Entergy Corporation · NYSE:ETR
Entergy — Bank of America Merrill Lynch 2012 Power and Gas Leaders Conference
42 slides from Entergy's conference presentation, Sep 20, 2012
Slide 1: Entergy: Focusing on Today and the Future
Filed by Entergy Corporation Pursuant to Rule 425 Under the Securities Act of 1933 Subject Company: Entergy Corporation Commission File No. 001-11299 Entergy: Focusing on Today and the Future Bank of America Merrill Lynch 2012 Power and Gas Leaders Conference September 20, 2012
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 and Mid South TransCo LLC (“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 prop
Slide 4: Entergy's Scope of Operations and Portfolio Management
Entergy Focus: Safety, Operational Excellence Entergy’s Scope of Operations and Portfolio Management Entergy’s Businesses • 30,000 MW electric generating capacity • One of the nation’s leading nuclear generators • 2.8 million utility customers • More than $11 billion revenues • ~15,000 employees Uti
Slide 5: Utility: The Foundation, What We're Working On, What's Ahead
Utility The Foundation • Safety and operational excellence What We’re Working On • Regulatory agenda • Storm recovery • MISO • Transmission business spin-merge with ITC What’s Ahead • Capital plan management • Regulatory constructs 4
Slide 6: An Active Regulatory Agenda
An Active Regulatory Agenda General Regulatory Update Texas • PUCT issued final order in ETI’s rate case in Sep 2012; reflects a 9.8% return on equity and a $27.7M base rate increase (ongoing EPS effect ~$0.01) • Awaiting Staff proposal on purchased power capacity rider; baseline amount determined i
Slide 7: Liquidity and Recovery Options Available to Fund Hurricane Isaac Costs
Liquidity and Recovery Options Available to Fund Hurricane Isaac Costs at Affected Utilities Preliminary Restoration Costs Sources of Liquidity $M As of Aug 31, 2012; $M Company Estimated Amount Cash and Funded Line of EAI 10 Cash Storm Credit EGSL 70 – 90 Company Equiv Reserves Capacity ELL 240 – 3
Slide 8: Doing Our Part to Keep Rates Low
Doing Our Part to Keep Rates Low MISO Proposal 2010 Present Value – ETR Analysis $B for 2013 – 2022; Filed May 12, 2011 Assumes All Utility OpCos Move to MISO Net Benefits 1.1 – 1.4 Admin Value Costs Added (0.2) Benefits Transmission 0.8 Cost Range (0.3) to 0 Entergy Service Territory Trade Benefits
Slide 9: MISO Preferred RTO Option for Customers
MISO Preferred RTO Option for Customers Continue to believe MISO is the best alternative for our customers: Operating, mature “Day 2” market that will produce significant savings for Utility customers Path forward for all the Operating Companies following EAI’s departure from the System Agreement in
Slide 10: The Next Step, Complete Transmission Independence
The Next Step, Complete Transmission Independence Proposed Spin-Merge of Transmission Business Illustrative Entergy Shareholders will own stock in two companies Entergy ITC ETR After Shareholders ITC After Shareholders ETR ITC $700M recapitalization Shares Shares (pre-close) Trust ETR and ETR Up to
Slide 11: The Benefits to Customers and Other Stakeholders
The Benefits to Customers and Other Stakeholders • Provides proven business model for owning and operating transmission systems Independence • Aligns with national policy objectives to facilitate investment in local, regional and inter-regional transmission, advance open access initiatives and promo
Slide 12: Transmission Spin-Merge: Our Case Underway
Transmission Spin-Merge: Our Case Underway LA Filed 9/5/12 (Docket U-32538) NO Filed 9/12/12 (Docket UD-12-01) Requests for Approval of Change of Ownership of Electric Transmission Businesses Witness Topic Bill Mohl (LA) / ITC transaction benefits jurisdiction’s customers, providing superior Charles
Slide 13: Short- and Long-run Benefits Will Offset a Modest Change in Retail Customers' Bills
Short- and Long-run Benefits Will Offset a Modest Change in Retail Customers’ Bills Illustrative Typical Residential Monthly Bill (1,000 kWh) Base Case Scenario, 2014; $ Estimated bill effect resulting from Base Case Scenario 100 FERC rate construct MISO’s 2011 Transmission Expansion Plan (“Business
Slide 14: Prudently Managing the Utility Capital Investment Plan
Now and What’s Ahead: Prudently Managing the Utility Capital Investment Plan Utility Capital Investment Plan 1 2012E – 2014E; % of Total – Prepared Jan 2012 Potential Investment Opportunities $6.0B • New Generating Capacity 100% - Acquire or contract with merchant Portfolio capacity Transformation -
Slide 15: Strategy and Recovery Mechanisms Key
Strategy and Recovery Mechanisms Key Regulatory Mechanisms for Cost Recovery Formula Rate Plans Special Riders Funded Storm Reserves Storm Balances/Reserves • Non-fuel O&M $M as of Jun 30 (except cash • Maintenance capital • Acquisitions reserves as of Aug 31) Illustrative X% • Capacity costs 322 •
Slide 16: Allowed Return on Equity Important
Allowed Return on Equity Important; Opportunity to Earn Even More So FRP Filed Return on Equity Book Return on Equity 2011; % 2011; % 2011 TY FRP pending 18 18 To file rate cases ROE inquiry Seeking Expected 15 by Jan 2013 initiated FRP 15 to file Rate case Aug 2012 extension rate case final order i
Slide 17: The Universal Bottom Line: Affordable Rates
The Universal Bottom Line: Affordable Rates Utility Average Residential Customer Rates 2011; ¢ per kWh 40 30 20 10 0 ETI ELL ENOI EAI EGSL EMI Utility Average Residential Customer Rates with $30/mt Carbon Tax 2011; ¢ per kWh 40 30 20 10 0 Sources: EIA, internal analysis ETI ELL EAI EMI Note: Regulat
Slide 18: Entergy Wholesale Commodities: The Foundation, What We're Working On
Entergy Wholesale Commodities The Foundation • Safety and operational excellence What We’re Working On • Portfolio management, hedging strategy What’s Ahead • Option value • Nuclear plant license renewal 17
Slide 19: Today, Cautiously Optimistic on Northeast Power Prices
Today, Cautiously Optimistic on Northeast Power Prices Illustrative Historical Northeast Market Power Prices (Energy Only) Potential 5-year out $/MWh; Rolling Averages view for NE power prices¹ 120 Market response Unit shutdown 100 Environmental regulation Rolling 365-day Spot 80 Upside: ~$80 60 Cur
Slide 20: Commodity Prices – Potential Rebound through Capacity Pricing and/or Market Heat Rates
Commodity Prices – Potential Rebound through Capacity Pricing and/or Market Heat Rates ISO New England Reserve Margins New York ISO Reserve Margins 2011 – 2020E; % Illustrative 2011 – 2020E; % Illustrative 40 40 Total 30 30 20 20 10 Target Reserve 10 Margin Range With Accelerated 0 Retirements 0 11
Slide 21: Signposts for Improvement in the New York Capacity Markets
Signposts for Improvement in the New York Capacity Markets Material Upside in NYISO Rest of State Capacity Price Illustrative NY Capacity Markets 6 month moving average; $/kW-mo Supply reaction (mothballing, 5 retirements) FERC decision EL11-50 4 Market design Potential mitigation of under revision
Slide 22: Our Point-of-view: Heat Rate Forwards Undervalued
Our Point-of-view: Heat Rate Forwards Undervalued Northeast Average Market Heat Rate Illustrative Market Heat Rate Upside 12 month moving average; Btu/kWh Demand recovery (e.g., 15,000 economic growth) Supply response to low prices 12,000 5-10% Heat Rates rise with declining gas prices Heat Rate - R
Slide 23: Natural Gas – Recent Rationalization… A Bottom Reached?
Natural Gas – Recent Rationalization… A Bottom Reached? Gas Storage Levels Gas Production Total U.S. Weekly Storage Level; Bcf U.S. Production; Bcf/d Storage Surplus 5,000 70 Gradually Eroding Isaac Impact U.S. Production Flatline? 4,000 2012 65 3,000 2011 60 2,000 2010 2012 EIA Demonstrated Capacit
Slide 24: Hedging Strategies Protect Near-term Value, While Retaining Longer-term Option
Hedging Strategies Protect Near-term Value, While Retaining Longer-term Option EWC Nuclear Contracted Revenues Optimizing hedge timing, Balance of 2012E – 2016E; as of Jun 30, 2012 volumes and products 3 % Revenue Contracted Price, $/MWh around POV 100 100 Firm products with call options for post-li
Slide 25: Securing Long-term Operations at Indian Point
Also Ahead, Securing Long-term Operations at Indian Point, Benefiting Us and the Region Selected findings: Study findings – impacts Conclusion: • NYISO identified multiple associated with IPEC’s closure • “All alternatives for reliability needs during the include: replacing IPEC are limited study pe
Slide 26: Entergy: The Foundation, What We're Working On, What's Ahead
Entergy The Foundation • Safety, operational excellence, portfolio management What We’re Working On • Financial strength and flexibility What’s Ahead • Actively engaged on opportunities 25
Slide 27: Credit Health Is Important
Credit Health Is Important Debt to Capital, excluding Securitization Debt Credit Ratings 2007 – 2011; % Debt to capital 80 60 1 1 Entity Rating (Outlook) Rating (Outlook) 40 Stable 57 59 56 55 55 20 Entergy BBB (Negative) Baa3 (Stable) Stable 0 07 08 09 10 11 EAI A- (Negative) A3 (Stable) Stable Gro
Slide 28: Near-term Earnings Affected by Current Low Prices, Timing of Investment / Rate Actions
Near-term Earnings Affected by Current Low Prices, Timing of Investment / Rate Actions 2013 EPS Considerations – Preliminary Illustrative Driver Note Sales growth / $(0.09) negative weather YTD 2Q12, $(0.18) included in revised weather guidance midpoint; 1 – 1.25% normalized weather-adjusted over ti
Slide 29: In Conclusion
In Conclusion The Foundation What We’re Working On What’s Ahead Utility • Safety, operational • Regulatory agenda • Capital plan excellence • Storm recovery management • MISO • Regulatory constructs • Transmission business spin-merge with ITC EWC • Safety, operational • Portfolio management, • Optio
Slide 30: Entergy: Focusing on Today and the Future
Entergy: Focusing on Today and the Future Bank of America Merrill Lynch 2012 Power and Gas Leaders Conference September 20, 2012
Slide 31: Appendix I: Additional Information
Appendix I Additional Information 30
Slide 32: Utility – Regulatory and Investment Outlook
Utility – Regulatory and Investment Outlook Utility Rate Actions and Investment Considerations for 2013 Co Regulatory Calendar / Investment Considerations EAI • Pending Hot Spring acquisition • File base rate case by 1Q13 (10 month statutory time limit) EGSL • Outcome of 2011 TY FRP filing (effectiv
Slide 33: Utility – Non-fuel O&M Trends
Utility – Non-fuel O&M Trends Utility Non-fuel O&M / Refueling Outage Expenses 2008 – 2014E; $M Drivers 2,500 • Varying compensation and Historical Illustrative benefit costs (e.g., pension 2,000 discount rates) • Increased costs associated with power plant 1,500 ~2 – 4%¹ acquisitions Annual Growth
Slide 34: Northeast Markets – Forward Energy and Power Prices
Northeast Markets – Forward Energy and Power Prices NYISO Auction-cleared Capacity Prices ISO-NE Capacity Prices For delivery Jun 2010 – Oct 2012; $/kW-mo For delivery Jun 2010 – May 2016; $/kW-mo Strip Forward Capacity Auctions 1 Spot Auction Monthly Reconfiguration Auctions Monthly Auctions Source
Slide 35: Northeast Markets – New York Zone A Market Prices and Heat Rates
Northeast Markets – New York Zone A Market Prices and Heat Rates NYISO Zone A ATC Forward Prices ($/MWh) At 8/31/12 55 YTD 2012 45 $27 1 Bal 2012 35 $32 Cal 2013 25 $33 01/11 04/11 07/11 10/11 01/12 04/12 07/12 Source: Derived from third party data service NYISO Zone A Implied Delivered Heat Rate (B
Slide 36: Northeast Markets – New York Zone G Market Prices and Heat Rates
Northeast Markets – New York Zone G Market Prices and Heat Rates NYISO Zone G ATC Forward Prices ($/MWh) At 8/31/12 65 YTD 2012 55 $36 Bal 2012¹ 45 $37 Cal 2013 35 $41 01/11 04/11 07/11 10/11 01/12 04/12 07/12 Source: Derived from third party data service NYISO Zone G Implied Delivered Heat Rate (Bt
Slide 37: Northeast Markets – New England Market Prices and Heat Rates
Northeast Markets – New England Market Prices and Heat Rates ISO-NE MASS Hub ATC Forward Prices ($/MWh) At 8/31/12 65 YTD 2012 55 $33 1 Bal 2012 $38 45 Cal 2013 35 $40 01/11 04/11 07/11 10/11 01/12 04/12 07/12 Source: Derived from third party data service ISO-NE MASS Hub Implied Delivered Heat Rate
Slide 38: EWC – Nuclear Fuel Trends
EWC – Nuclear Fuel Trends Illustrative Nuclear Fuel Projections 1 2011 – 2015E; $M $5 $8/MWh (2012E – 2015E) Expense (pre-tax) Capital Spend 11 12E 13E 14E 15E Uranium Price, Production and Demand 150 250 120 Demand (lbs) 200 90 150 Production (lbs) 60 Current Market Price Levels 100 Price Appear to
Slide 39: EWC – Non-fuel O&M Trends
EWC – Non-fuel O&M Trends EWC Non-fuel O&M / Refueling Outage Amortization 1 Drivers 2008 – 2014E; $M 1,400 • Varying compensation History Illustrative and benefit costs (e.g., 1,200 pension discount rates) Special items Non- 1,000 nuclear • Higher NRC fees and new regulatory requirements 800 ~2 – 4
Slide 40: Appendix II: Regulation G Reconciliations
Appendix II Regulation G Reconciliations 39
Slide 41: Regulation G Reconciliations
Regulation G Reconciliations Table 1: Entergy Consolidated Debt to Capital, Excluding Securitization Debt and Gross Liquidity Reconciliation of GAAP to Non-GAAP Measures 2007 – 2011 ($ in millions) 2007 2008 2009 2010 2011 Gross debt (a) 11,123 12,279 12,014 11,816 12,387 Less securitization debt (b
Slide 42: Regulation G Reconciliations
Regulation G Reconciliations Table 2: Entergy Wholesale Commodities Non-fuel O&M 1 Reconciliation of GAAP to Non-GAAP Measures 2009 and 2010 ($ in millions) 2009 2010 As-reported Non-fuel O&M (a) 1,058 1,195 Less Special Items Non-utility nuclear spin-off expenses 2 48 117 Total Special Items (b) 48
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