Entergy Corporation · NYSE:ETR
Entergy — 47th Edison Electric Institute Financial Conference 2012
60 slides from Entergy's conference presentation, Nov 13, 2012
Slide 1: Creating Sustainable Value
Filed by Entergy Corporation Pursuant to Rule 425 Under the Securities Act of 1933 Subject Company: Entergy Corporation Commission File No. 001-11299 Creating Sustainable Value th 47 Edison Electric Institute Financial Conference November 11 – 13, 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 On Sept. 25, 2012, ITC filed a registration statement on Form S-4 with the Securities and Exchange Commission (SEC) registering shares of ITC common stock to be issued to Entergy shareholders in connection with the proposed transactions, but this registrat
Slide 4: Entergy's Scope of Operations Today
Entergy’s Scope of Operations Today Entergy’s Scope of Operations 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 Utility • 6 vertically integrated elec
Slide 5: Business Model Has Two Main Dimensions Based on Dynamic Point of View
Business Model Has Two Main Dimensions Based on Dynamic Point of View Entergy’s Business Model Supply / Demand Climate / Weather Data Environment Competitive Behavior Long Positions Fuel Prices Legislation / Regulation Credit Markets Capital Markets Structured Contracts Strict Risk Limits Rigorous A
Slide 6: Business Model Has Two Main Dimensions Based on Dynamic Point of View
Business Model Has Two Main Dimensions Based on Dynamic Point of View Entergy’s Business Model Business Create Strategy Options Produce Driven by: Products/ Markets Services Skills Operational Achieve Scale Industry Excellence Productivity Scope Standards Positions Manage Relationships 5
Slide 7: The Foundation: Safe, Secure and Efficient Operations
The Foundation: Safe, Secure and Operational Efficient Operations Excellence 2012 Operational Accomplishments Year-to-Date Utility EWC Completed breaker-to- Maintained flat breaker run at FitzPatrick non-fuel electric rates from 2011 to 2012 Obtained Pilgrim Restored power to 20-year license 90% of
Slide 8: Active Regulatory Calendar – Constructive Regulatory Relationships
Active Regulatory Calendar – Operational Constructive Regulatory Relationships Excellence Arkansas • Hot Spring acquisition approved Jul 2012, with cost recovery through capacity rider; DOJ review ongoing • Next base rate case expected to be filed in 1Q13; 10-month statutory deadline Louisiana • Bas
Slide 9: Strategy and Recovery Mechanisms Key
Strategy and Recovery Mechanisms Key Operational Excellence Illustrative Regulatory Mechanisms for Cost Recovery Example X% Formula Rate Non-fuel O&M Plan Maintenance capital X% Acquisitions Capacity costs Specific Emission costs Cost Recovery Recovery Energy efficiency Renewables Acadia Unit 2 Stor
Slide 10: For a Utility, What Really Matters Is What You Earn
For a Utility, What Really Matters Operational Is What You Earn. . . Excellence Return on Equity: ETR Utilities vs Peer Utility Holding Companies 1 % 15 14 13 12 ETR Utilities 11 10 9 0 5-Year Book ROE 5-Year Average 2012 Allowed ROE 1 Range Allowed ROE Range (Min / Max) 1 Utility Holding Companies
Slide 11: While Keeping Customer Rates Affordable
. . .While ..WhileKeeping KeepingCustomer CustomerRates RatesAffordable Affordable Operational Excellence 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
Slide 12: Challenges in Texas Remain, But We Have Options
Challenges in Texas Remain, Operational But We Have Options Excellence Operational ROE Paths for Improving ROE in Texas 2007 – 2012E; % • Purchased power recovery rulemaking (draft rider rule under development) As-Reported • Special relief through fuel adjustment clause • Transmission Cost Recovery
Slide 13: Increased Investment on Horizon Requires Prudent Management
Increased Investment on Horizon Operational Requires Prudent Management Excellence Key Drivers Issue Investment Types Growing ~3.7 GW projected Entergy Portfolio demand region load growth by 2020 transformation Ninemile 6 CCGT Aging ~12 GW of existing Utility Major projects infrastructure generation
Slide 14: At EWC, Resolution of License Renewal Could Take Up to 7 to 10 Years
At EWC, Resolution of License Renewal Operational Could Take Up to 7 to 10 Years Excellence NRC License Renewal Status Issued for 20 years Pending Recent Events / Palisades renewed on 1/17/07 Unit Expiration Next Steps (expires 3/24/31) • Final Safety Evaluation Indian Report issued in 2009; FitzPat
Slide 15: Indian Point State Water Quality Proceedings Ongoing
Indian Point State Water Quality Operational Proceedings Ongoing Excellence Wedgewire Screens vs Cooling Towers Capital estimate: at least $1.19B (2009$, direct capital cost) Capital estimate: + 14.5 TWh of lost generation $250M – $300M over 42-week outage period Cooling Towers Wedgewire Screen a) W
Slide 16: Pursuing Several Paths to Resolve Coastal Zone Management Issue
Pursuing Several Paths to Resolve Operational Coastal Zone Management Issue Excellence U.S. Statute Coastal Zone Management Act Our Response “In the event the State agency has previously reviewed a license or permit • No new coastal zone effects will be caused by license renewal and NY State has act
Slide 17: Indian Point Safe, Secure, Vital… and Has Public Support
Indian Point Safe, Secure, Vital… Operational and Has Public Support Excellence An Assessment of Energy Needs in Westchester County Polling Results Over Time; % Q: Do you favor or oppose renewing the licenses for the electricity-generating nuclear plants at the Indian Point Energy Center? 60 Fukushi
Slide 18: Business Model Has Two Main Dimensions Based on Dynamic Point of View
Business Model Has Two Main Dimensions Based on Dynamic Point of View Entergy’s Business Model Supply / Demand Climate / Weather Data Environment Competitive Behavior Fuel Prices Legislation / Regulation Credit Markets Capital Markets Rigorous Analysis Current Point of View Create Options Produce Pr
Slide 19: Cautiously Optimistic on Northeast Power Prices
Cautiously Optimistic on Northeast Power Prices Point Current of View Historical Northeast Market Power Prices (Energy Only) Illustrative $/MWh; Rolling Averages Potential 5-year out view for 1 NE power prices 120 Increased Hedging Market response Mid-2010 Unit shutdown 100 Rolling Prompt Environmen
Slide 20: Previous Hedging Preserved Value
Previous Hedging Preserved Value Current Point of View EWC Nuclear Portfolio Revenue With and Without Contracting 2009 – 2017E; $/MWh; Capacity and Acquisition PPA Recognized at Contract Prices 80 70 Realized MTM Gain since 2009: ~$1.6B 60 Not Yet Realized MTM Gain: ~$0.2B 50 40 30 Historical Spot a
Slide 21: Current Hedging Product Selection Designed to Benefit If Prices Rise
Current Hedging Product Selection Current Point of Designed to Benefit If Prices Rise View EWC Nuclear Revenue Sensitivity on Optimizing hedge timing, Contracted Energy volumes and products Based on market prices as of Sep 30, 2012 around POV 10 2014 • Firm products with call options for post-licens
Slide 22: Business Model Has Two Main Dimensions Based on Dynamic Point of View
Business Model Has Two Main Dimensions Based on Dynamic Point of View Entergy’s Business Model Supply / Demand Climate / Weather Data Environment Competitive Behavior Long Positions Fuel Prices Legislation / Regulation Credit Markets Capital Markets Structured Contracts Strict Risk Limits Rigorous A
Slide 23: Significant Progress Made in Advancing MISO Proposal
Significant Progress Made in Advancing Portfolio MISO Proposal Management “The Companies’ Application filed in MISO Proposal this docket is approved as in the public interest, subject to…contingencies… and conditions…” --LPSC Order No. U-32148, 6/28/12 “…EAI is hereby authorized to sign the MISO Tra
Slide 24: The Next Step, ITC Transaction – Benefits for Customers, Other Stakeholders
The Next Step, ITC Transaction – Portfolio Management Benefits for Customers, Other Stakeholders Proposed Spin-Merge of Transmission Business Illustrative Entergy Shareholders will own stock in two companies Entergy ITC ETR ETR After After Shareholders ITC ITC After After Shareholders ETR ITC $700M
Slide 25: The Common Dividend: Current Structure vs Post ITC Transaction
The Common Dividend: Current Structure vs Post ITC Transaction Illustrative 1 Current business supports the current dividend of $3.32 per share Return to shareholders, $B ~$4B 4 3 2 Dividends Future dividends 1 at $3.32/sh Share Repurchases 0 10 11 12E 13E 14E 10 - 14E 2 Objective: ETR + ITC dividen
Slide 26: The Common Dividend: Our Objectives
The Common Dividend: Our Objectives ETR Today 1 Current business supports the current dividend of $3.32 per share Post Spin-Merge 2 Objective: ETR + ITC dividends accretive for ETR shareholders Previously, we’ve said the long-term financial outlook supported maintaining Entergy’s dividend at the cur
Slide 27: Benefits from Independence – Regional Transmission Planning
Benefits from Independence – Portfolio Regional Transmission Planning Management Transmission Planning ITC • Optimize projects across both systems and other regions • Better access to information • Within MISO and beyond Aligns with national policy objectives Greater participation, disclosure by thi
Slide 28: Benefits from Operational Excellence
Benefits from Operational Excellence Portfolio Management Hurricane Isaac Storm Command Center ITC provides a singular focus on Leverages Entergy’s world-class transmission system performance, storm restoration process planning and operations 27
Slide 29: Benefits from Financial Flexibility
Benefits from Financial Flexibility Portfolio Management Utility Operating Cash Flow Minus Utility Debt Obligations Cash Construction Expenditures 2018E; $B 2014E – 2018E; $B 6 12 20% 5.20 4.34 9 $2.7B 4 6 2 3 0 0 Status Quo With ITC Status Quo With ITC Transaction Transaction Transmission-related c
Slide 30: Benefits Offset Modest Customer Bill Effects
Benefits Offset Modest Customer Bill Effects Portfolio Management Typical Residential Monthly Bill (1,000 kWh) Illustrative Base Case Scenario, 2014; $ Estimated net bill effect resulting 1 from FERC rate construct 100 80 60 Continued Entergy ownership 40 20 0 EAI EGSL ELL EMI ENOI ETI 1 Does not in
Slide 31: Regulatory Approval Process Underway
Regulatory Approval Process Underway Portfolio Management ITC Change of Control Filings Timeline of Key Events Arkansas (Docket 12-069-U) 9/28/12 Filing 1 Procedural schedule not yet established Louisiana (Docket U-32538) 9/5/12 3/14/13 4/25/13 6/24/13 Sep Filing Discovery Staff / ELL / EGSL Hearing
Slide 32: Evaluating Strategies to Improve Efficiency for Post-Transaction State and the Future
Evaluating Strategies to Improve Efficiency Portfolio for Post-Transaction State and the Future Management Quartile Ranking Warehousing Materials 1 2 Procurement Vendors 3 4 Fuel Contracts Measure Measure Measure Measure 1 2 3 4 31
Slide 33: Continue to Seek Solutions to Maximize Value for Utility, EWC, Entergy
Continue to Seek Solutions to Maximize Value Portfolio for Utility, EWC, Entergy Management Illustrative Today Proposed Future? ETR ETR Shareholders Shareholders Operational Excellence and Portfolio Management Vertically Transco Integrated Isolate, Utility Separate Business Risks Utility to Maximum
Slide 34: Summary
Summary • Business and financial plan based on realities of today - Starts with safety and operational excellence every day - Active Utility regulatory agenda and substantial investment program and opportunities - Protracted license renewal processes for EWC nuclear plants - Depressed power prices e
Slide 35: Questions?
Slide 36: Appendix I Additional Information
Appendix I Additional Information 35
Slide 37: Utility Overview – Operating Diversity and Regulatory Oversight
Utility Overview – Operating Diversity and Regulatory Oversight Overview of Utility Operating Companies Electric Customer Breakdown Entergy Gulf States Entergy Arkansas Entergy Louisiana 2011; % of MWh sales Louisiana • Electric utility • Electric and gas utility • Electric utility • 693,000 electri
Slide 38: Utility Investments – Hot Spring and Hinds Energy Facilities
Utility Investments – Hot Spring and Hinds Energy Facilities Hot Spring Hinds MW 620 450 Seller KGen Power Corporation Total Investment (excluding transmission) $277M; $447/kW $246M; $547/kW Plant Type / Fuel Source Combined Cycle / Natural Gas Hot Spring Energy Facility Location Hot Spring County,
Slide 39: Utility Investments – Ninemile 6 New CCGT Plant
Utility Investments – Ninemile 6 New CCGT Plant Ninemile 6 MW / Plant Type ~550 / Natural Gas-Fired Combined Cycle Total Investment $721M, excluding transmission Spending Through 2012E: $225M; 2013E: $342M; 2014E: $117M; 2015E: $37M Location Westwego, LA Expected In-Service First part of 2015 Jurisd
Slide 40: Utility Investments – Waterford 3 Steam Generator Replacement
Utility Investments – Waterford 3 Steam Generator Replacement Waterford 3 Estimated Cost $687M Spending Prior to 2012: $384M; 2012E: $263M; 2013E: $40M Plant Type / Fuel Source Nuclear Status Installation underway Jurisdiction ELL Recovery Mechanism • Eligible for recovery through 2011 test year FRP
Slide 41: Utility – Hurricane Isaac Adds to Capital and Regulatory Recovery Agenda
Utility – Hurricane Isaac Adds to Capital and Regulatory Recovery Agenda Preliminary Isaac Restoration Costs Storm Cost Recovery Options $M Company Estimated Amount • Accessing funded storm reserves at EAI 10 the appropriate time (invoices are EGSL 70 – 90 still being received / processed) ELL 240 –
Slide 42: 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 discount rates) 2,000 • Increased costs associated with power plant 1 1,500 ~2 – 4% acquisitions Annual • Spen
Slide 43: 2013 Utility Earnings Sensitivities
2013 Utility Earnings Sensitivities Utility Net Income $/share (after-tax) – Prepared Nov 2012 Around 6% Net Income CAGR (2009 base) on attractive investment opportunities; $M 0.11 Retail Sales Growth 1% change in MWh sold (0.11) Rate Base 0.03 692 $100M change (0.03) Allowed ROE 0.41 1% change (0.4
Slide 44: EWC – Northeast Markets Forward Energy and Power Prices
EWC – Northeast Markets Forward Energy and Power Prices NYISO Auction-Cleared Capacity Prices ISO-NE Capacity Prices For delivery Jun 2010 – Dec 2012; $/kW-mo For delivery Jun 2010 – May 2016; $/kW-mo 3.0 5.0 Strip Forward Capacity Auctions 1 2.5 4.0 2.0 Monthly 3.0 1.5 Spot Auction 1.0 2.0 Reconfig
Slide 45: EWC – Northeast Markets New York Zone A Market Prices and Heat Rates
EWC – Northeast Markets New York Zone A Market Prices and Heat Rates NYISO Zone A ATC Forward Prices; $/MWh At 10/31/12 45 Cal 2013 $37 35 Cal 2014 $37 Cal 2015 $38 25 01/12 04/12 07/12 10/12 Source: Derived from third party data service NYISO Zone A Implied Delivered Heat Rate; Btu/kWh At 10/31/12
Slide 46: EWC – Northeast Markets New York Zone G Market Prices and Heat Rates
EWC – Northeast Markets New York Zone G Market Prices and Heat Rates NYISO Zone G ATC Forward Prices; $/MWh At 10/31/12 55 Cal 2013 $45 Cal 2014 45 $46 Cal 2015 $47 35 01/12 04/12 07/12 10/12 Source: Derived from third party data service NYISO Zone G Implied Delivered Heat Rate; Btu/kWh At 10/31/12
Slide 47: EWC – Northeast Markets New England Market Prices and Heat Rates
EWC – Northeast Markets New England Market Prices and Heat Rates ISO-NE MASS Hub ATC Forward Prices; $/MWh At 10/31/12 55 Cal 2013 $45 45 Cal 2014 $45 Cal 2015 $46 35 01/12 04/12 07/12 10/12 Source: Derived from third party data service ISO-NE MASS Hub Implied Delivered Heat Rate; Btu/kWh At 10/31/1
Slide 48: EWC – Positively Leveraged to Rising Prices
EWC – Positively Leveraged to Rising Prices EWC Nuclear Energy and Capacity Revenue Sensitivity Based on market prices as of Sep 30, 2012 Expected sold and market total revenue $47 $47 2013 2014 2016 $45 $45 2015 Northeast Energy Market Prices, $/MWh 47
Slide 49: EWC – Nuclear Fuel Trends
EWC – Nuclear Fuel Trends Illustrative Nuclear Fuel Projections 2011 – 2015E; $M $6 $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) 60 100 Price 30 50 0 0 05 06 07 08 09 10 11 12E 13E 14
Slide 50: EWC – Non-Fuel O&M Trends
EWC – Non-Fuel O&M Trends EWC Non-Fuel O&M / Refueling Outage Amortization Drivers 2008 – 2014E; $M 1 1,400 • Varying compensation History Illustrative and benefit costs (e.g., 1,200 pension discount rates) 1,000 Special items • Higher NRC fees and new regulatory requirements 800 ~2 – 4% • Workforce
Slide 51: EWC – Long-Term Financial Outlook
EWC – Long-Term Financial Outlook 2013 EWC Earnings Sensitivities 1 EWC Results $/share (after-tax) – Prepared Nov 2012 Declining Operational Adjusted EBITDA through 2014 compared to 2010 level; $M Nuclear Capacity Factor 0.06 1% change (0.06) 1,048 0.49 862 EWC Revenue $10/MWh market price change (
Slide 52: 2013 Earnings Guidance
2013 Earnings Guidance Operational EPS 2013E Guidance (after-tax) – Prepared Nov 2012 Current Net $0.05 indications point to upper end of range Net $(0.70) 4.85 – 5.65 Net $0.10 5.00 Midpoint Range 4.60 – 5.40 Range Other Other Inc Net Rev Interest Inc Tax Depn Inc Tax Interest 5.55 Other Taxes Deco
Slide 53: Preliminary Three-Year Capital Investment Plan
Preliminary Three-Year Capital Investment Plan Preliminary Projected Capital Expenditures Investing Capital 2013E – 2015E; $B – Prepared Nov 2012 2013E – 2015E; % of Total – Prepared Nov 2012 Preliminary Preliminary 2.5 Maintenance Investing 100% Capital Capital Portfolio Transformation 80% Environm
Slide 54: Capital Deployment – Return Cash to Owners; No Traditional Equity Issuances
Capital Deployment – Return Cash to Owners; No Traditional Equity Issuances Illustrative 2013 Corporate Earnings Sensitivities Current Financial Outlook $/share (after-tax) – Prepared Nov 2012 Cash Sources and Uses $B Balanced capital investment / return program with a total of around $4B dividends
Slide 55: Entergy's Long-Term Financial Outlook
Entergy’s Long-Term Financial Outlook Utility Net Income EWC Results Around 6% Net Income CAGR (2009 base) Declining Operational Adjusted EBITDA on attractive investment opportunities; $M through 2014 compared to 2010 level; $M 1,048 862 692 1 1,2 1,2 1,2 09 14E 10 11 12E 13E 14E 1 Illustrative, not
Slide 56: Appendix II Regulation G Reconciliations
Appendix II Regulation G Reconciliations 55
Slide 57: Regulation G Reconciliations
Regulation G Reconciliations Table 1: ETI Return on Average Common Equity Reconciliation of GAAP to Non-GAAP Measures 2007, 2008 and 2012E ($ in millions) 2007 2008 2012E As-Reported Earnings (a) 58.9 57.9 47.9 Less Special Items Transmission business spin-merge expenses - - (4.4) Total Special Item
Slide 58: Regulation G Reconciliations
Regulation G Reconciliations 1 Table 2: Entergy Wholesale Commodities Non-Fuel O&M 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 2 Non-Utility Nuclear Spin-Off Expenses 48 117 Total Special Items (b) 48
Slide 59: Regulation G Reconciliations
Regulation G Reconciliations Table 3: Entergy Wholesale Commodities Operational Adjusted EBITDA Reconciliation of GAAP to Non-GAAP Measures 2010 and 2011 ($ in millions) 2010 2011 Net Income 489 492 add back: Interest expense 72 21 add back: Income tax expense 269 225 add back: Depreciation and amor
Slide 60: Regulation G Reconciliations
Regulation G Reconciliations Table 4: Consolidated EPS Reconciliation of GAAP to Non-GAAP Measures 2012E Guidance (after-tax) (Per share in U.S. $) 2012E Revised Guidance Range¹ As-Reported (a) 3.44 – 4.24 Less Special Items Through 3Q12 Utility Transmission business spin-merge expenses (0.15) – (0.
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