Entergy Corporation · NYSE:ETR
Entergy — Merger or Acquisition (June 2012)
25 slides from Entergy's merger presentation, Jun 18, 2012
Slide 1: Update on Entergy Transmission Spin/Merger with ITC
Filed by Entergy Corporation Pursuant to Rule 425 Under the Securities Act of 1933 Subject Company: Entergy Corporation Commission File No. 001-11299 Update on Entergy Transmission Spin/Merger with ITC June 18 – 20, 2012 Presented by Entergy Texas 0
Slide 2: Entergy Forward-Looking Information
Entergy Forward-Looking Information In this communication, and from time to time, Entergy makes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Except to the extent required by the federal securities laws, Entergy undertakes no obligat
Slide 3: Additional Information and Where to Find It
Additional Information and Where to Find It ITC and Transco will file registration statements with the Securities and Exchange Commission (“SEC”) registering shares of ITC common stock and Transco common units to be issued to Entergy shareholders in connection with the proposed transactions. ITC wil
Slide 4: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 3
Slide 5: The Merger Transaction – End State
The Merger Transaction – End State Illustrative • Entergy Utility Operating Companies comprised of: Entergy Shareholders – Generation – Distribution Parent • ~$1.775B of debt will be issued by Entergy in connection with the internal separation of the Creditors transmission business, the proceeds fro
Slide 6: Agenda: Benefits of ETR – ITC Spin-Merge Transaction
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 5
Slide 7: Overview of Benefits to Customers Through Spin-Merge
Overview of Benefits to Customers Through Spin-Merge Independent • Provides singular focus on transmission system performance, and planning and operations Transparent • Aligns with national policy objectives to facilitate investment ITC Model in local, regional and inter-regional transmission, advan
Slide 8: Agenda: Financial Flexibility
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 7
Slide 9: The Utility Industry Is Facing Huge Need for Capital – Estimated at $2.2T Over the Next 20 Years
The Utility Industry Is Facing Huge Need for Capital – Estimated at $2.2T Over the Next 20 Years Issues Facing Utility Industry Over Next 20 Years Projected Industry Capital Investments Over Next 20 Years Growth / Investment $T ??? Other = 0.15 Distribution Transmission Generation Current Market Cap
Slide 10: Capital Trends – Rating Agency Considerations
Capital Trends – Rating Agency Considerations Standard and Poor's Outlook – "Utility Credit Ratings Critical to Raising Capital – Money Needed to Build Wires and Plants Challenges • "the real tests lie ahead, when federal environmental mandates and consequent spending requirements are more certain,
Slide 11: Industry Is Responding to Capital Investment Challenges with Different Approaches
Industry Is Responding to Capital Investment Challenges with Different Approaches Create larger footprint; upsize balance sheet • Duke / Progress Consolidate • Northeast Utilities / NSTAR • PPL / LG&E • First Energy / Allegheny • Exelon / Constellation Build Achieve greater certainty in regulations
Slide 12: Capital Trends – Rising Capital for Entergy Overall
Capital Trends – Rising Capital for Entergy Overall Capital spending could significantly increase over the next 10 years due to the potential for new environmental regulations and improvement of infrastructure ??? Entergy Utilities Capital Investment Effect of EPA rules? Total Spend ??? Infrastructu
Slide 13: Capital Trends – Rising Capital for Entergy’s Transmission Business
Capital Trends – Rising Capital for Entergy’s Transmission Business Entergy Projected Transmission Capital Investment 2012E-2014E $M Projected Depreciation Expense 12
Slide 14: For ETR Utilities, Spend on Major Storms Amounted to ~$3.2B Over 2005-2010
For ETR Utilities, Spend on Major Storms Amounted to ~$3.2B Over 2005-2010 Spend 1 Event Year ($M) In the past, ETR Hurricane Katrina 2005 1,117 utilities have had to Hurricane Rita 2005 645 effectively respond to major storms Hurricane Gustav 2008 680 which have required Hurricane Ike 2008 626 unpl
Slide 15: Capital Trends – Rising Capital for ETI
Capital Trends – Rising Capital for ETI Capital spending could significantly increase over the next 10 years due to the potential for new environmental regulations and Entergy’s infrastructure ETI Capital Investment Total Spend ??? $M ??? Effect of EPA rules? Effect of EPA rules? Infrastructure impr
Slide 16: Agenda: Storm Response
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 15
Slide 17: Storm Response Organization Will Be Modified to Ensure Close Coordination Between Entergy and ITC
Storm Response Organization Will Be Modified to Ensure Close Coordination and Interaction Between Entergy and ITC ITC Technical/Mgmt ITC System Incident employee assigned to ETR System Incident ETR storm response Commander (SIC) Commander (SIC) center in Jackson Greg Grillo John Mullins ITC-ETR Syst
Slide 18: Agenda: Rate Effects of Spin-Merge Transaction
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 17
Slide 19: Significant Variability in Average Residential Bills – Yearly Variation Between $2 and $17 Over 2001-2011
Significant Variability in Average Residential Bills – Yearly Variation Between $2 and $17 Over 2001-2011 Illustrative ETI Avg. Monthly Residential Bill- 1,000 kWh Henry Hub Gas Index $ $/mmBtu +17.15 150 15 (+17%) 4% reduction in customer bills since 2008 -4% 116.92 -1.69 113.06 107.24 108.73 (-2%)
Slide 20: Transmission Constitutes ~7.5% of Typical ETI Customer Bill
Transmission Constitutes ~7.5% of Typical ETI Customer Bill Typical ETI Customer Bill Transmission 7.5% Fuel 45.3% 47.2% Non-Fuel 19
Slide 21: Rate Impacts Split into Rate Construct, Rate Timing and Other Effects for Retail Customers
Rate Impacts Split into Rate Construct, Rate Timing and Other Effects for Retail Customers Transition from current retail rate construct to FERC-regulated rate construct expected for ITC Rate Analysis assumes MISO base ROE for Entergy transmission business Construct (12.38%) and capital structure cu
Slide 22: ETI Typical Residential Customer Bill Not Expected to Increase Post Spin-Merge
ETI Typical Residential Customer Bill Not Expected to Increase Post Spin-Merge Due to Rate Construct Effects ETI Residential Bill-1,000 kWh Illustrative $ 115 ~(0.26) Over the long term, customer (0.2%) bill effects expected to be ~0.76 ~(0.29) ~(0.73) mitigated by... 110 108.73 ~108.47 Enhanced Fin
Slide 23: ETI Typical LIPS Customer Bill Not Expected to Increase Post Spin-Merge
ETI Typical LIPS Customer Bill Not Expected to Increase Post Spin-Merge Due to Rate Construct Effects Illustrative ETI LIPS Bill – 5,000 kWh, 80% load factor; $ 170,000 ~(3.33) Over the long term, customer (0.0%) bill effects expected to be 168,000 mitigated by... ~470.87 ~(22.29) ~(451.91) 166,962.
Slide 24: Agenda: Approvals Required
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 23
Slide 25: Pathway to Completion – Required Approvals
Pathway to Completion – Required Approvals Authority Requirements Entergy retail • Change of control of transmission assets regulators • Affiliate transaction approvals related to steps in the spin / merge • Authorization to incur debt in some jurisdictions FERC • Change of control of transmission a