Entergy Corporation · NYSE:ETR
Entergy — Deutsche Bank 8th Annual Electric Power Conference 2003
31 slides from Entergy's conference presentation, Jun 9, 2003
Slide 1: Deutsche Bank 8th Annual Electric Power Conference
Deutsche Bank 8th Annual Electric Power Conference June 9, 2003 C. John Wilder == Executive Vice President and CFO — En ler BY
Slide 2: Safe Harbor and Reg G Compliance
Safe Harbor and Reg G Compliance 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. S
Slide 3: Business Strategy: It's All About Execution
Business Strategy: It’s All About Execution @) How much commodity risk does your business strategy have? Are your profit margins in 2005 likely to be the same, higher, or lower than the level of profit margin in 2003? How much debt can your business strategy support over a commodity price cycle? del
Slide 4: Execution Is at the Core of Entergy's Strategy
Execution Is at the Core of Entergy’s Strategy + Top quartile total shareholder retum + 8-10% average annual earnings growth + 10% return on invested capital + A credit rating What We Want What We Believe ° Creative regulatory solutions Creates Value + High operating productivity + POV-based portfol
Slide 5: Entergy's Three Businesses Have Strong Competitive Positions
Entergy’s Three Businesses Have Strong Competitive Positions
Slide 6: Utility Strategy Emphasizes Customer Service, Reliability and Regulatory Relationships
Utility Strategy Emphasizes Customer Service, Reliability and Regulatory Relationships How Do We Compete? Customers Products/ Services Competitors Growth Potential Competitive Advantages ?Residential, commercial, governmental, and industrial customers ?Electricity ?Gas distribution ?None ?Productivi
Slide 7: Utility Has Executed Across Operational and Financial Dimensions
Utility Has Executed Across Operational and Financial Dimensions Regulatory Outage Outage Frequency Outage Duration Complaints average number per customer average minutes per customer F el sen - ae i ’ 02 98 02 Operational Earnings* Operational Return on Equity** $ishare % Excludes 236 247 2.58 Weat
Slide 8: Operational Excellence Is at the Heart of Entergy Nuclear's Strategy
Operational Excellence Is at the Heart of Entergy Nuclear’s Strategy How Do We Compete? Customers Products/ Services Competitors Growth Potential Competitive Advantages ?Utility companies with real end customers ?Single unit operators ?Nuclear plant owners ?Nuclear-generated electricity ?Decommissio
Slide 9: Entergy Nuclear's Expansion and Operational Performance Drives Earnings and Returns
Entergy Nuclear’s Expansion and Operational Performance Drives Earnings and Returns Average Capacity Factor Average Production rk % siMWh 91 rd Before Entergy After Entergy Before Entergy After Entergy Operational Earnings per Share* Operational Return on Average Invested $ Capital* 37 0.88 % I 7 9
Slide 10: Gulf South Pipeline's Strategy Is Based on Sustainable Productivity Improvements
Gulf South Pipeline’s Strategy Is Based on Sustainable Productivity Improvements How Do We Compete? Where Do We Compete? Customers *Local distribution companies *Industrials/power plants *Pipelines/gathering interconnects Products/ * interstate gas transportation Services services * Gas storage serv
Slide 11: Entergy-Koch Trading's Strategy Is Well Integrated Across Commodities and Markets
Entergy-Koch Trading’s Strategy Is Well Integrated Across Commodities and Markets How Do We Compete? Where Do We Compete? Customers ?Investor-owed utilities ? Local distribution companies ? Producers and industrials Products/ —_? Electricity, gas, and weather products Services ?Physical optimization
Slide 12: Deregulation Has Been More Fiction Than Reality
Deregulation Has Been More Fiction Than Reality 01 Generation 01 Retail Market Market Size Incumbents’ share Size Incumbents’ share Market TWh % TWh % MISO 527 479 Texas 353 315 PJM 291 248 California 185 168 Illinois 172 124 New York 138 126 62 Weighted Average = 75% Weighted Average = 90% in
Slide 13: Entergy's Strategic Execution Has Capitalized on Changing Deregulation
Entergy’s Strategic Execution Has Capitalized on Changing Deregulation Impact of Deregulation on Entergy’s ... Product / Potential Competitive Growth Overall to Business Customers Service Competitors Advantages Opportunities Entergy Utility ?None ?None ?Noentrants ?Incumbency ? Supply additions (no
Slide 14: Commodity Risk: How To Compete In a Cyclical Business
Commodity Risk: How To Compete In a Cyclical Business What is your business strategy? How has deregulation impacted the strategy? How much commodity risk does your business strategy have? Are your profit margins in 2005 likely to be the same, higher, or lower than the level of profit margin in 2003?
Slide 15: VAR is Relatively Modest
VAR is Relatively Modest 03 Operational Business Earnings $/share* Estimated VAR $M Earnings/VAR Utility $2.73 0 N/A Entergy $0.93 52* 4 Nuclear Non-Nuclear " Wholesale (0.05) 2 WHS Entergy-Koch Trading $0.26 10-15 5 eos onD $0.15 0 NIA Pipeline “Midpoint of guidance range: excludes the impact of sp
Slide 16: Entergy Is Structurally Long Natural Gas...
Entergy Is Structurally Long Natural Gas... Exposure to Energy Commodity Price Volatility Natural oll Dark Spark Business Gas Spark Spread Comments Vi ? Fuel costs are passed through Utility O O to regulated customers Entergy O ? Gas is increasingly on the Nuclear margin in the Northeast ? Remaining
Slide 17: ...But Near-Term Volatility Is Reduced Due to Contracted Positions
...But Near-Term Volatility ls Reduced Due to Contracted Positions Entergy Unregulated Planned Generation Entergy Nuclear Generation Sold Forward 03-05: % 03-05; % [By Original PPA Contracts 1 New PPA Contracts 100 93 31 04 05* 03 vA Non-Nuclear Contractual vs. Average Market Price Wholesale SIMWh (
Slide 18: Sensitivity Analysis: Relatively Small And More Upside Than Downside
Sensitivity Analysis: Relatively Small And More Upside Than Downside Unsold Entergy Nuclear Generation Sensitivity Analysis $/share 04 05 (0.03) |}| 0.03 (0.34) 0.34 EC (0.01)]] 0.01 (0.07)| |} | 0.07
Slide 19: Margins: Entergy Grows Top Line, Reduced Middle Line and Grows Bottom Line
Margins: Entergy Grows Top Line, Reduced Middle Line and Grows Bottom Line What is your business strategy? How has deregulation impacted the strategy? How much commodity risk does your business strategy have? How much debt can your business strategy support over a commodity price cycle? deliver annu
Slide 20: Net Margin Has Doubled Since Beginning of Entergy's Turnaround
Net Margin Has Doubled Since Beginning of Entergy’s Turnaround ETR Operational Net Margin* Operational Net Margin vs. S&P Electrics* 12 Months Ended 2Q98-1Q03; % 12 Months Ended 4Q02; % 12 15 9 10 5 6 0 3 5 0 2Q98 2299 2Q00 2Q01 2Q02 -10 “Source: Compustat; excludes AYE. Competitor data excludes aft
Slide 21: Net Margin Should Remain at Top Quartile
Net Margin Id Remain at Top Quartile Operational Net Margin* 98 -05E; % 12 Target 10% —» 98 99 00 01 02 O3E O4E O05E “Excludes the impact of special items. 20
Slide 22: Margins Improvement is Possible
Margins Improvement is Possible Utility Operational Net Margin* Business Unit Drivers ty % 99, 93 9.0 Weather 86 76 Exciudes| Weather I sales growth reduction ge in ROE 98 99 00 01 02 Entergy Nuclear Operational Net Margin* » % 16.5 2 16.7 : | q 98 99 00 01 02 “Excludes the impact of special items.
Slide 23: Debt: Don't Drink The Kool-Aid
Debt: Don’t Drink The Kool-Aid What is your business strategy? How has deregulation impacted the strategy? @) How much commodity risk does your business strategy have? Are your profit margins in 2005 likely to be the same, higher, or lower than the level of profit margin in 2003? How much debt can y
Slide 24: Entergy Is Very Financially Flexible
Entergy Is Very Financially Flexible ETR Net Debt to Net Capital Net Debt to Net Capital vs. S&P 12 Months Ended 2Q98-1Q03; % Electrics* 12 Months Ended 2Q98-4Q02; % fe 100 55 90 80 50 0 45 eo 50 40 40 30 35 20 30 10 2A98 2Q99 2000 2001 2002 0 * Source: Compustat; excludes AYE. 23
Slide 25: Probability Distributions Are Tight Without Fat Tails
Probability Distributions Are Tight Without Fat Tails Operating Cash Flow Net Debt to Net Capital 03-05 Average 03-05 Average $ billions % 237 Cash Flow Interest Coverage 03-05 Average Times 24
Slide 26: The Tail Doesn't Wag the Dog: Financial Strategy Follows Business Strategy
The Tail Doesn’t Wag the Dog: Financial Strategy Follows Business Strategy and Operating Leverage . Cash Flow Acceptable % of Contribution to Business Profile Debt Range Entergy* Overall Debt Target Utility Stable 55-60% 80% 45-48% Entergy Moderate “ 5 “ Nuclear Volatility 25-30% 14% 45% Entergy-Koc
Slide 27: Entergy Has $3B Liquidity with $2B Debt Capacity
Entergy Has $3B Liquidity with $2B Debt Capacity Net Debt to Net Capital Cash Flow Interest Coverage Ratio 98-05E; % 98 — 05E: # Times 60 9 Target —, a0 Addin 40 } chanty 6 va 30 r 20 3 10 0 0 98 99 00 01 02 03E04E 05E 98 99 00 01 02 03E04E05E 28
Slide 28: Business Strategy: It's All About Execution
Business Strategy: It’s All About Execution (4) What is your business strategy? How has deregulation impacted the \_’ strategy? How much commodity risk does your business strategy have? Are your profit margins in 2005 likely to be the same, higher, or lower than the level of profit margin in 2003? (
Slide 29: Long-Term Profitability Remains Robust Without Relying on Material Acquisitions
Long-Term Profitability Remains Robust Wit Relying on Material Acquisitions Operational Earnings* $/Share; 98-03E 98 99 OO 01 02 «203 Guidance “Excludes the impact of special items. Industry Median, Source Compustat Components of EPS Growth 98-02 and 03E-05E 98-02 03E-05E 28
Slide 30: Targeted Growth Rate Is Achievable Under Various Scenarios
Targeted Growth Rate Is Achievable Under Various Scenarios Operational Earnings Indications* $/Share 03E-05E $3B invested at 525 9% historical reinvestment rate Hedge remaining ars 04 and 05 nuclear i output at current aa ee “ market prices** 6% intrinsic 4.25 silt “ $3.8: 3.75 03E 04E O5E "03 based
Slide 31: Entergy's Value Proposition to Investors
Entergy’s Value Proposition to Investors Strategy: Strategic focus is grounded in operational excellence, leveraging assets and skills, and relentless attention to execution Commodity risk: Regulated utility contributes 75% of earnings while contracted positions and modest VARs minimize unregulated
Entergy — Deutsche Bank 8th Annual Electric Power Conference 2003 on 6ix