Entergy Corporation · NYSE:ETR
Entergy — Barclays 2013 CEO Energy-Power Conference
51 slides from Entergy's conference presentation, Sep 13, 2013
Slide 1: Entergy: Focus on Simplifying
Filed by Entergy Corporation Pursuant to Rule 425 Under the Securities Act of 1933 Subject Company: Entergy Corporation Commission File No. 001-11299 Entergy: Focus on Simplifying Barclays 2013 CEO Energy-Power Conference Sept. 13, 2013
Slide 2: Caution Regarding Forward-Looking Statements and Regulation G Compliance
Caution Regarding Forward-Looking Statements and Regulation G Compliance In this presentation, and from time to time, Entergy Corporation makes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Except to the extent required by the federa
Slide 3: Additional Information and Where to Find It
Additional Information and Where to Find It ITC filed a registration statement on Form S-4 (Registration No. 333-184073) with the SEC registering the offer and sale of shares of ITC common stock to be issued to Entergy shareholders in connection with the proposed transactions. This registration stat
Slide 4: Entergy's Scope of Operations Today
Entergy’s Scope of Operations Today Entergy’s Scope of Operations Entergy’s Businesses • 30,000 MW electric generating capacity • One of the nation’s leading nuclear generators • 2.8 million utility customers • More than $10 billion revenues • ~15,000 employees Utility • 6 vertically integrated elec
Slide 5: Strategic Imperatives – Simplify and Optimize the Business
Strategic Imperatives – Simplify and Optimize the Business • Execute MISO / ITC • Grow Utility business (e.g., economic development) • Continue to develop and implement Our Mission: productive regulatory constructs Create Sustainable Value • Improve EWC results • Optimize the organization through fo
Slide 6: Discussion Outline – The Utility
Discussion Outline – The Utility Business Purpose We grow the business by providing customers with low- emission, reliable energy at reasonable cost; superior service; a strict focus on safety; operational excellence and engaged employees 5
Slide 7: Safety, Rates, Reliability – The Foundation for the Utility
Safety, Rates, Reliability – The Foundation for the Utility Lost Workday Incident Rate Entergy Utility Outage Frequency / SAIFI Southeastern Electric Exchange Companies Avg number per customer per year, excl major storms 2012 2008 – 2012 Entergy Utility 0 ETR Utility Average Residential Customer Rat
Slide 8: Joining MISO – One Opportunity to Keep Reasonable Rates
Joining MISO – One Opportunity to Keep Reasonable Rates On track to integrate into MISO Projected savings of ~$1.4 billion in Extensive training under way to prepare first ten years for transition Enhanced independence, transparency Over 600 employees have clocked more than 239,000 hours since 2011
Slide 9: ITC Transaction, Incremental Benefits to MISO
ITC Transaction, Incremental Benefits to MISO • Singular focus on transmission • Opportunities for employees, customers and communities and increased strategic flexibility and strength for Entergy • Independent transmission company promotes robust market • Ultimately expected to result in lower deli
Slide 10: Moderate Sales Growth Also Supports Reasonable Rates
Moderate Sales Growth Also Supports Reasonable Rates Long-term Weather-Adjusted Sales Growth What to Watch For % • Industrial development – significant opportunities • Economic growth outside of industrial development – region expected to more closely follow national trends • Energy efficiency – sma
Slide 11: Significant Economic Development Project Pipeline
Significant Economic Development Project Pipeline Estimated Capital Expenditures for Announced Economic Development Projects 1 $B Other (15 projects) Wood, Pulp & Paper (6 projects) • Approximately 1,500 – 2,000 Steel, Metals (4 projects) MW of potential load Refining (2 projects) Transportation & •
Slide 12: Efficient Operations and Prudent Investment Are Key
Efficient Operations and Prudent Investment Are Key Human Capital Management: Targeting $200 – 250M in Savings Investment Types Estimated Business Segment Split Ninemile 6 CCGT ~$721M through 2015 % Post-Fukushima requirements at Utility EWC ~$230M (capital) for 2012 – 2018 ~35 – 40 Utility ~60 – 65
Slide 13: Working on Resolution of Current Regulatory Agenda
Working on Resolution of Current Regulatory Agenda Rate Case Filings – Requested Rate Increases1 $M . . . plus ETI and ENOI expected to be filed later in 3Q13 1 Reflects MISO-only scenario; requested base rate increases for MISO / ITC scenario was $218M for EAI (not updated in rebuttal testimony), $
Slide 14: Entire Regulatory Package Defines Ability to Earn
Entire Regulatory Package Defines Ability to Earn Regulatory Mechanisms by Entergy Operating Company Jurisdiction AR LA MS NO TX FRPs Performance factor in FRP Specific recovery of major projects in rates Securitization for storm cost recovery and/or reserves Transmission and distribution rider mech
Slide 15: Including Evaluating Alternative Regulatory Constructs
Including Evaluating Alternative Regulatory Constructs Illustrative Industry Issues Potential Options Customer Benefits Rising capital • Riders Increased rate stability investment needs • Forward test year Improved • Decoupling infrastructure and Sales growth reliability uncertainty • Pricing of net
Slide 16: The Objective – A Simpler, Better Positioned Utility
The Objective – A Simpler, Better Positioned Utility Where we expect to be by mid-2014: What that ultimately means longer-term for: Uncompensated Rates Risk Earnings Transition to MISO Neutral complete Transmission spin-merge ETR+ Resolved with ITC closed ITC Economic development to grow Utility ong
Slide 17: Discussion Outline – Entergy Wholesale Commodities
Discussion Outline – Entergy Wholesale Commodities Business Purpose We focus on best-in-class operational efficiency, safety, security and reliability while continually seeking to optimize our portfolio of assets in an ever-dynamic market Note: Entergy plans to close and decommission the Vermont Yan
Slide 18: Safe, Secure, Reliable – The Foundation for EWC
Safe, Secure, Reliable – The Foundation for EWC Lost Workday Incident Rate Nuclear Capability Factor by Fleet 2012 2012; % EWC EWC ETR Nuclear Plant Production Cost – Three-Year Average 2010 – 2012; $/MWh EWC Nuclear Fleet Sources: Southeastern Electric Exchange, INPO, internal analysis Note: Exclud
Slide 19: Lower Hudson Valley Capacity Zone Progressing
Lower Hudson Valley Capacity Zone Progressing In August 2013, FERC approved tariff changes to establish a new Lower Hudson Valley capacity zone Reflects FERC’s support for efficient markets that send the right price signals to ensure long-term reliability Every $1/kW-mo change at Indian Point ~$25M/
Slide 20: More Needs to Be Done
More Needs to Be Done We believe that the current market design of the Northeast ISOs are not sustainable in the long run and need to be reassessed Any electric system (or market) must meet the following long-term objectives: • Ensure reliable service to customers • Be environmentally sustainable •
Slide 21: Hedging Provides Asymmetrical Upside Opportunity
Hedging Provides Asymmetrical Upside Opportunity EWC Nuclear Revenue Sensitivity on Contracted Energy Based on market prices as of June 30, 2013* 2015 2014 Balance of 2013 Avg expected contracted revenue/MWh $46 on ~18 TWh $46 on ~30 TWh $48 on ~16 TWh Market Price Change, $/MWh * Reflects updates s
Slide 22: Acting on Cost Savings Opportunities
Acting on Cost Savings Opportunities Human Capital Management: Targeting $200 – 250M in Savings Estimated Business Segment Split % Implementation was completed on an accelerated basis for EWC’s EWC non-nuclear operations ~35 – 40 Utility ~60 – 65 Looking at other efforts to lower costs and improve p
Slide 23: District Energy Sale One Step in Simplifying EWC
District Energy Sale One Step in Simplifying EWC Brookfield Infrastructure Partners, L.P. Buyer and other institutional investors Price $130M + closing adjustments Book Value ~$90M (at 6/30/13) Targeted 2013, subject to various governmental Close and customer approvals Houston New Orleans 22
Slide 24: Closing Vermont Yankee – Driven by Economics
Closing Vermont Yankee – Driven by Economics Estimated Cash Flow • Decision driven by sustained low power prices, high costs Improvement and wholesale electricity market design issues in the region Through 2017 $M • De-risks the business while forgoing only ~15% of potential upside in power prices 1
Slide 25: Decision to Close VY Not Due to Litigation, Political Risk
Decision to Close VY Not Due to Litigation, Political Risk Proceeding Recent Developments Second Circuit • Second Circuit Court of Appeals affirmed U.S. Appeal of U.S. District Court decision in August 2013 District Court preemption decision “We AFFIRM the district court’s grant of a declaratory jud
Slide 26: Committed to Continued and Safe Operation of Indian Point
Committed to Continued and Safe Operation of Indian Point Proceeding Recent Developments NRC License • NRC issued letter in August 2013 acknowledging that Renewal IP2 will enter period of extended operation under its existing license on 9/28/13 • In Atomic Safety Licensing Board hearing process Wate
Slide 27: The Objective – Better Performing, More Certain EWC
The Objective – Better Performing, More Certain EWC Where we expect to be by mid-2014: What that ultimately means longer-term for: Costs Risk Earnings New Lower Hudson Valley Neutral Neutral capacity zone implemented Human Capital Management Neutral largely implemented District Energy business Neutr
Slide 28: Summary
Summary • Aiming for success in all of our strategic imperatives to support a step change in our customers’ value proposition and that of the company – Solid Utility with reasonable rates, moderate sales growth and continued investment needs – Taking action to improve EWC results while preserving th
Slide 29: Entergy: Focus on Simplifying
Entergy: Focus on Simplifying Barclays 2013 CEO Energy-Power Conference Sept. 13, 2013
Slide 30: Appendix I Additional Information
Appendix I Additional Information 29
Slide 31: The Utility Operating Companies
The Utility Operating Companies Electric Retail Customer Overview of Utility Operating Companies Breakdown Entergy Gulf States Entergy Arkansas Entergy Louisiana 2012; % of MWh sales Louisiana • Electric utility • Electric and gas utility • Electric utility • 696,000 electric customers • 387,000 ele
Slide 32: Entergy Arkansas Regulatory Highlights
Entergy Arkansas Regulatory Highlights 2012 Return on Equity; % Rate Case Filed March 1, 2013 (Docket No. 13-028-U) • 12/31/12 test year + known and measurable changes and rate base closed to plant in service through 12/31/13 • Rate base (last approved $3.996B) - $4.875B (MISO-only) 2,3* • EAI rebut
Slide 33: Entergy Gulf States Louisiana Regulatory Highlights
Entergy Gulf States Louisiana Regulatory Highlights 2012 Return on Equity; % Rate Case Filed Feb. 15, 2013 (Docket No. U-32707) 2 • 6/30/12 test year + known and measurable changes and rate base closed to plant in service through 12/31/13 • Rate base (last approved $2.405B) - $2.666B (MISO-only), $2
Slide 34: Entergy Louisiana Regulatory Highlights
Entergy Louisiana Regulatory Highlights 2012 Return on Equity; % Rate Case Filed Feb. 15, 2013 (Docket No. U-32708) 2 • 6/30/12 test year + known and measurable changes and rate base closed to plant in service through 12/31/13 • Rate base (last approved $3.560B) - $4.475B (MISO-only), $3.822B (MISO
Slide 35: Entergy Mississippi Regulatory Highlights
Entergy Mississippi Regulatory Highlights 2012 Return on Equity; % 10.59 2012 Test Year FRP Filed March 15, 2013; Point of Revised April 30, 2013 (Docket No. 2009-UN-388) Adjustment • ROE midpoint is 10.80% ROE (10.06% + 0.74% performance factor); 9.76 – 11.83% range • 48.21% common equity ratio • $
Slide 36: Entergy New Orleans Regulatory Highlights
Entergy New Orleans Regulatory Highlights 2012 Return on Equity; % 2011 Test Year FRP (Docket No. UD-08-03) • $0.295B electric rate base, $0.09B gas rate base • Electric: 8.58% WACC and 50.08% common equity ratio • Gas: 8.40% WACC and 50.08% common equity ratio • On 8/8/13, the CCNO approved a “blac
Slide 37: Entergy Texas Regulatory Highlights
Entergy Texas Regulatory Highlights 2012 Return on Equity; % Paths for Improving ROE in Texas • ETI currently expects to file a rate case in 3Q13 • Purchased Power Capacity Rider approved 5/9/13 (Docket No. 39246) • Appeals of rate case order pending in Travis County Court, decision expected by year
Slide 38: System Energy Resources Regulatory Highlights
System Energy Resources Regulatory Highlights 2012 Return on Equity; % Overview • SERI’s principal asset currently consists of an ownership interest and a leasehold interest in the Grand Gulf Nuclear Station • 8.97% WACC (10.94% ROE and 64% common equity ratio at 12/31/12, where sale / leaseback is
Slide 39: Northeast Energy Markets – Forward Power Prices
Northeast Energy Markets – Forward Power Prices Northeast Nuclear Fleet Forward Energy Prices January 2012 – August 2013; around-the-clock $/MWh; excludes Palisades At 8/30/13 Bal 2013 1 $43 Cal 2014 $45 Cal 2015 $45 1 Starting in January 2013, the dotted 2013 line reflects balance of the year price
Slide 40: Northeast Capacity Markets – Cleared Auctions
Northeast Capacity Markets – Cleared Auctions NYISO Auction – Cleared Capacity Prices For delivery June 2010 – October 2013; $/kW-mo Spot Monthly (weighted average by amount sold) ISO-NE Capacity Prices For delivery June 2010 – May 2017; $/kW-mo 39
Slide 41: NY Capacity Market – Lower Hudson Valley Zone Status
NY Capacity Market – Lower Hudson Valley Zone Status Rest of State NYISO 2013 Auction Simulation Capacity price estimates with new capacity zone (NCZ), $/kW-mo Zones 1 3 Scenario NYCA Zone J*² Zone K NCZ August 2013 (Summer) No NCZ 4.56 15.16 7.59 With NCZ 4.37 15.16 7.59 9.34 G November 2013 (Winte
Slide 42: Decommissioning – SAFSTOR at Licensee Option
Decommissioning – SAFSTOR at Licensee Option NRC Regulation on Decommissioning Alternatives Licensees may choose from three alternative decommissioning strategies: • DECON (prompt dismantlement) – soon after the nuclear facility closes • SAFSTOR (delayed dismantlement) – facility is maintained and m
Slide 43: Decommissioning – Decon vs SAFSTOR
Decommissioning – Decon vs SAFSTOR DECON SAFSTOR (Prompt Dismantlement) (Delayed Dismantlement) Illustrative • Higher spending in early Illustrative • Put site in “cold and dark” years state for up to ~50 years Cumulative Spending • After transition, site Trust Bal (minimal decontamination) Trust Ba
Slide 44: Decommissioning – Initial Activities
Decommissioning – Initial Activities Regulatory processes include: Operational activities include: • Develop and submit Post Shutdown • Defuel reactor vessel, move spent Decommissioning Activities Report filing fuel from wet to dry storage, drain (PSDAR) and de-energize systems – Due within 2 years
Slide 45: Decommissioning – SAFSTOR Long-term Process
Decommissioning – SAFSTOR Long-term Process Decommissioning Process Overview Assuming SAFSTOR Illustrative Access to Decommissioning Fund Planning • Up to 3% 2 for planning (before Shutdown final shutdown) Move fuel from reactor vessel to fuel pool • Balance available 90 days after Transfer fuel fro
Slide 46: Credit and Financial Metrics
Credit and Financial Metrics Credit Ratings Financial Metrics Standard & Poor’s Moody’s Gross Liquidity, $B Entity Rating Outlook Rating Outlook 4.1 Revolver Entergy A- Stable A3 Stable Cash / Cash capacity Arkansas 1 Equivalents Entergy Gulf A- Stable A3 Stable 1 States Louisiana A- Stable A3 Stabl
Slide 47: Preliminary – Key Earnings Drivers for 2014
Preliminary – Key Earnings Drivers for 2014 Preliminary 2014 Drivers Utility • Transmission spin-merge transaction • Rate actions, including current base rate cases filed in Arkansas and Louisiana, Mississippi FRP and to-be-filed cases in Texas and New Orleans • Non-fuel O&M expense • Sales growth,
Slide 48: Appendix II Regulation G Reconciliations
Appendix II Regulation G Reconciliations 47
Slide 49: Regulation G Reconciliations
Regulation G Reconciliations Table 1: Return on Average Common Equity –Reconciliation of GAAP to Non-GAAP Measures 2012 ($ in millions) EAI EGSL ELL EMI ENOI ETI SERI Utility1 As-reported earnings available to common stock (a) 145.5 158.2 274.1 43.9 16.1 42.0 111.9 943.0 Add back: Preferred dividend
Slide 50: Regulation G Reconciliations
Regulation G Reconciliations Table 2: Gross Liquidity Reconciliation of GAAP to Non-GAAP Measures As of June 30, 2013 ($ in millions) 2Q13 Cash and cash equivalents (a) 311 Revolver capacity (b) 3,819 Gross liquidity (a)+(b) 4,130 49
Slide 51: Regulation G Reconciliations
Regulation G Reconciliations Table 3: Debt to Capital Ratio, Excluding Securitization Debt Reconciliation of GAAP to Non-GAAP Measures As of June 30, 2013 ($ in millions) 2Q13 Gross debt (a) 13,747 Less securitization debt (b) 927 Gross debt, excluding securitization debt (c) = (a)-(b) 12,820 Total