid execution. Excellence with Smart Investing JUUS Performance/ | Productivity P
Slide 12: Utility Success Starts with Strong Service Performance
Utility Success Starts with Strong Service Performance Call Center Answer Speed Abandoned Calls 98 vs. 02; seconds 98 vs. 02; 000s Entergy undertook —_ a variety of initiatives to 98 02 98 02 improve customer service and safety. Substantial performance improvements have helped repair relationships w
Slide 13: EMI Case Provides An Example of Regulatory Success
EMI Case Provides An Example of Regulatory Success % Above-average return targets 14% achieved at Entergy Mississippi, Inc. improve further with incentive Return jo9, opportunities, On Equity 10% 8% 50/50 Sharing EMI Return on Equity Bandwidth “98 - "02 Avg. ROE 50/50 Sharing +/- 100 Basis Pts, —___
Slide 14: Entergy Has Leveraged Its Operational Expertise to Extract Value From Nuclear Acquisitions
Entergy Has Leveraged Its Operational Expertise to Extract Value From Nuclear Acquisitions Entergy’s Northeast nuclear fleet has produced improve- ments across operating metrics. Production Cost Before vs. After ETR Capacity Factors Before vs. After ETR Ownership: Average $/MWWh Ownership: Average %
Slide 15: Entergy-Koch's Trading Philosophy Has Produced a Consistently Profitable Track Record
Entergy-Koch’s Trading Philosophy Has Produced a Consistently Profitable Track Record Trading Track Record Gain/Loss Days Daily Trading Earnings 99 — 02; ratio 00 - 02; days Entergy-Koch Winning days Avg daily Tightly centered Trading integrates far outnumber profit is distribution information ; los
Slide 16: Successful Deal Execution Has Driven Entergy's Growth
Successful Deal Execution Has Driven Entergy’s Growth Timeline of Divestitures and Investments my, Ga \ 4» Entergy’s is after tax debt transaction tee i a gain eliminated history has been key tothe improvement in a ce ce ce its financial security lyperion “DeSoto America 4 Electricity Sites metrics.
Slide 17: Discussion Outline
Discussi line Industry- Flexible . Industry Leading Strategy ( Dynamics Financial Provides May Provide Performance Foundation q Upside n ina | Portfolio ) Earni gs, Cash and PPA Difficult 4 Management } and Credit q Opportunities Environment // Key to
Slide 18: Financial Goals Continue to Emphasize Operational Results, Financial Flexibility, and Returns
Financial Goals Continue to Emphasize Operational Results, Financial Flexibility, and Returns e Average annual earnings Operating growth of 8-10% Performance, e Top quartile cost position e@ Top quartile net margin Entergy’s financial forecast reflects continued solid performance across a range of f
Slide 19: 1st Quarter Guidance Reflects Success of POV Trading and Implementation of FAS 143
1st Quarter Guidance Reflects Success of POV Trading and Implementation of FAS 143 Implementation of FAS 143 results in a positive difference between as-reported and operational EPS. Higher 1st quarter operational eamings are driven by strong trading results at Entergy-Koch. Despite strong 1% quarte
Slide 20: OCF Is Anticipated to Remain Strong...
OCF Is Anticipated to Remain Strong... Operating Cash Flow 98 - 05E: $B Building on its solid history of producing strong 2.2 2.2 $1.7 billion average cash flow, Entergy 20 annually expects to ; produce about 18 $65.2 billion in operating cash 44 | | | [ flow from 2003 to = 2005. 03 04 05 98 99 00 0
Slide 21: ...Driving Credit Metrics to Even Better Levels
...Driving Credit Metrics to Even Better Levels Improvements in capital structure and coverages will continue to be areas of focus in order to sustain financial flexibility. Net Debt/Net Capital 98-05E: % 52 50 | 48 46 44 42 40 38 Target 50% —, 98 99 00 01 02 03 04 05 FFO Interest Coverage Ratio 98
Slide 22: Growth in Liquidity Fuels Financial Flexibility
Growth in Liquidity Fuels Financial Flexibility Projected Liquidity 03-05; $B Entergy’s « Sources - $12.9B io Uses - $9.6B .. diverse sources of liquidity comfortably Available for exceed the uses Investment, Debt of cash required Retirement, to fund Dividends obligations, dividends and capital inve
Slide 23: Discussion Outline
Discussi line Balanced Financial Goals for the Future Industry- Flexible Leading Strategy Financial Provides Performance Foundation Em ina ) Portfolio : Earnings, Cash q : and PPA Difficult 4 Management } and Credit q Opportunities Environment // Key to
Slide 24: Next 3-5 Years Present Greatest Investment Opportunity
Next 3-5 Years Present Greatest Investment Opportunity Industry Catalysts for Change 2001 2002 2003 2004 - 2007 Entergy expects that energy merchants will a x experience Market Building Prices Industry financial distress Conditions Frenzy | Collapse | Over-built as weak wholesale power market condit
Slide 25: Entergy Will Only Invest in Businesses Where We Have a Distinctive Competency...
Entergy Will Only Invest in Businesses Where We Have a Distinctive Competency... Nuclear Operational Position - - 2001; capacity factor vs. cost Operational skills 100 are top quartile or top decile in Nuclear, Fossil, and Capacity Pipeline. Factor 85 (%) The Southern fleet’s Nuclear performance is
Slide 26: ...And When The Timing Is Right
...And When The Timing Is Right Properly timed acquisitions have the potential to yield Significant return opportunities, Asset Acquisition/Divestiture Economics NPV derived from [ operating income NPV Buy/sell [== capital gains 100% = IRR Scenario SiKW % $MM Percent Buy at bottom, Buy at middle, se
Slide 27: Structural Changes in Gas Market Provide Upside Opportunities...
Structural Changes in Gas Market Provide Upside Opportunities... Rig Count Gas Reserves/Production 96 - 02: % change 77-01; Ratio 250% , — Gas Rigs — Cash Gas Prices 14 100% u i a 10 0% 4 so : ‘ii s 96 96 97 98 99 00 01 O1 02 tm 6% 85 Se LNG Imports Gas Storage Demand 00 - 10E; BCF/day 96 - 03E:; %
Slide 28: ...With Natural Gas and Oil on the Margin
...With Natural Gas and Oil on the Margin Significant differences in the percent of time in 2003 that gas and oil will be on the margin exists across U.S. regions. The all time percentage varies from over 90 in Californiato below 20 in the MAPP-US, MAIN, and the Rocky Mountains. Pacific Northwest *S
Slide 29: ...Helping to Significantly Improve Prices for 2005 Nuclear Output
...Helping to Significantly Improve Prices for 2005 Nuclear Output PPA Commitments PPA Pricing 02 - 06: % of output sold forward 02 — 06; $/MWh Entergy Nuclear is almost fully hedged Gi Contracts Gi Northeast Fleet* near-term and is Gi Goal by end of — Market working actively to 2003 secure addition
Slide 30: While Growth Will Be Derived From Intrinsic and Step-Out Sources...
While Growth Will Be Derived From Intrinsic and Step-Out Sources... Sources of Earnings Per Share Growth 99 - 05E; Allocation of EPS Growth; % As yesterday's step-out investments - 99-03 03-05 Entergy Nuclear ze and Entergy-Koch — add to Entergy’s baseline, they become important sources of tomorrow'
Slide 31: ...Hedging 2005 Nuclear Output At Higher Prices Can Reduce Reliance on Step-Out Growth
...Hedging 2005 Nuclear Output At Higher Prices Can Reduce Reliance on Step-Out Growth By selling its non- PPA nuclear output at market Prices in 2004 and 2005, Entergy may reduce its need for Step-out investments to meet earnings growth targets. 5.25 5 4.75 4 4.25 | “yy 3.75 Earnings Per Share Guid
Slide 32: Summary
Summary Significant financial, regulatory, and operational progress has been achieved placing Entergy among the top performers in its peer group Disciplined portfolio management has contributed to significant improvements in earnings and financial flexibility Growth is provided by a mix of intrinsic
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