Entergy Corporation · NYSE:ETR
Entergy — Lehman Brothers CEO Energy/Power Conference 2002
46 slides from Entergy's conference presentation, Sep 4, 2002
Slide 1: Lehman Brothers CEO Energy/Power Conference
Lehman Brothers CEO Energy/Power Conference J. Wayne Leonard Chief Executive Officer = September 4, 2002 — kin fer By
Slide 2: Discussion Outline
Discussion Outline Crix ) Cacquire) Cmerg ) Entergy Entergy Financial A Track ASol Nuclear Health Record of Supports Success Performer A Top Unregulated And Pipeline Generator Operator In ako bases Move, we refocused our strategy to achieve lor operating performance in our core domestic utility o) i
Slide 3: “Seen one, seen ‘em all”
“Seen one, seen ‘em all” “Back to Basics”: or “Misery loves company” Investor Confidence Performance. Accounting! Disclosure Shareholder Credit Eamings Trading Suit Downgrade Warning / Miss Issues Equity Sales AEP ' ' ’ AES ' ' ’ Aquila ' ' ' ' ’ Dynegy ' ' ' ' ' Duke ' ' ' ’ ’ Calpine ' ' ¥ ' TR fo
Slide 4: Staying out of Trouble By Delivering on Commitments
Staying out of Trouble By Delivering on Commitments Operationgf Eamings Ber Share r Net Debt t>Net Capital Ratio Annual 1998 — ¥ is Ended, % 3.50 3.25 3.00 2.75 2.50 2.25 2.00 4.75 “Weather-adjusted 1.50 98 99 00 01 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 98 98 99 99 00 00 01 01 02 * Source: Compustat, Bloomberg
Slide 5: More on Credit Quality
More on Credit Quality 'O Interest Covera: Te 45 4.0 3.5 3.0 2.5 2.0 1.5 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 98 98 99 99 00 00 01 01 02 FFO Interest Coverage vs. SPELEC* 298 through 4Q01, % Change 60 40 20 ETR. 4st * Source: Compustat, Bloomberg; ETR data operational, all others as reported; Excludes EIX and
Slide 6: That “Back to Basics” Thing Really Worked
That “Back to Basics” Thing Really Worked Competitor Gp~ Matrix IPP Growth Rates Collapse in 2002* 0% “mR Changes xd sted Leverage +20% Source: Bloomberg "2002 growth rate based on FirstZall consensus estimate * Leverage is adjusted by deleting equily issuances since 1998 from total capital, Mirant
Slide 7: It's Never Too Late ...
Its Never Too Late ... Price Appreciation 0 Entergy C1 sap 500 (1 SPELEC If you had gotten in (and held) 49% ae ue LI] ~T 10% 12% oy 11% 22% 218% 25% 36% 31% yr. 2yr. 3yr. Since New Strategy Spread to SPELEC Total 30 59 46 65 Per Year 30 30 15 16 *As of July 31, 2002 Page7
Slide 8: “Back to Basics” Is Not “Back to the Future”
“Back to Basics” Is Not “Back to the Future” Process for Managing in Volatile Markets Legislative/Regulatory I Infrastructure a \ Supply ————__—_ « Rigorous 7” Analysis Demand 7 Fuel Prices f Competitive Behavior H Current Point of View Climate/Weather Data = Create Portfolio “ Options |“ Management
Slide 9: Start with What You Know; Find Out What You Don’t
Start with What You Know; Find Out What You Don’t 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 Safet
Slide 10: A Track Record of Success
Entergy A Track Record of Success Discussion Outline Entergy q Entergy Financial cena Nuclear Health Perforano) A Top Supports Unregulated ipelil New Generator Operator Investments Page 10
Slide 11: “Back to Basics” Is Not Gold-Plating
“Back to Basics” Is Not Gold-Plating Investment Relationship: Making Good Investments at the Margins Customer Satisfaction (%) 100 80 4 60 4 40 4 20 + # of Service Interruptions per Year Page 11
Slide 12: Every Project Tied to Specific Customer Safety/Reliability Metric
Every Project Tied to Specific Customer!/ Safety/Reliability Metric at the “Device” Level Capital Investment and Depreciation $ Millions [-] Capex —= Depreciation 1,063 Page 12
Slide 13: Customer Reliability
Customer Reliability Satisfaction Improvement Return on Investment 1998 vs. 2001 Outage Outage Frequency Duration Down Down 40% 42% Call Center Regulatory Outage Answer Time Complaints Improved Regulatory Relations Higher Returns Less Disallowances Growth Opportunities Investment Page 13
Slide 14: “Back to Basics” — Managing Business Processes Not Litigation Processes
“Back to Basics” — Managing Business Processes Not Litigation Processes ELI settles rate review with no rate action required ELI settles 4th rate review refunding less than $1 million Regulatory Timeline MPSC EGSITX settles Ea approves $137 with PUCT on cost refund Louisiana million unbundlin, Issue
Slide 15: The Utility: An Evolved Species
The Utility: An Evolved Species Utility Provide excellence through safety, service & reliability : Leader in 7 - Constructive Hie Excellence in safe Excellence in transmission 2 % regulatory aS work practices operations policy relationship skills ceeeieenraa? * Corporate safety council established *
Slide 16: Moving Past “GO” To...
Moving Past “GO” To... 1998: “Back to Basics” 2002: “Beyond the Basics” Improve Customer Service Pursue Regulatory Initiatives Improve Reliability Pursue Generation Investment Improve Regulatory Relationships Pursue Economic Development Initiatives 7% 5% Average Annual Growth 98 - 01* Targeted Long
Slide 17: Resource Plan: Modern Day Alchemy
Resource Plan: Modern Day Alchemy _ Lemons to... Capacity and Demand i Generation Market cw ‘Gross nan) Qoectet ae Bure we Sick ae “Bautnover ese mansion BD ce-coaen rs _ Hh Cogen Het seriag Cousny APNEA SD fiw @ Homeszoad Courty BE tices Transérea eae gece par BEWWO-S cectaw Panda Union (C1 Dora) E
Slide 18: Resource Plan: Modern Day Alchemy
Resource Plan: Modern Day Alchemy ..Lemonade Illustrative Non-Fuel Customer Cost s/Mwh 7 a Long Run Syr time period i Marginal Cost be ta l 4 ! = iggume > / 1 eet s. 2 meget andl x no Revenue *: gs a Requirements peace ! ge $600/KW 1 a Pais I a 3-yrmarket purchase t <—400kw pa 1 5} 9 13 17 1 1 Suppl
Slide 19: From Cost Plus to Value Added
From Cost Plus to Value Added | Traditional Earnings Rate Base ONPV O & MReduction Regulatory _ toO2 "es above Lag _ ; Capital Savings Cost of capital CO sales Growth Potential 0% - 2% ROE Enhancement 1 Fuel Savings oO Purchased Power Savings oO Fuel / Purchase Power Efficiencies O&M & Capital / oO
Slide 20: Discussion Outline
Discussion Outline Entergy Entergy a Financial Health Supports A Track The Utility AT Record of A Solid op) Unregulated Generator Success Performer Operator Page 20
Slide 21: At Entergy Nuclear, Our Regulated Fleet Provided Skills-Based Growth...
At Entergy Nuclear, Our Regulated Fleet Provided Skills-Based Growth... ANO 1 - 836 MW (PWR - B&W) Grand Gulf - 1210 MW (BWR - GE) Waterford - 1075 MW (PWR — CE)
Slide 22: Allowing Entergy to Amass Critical Scale
Allowing Entergy to Amass Critical Scale in the Northeast at a Reasonable Price... FitzPatrick - 825 MW (BWR — GE) Acquired Nov. 2000 Average Cost: Vermont Yankee - 510 MW (BWR - GE) $240/kW Acquired July 2002 Indian Point 2 - 970 MW (PWR — Westinghouse) Acquired Sept. 2001 nian Point 3- 980 MW (PWR
Slide 23: ...Without Adding Substantial Market Risk
...Without Adding Substantial Market Risk Innovative Business Structures Merchant Acquisition (or firm PPA) High Structured . Acqui ion Risk (unit contingent PPA) Transfer Low Low i Earnings High Potential Page 23
Slide 24: “Back to Basics” — The New Math
“Back to Basics” — The New Math Lax) Capacity Factor % ver 7 million more MWhrs per year 95 98 oH 94 34 4 million MWhrs > 90 87 86 76 [) Before ETR AfterETR 43 = Pilgrim IP3 FitzPatrick IP2 vY ETR ‘01 Industry Regulated Average Note: Before ETR consists of previous 3 years performance Average Source
Slide 25: It Ain’t Rocket Science...
It Ain’t Rocket Science... Production Cost 3-year rolling average, $/MWh $26.48/MWhr Avg. 24 $16.49/MWhr Avg. 19 20 19 17 a6 14 Pilgrim IPS FitzPatrick IP2 VY ANO Grand Gulf River Bend Waterford Industry Average Note: Entergy plants through 2001, Industry is through 2000. Northeast fleet includes co
Slide 26: ... OK, This Part Is Close (to Rocket Science)
... OK, This Part Is Close (to Rocket Science) Nuclear Refueling Outage Days $104 ion Previous Record Last Outage {| Entergy Fleet 67 57 Current Industry 40 -----fa-----4 | er «| |e ee Average 36 30 34 28 29 26 26 bi 23 22 23 17 IP3 Pilgrim = Grand = ANO1 River | ANO2 Waterford ‘77-00 '01-'02 Gulf B
Slide 27: Inside the Rocket: Is That U or Au?
Inside the Rocket: Is That U or Au? Nuclear Plant Schematic ‘Containment Structure Secondary Side / Efficiency Uprates Page 27
Slide 28: More New Math: Capacity Without New Plants
More New Math: Capacity Without New Plants Entergy Nuclear South Capacity Entergy Nuclear Northeast Capacity Mw mw $25? $50? $100 jon 5,078 4,159 Indian Waterford a Roint2 FitzPatrick ANO2 Vermont Yankee River Bend ANO2 Indian Point 2 Grand Gulf Waterford Pilgrim Indian Point 3 ANO2 3,955 Indian Poi
Slide 29: The More We Learn, The Better It Looks
The More We Learn, The Better It Looks Example: Vermont Yankee Uprate Process 2001 2002 2003 2004 2005 2006 Feasibility Study | [| [| Engineering Plan | | Economic Analysis Implementation Plan | Project Work MWs in Operation [5 Original "1 Revised Page 29
Slide 30: “Back to Basics” — Operating
“Back to Basics” — Operating One Nuclear Plant??? Illustrative Map of Potential Operating Fleets [| small Scale Plants (1 Entergy Plants Note: Map includes only plants whose owners operate three units or fess Page 30
Slide 31: Discussion Outline
Discussion Outline Entergy- Entergy _ Entergy Suse Koch LP Financial A Track The Utility Yay Nuctear A Strong dealin Record of A Solid canvas Hy) Energy Tradey (ys Success Performer een oar And Pipeline, Operator Page 31
Slide 32: Entergy-Koch Basics Include Pipeline Discipline
At SE ea phe. Basics Include 40%-60% 40%-60% Pipeline Earnings Trading Earnings Discipline Page 32
Slide 33: Good Location...
Good Location... e Significant deliveries into the national gas pipeline grid e Connections to more than 100 pipelines including Texas Eastern, Transco and FGT e Unique hub4ike system and variety of storage assets - facilitates flexible, market responsive Gulf South Pipeline services Key Statistics
Slide 34: ...Outstanding Performance
...Outstanding Performance Safety Incidents* Per 200k man-hours 24 25 2.6 Industry Average 1.2 1.2 1.0 0.7 Gulf South 98 99 00 01 *Source: Southern Gas Association survey Operating Expense Excl. Fuel $ Million 122 97 113 98 86 99 91 00 83 01 SG&A O&M Page 34
Slide 35: Entergy-Koch — Balance and Discipline
Entergy-Koch — Balance and Discipline 3 Distinct and Complementary Businesses Earnings Composition Target: % 40%-60% ipeline Earning) Physical Optimization (Value Capture) 35% Discipline ay Financial Optimization ‘Value Protection) 15% Point-of-View Trading 50% Page 35
Slide 36: ...All Supported By A Strong Credit Rating
..-All Supported By A Strong Credit Rating Company UBS Warburg Entergy-Koch Sempra Energy Constellation Group Duke Energy Trading El Paso Corporation Williams Company Aquila Dynegy Reliant Resources Edison Mission Mirant * Credit watch negative Page 36
Slide 37: Physical Optimization — Trading Around Assets
Physical Optimization — Trading Around Owners’ Assets Products and Structures Revenue Sharing Physical Positions <iA-DGOZz00 Profit/Loss RiskVolatiity [Lower due to risk transfer Return More predictable with upside |Share of upside (Credit Profile _|Improved due to risk transfer nal impact; most ris
Slide 38: While EKT’s Financial Optimization Business Protects Value
While EKT’s Financial Optimization Business Protects Value Customers Products and Structures Margins <i-u0zZzZ00 Risk managed to desired [Risk held if consistent with levels POV or transferred to market Hor a gain Return |Variable, but usually slighty [Earns bidask spread lower due to less ri [Credi
Slide 39: EKT’s Point-of-View Trading Techniques Have Produced A Consistently Profitable Track Record...
EKT’s Point-of-View Trading Techniques Have Produced A Consistently Profitable Track Record... Trading Track Record Gain/loss days: Ratio 98-01 daily earnings: Trading Days 3.0 350 25 300 250 2.0 200 1.5 150 1.0 100 0.5 50 | 0.0 0 el lh 98 99 00 01 4-3-2101 23 «4 Power [| Weather % of annual earning
Slide 40: ...With The Potential for Further Growth
...With The Potential for Further Growth Point-of-View Expansion Growth Area Growth Requirements Growth Opportunities Western US, Canada, Continental Europe Region Liquid markets #2 oil, coal, emissions, Commodity Energy relationship transmission, weather products, cross commodities Time Analytical
Slide 41: Discussion Outline
Discussion Outline Entergy Enteray Suse Financial A Track The Utility aes Health Record of A Solid ce Supports Unregulated Generator Operator Success Performer And Pipeline New Investment: Page 41
Slide 42: Cash Is Good...
Cash Is Good... Projected Cash Flows 2002 - 2004 $B Sources - $7.7B Uses - $4.8B 1.4 NI 23 Utility Only eee _ —_ Other 0.5 -0.9 | 2.9 -0.6* 0.8 Beginning OCF New Debt Maintenance Dividend Investment Available for Capital Commitment Growth * Includes turbine contract cancellation costs Page 42
Slide 43: ...And a Financial Cushion Is Critical
...And a Financial Cushion Is Critical 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 43
Slide 44: “Back to Basics” — The Simple Math
“Back to Basics” — The Simple Math 2002-2005 Merchant Energy Industry Evolution Catalysts ‘Open MW Positions 104, and 05 % Sold Forward" Reduced or Disbanded Elec Vol” Gas Vol* TWh Beflday 09 65 i. |- TWh sold (300) Spark ($10) ESTOASE (3) Elec Vol? (0.8) SIMWh x36 Margin x2% EBITDASE (60.6) GasVol?
Slide 45: Discussion Outline
Discussion Outline Entergy Entergy Entergy : Nuclear A Strona Financial too The Utilit A Top Health Summary Unregulated And Pipeline Supports Generator Operator Record of A Solid Success Performer Page 45
Slide 46: Lehman Brothers CEO Energy/Power Conference
Lehman Brothers CEO Energy/Power Conference J. Wayne Leonard Chief Executive Officer September 4, 2002 2 in tergy
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