Entergy Louisiana LLC · NYSE:ELC
Entergy Louisiana — Entergy — Entergy 2002 Analyst Meeting
39 slides from Entergy Louisiana's conference presentation, Jun 14, 2002
Slide 1: Financial Review: Fulfilling Our Growth Commitment
Financial Review: Fulfilling Our Growth Commitment Entergy 2002 Analyst Meeting C. John Wilder Executive Vice President and Chief Financial Officer June 14, 2002
Slide 2: Discussion Outline
Discussion Outline New An Early 2003 Growth Financial Look at Earnings Oppor- Summary Turnaround 2004 and Guidance tunities 2005 Page 2 of 39
Slide 3: Discussion Outline
Discussion Outline New An Early 2003 Growth Financial Financial Look at Earnings Oppor- Summary Turnaround Turnaround 2004 and Guidance tunities 2005 Page 3 of 39
Slide 4: Entergy Has Outperformed the Market Since 2Q 1998
Entergy Has Outperformed the Market Since 2Q 1998… Total Shareholder Return Total Shareholder Return vs SPELEC* 5/22/98 - 6/10/02, % 5/22/98 - 6/10/02, % 140 120 ETR Entergy 2nd 120 100 100 112% 112% 80 80 60 60 SPELEC 40 40 20 S&P 500 20 0 0 -20 4Q 3Q 2Q 1Q 4Q -20 98 99 00 01 01 * Source: Bloomberg
Slide 5: Solid, Consistent Earnings Growth
…And Has Achieved Solid, Consistent Earnings Growth… Operational Earnings Per Share Earnings Per Share Growth vs SPELEC* Annual 1998-2001, $ 2Q98 through 4Q01, % Change 3.50 100 ETR 3.25 75 5th 3.00 49% 49% 50 2.75 25 2.50 0 2.25 -25 2.00 -50 Weather- 1.75 adjusted -75 1.50 -100 98 99 00 01 * Source
Slide 6: Improved Net Margin Relative to Peers
…With Financial Health Reflected in Improved Margin Relative to Peers Net Margin Net Margin Improvement vs SPELEC* 12 Months Ended, % 2Q98 through 4Q01, % Change 10 60 ETR 1st 8 45% 40 45% 20 6 0 4 -20 2 -40 -60 0 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q -80 98 98 99 99 00 00 01 01 * Source: Compustat, Bloomberg; ET
Slide 7: Higher Returns on Equity
Our Strategy Execution Produced Higher Returns on Equity… Return On Equity (Operational) Return on Equity Improvement vs SPELEC* 12 Months Ended, % 2Q98 through 4Q01, % Change 12 100 11 75 29% ETR 10 29% 50 6th 9 25 8 0 7 -25 6 -50 5 4 -75 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q -100 98 98 99 99 00 00 01 01 * Sourc
Slide 8: Higher Returns on Invested Capital
…And Higher Returns on Invested Capital Return On Invested Capital ROIC Improvement vs SPELEC* 12 Months Ended, % 2Q98 through 4Q01, % Change 10 80 9 60 ETR 40 3rd 8 21% 21% 20 7 0 6 -20 5 -40 4 -60 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q -80 98 98 99 99 00 00 01 01 * Source: Compustat, Bloomberg; ETR data operatio
Slide 9: We've Strengthened Our Balance Sheet
We’ve Strengthened Our Balance Sheet… Net Debt to Net Capital Ratio Net Debt Ratio Improvement vs SPELEC* 12 Months Ended, % 2Q98 through 4Q01, % Change 60 60 55 50 -9% -9% 40 50 30 45 20 10 40 0 35 -10 30 -20 ETR 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 3rd -30 98 98 99 99 00 00 01 01 * Source: Compustat, Bloomberg
Slide 10: Maintaining Credit Quality in a Difficult Market
…While Maintaining Credit Quality in a Difficult Market Net Interest Coverage Ratio (Operational) Net Coverage Ratio Improvement vs SPELEC* 12 Months Ended, # times 2Q98 through 4Q01, % Change 7 60 6 40 5 ETR 20 9th 4 1% 1% 0 3 -20 2 -40 1 -60 0 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q -80 98 98 99 99 00 00 01 01 *
Slide 11: FFO Interest Coverage Results Are Even Stronger
FFO Interest Coverage Results Are Even Stronger FFO Interest Coverage Ratio FFO Coverage Improvement vs SPELEC* 12 Months Ended, # times 2Q98 through 4Q01, % Change 5 60 ETR 1st 4 40 4 20 3 0 -20 3 49% 49% -40 2 -60 2 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q -80 98 98 99 99 00 00 01 01 * Source: Compustat, Bloomberg
Slide 12: Strong Financial Performance Across Balanced Metrics
Entergy Has Achieved Strong Financial Performance Across Balanced Metrics Rank among Metric % Change SPELEC* TSR 112% 2nd EPS Growth 49% 5th Net Margin 45% 1st ROE 29% 6th ROIC 21% 3rd Net Debt / Net Capital -9% 3rd Net Interest Coverage 1% 9th FFO Interest Coverage 49% 1st Overall 1st *Excludes EIX
Slide 13: Discussion Outline
Discussion Outline New An Early 2003 2003 Growth Financial Look at Earnings Earnings Oppor- Summary Turnaround 2004 and Guidance Guidance tunities 2005 Page 13 of 39
Slide 14: Entergy Believes 8-10% Average Annual Growth Will Continue
Entergy Believes 8-10% Average Annual Growth Will Continue Operational Earnings $/Share Excluding Weather 3.75-3.95 3.40-3.60 Competitive 3.24 Business 2.80 2.08 Regulated 1.92 Business 71% 98 99 00 01 02 03 Annual Growth 8% 35% 16% 8% 10% CAGR since 98 8% 21% 19% 16% 15% Page 14 of 39
Slide 15: Utility Value Drivers Point to Continued Growth
Utility Value Drivers Point to Continued Growth Rate Base GDP and Weather-adjusted Sales $B % Growth .2B; .2B; 2.2%; 2.2%; 13 4 2% Guidance 200% Regional 2% 200% $12B GDP* 3 Weather-adjusted 12 2 Sales 1.1% 1 11 0 -1 R&C 0.4% 10 Ind -2.3% R&C 0.9% -2 Ind 0.2% 9 -3 98 99 00 01 02 03 98 99 00 01 02 03
Slide 16: Utility Is a Steadily Growing Contributor
Utility Is a Steadily Growing Contributor Utility Operational Earnings $/Share 0.10 2.68 0.05 2.53 02 Midpoint Rate Base Sales Growth 03 Midpoint Page 16 of 39
Slide 17: Increased Scale and Reduced Costs Drive Value in Nuclear
Increased Scale and Reduced Costs Drive Value in Nuclear Production Volume Production Cost $17-18 LT Goal TWh $/MWh = $125M in pre- tax savings 40 35 34 TWh Previous owners Previous 30 owners* 30 $0.10; $0.10; 1% 1% 20 25 44TWh; TWh; Entergy 13% 13% Entergy $21 10 20 Excl. outage amortization 0 15 9
Slide 18: PPA Renewals and Market Prices Are Also Important Drivers
PPA Renewals and Market Prices Are Also Important Drivers Average Nuclear PPA Pricing Nuclear Generation Sold Forward $/MWh % 50 100 100% 45 80 Entergy 40 $38/MWh 60 35 Market Price* 40 30 -$1.50; -$1.50; 0%; -4% 20 0%; 25 -4% 0% 0% 20 0 99 00 01 02 03 99 00 01 02 03 * Estimated average market price
Slide 19: Operational Excellence Is Key to Nuclear Earnings Growth
Operational Excellence Is Key to Nuclear Earnings Growth Nuclear Operational Earnings $/Share 0.08 0.09 -0.08 0.88 0.83 -0.04 02 Midpoint Production Production Outage Price 03 Midpoint (Incl FY VY) Expense Amortization Page 19 of 39
Slide 20: ECS Value Drivers Show Physical and Financial Optimization Expanding
ECS Value Drivers Show Physical and Financial Optimization Expanding Managed Transport Volatility Managed Storage Bcf/day Annualized Daily Volatility Bcf 1.5 1.6 0.1 Bcf/day 8 250 0.1Bcf; Bcf; 1.4 8%8% 7 Electric 200 220 1.2 6 Bcf -0.5; -0.5; 1.0 5 -25% 150 -25% 0.8 4 0.6 3 100 -0.1; -0.1; -22% -22%
Slide 21: Gas Transportation Value Drivers Show Modest Improvement
Gas Transportation Value Drivers Show Modest Improvement Gulf South Throughput Gulf South Production Cost (excluding fuel) Bcf/day $/mmBtu 3.5 0.10 2.7 3.0 Bcf/day 2.5 0.09 $0.09 2.0 0.1 0.1 $0.004; 1.5 $0.004; Bcf/d; Bcf/d; -4% 0.08 -4% 1.0 5% 5% 0.5 0.0 0.07 98 99 00 01 02 03 98 99 00 01 02 03 Pag
Slide 22: Employee Reductions From Declining Trends in Owned Generating Assets
Employee Reductions Result From Declining Trends in Entergy-Owned Generating Assets Production Volume Spark Spread* Employee Count TWh $/MWh #; End of Period -0.3 -0.3 12 45 -$0.90; -$0.90; 400 -54; -54; TWh; TWh; -13% -13% -71% -71% -10% -10% 40 350 10 35 300 8 30 250 25 6 200 20 2.7 150 4 15 TWh 1
Slide 23: ECS Growth Driven by Multiple Efforts
ECS Growth Driven by Multiple Efforts ECS Operational Earnings $/Share 0.07 0.38 0.02 0.01 0.28 02 Midpoint Commodity Pipeline Reduced 03 Midpoint Trading Operations Overhead/ EAM Restructuring Page 23 of 39
Slide 24: All Businesses Contributing to 2003 Growth
All Businesses Contributing to 2003 Growth Operational Earnings $/Share Business Key Assumptions ECS l 10% growth in trading 3.75 – 3.95 l 5% growth in pipeline 3.40 – 3.60 0.35 – 0.40 l $20+M restructuring savings 0.25 – 0.30 0.85 – 0.90 Nuclear l 93-95% capacity factor 0.80 – 0.85 l $38/MWh PPA l
Slide 25: Uncertainties Exist But Are Balanced
Uncertainties Exist But Are Balanced 2003 Sensitivity Analysis $/Share Variance for Change in Value Driver Commodity Trading (0.10) 0.10 0.50 $1/MWh Expense (NE Nuclear) (0.10) 0.10 1% Utility Sales Growth (0.10) 0.10 $25/MWh Spark Spread ( Peakers ) 0.00 0.05 $5/MWh Spark Spread (Base) (0.02) 0.03
Slide 26: Discussion Outline
Discussion Outline New New An Early 2003 Growth Growth Financial Look at Earnings Oppor- Summary Turnaround Oppor- 2004 and Guidance tunities tunities 2005 Page 26 of 39
Slide 27: Entergy Will Generate Significant Cash to Invest in Growth
Entergy Will Generate Significant Cash to Invest in Growth Projected Cash Flows 2002 - 2004 $B Sources - $7.7B Uses - $4.8B 1.4 5.5 80% NI 2.3 Utility Only D&A 2.7 90% -3.3 Other 0.5 -0.9 2.9 -0.6* 0.8 Beginning OCF New Debt Maintenance Dividend Investment Available for Capital Commitment Growth * I
Slide 28: Solid Credit Metrics Will Support New Investments
Solid Credit Metrics Will Support New Investments Net Debt/Net Capital Net Interest Coverage Ratio % # Times 52 7 Target 50% 50 6 Projected Range 5 Projected 48 Target 4.0x Range 46 4 44 3 42 2 40 1 38 0 98 99 00 01 02 03 04 05 98 99 00 01 02 03 04 05 Page 28 of 39
Slide 29: Entergy Expects to Have Investment Alternatives
Entergy Expects to Have Investment Alternatives... $1 B Investment Alternatives EPS Nuclear EPS CCGT 0.40 0.40 0.30 0.30 0.20 7% Earnings 0.20 7% Earnings Productivity Productivity 0.10 0.10 475 450 425 400 $/KW 175 150 125 100 $/KW EPS Pipeline EPS Entergy Stock 0.40 0.40 0.30 0.30 0.20 0.20 7% Ear
Slide 30: As Companies Announce Divestment Plans
…As Companies Announce Divestment Plans Divestments Plans Announced Average Debt To Total Capital Ratio $B % Before and After Divestitures Company Amount $19 B 66 planned AES 1.4 61 divestitures AEP 3.0 50 Add’l $31 B CPN 0.3 to achieve 50% debt MIR 1.6 NRG 1.9 EP 3.4 $50-60B WMB 4.0 CMS 2.9 ILA 0.5
Slide 31: Valuable Assets Will Become Available at Reasonable Prices
Valuable Assets Will Become Available at Reasonable Prices 2002-2005 Merchant Energy Industry Evolution Catalysts Implications Results Open MW Positions EBITDA Scale down Coverage Expand in 04 Stepwise operations VAR and 05 deterioration % Sold Forward* in financial results 70 EBITDA TWh sold (300)
Slide 32: Discussion Outline
Discussion Outline New An An Early Early 2003 Growth Financial Look Look at at Earnings Oppor- Summary Turnaround 2004 2004 and and Guidance tunities 2005 2005 Page 32 of 39
Slide 33: Minimal Gap to Continue on 8-10% Growth Path in 2004
Minimal Gap to Continue on 8-10% Growth Path in 2004 2004 Earnings Indication $/Share 9% 14% Gap Midpoint 0 25 50 75 100 0.05 4.20 4.15 04 Gap • $0.4B higher • 10% trading growth cash balance 04 Growth 3.85 • $39/MWh • 5% pipeline average price growth • 3% cost • 5% growth reduction 03 Baseline 2003
Slide 34: PPA Renewals and Market Prices Impact 2005
PPA Renewals and Market Prices Impact 2005 Average Nuclear PPA Pricing Nuclear Generation Sold Forward $/MWh % 50 -3.0 -3.0 100 MWh; MWh; -8% -8% 45 80 Entergy 40 60 $36 35 40 30 Market Price of -66%; -66%; Merchant Positions* -78% -78% 20 25 19% 20 0 99 00 01 02 03 04 05 99 00 01 02 03 04 05 * Esti
Slide 35: Baseline Growth Slows in 2005, When Nuclear PPAs Expire
Baseline Growth Slows in 2005, When Nuclear PPAs Expire 2005 Earnings Indication $/Share 9% 40% Gap Midpoint 0 25 50 75 100 0.30 4.60 05 Gap 4.30 04 Gap 05 Growth • $0.6Bhigher • 10% trading cash balance • 200MW growth • 5% pipeline 04 Growth uprates 3.85 • $36/MWh growth average price 5% growth • 7
Slide 36: Gap May Be Lower as Nuclear Output Is Sold Forward
Gap May Be Lower, as Nuclear Output Is Sold Forward over Next Two Years 2005 Earnings Indication assuming $4.50/mmBtu Gas Price $/Share 9% 27% Gap Midpoint 0 25 50 75 100 0.20 4.60 05 Gap 4.40 04 Gap • $0.6Bhigher 05 Growth • 10% trading cash balance growth • 5% pipeline • 200MW growth 04 Growth upr
Slide 37: Gap Will Be Filled by Investing at 6% ROICs or Better
Gap Will Be Filled by Investing at 6% ROICs or Better Cumulative Investment* Potential EPS Contribution $B $/Share 0 25 50 75 100 2.9 1.00 Entergy’s 3-year Performance on 2005 $4.3 B of capital 0.80 2.0 0.60 0.40 05 Gap 0.20 0.00 2003 2004 5% 6% 7% 8% 9% 10% ROIC assumed for New Investments *Based o
Slide 38: Discussion Outline
Discussion Outline New An Early 2003 Growth Financial Financial Look at Earnings Oppor- Summary Summary Turnaround Turnaround 2004 and Guidance tunities 2005 Page 38 of 39
Slide 39: Summary - Financial Review
Summary - Financial Review •• We have demonstrated a proven track record in capital allocation and execution resulting in strong and balanced financial performance •• We have developed concrete plans to achieve 2003 earnings per share growth of 10 percent •• We have achieved strong cash flow, liquid