Entergy Corporation · NYSE:ETR
Entergy — Merger or Acquisition (May 2012)
28 slides from Entergy's merger presentation, May 31, 2012
Slide 1: Update on Entergy Transmission Spin/Merger with ITC
Filed by Entergy Corporation Pursuant to Rule 425 Under the Securities Act of 1933 Subject Company: Entergy Corporation Commission File No. 001-11299 Update on Entergy Transmission Spin/Merger with ITC CLECO/NRG May 31, 2012 Presented by Entergy Louisiana and Entergy Gulf States Louisiana 0
Slide 2: Entergy Forward-Looking Information
Entergy Forward-Looking Information In this communication, and from time to time, Entergy makes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Except to the extent required by the federal securities laws, Entergy undertakes no obligat
Slide 3: Additional Information and Where to Find It
Additional Information and Where to Find It ITC and Transco will file registration statements with the Securities and Exchange Commission (“SEC”) registering shares of ITC common stock and Transco common units to be issued to Entergy shareholders in connection with the proposed transactions. ITC wil
Slide 4: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 3
Slide 5: The Merger Transaction – End State
The Merger Transaction – End State Illustrative • Entergy Utility Operating Companies Entergy comprised of: Shareholders – Generation – Distribution Parent Creditors Entergy • Entergy expects to receive gross cash proceeds of $1.775B from new indebtedness that will be assumed by ITC at close Entergy
Slide 6: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 5
Slide 7: Overview of Benefits to Customers Through Spin-Merge
Overview of Benefits to Customers Through Spin-Merge • Provides singular focus on transmission system performance, planning and operations Independent • Aligns with national policy objectives to facilitate investment in and local, regional and inter-regional transmission, advance open Transparent ac
Slide 8: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 7
Slide 9: The Utility Industry Is Facing Huge Need for Capital – Estimated at $2.2T Over the Next 20 Years
The Utility Industry Is Facing Huge Need for Capital – Estimated at $2.2T Over the Next 20 Years Issues Facing Utility Industry Over Next 20 Years Projected Industry Capital Investments Over Next 20 Years Growth / Investment $T ??? Other = 0.15 Distribution Transmission Generation Current Market Cap
Slide 10: Capital Trends – Rating Agency Considerations
Capital Trends – Rating Agency Considerations Standard and Poor's Outlook – "Utility Credit Ratings Critical to Raising Capital – Money Needed to Build Wires and Plants • "the real tests lie ahead, when federal environmental mandates and consequent Challenges spending requirements are more certain,
Slide 11: Industry Is Responding to Capital Investment Challenges with Different Approaches
Industry Is Responding to Capital Investment Challenges with Different Approaches Create larger footprint; upsize balance sheet • Duke / Progress Consolidate • Northeast Utilities / NSTAR • PPL / LG&E • First Energy / Allegheny • Exelon / Constellation Build Achieve greater certainty in regulations
Slide 12: Capital Trends – Rising Capital for Entergy Overall
Capital Trends – Rising Capital for Entergy Overall Capital spending could significantly increase over the next 10 years due to the potential for new environmental regulations and replacement of aging infrastructure ??? Entergy Utilities Capital Investment Effect of EPA rules? Total Spend ??? Aging
Slide 13: Capital Trends – Rising Capital for Entergy’s Transmission Business
Capital Trends – Rising Capital for Entergy’s Transmission Business Entergy Projected Transmission Capital Investment 2012E-2014E; $M 600 500 400 300 Projected 200 Depreciation Expense 100 0 2012E 2013E 2014E 12
Slide 14: For ETR Utilities, Spend on Major Storms Amounted to ~$2.6B Over 2005-2010
For ETR Utilities, Spend on Major Storms Amounted to ~$2.6B Over 2005-2010 Spend 1 Event Year ($M) In the past, ETR Hurricane Katrina 2005 1,117 utilities have had to Hurricane Rita 2005 645 effectively respond to major storms Hurricane Gustav 2008 680 which have required Hurricane Ike 2008 626 unpl
Slide 15: Capital Trends – Rising Capital for LAU
Capital Trends – Rising Capital for LAU Capital spending could significantly increase over the next 10 years due to the potential for new environmental regulations and replacement of aging infrastructure ??? LAU Capital Investment Effect of regulations? Total Spend ??? Aging infrastructure? $B Effec
Slide 16: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 15
Slide 17: Storm Response Organization Will Be Modified to Ensure Close Coordination Between Entergy and ITC
Storm Response Organization Will Be Modified to Ensure Close Coordination and Interaction Between Entergy and ITC ITC Technical/Mgmt ITC System Incident employee assigned to ETR System Incident ETR storm response Commander (SIC) center in Jackson Commander (SIC) (Greg Grillo) (John Mullins) ITC-ETR
Slide 18: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 17
Slide 19: Significant Variability in Average Residential Bills – Yearly Variation Between $2 and $26 Over 2001-2011
Significant Variability in Average Residential Bills – Yearly Variation Between $2 and $26 Over 2001-2011 Illustrative ELL Avg. Monthly Residential Bill - 1,000 kWh Henry Hub Gas Index $ $/mmBtu 150 13% reduction in customer 15 bills since 2008 -$26.43 (-24%) +$2.23 (+2%) 100 -13% 10 99.55 109.77 50
Slide 20: Significant Variability in Average Residential Bills – Yearly Variation Between $1 and $27 Over 2001-2011
Significant Variability in Average Residential Bills – Yearly Variation Between $1 and $27 Over 2001-2011 Illustrative EGSL Avg. Monthly Residential Bill - 1,000 kWh Henry Hub Gas Index $ $/mmBtu 150 14% reduction in customer 15 bills since 2008 -$26.64 (-24%) +$0.37 (0%) 100 -14% 10 101.47 108.99 5
Slide 21: Transmission Constitutes ~12% of ELL Rate Base and ~13% of EGSL Rate Base (2010)
Transmission Constitutes ~12% of ELL Rate Base and ~13% of EGSL Rate Base (2010) ELL Last Filed Rate Base EGSL Last Filed 2010 Rate Base $B $B 4 4 3 0.4 3 Estimated ELL 0.3 2 2 Transmission Estimated 3.2 Rate Base EGSL 2.8 Is ~12% 2.4 Transmission 1 of Total 1 Rate Base 2.1 Is ~13% of Total 0 0 Aggr
Slide 22: Rate Impacts: Transmission Constitutes a Small Portion of an ELL Customer's Total Bill
Rate Impacts: Transmission Constitutes a Small Portion of an ELL Customer's Total Bill Illustrative Typical ELL Customer Bill Transmission 4.0% Fuel 43.0% 53.0% Non-Fuel 21
Slide 23: Rate Impacts: Transmission Constitutes a Small Portion of an EGSL Customer's Total Bill
Rate Impacts: Transmission Constitutes a Small Portion of an EGSL Customer's Total Bill Illustrative Typical EGSL Customer Bill Transmission 6.6% Fuel 38.9% 54.5% Non-Fuel 22
Slide 24: Rate Impacts Split into Rate Construct, Rate Timing and Other Effects for Retail Customers
Rate Impacts Split into Rate Construct, Rate Timing and Other Effects for Retail Customers • Transition from current retail rate construct to FERC-regulated rate construct expected for ITC Rate • Analysis assumes MISO base ROE for Entergy transmission business Construct (12.38%) and capital structur
Slide 25: ELL Typical Residential Customer Bill Expected to Initially Increase 0.4% Due to Rate Construct Effects
ELL Typical Residential Customer Bill Expected to Initially Increase 0.4% Due to Rate Construct Effects – Expected Mitigation by Customer Benefits ELL Residential Bill - 1,000 kWh Illustrative $ +0.38 100 0.4% Over the long term, 98 customer bill effects ~0.84 ~(0.27) ~(0.19) ~96.31 expected to be m
Slide 26: EGSL Typical Residential Customer Bill Expected to Initially Increase 1.1% Due to Rate Construct Effects
EGSL Typical Residential Customer Bill Expected to Initially Increase 1.1% Due to Rate Construct Effects – Expected Mitigation by Customer Benefits EGSL Residential Bill-1,000 kWh Illustrative $ 100 +1.04 Over the long term, 1.1% customer bill effects 96 ~0.92 ~(0.24) ~0.36 ~94.59 93.55 expected to
Slide 27: Agenda
Agenda ITC Spin-Merge Transaction Overview Benefits of ETR – ITC Spin-Merge Transaction Financial Flexibility Storm Response Rate Effects of Spin-Merge Transaction Approvals Required 26
Slide 28: Pathway to Completion – Required Approvals
Pathway to Completion – Required Approvals Jurisdiction / Authority Approval(s) MISO RTO • Final approval of move to MISO RTO by all retail jurisdictions • Final FERC approval of move to MISO RTO Entergy Retail • Change of control of transmission assets Regulators • Authorization to incur debt in so