Entergy Corporation · NYSE:ETR
Entergy — Investor Day (June 2002)
39 slides from Entergy's investor day 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 ry == June 14, 2002 — Enter, gy
Slide 2: Discussion Outline
Discussion Outline New Growth Oppor- tunities An Early Look at 2004 and 2005 2003 Earnings Guidance Financial urnaround Page 2 of 39
Slide 3: Discussion Outline
Discussion Outline New Growth Oppor- tunities An Early Look at 2004 and 2005 Financial ed Turnaround Earnings Guidance Page 3 of 39
Slide 4: Entergy Has Outperformed the Market Since 2Q 1998
Entergy Has Outpe the Market Since 2Q 1998... Total Shareholder Return 5/22/98 - 6/10/02, % 140 120 100 SPELEC S&P 500 4Q 3Q 2Q 1Q 4Q 98 99 00 01 01 * Source: Bioornberg; Excludes EIX and PCG rmed Total Shareholder Return vs SPELEC* 5/22/98 - 6/10/02, % 120 100 80 60 40 7 ol tl | | Page 4 of 39
Slide 5: ...And Has Achieved 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 3.00 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: Compust
Slide 6: ...With Financial Health Reflected in Improved 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 1 8 40 20 . ial Q ou 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; ETR data o
Slide 7: Our Strategy Execution Produced Higher Return On Equity
Our Strategy Execution Produced Higher Return On Equity (Operational) 12 Months Ended, % 12 11 10 9 8 7 6 5 4 Returns on Equit 100 75 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4a 4100 98 98 99 99 00 00 01 01 Return on Equity Improvement vs SPELEC* 298 through 4901, % Change ETR oth y. * Source: Compustat, Bloomberg; ETR
Slide 8: ...And 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 E 3 8 40 20 7 4 - all S -20 iil 5 40 4 -60 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q_ -30 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 40 50 30 45 20 40 10 0 35 40 30 -20 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 30 98 98 99 99 00 00 01 01 * Source: Compustat, Bloomberg; Excludes EX and
Slide 10: ..While 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 7 6 5 60 40 20 298 through 4901, % Change Zalll 60 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4a ¢9 98 98 99 99 00 00 01 04 * Source: Compustat, Bloomberg;
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 4 40 4 20 3 0 - -20 3 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; ETR data
Slide 12: Entergy Has Achieved Strong Financial Performance Across Balanced Metrics
Entergy Has Achieved Strong Financial Performance Across Balanced Metrics Rank among Metric % Change SPELEC* TSR 112% Zee EPS Growth 49% 5th Net Margin 45% 4st ROE 29% 6th ROIC 21% 3rd Net Debt / Net Capital -9% 3rd Net Interest Coverage 1% gth FFO Interest Coverage 49% 4st “Excludes EIX and PCG Pag
Slide 13: Discussion Outline
Discussion Outline New Growth Oppor- tunities An Early Look at 2004 and 2005 2003 Earnings Guidance Financial urnaround Page 13 of 39
Slide 14: Entergy Believes 8-10% Annual Growth Will Continue
Entergy Believes 8-10% ge Annual Growth Will Continue Operational Earnings $/Share Excluding Weather 3.75-3.95 3.24 pe Competitive Business 2.80 2.08 Regulated 1.92 Business ——, 98 99 00 01 02 Annual Growth 8% 35% 16% 8% CAGR since 98 8% 21% 19% 16% 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 13 ‘ 4 ; Guidance Regional $128 3 GDP* yf Weather-adjusted 12 2 Sales 11% f 11 0 a 10 -1 | R&C 0.4% 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 * Source: Econorry.com Page
Slide 16: Utility Is a Steadily Growing Contributor
Utility Is a Steadily Growing Contributor Utility Operational Earnings $/Share ° » 2.68 ———] 02 Midpoint Rate Base Sales Growth 03 Midpoint Page 16 of 39
Slide 17: Increased Scale and Reduced Cost Drive Value in Nuclear
Increased Scale and Reduced Cost Drive Value in Nuclear Production Volume Production Cost TWh S$iMWh 40 35 34 TWh Previous owners Previous 30 owners* 30 $0.10; 1% 20 25 ntergy $21 10 20 a \” Excl. outage amortization 0 15 98 99 OO 01 02 03 98 99 OO 01 02 03 *Source: Utilities Data Institute (UD); Es
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 SIM % 50 100 —_—_—_—____—_+—1 100% 45 80 40 Ertergy: 38/MWh 60 35 Market Price* 40 30 0%: 28 70 0% 20 0 99 00 01 02° 03 99 00 01 02 03 * Estimated average market price of Entergy’s n
Slide 19: Operational Excellence Is Key to Nuclear Earnings Growth
Operational Excellence Is Key to Nuclear Earnings Growth Nuclear Operational Earnings $/Share 0.08 | 0.88 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 Bcfiday Annualized Daily Volatility Bef 1.5 ae, 0.1 Bef; FP Befiday 250 41.4 8% 200 220 1.2 Bef 1.0 150 08 06 100 0.4 . 50 16 Bef; 0.2 8% 0.0 0 98 99 00 01 02 03 98 99 00 01 02 03 98 99
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) Befiday $/mmBtu 3.5 0.10 27 3.0 Nt 2.5 0.09 2.0 $0.09 1.5 $0.004; 9 0.08 avo 1.0 0.5 le 0.07 98 99 00 01 02 03 98 99 00 01 02 03 Page 21 of 39
Slide 22: Employee Reductions Result From Declining Trends in Entergy-Owned Generating
Employee Reductions Result From Declining Trends in Entergy-Owned Generating Production Volume Spark Spread* Employee Count TWh $/MWh #; End of Period 0.3 12 TWh; 45 400 10% 40 40 350 35 300 8 30 250 25 6 200 20 4 27 45 150 TWh 100 2 10 $5.90 5 50 22 tt) 0 0 98 99 00 01 02 03 98 99 00 01 02 03 99 00
Slide 23: ECS Growth Driven by Multiple Efforts
ECS Growth Driven by Multiple Efforts ECS Operational Earnings $/Share 0.07 0.38 0.02 0.04 — 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 e 10% growth in trading 3.75 —3.95 e 5% growth in pipeline 3.40 - 3.60 e $20+M restructuring savings Nuclear e 93-95% capacity factor e $38/MWh PPA e $21/MWh operating cost Utility e $12B rate base e
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) 0.50 $1/MWh Expense (NE Nuclear) (0.10) 1% Utility Sales Growth (0.10) 0.10 $25/MWh Spark Spread ( Peakers) $5/MWh Spark Spread (Base) 1% Capacity Factor (NE Nuclear) $
Slide 26: Discussion Outline
Discussion Outline New Financial coats crown Earnings Oppor- Guidance tunities An Early Look at 2004 and 2005 urnaround 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 NI 23 Utility Only v Mee — | Other 0.5 -0.9 = 2.9 -0.6* 0.8 Beginning OCF New Debt Maintenance Dividend Investment Available for Capital Commitment Growth * Includes turbin
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 Target 50% 50 48 Target 4.0x 4 46 44 42 40 38 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 ” a 0.30 0.20 7% Earmings 0.20 7% Earnings Productivity Productivity 0.10 ide 475 450 425 400 $iKW 175 150 125 100 = $iKW EPS Pipeline EPS Entergy Stock 0.40 0.40 0.30 —— 0.30 9.20 7% Earni
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 $19B 66 planned AES 1.4 ea divestitures AEP 3.0 \ add'l $31B CPN 0.3 to achieve MIR 1.6 50% debt NRG 1.9 EP 3.4 WMB 4.0 CMS 2.9 ILA 0.5 Before A
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 EBITDA , > Sealedown — § Covee Stepwise operations var ‘ a deterioration See Tonia in financial results pein ‘ TWh sold (300) ‘ Spark 10) SeEBITDA $(4)B s Cut costs
Slide 32: Discussion Outline
Discussion Outline New An Early Financial . ed Growth Look at Beane urnaround arm ngs Oppor- 2004 and Guidance tunities 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 14% Gap 0 25 50 75 100 415 0.05 4.20 au 5 04 Gap corres “10% trading Sash nalance 04 Growth 3.85 [] 0mm Spt ; [ mee 5% growth + 3% cost retuetion 03 Baseline 2003 Utility Nuclear Ecs Parent 2004 Gap to 9% 2004 Guid
Slide 34: PPA Renewals and Market Prices Impact 2005
PPA Renewals and Market Prices Impact 2005 Average Nuclear PPA Pricing Nuclear Generation Sold Forward $iMWh % 50 100 ig 45 80 40 i 60 ‘ 35 ‘ 40 30 Market Price of 7 66%; \ Merchant Positions* 78% \ 20 v 25 19% 20 0 99 00 01 02 03 04 05 99 00 01 02 03 04 05 * Estimated average market price of Enterg
Slide 35: Baseline Growth Slows in 2005, When Nuclear PPAs Expire
Baseline Growth Slows in 2005, When Nuclear PPAs Expire 2005 Earnings Indication $/Share a 05 Gap 4.30 04 Gap a 05 Growth Se —— 10% trading cash balance omy apmn 04 Growth uprates: ~5% pipeline 3.85 + $36(MNWh growth 5% growth cog reduction 03 Baseline 2003 Utility Nuclear EcS Parent 2005 = Gap to9%
Slide 36: Gap May Be Lower, as Nuclear Output Is Sold Forward over Next Two Years
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% a | 2 ce Midpoint 0 25 50 75 100 0.20 4.60 _ ee 4.40 04 Gap — _—n osose tune 05 Growth foe trading cash balance growth || 5% pipeline ; growth 04 Growth +5% grow
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 1.90 Entergy’s 3-year Performance on 2005 0.80 $4.3 B of capital a0 en) Serer ere ~ . 0.60 : . . 0.40 5 . 05 Gap 0.20 . ' . 0.00. $s. 2003 2004 5% 6% 7% 8% % 10% ROIC
Slide 38: Discussion Outline
Discussion Outline New Growth Oppor- tunities An Early Look at 2004 and 2005 2003 Earnings Guidance Financial Summary urnaround 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, liquidity