Entergy Corporation · NYSE:ETR
Entergy — Investor Day (June 2002)
32 slides from Entergy's investor day presentation, Jun 14, 2002
Slide 1: Entergy-Koch: A Balanced Approach
Entergy-Koch: A Balanced Approach Entergy 2002 Analyst Meeting Kyle Vann Chief Executive Officer, EKLP June 14, 2002 Entergy-Koch
Slide 2: Discussion Outline
Discussion Outline Entergy-Koch Trading Page 2 of 32m
Slide 3: Natural Gas Demand Is Still Expected to Grow
Natural Gas Demand Is Still Expected to Grow. Natural Gas Demand Growth Teflyear % Other Power Industrial Commercial Residential Source: CERA Page 3 of 32
Slide 4: Entergy-Koch's Transportation Business Is Well Positioned with Gulf South Pipeline
And Entergy-Koch’s Transportation Business Is Well Positioned with Gulf South Pipeline GULF SOUTH e Significant deliveries into the national gas pipeline grid ® Connections to more than 100 pipelines including Texas Eastern, Transco and FGT e Unique hub-like system and variety of storage assets - fa
Slide 5: Gulf South Operates a Diversified Business
Gulf South Operates a Diversified Business... Supply Source Customers Revenue Services Revenue % % % Other , North Louisiana Other Gathering Alabama & st Storage Mississippi ‘rage Industrials! No Notice Power Plants Service South Louisiana and Gurof Parking and Mexleo LDC’s Lending Interruptible Tra
Slide 6: ...Focused on Operational Performance
...Focused on Operational Performance Operating Expense Excl. Fuel $ Million 122 43 97 98 Safety Incidents Per 200k man-hours 24 25 26 Industry Average 4: fe 10 o7 Gulf South 98 99 00 01 Source: Southem Gas Association survey 00 83 SG&A O&M 01 2001 Customer Service Ranking Population of 18 1 Great L
Slide 7: Magnolia and Gulf Pines Provide Long-term Growth Opportunities
Magnolia and Gulf Pines Provide Long-term Growth Opportunities Gulf South Pipeline Gulf Pinos Proposed Pipotine Alternate “ Location - Southeastern Louisiana Miles of Pipeline - 600 Working Capacity - 4.1 Bcf “* Capacity - 1 Bcfid > Withdrawal Capacity - 400 MiMcfid “+ Capital Investment - $1 billio
Slide 8: Discussion Outline
Discussion Outline Gulf South Pipeline Page 8 of 32
Slide 9: The Current Merchant Energy Sector Credit Concerns Are Not Surprising
The Current Merchant Energy Sector Credit Concerns Are Not Surprising Contribution to EBIT % 100 90 80 Trading & Marketing 70 60 50 40 Merchant Assets Oo Other fj 1 Debt/Capital 53% 62% 81% s&P At | BBB- BB Moody's Al Bal B1 Outlook s s N N s N Source: Salomon Smith Barney, Moody's, Standard & Poor'
Slide 10: The Key Takeaway Is a Balanced Business Requirement
The Key Takeaway Is a Balanced Busi Req ent... 40%-60% 40%-60% Ratable Earnings Trading Earnings Page 10 of 32
Slide 11: Which Entergy-Koch Has Committed to and Maintained All Along
Which Entergy-Koch Has Committed to and Maintained All Along Company UBS Warburg Entergy-Koch Sempra Energy Duke Energy Trading Constellation Group El Paso Corporation Williams Company Aquila Dynegy Reliant Energy Resources Edison Mission Mirant * Credit watch negative Note: As of May 31, 2002 Page
Slide 12: Other Key Financial Trading Industries Have Survived These Cycles
Other Key Financial Trading Industries Have Survived These Cycles “The [company’s] collapse ...[has] exerted a J on market participants.... Dealers’ customers have been securities to dealers, which use them in matched-book operations or for short sales. ...[Small] dealers operating without a large c
Slide 13: Power Markets Are Large with Tremendous Growth Potential and Capital at Risk
S Power Markets Are Large with Tremendous Growth Potential and Capital at Risk... Estimated US Power Market Sizing TWh TWh $ Million 283%Growth 10x 92%Growth Regulated Merchant! L J 2001 TWh 2001 Trading 2010 TWh 2010 Trading 2001 Daily 2010 Daily Volume Less Volume Market and = Market and 10% Value
Slide 14: While US Gas Markets Are Larger and Have Even More at Risk
While US Gas Markets Are Larger and Have Even More at Risk Estimated US Gas Market Sizing Tef Tef 18%Growth NYMEX Physical Growth - ze ~ 2001 Gas Annual Trading 2010 Gas Demand Volume Demand Source: CERA, NYMEX, internal analysis 2010 Trading Volume $ Million 2001 Daily 2010 Daily Market and = Marke
Slide 15: Why Is Trading Important?
Why Is Trading Important? * Value capture and value protection through economic and efficient risk transfer ¢ Not a “zero sum” game, ratepayers and shareholders can benefit * Creates informed decisions around optimization including asset sales and acquisitions
Slide 16: Trading Business Segmentation
Trading Business Segmentation High Point-of-View Trading Physical Financial Optimization Optimization . (Value Capture) (Value Protection) Margin : Low Low Credit Requirement Page 16 of 32
Slide 17: Entergy-Koch Trading's Businesses
Entergy-Koch Trading’s Businesses... Physical Optimization (Value Capture) Financial Optimization (Value Protection) Point-of-View Trading Page 17 of 32
Slide 18: ...Are Founded on a Simple Structure
...Are Founded on a Simple Structure Customers Risk mitigation Physical and Financial Optimization Incentives Experience Science/analysis Markets Quantitative analysis Trading execution -Fundamental analysis Confidence Controls -Product development -Compliance Page 18 of 32
Slide 19: Physical Optimization
Physical Optimization Physical Optimization (Value Capture) Financial Optimization (Value Protection) Point-of-View Trading Page 19 of 32
Slide 20: EKT's Physical Optimization Business Emphasizes A National Grid of Alliances in the US
EKT’s Physical Optimization Business Emphasizes A National Grid of Alliances in the US... Physical Optimization Network Key Assets Western Hub <> Regional Hubs Managed Assets Midwest Hub Northeast Mid ‘Atlantic A Hub aS Southeast Hub Production Area Hub Page 20 of 32
Slide 21: ...And in the United Kingdom
...And in the United Kingdom... Physical Optimization Network Key Assets ry a4 Za “Gy & & d Managed Assets Page 21 of 32
Slide 22: Which Is Supported by Stable Customers and Asset Positions
ich Is Supp d by Stable Customers and Asset Positions Customers Asset Positions 2002 Partners: # Assets Under EKT Mgmt 350 2.4 24 loUs 2007 Goal 7 LDCs/Coops Current Delivery Storage Managed (BcfiDay) (Bcf) (GW) Page 22 of 32
Slide 23: Profile: EKT's Physical Optimization Business
Profile: EKT’s Physical Optimization Business Products and Structures Asset Owner Revenue Sharing Physical Positions <iA-DGOZz00 Profit/Loss Owner gains: + Ability to extract imbedded option value + Credit/liquidity capacity for asset business + Lower SG&A + Financial benefits to shareholders and ra
Slide 24: Financial Optimization
Financial Optimization Physical Optimization (Value Capture) Financial Optimization (Value Protection) Point-of-View Trading Page 24 of 32
Slide 25: Commodity Risk in the Energy Markets Can Be Extreme
Commodity Risk in the Energy Markets Can Be Extreme Volatility Gas annualized daily volatility Into-Cinergy annualized daily volatility 0.75 8.25 oro mn 7.25 0.65 | 6.25 0.60 0.55 5.25 0.50 4,25 945 3.25 0.40 2.25 0.35 0.30 1.25 0.25 0.25 97 98 99 00 O01 02 97 98 99 00 01 02 Page 25 of 32
Slide 26: EKT Is a Recognized Leader in Helping Customers Find Financial Solutions
EKT Is a Recognized Leader in Helping Customers Find Financial Solutions... Recognized Expertise Financial Optimization: Ranking and Category Natural Gas Natural,Gas Weather Power US Natural Gas UK Natural Gas 1. NYMEX Look-alike - Swaps 2. Options 1. NYMEX Look-alike - Options 1. Basis - Swaps 2. B
Slide 27: ...And Customers Have Responded Favorably
...And Customers Have Responded Favorably Customer Focus Marketing Category and Ranking Gas Deriv Customers; % 100 2001 Mega Marketer Gas Trading (out of 20) 1 TXU Energy Trading (TXU Corp) Financial 2 Conoco, Inc. Participants 3 Reliant Energy Resources Corp 4 Mirant Americas Energy Marketing, LP 5
Slide 28: Profile: EKT's Financial Optimization Business
Profile: EKT’s Financial Optimization Business Customers Producers } c ; fe) Market Risk Products [y¥) <eremee Interface Mitigation and M i sh | Structures, (We) D Financial " . Participants Margins | T Utilities), \e Owner gains: + Reduced income volatility + Improved credit treatment + Ability to
Slide 29: Point-of-View Trading
Point-of-View Trading Physical Optimization (Value Capture) Financial Optimization (Value Protection) Point-of-View Trading Page 29 of ape
Slide 30: Disciplined, Analytical Trading Techniques Have Produced A Consistently Profitable Track Record
Disciplined, Analytical Trading Techniques Have Produced A Consistently Profitable Track Record Trading Track Record Gain/loss days: Ratio 3.0 2.5 2.0 1.5 1.0 0.5 0.0 98 99 (>) Power {-] Gas 00 01 {—] Weather Overall 98-01 daily earnings; Trading days 350 300 250 200 150 100 50 | = - Avg. loss vs. a
Slide 31: Point-of-View Growth Is Possible
Point-of-View Growth Is Possible 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 capabili
Slide 32: Summary - Entergy-Koch, LP
Summary - Entergy-Koch, LP e Gulf South Pipeline is well situated geographically with disciplined operations management and diversified sources and customers e Entergy-Koch has a strong credit and liquidity position with an independent A/A3 rating e Entergy-Koch Trading’s organizational structure an