Entergy Corporation · NYSE:ETR
Entergy — Investor Day (June 2002)
50 slides from Entergy's investor day presentation, Jun 14, 2002
Slide 1: Entergy 2002 Analyst Meeting
| | Entergy 2002 Analyst Meeting At | J. Wayne Leonard Chief Executive Officer | June 14, 2002
Slide 2: Overall Market Performance
Overall Market Performance Market Performance ua Indexed to 100 110 100 90 80 70 60 50 1 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 May-02 Source: Bloomberg through 5/31/02 ‘S&P 500 ¥ $4.9 trillion NASDAQ ¥ $1.0 trillion Page 2
Slide 3: Sector Performance
Sector Performance 2001 Total Shareholder Return by S&P Industry Group % Return 20 10 iam] ° Doom . pra -20 -30 SPELEC -8Y 40 2 -50 60 -70 Drugs Insurance Movies oil Health Retail _&TV Care Cetecom> computer Semi: Banks Telephone Finance — Software conductor Source: Bloomberg Page 3
Slide 4: Technology Implosion
Technology Implosion Telecom Sector Events in 2001-2002 Earnings Shortfalls at Debt trading “Baby Bells” 450 bp higher 345,000 Job cuts Bankiptey Over $60 billion punts debt default WorldCom CEO exits abruptly Credit downgrades at: Sprint, WorldCom, SBC CEO: AT&T, Qwest, “| see no uptick and Citizen
Slide 5: Energy Industry
Energy Industry ~~ Barbarians at the Gate” b> —— New World % Market Credit. <= Company Cap Lost Rating Enron Chapter 11 Ca/D Dynegy 83 Ba1/BBB = AES 89 Ba1/BB Calpine 73 B1/BB Mirant 76 Ba1/BBB- PGE Chapter 11 Source: Bloomberg; calculated by taking the individual company high stock price and compar
Slide 6: Entergy
Entergy Integrated POV Historical Performance Market Cap Growth 4 Year Average Last 12 Months 11% per year 4% reholder Return Last 12 Months 5% 4 Year Average 18% per year Source: Bloomberg through 5/31/02 Other Indicators Average Annual Earning Growth © 16% 98 -'02 guidance) All - Time High Stock P
Slide 7: © x c) am g fo) c= =
© x c) am g fo) c= =
Slide 8: Example: Enron
Example: Enron “In a League of Their Own” Enron’s Stock Price $/share Payment stopped on Dabhol CA utilities file for bankruptey Enron subpoenaed for CA refunds $287m Azurix sale charge CEO Skilling resigns $1b earnings charge announced SEC probe announced & CFO ousted Credit downgrades Restate earn
Slide 9: What Went Wrong?
What Went Wrong? ° Bad Investments ° Over leveraged U Af Page 9
Slide 10: Example: Trading and IPP Companies
Example: Trading and IPP Companies Stock Price ae $/share 12/19/01 . Moody’s Calpine ts toBa 4/24/02 S&P cuts Source: Bloomberg Page 10
Slide 11: What Got "New World" Players Into Trouble
What Got “New World” Players Into Trouble Ignoring the Basics
Slide 12: What Got "New World" Players Into Trouble
What Got “New World” Players Into Trouble Ignoring the Basics Outside core competencies
Slide 13: What Got "New World" Players Into Trouble
What Got “New World” Players Into Trouble Ignoring the Basics Outside core competencies Poor risk management Growing too fast
Slide 14: What Got "New World" Players Into Trouble
What Got “New World” Players Into Trouble Ignoring the Basics Outside core competencies Poor risk management Growing too fast Single POV and Strategy “Bet it all and let it ride”
Slide 15: What Got "New World" Players Into Trouble
What Got “New World” Players Into Trouble Ignoring the Basics Outside core competencies Poor risk management Growing too fast Single POV and Strategy ie Home-run mentality Over-leveraged with debt
Slide 16: What Got "New World" Players Into Trouble
What Got “New “World” Players Into Trouble Ignoring the Basics Outside core competencies Poor risk management Growing too fast Single POV and Strategy Home-run mentality Over-leveraged Limited liquidity
Slide 17: What Got "New World" Players Into Trouble
What Got “New World” Players Into Trouble Warehousing too much risk
Slide 18: Competitive Markets Require
Competitive Markets Require 1. Demand response (real time prices) 2. Central dispatch integrated with locational marginal pricing 3. Transmission business model (expansion, congestion, independence) 4. Deregulation of production (divestiture, no government / regulated generation) 5. Customer choice
Slide 19: Does it Matter?
Does it Matter? Deregulation of production ta y ° All | amg. erhea id, cost of capital) Pond Flaw vod What did happen? (Enron/ cali) Regulation ———> closed marke: if e Monopolists LS. ° Build rat ity ° Ineff; er He costs Dum Po’ ewer Economic ni ie a i. aw t of capital # * Seren calls Page 19
Slide 20: Why Me?
Why Me? Investor Confidence Performance. Accounting! Disclosure Shareholder Credit Earnings Trading Suit Downgrade Warming / Miss Issues Equity Sales AEP v v AES vf Pa v Aquila v vf vf v v Dynegy v Jf vf v Duke v vf v v Calpine v vf vf v ET Paso vf v Enron v Pa v v Fa Mirant v vf Pa v Reliant v vf v
Slide 21: Warehousing A Lot of Risk
Warehousing A Lot of Risk No parent guarantee,fa9%| ETR or Koch Trittastriesii0 TEC ourse Superior analytics ¢ POV-driven positions Weather ¥ Unit contingent PPA * Decomissioning fully funded Non recourse debt__ * UK trading operations (at EK) *_Nonrecourse debt * Gas contract flexibility 2 Cancella
Slide 22: Taking on More Risk Than We Can Manage
Taking on More Risk Than We Can Mana Commodity Price Risk VAR* $ millions Source: Individual company 4Q earnings’ calls * Data represents average VAR on mark to market contracts for 2001, except for DUK which is average DEAR for 2001 Represents asset VAR. Page 22
Slide 23: Spec Traders
Spec Traders EK Trading: Proven Success in Up, Down and Flat Markets Last 1,000 Days* Days 350 5 300 250 4 200 150 100 50 4 | 0 0 Distribution of Daily Gross Trading Profits (Millions) * 1999 - 2007 Page 23
Slide 24: Financial Risk... Leveraged Up...
Financial Risk... Leveraged Up... Leverage Quick Ratio % 0.54 62% 52%* 0.39 49% ETR SPELEC ETR SPELEC * Includes off-balance sheet debt Source: Bloomberg, Compustat, Internal Analysis a eA i Page 24
Slide 25: Short of Cash
Short of Cash Cash Sources and Uses $ billions 2002 - 2004 1.4 (3.3) « [a (0.9) me ae 0.8 Balance OCF New Debt Maintenance Dividends Investment Available for Capital Commitment Additional Growth* “includes turbine contract cancellation costs Page 25
Slide 26: Outside Our Core Competencies
Outside Our Core Competencies Strategy Core Competency Utility / Excellence in safe work practices Provide excellence Excellence in operations through, safety, Constructive regulatory relationship skills service & reliability Leader in transmission policy development Nuclear Safety first mentality E
Slide 27: Doing It All Internally
Doing It All Internally Partners Providing Unique Expertise Kd KOG Hi ) === FRAMATOME ANP VAN Shaw The Shaw Group Inc™ Page 27
Slide 28: Ignoring the Customer
Ignoring the Customer Investment* Average Call Center Speed* $ per customer seconds to answer 32 $237 $139 13 Entergy SPELEC Entergy SPELEC I NR 40% Outage Frequency Improvement 79% Less Regulatory Outage Complaints *98 - "0: * Data represented is for the year 2000 Page 28
Slide 29: Example: California Utilities
Example: California Utilities Californian Deregulation Model Utilities A greed to Divest Generation ISO Buys Power at Market Clearing Price Retail Rates are Frozen “California PX ~ Utilities Forced to Buy Power at Market Prices, Significantly Above Retail Rates Unrecovered Power Costs at SCE $ billi
Slide 30: California Utilities
California Utilities What Went Wrong? ° Warehousing huge ‘short’ position ° Poor risk management ° Bad investments ° Do it all alone *Trading *Development *Construction *Origination SS Page 30
Slide 31: California
California Louisiana LPSC has deferred pursuing retail open access, pending developments at the federal level and in other states. Ye. retail open Mississippi MPSC has recommended not pursuing open access at this time. inded a delay in competition st 2010. Page 31
Slide 32: Polluting the Environment
Polluting the Environment Ehe New York Cimes 45,000 per year in US from all air sources Study Sea{6,000 Deaths From Power Plants Py AsnUAANE¢SSELE Pepin tam. rage ; SE Se a See ace eAASRINTON or 4 pi een ee Erase Chao on suet apace ism ane Ta ES Sweep ne nae a fo On ea Se naka oo ahr lectrie lies wi
Slide 33: Locked into One Strategy
Locked into One Strategy Process for Managing Industry Change Legislative/Regulatory a Infrastructure —™~ \ Supply —————___ ~~» Rigorous 7”. Analysis Demand y, Fuel Prices f Competitive Behavior 4 Current Point of View Long Positions Structured “| Contracts VAR Asset Development / Acquisitions Clima
Slide 34: Locked into One POV
Locked into One POV EPS Projection—Then EPS Projection —Now mid 1998 May 2002 = Parent 593.50 Energy Commodity Services Parent Nuclear UK Projects Trading Nuclear Utility Utility $1.92 $1.92 1998 Sources of 1998 Sources of Growth Growth * Midpoint of guidance Page 34
Slide 35: Failing to Deliver Now or Mortgaging the Future
Failing to Deliver Now or Mortgaging the Future Competitor Matrix Since New Strate: CoD Earnings AYE Growth GEE EES>.., <$o> ED > IPP Growth Rates Collapse in 2002* 0% ~CAES) 0% Changes in Adjusted Leverag@{Since 1998** +20% Source: Bloomberg *2002 growth rate based on FirstZall consensus estimate *
Slide 36: Perfect
Perfect Our Goal Zero employees Safety accidents Development Site, permit, construct, (Damhead Creek and operate projects at and Others) positive NPV Acquire nuclear assets at Nuclear positive NPV and improve operations Turbines / Place all turbines in value Equipment added projects Create one of th
Slide 37: Going to Let You Down
Going to Let You Down Entergy Stock Performance Since New Management 50 40 30 @ All-time high stock 20 16 Quarters of exceeding earnings expectations 10 2 * Credit rating increase ODisclosure award 0 2 2 2 2 2 2 s s a 2 2 2 2 8 3 8 3 g = 2 = 2 = z = z = Source: Bloomberg through May 31, 2002 Page 37
Slide 38: Balance Sheet
» Superior analytics - Grid of alliances » Flexi Balance Sheet
Slide 39: Out of Bullets
Out of Bullets oo » Superior analytics of alliances » Flexi Balance Sheet
Slide 40: Out of Bullets
Out of Bullets es + Regulatory Initiatives . ion Investment ;
Slide 41: Out of Bullets
Dut of Bullets + Regulatory Ii es - Generation Investment
Slide 42: Out of Bullets
Dut of Bullets + Regulatory Ii es - Generation Investment
Slide 43: Out of Bullets
Dut of Bullets =
Slide 44: Out of Bullets
Dut of Bullets =
Slide 45: Out of Bullets
Dut of Bullets
Slide 46: Out of Bullets
Out of Bullets
Slide 47: Out of Bullets
Dut of Bullets Regulatory Initiatives Generation [ital - World class operator : $cale economies //EK Trading + Superior analytics \\- Grid of alliances Pipeline + Operational expertise / - Advantaged location Assets + Distressed buyer at owner advantage
Slide 48: Not Out of Bullets
Slide 49: Entergy 2002 Analyst Meeting
| | Entergy 2002 Analyst Meeting At | J. Wayne Leonard Chief Executive Officer | June 14, 2002
Slide 50: What -- me worry?
What -- me worry?