Entergy Corporation · NYSE:ETR
Entergy — Merrill Lynch Power and Gas Leaders Conference 2003
38 slides from Entergy's conference presentation, Sep 17, 2003
Slide 1: Merrill Lynch Power and Gas Leaders Conference: Back to the Future
Merrill Lynch Power and Gas Leaders Conference < “Back to the Future” > J. Wayne Leonard Chief Executive Officer we September 17, 2003 7 Entergy
Slide 2: Safe Harbor and Reg G Compliance
Safe Harbor and Reg G Compliance The following constitutes a "Safe Harbor” statement under the Private Securities Litigation Reform Act of 1995: Fram time ta time, Entergy makes statements concerning its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. S
Slide 3: What We Said on September 17 in 1998
What We Said on September 17* in ... 1998! “This isn’t rocket science ... it’s pretty basic” e Stop doing what isn’t working/making money e Fund the future, or without the funds, you have no future e Act like a real utility - make reliability a reality e Fix what’s broken e Build on what you do well
Slide 4: Stop Doing What Isn't Making Money
Stop Doing What Isn’t Making Money Timeline of Divestitures 98-03 98 99 03 Results ries "or Projects Creek of assets after-tax debt divested gain eliminated
Slide 5: Fund the Future
Fund the Future Sources and Uses of Cash 98 - 02: $B Sources of Cash: Asset Sales 3.8 Operating Cash Flow 8.5 Total Sources of Cash C23) Fund Uses of Cash: Investments in: Utility 4.7 } the Nuclear 1.3 7 Future Entergy-Koch 0.4 Entergy Wholesale/Other 2.0 Net Debt Reduction 0.9 Dividends/Share Buyba
Slide 6: Start Measuring
Start Measuring A it Perspective ‘Strategic Objective MeasurelKPI see Financial Meet or Exceed Commitments EPS - Consolidated Quarterly Enhance Cash Flow OCF - Consolidated Quarterly Increase Net Income Eamings from Initiatives Annually Improve Cost Competitiveness Total Spending - F&IT Monthly Oper
Slide 7: Act Like a Real Utility...in Fossil Operations
Act Like a Real Utility...in Fossil Operations Regulated Fossil Plants Outage Rates 99-02: % 1 9 8 7 6 6 | ] | M | | 99 00 01 02 | Forced Outage Rate iP Equivalent Forced Outage Rate
Slide 8: Act Like a Real Utility...in Nuclear
Act Like a Real Utility...in Nuclear Production Costs* Capacity Factors* Industrial Accident Rate* 99-02: $/MWh 99 - 02: 3 Year Moving Average. % 97 — 03E; 18/24 Month Average GD C= 19 a5 94.4 18.0 16.8 88.8 : ag as 88 863 99 00 01 02 99 00 01 02 09 06 | sccm Fleet Operators’ Range * All statistics
Slide 9: Act Like a Real Utility...in Transmission
Act Like a Real Utility...in Transmission Transmission Service Index Transmission Service Schedules Managed 98 — 02; MWhs Not Served 96 — 03E; # of Schedules 3000 2,749 180,000 165,000 2500 460,000 aa 140,000 2000 iis 120,000 1500 100,000 80,000 1000 60,000 500 40,000 20,000 3,500 0 0 96 97 98 99 00
Slide 10: Act Like a Real Utility...in Reliability and Customer Service
Act Like a Real Utility...in Reliability And Customer Service Call Center Answer Speed Abandoned Calls Employee Accidents Seconds 000s 98 02 98 02 98 02 Regulatory Outage Outage Frequency Outage Duration Complaints Per Customer Per Year Average Minutes 3g ,,~3 gt
Slide 11: Fix What's Broken
oe Fix What’s Broken Issue Problem Solution Customer + Busy signals and long delays + Implement new call center Service + Lack of customer-friendly technology, offices, and staffing policies; shut-offs + Add wall centers + Not enough aid for low-income __- Offer bill paying options to low customers
Slide 12: Build on What You Do Well...in Nuclear
oe Build on What You Do Well...in Nuclear FitzPatrick - 825 MW (BWR - GE) Acquired Nov. 2000 3,955MW@ Vermont Yankee - 510 MW $240/kW Acquited July 2002 Indian Point 2 - 970 MW (PWR — Westinghouse) Acquired Sept. 2001 indian Point 3 - 980 MW (PWR — Westinghouse) Acquired Nov. 2000 Pilgrim - 670 MW (
Slide 13: Build on What You Do Well...in Nuclear
Build on What You Do Well...in Nuclear Production Costs Gapacinpractors Courage Duration Before ETR_Ownership vs. 03E é€ ETR Ownership vs. 03E Previous Record vs. 03E Average % Average days/plant 3a Southern Fleet in 02 = 97 2A 93 46 ie Southern Fleet in 02 = 15 Sojutherm Fleet's Last Outage = 27 25
Slide 14: Build on What You Do Well...in Trading
Build on What You Do Well...in Trading Henry Hub Spot Gas Prices 1Q01 — 2Q03; $/MMBtu 20 15 @ Price movement > $0.40/MMBtu 10 1001 2Q01 3001 4001 1902 2002 3Q02 4002 1Q03 2003 Operational Earnings Per Share — Entergy-Koch, LP 1Q01 — 2Q03; $/share 0.41 0.22 Gulf South Pipeline Entergy-Koch Trading 10
Slide 15: Create Management Team Committed to the Truth
Create Management Team Committed to the Truth Entergy’s Stated Goals and Results 98-02 atinees Grow Operational Earnings 8 — 10% 14.5% Annual Average Sustain eicog iting saa Flow Se eal auerage Improve Operational Net Margin Improved 119% Decrease Net Debt to Net Capital* Decreased 15% Make Tough De
Slide 16: We Have Our Story... You Have Your Perspective
We Have Our Story... You Have Your Perspective But Here’s What Our Employees Think Overall, good customer Entergy promotes diversity Your department service is provided by of backgrounds, talents, cooperates well with other Entergy. and perspectives. departments. <i ii 79 a BS | 99 02 99 02 Leadersh
Slide 17: Our Approach Is Unchanged
Our Approach Is Unchanged e Stop doing what isn’t working/making money e Fund the future, or without the funds, you have no future Act like a real utility - make reliability a reality Fix what’s broken Build on what you do well Create a management committed to the truth, who know what’s going on e S
Slide 18: Fund The Future: Projected Liquidity
Fund The Future Projected Liquidity* 2Q03 - 05; $B 5.7 Available for Investment, Debt/Equity Retirement. Dividend Increases (3.0) (1.0) 1.3 (0.8) ve Beg. Net Debt Adj. Op. Capital Di Cash Financing Cash Investment Liqui Flow** idends Target End ity Cash * Consistent with published estimates ** Adj.
Slide 19: Act Like A Real Utility... by Procuring Least-Cost Resources
Act Like A Real Utility... by Procuring Least-Cost Resources Through Integrated Supply Plan Generating Capacity in ETR’s Region Generation Market 03 — 05; Cumulative GW 17 17 16 3 3 3 03E 04E 05E Needed by ETR Available for reliability Capacity O3E O4E 05E Resulting Reserve Margins 57% 59% 56% ‘Look
Slide 20: But Planning Has Become Much More Complex
But Planning Has Become Much More Complex Utility Supply Planning Then vs. Now Issue Old WORL. lew WORLD Certainty about load to plan for Regulated utility sole supplier + Cogen potential + Potential deregulation Transmission system planning and operations Integrated generation and transmission plan
Slide 21: The Goal is Simple
The Goal is Simple: and Utility Supply Planning Components and Objectives STRATEGIC SUPPLY RESOURCE PLAN SETS STRATEGY AND LONG- TERM PLAN FOR GENERATION SUPPLY PORTFOLIO + Generation mix matched to load shape + More modern and efficient generation fleet iversified Resource Mix, irchasé vs. own + Lo
Slide 22: Supply Plan Uses Load Shape To Determine Type and Amount of Generation
Supply Plan Uses Load Shape To Determine Type and Amount of Generation Required Supply Requirements vs. Existing Generation Based on 03 Load Duration Curve Supply Existing Requirements Plenty of Existind, Generation Peaking/Reserve Generation Existing 6 _Existing Gas 24,000MW 120% - Generation > Res
Slide 23: Needs Are Converted to Financial/Physical Assets
Needs Are Converted to Financial/Physical Assets Supply Requirements, Existing Generation and New Resource Options Based on 03 Load Duration Curve Comparable Supply Options Supply Existing | New Resource Me ares Requirements Generation Supply Options ice Arte Existing : Term Options 24,000 MW 120% |
Slide 24: Location Determines Both Price and Reliability
Location Determines Both Price and Reliability New Generation by Region © cor (complete) @ ccot Under const, Ie «collec ° : © cogeniccot (complete ea sietvaven-teagenrey: | deeemGee? Under tou Fon neeit cana © Goson (Gomplcte @ ct (complete) © et under const. jell Power (Suspended) nto \Bstesvitie C
Slide 25: ETR Load Requirements vs. Regional Supply Availability
MW ETR Load Requirements vs. Regional Supply Availability Why So Many Complaints? North Arkansas‘ Profile | ETR Peak Load ~~ 7,000 6,000 5,000 4000 3,000 2,000 1,000 ° : ETR Load ETR Capacity Total Regional Merchant Capacity 12.712 MW ETR Capacity Total Regional Supply Sources Fine _Merchant Load Ca
Slide 26: Case Study: ENOI
Case Study: ENOI Entergy New Orleans Inc. (ENOI) Generation Supply Strategy Illustration Strategy Measure Before Strategic After Strategic Supply Objective Supply Resource Resource Plan Plan Price Stability- Less % of Energy Exposure to Gas Requirements Y v Brite Provided by 27% Coal/Nuclear Capacit
Slide 27: Case Study: ENOI — Lower, More Stable Prices
Case Study: ENOI — Lower, More Stable Prices ENO’ Before New Strategic Supply Plan Production Mix Production Costs* % SIMWh 73% ENOI’s Gas/Oil/Purel production costs were very sens ibve to gas $3/mmbtu $4/mmbtu $5/mmbtu CoaliNuel power costs ENO! After New Strategic Supply Plan Production Mix Produc
Slide 28: Fix What's Broken...in Transmission Policy
Fix What’s Broken...in Transmission Policy Problem Solution + Uneconomic pricing rules for + Participant funding interconnection of generation + Generator deliverability standards + Potel cost shifting and + Locational marginal pricing subsidization + Congestion pricing + Result is state/federal war
Slide 29: Fix What's Broken...in Texas
Fix What’s Broken...in Texas Problem: Returns Are Unacceptable Solution: Start of Retail Compet DD PTB Base Rate set in 3/02 EGSI-TX Return on Equity %; Estimated 2) PTB Fuel Factor set in 8/03 11% 3 On 8/20/03, the Texas PUCT approved the Allowed ROE protocols settlement agreement Anticipated 7.6 4
Slide 30: Build on What You Do Well...by Pursuing Top Quartile Utility Cost Performance
Build on What You Do Well...by Pursuing Top Quartile Utility Cost Performance Entergy’s Spending Rankings vs. Peers 01; Quartile Fossil Non-Fuel O&M $/MW Nuclear Non-Fuel O&M $/MWh Transmission $/Transmission Asset Customer Service O&M $/Customer Distribution $/Overhead Line Mile Total O&M/A&G $/MWh
Slide 31: Build on What You Do Well...by Growing Nuclear Profitability
Build on What You Do Well...by Growing Nuclear Profitability Reducing Labor Costs Entergy Nuclear Workforce # of employees Projected Cost Savings From Productivity Improvements 03E — 06E: $M 2,080 3,240 a 2Q03 30 Applying Southern Practices to Northern Fleet e Shared resources — staff from other 25
Slide 32: Build on What You Do Well...by Adding Best Practices to Both Nuclear Fleets
Build on What You Do Well...by Adding Best Practices to Both Nuclear Fleets Illustrative Sources of Cost Savings Reduce outage frequency and duration — implementation of the outage management team concept Minimize out of service time — use of Functional Equipment Groups to effectively bundle related
Slide 33: Build on What You Do Well... by Adding New Nuclear Plants
Build on What You Do Well... by Adding New Nuclear Plants Through Purchase or Management Contracts Example: Cooper Nuclear Station Risk Mitigation & Share of Upside a ” Nu lear Plant - ea . _ $10-20M Gee Generation Performance, ntergy Spporunny | Indicators Nuclear per plan per year — Management Fee
Slide 34: Build on What You Do Well...by Executing on Commodity Point of View
Build on What You Do Well...by Executing on Commodity Point of View 1) Point of View Trading Create asymmetric trading Natural G Price Price positions: atural' Gas | increases | Decreases - ie. y? + Establish trading position ousaar Boul ($$$) $$$$ Ko based on point of view be si + Hedge trading pos
Slide 35: And Business Is Good
And Business Is Good Customer Derivative Contracts Asset Positions Under EKT Management Year-over-Year Change: % 01 vs. Today Delivery (Bcf/Day) Storage (Bcf) Power (GW) +74% 208 200 11.3 a8 7.4 1.0 +12% 02 YTD 03 01 9/03 01 9/03 01 9/03 33
Slide 36: Build on What You Do Well by Making POV-Based Strategic and Operational Decisions
Build on What You Do Well by Making POV-Based Strategic and Operational Decisions Entergy’s Points of View Price - Retail deregulation - Show retail regulators that regu- more fiction than fact wholesale competition lation - States’ rights benefits customers convolute federal - Transmission energy p
Slide 37: Build on What You Do Well by Making POV-Based Strategic and Operational Decisions
Build on What You Do Well by Making POV-Based Strategic and Operational Decisions Entergy’s Points of View <iz = Ny ° Cost -Deflationary pressures -Customized pricing to trends mount protect exit or movement offshore of industrials Tech- - Modularization, - Deeply discounted prices nology minimizati
Slide 38: Start Measuring: Goals
Start Measuring Goals Near-Term Deliver average annual earnings growth of 8-10% Improve net margin Achieve $145M in cost savings Maintain or improve 45-50% net debt to net capital ratio Maintain or improve 4x or better interest coverage Achieve 9% return on invested capital Reinvest at high rate of
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