Entergy Corporation · NYSE:ETR
Entergy — Howard Weil 33rd Annual Energy Conference (April 2005)
42 slides from Entergy's conference presentation, Apr 5, 2005
Slide 1: The Simple Life
The Simple Life Howard Weil 33rd Annual Energy Conference J. Wayne Leonard aan Chief Executive Officer = April 5, 2005 —=Enten gy
Slide 2: Safe Harbor and Reg G Compliance
Safe Harbor and Reg G Compliance In this presentation ard from time to time, Entergy makes statements concemirg its expectations, beliefs, plans, objectives, goals, strategies, and future events or performance. Such statements are "forward-laaking statem ents" within the meaning of the Private Secur
Slide 3: Entergy's Business Model
‘Supply/Demand Environment Fuel Prices Credit Markets Business Si Markets Skills Scale Scope Positions Entergy’s Business Model Climate/Weather Data Competitive Behavior Legisiation/Regulation Capital Markets
Slide 4: Strategic Principles Are the Cornerstones of Our Business Model
Strategic Principles Are the Cornerstones of Our Business Model Business Strategy Financial Strategy Corporate Wealth Creation > Corporate Wealth Distribution
Slide 5: Business Strategy Is Grounded in Four Key Concepts
Business Strategy Is Grounded in Four Key Concepts BUSINESS STRATEGY Capital POV - Driven Develop robust POV; use it to drive all decisions Narrow Strategic Only enter (or stay invested in) businesses where we Disciplined Capital Conservation of Identify every risk; price, mitigate and monitor the o
Slide 6: Simple But Timeless Principles Guided Our Past Actions
Simple But Timeless Principles Guided Our Past Actions
Slide 7: Dynamic POV Drove Decisive Action
Dynamic POV Drove Decisive Action Divestitures 98-04 FPL Merger 00 ee Latin aed Security) | Hyperion America a Fossil Citi- EIS! F 7: Edesur rns sat Turbines cree Wholesale Results GB os Gea)
Slide 8: Including Divesting to Extract Maximum Value
Including Divesting to Extract Maximum Value 50% Owner C1] Entergy-Koch Trading ae | © ulf South Pipeline wa GULF SOUTH® {sora to 3 mernnt Lynch Closed%,.41/1/0: Undisclosed price [soa to TEXAS GAS NO_transmission, ve -a subsidiary of Loews Corp Closed /29/ $1.136B price SS Sales monetized value cre
Slide 9: Strategic POV - Exit
Strategic POV - Exit Example #1 TRADING RJ BUSINESS STRATEGY POV: Natural owners: Big| Sideline busi Global market Increasing sales pi Complex fuel price for pipelines interrelationships More risk, less margin Conservation of R Example #2 PIPELINE BUSINESS STRATEGY POV: Natural owners: EBITDA multip
Slide 10: Strategic POV - Grow
Strategic POV - Grow Example #3 NUCLEAR BUSINESS STRATEGY POV: Scale advantage Poor operator: Operate all Talent pool shrinking Turn-aro NRC pressures [ Environmental be! “zero emissions” Example #4 SUPPLY PLAN BUSINESS STRATEGY POV: High gas prices / low] technology Bid-ask spread in I PPAs Credit
Slide 11: Protecting Wealth
Protecting Wealth FINANCIAL STRATEGY Balance Sheet Financial Optimization Flexibility > a Balance Sheet Align leverage (including debt, guarantees and Optimization contractual obligations) with business risk profile Financial Flexibility Ensure cash is available to maintain | 40
Slide 12: Balance Sheet Optimization
Balance Sheet Optimization Capital Structure ; 04 and 05 S&P : Raised ratings* of ETR operating 1098 vs. 4004; 9 BES yes4NO4 subsidiaries; Raised EGSI secured and unsecured ratings } 04 05 3/31/05 - — wa ot pli EAl BBB+mmp A- 6i ratings Ecs| BBB- =} BBB=} BBB+ | ) upgraded) Fj BBB+mm) A- EM BBB+mm A
Slide 13: Cash Enabled Entergy to Act
Cash Enabled Entergy to Act Cash Generation and Investment 99-04; $B Cash Flow from Operating Activities 12.7B, $ ae oe 99-04 = $0.9B / year x Debt reduction [ts repurchases Beg. Cash $1.28 0.8 * — | Operating Maintenance Free Cash Proceeds Investments Ending Cash Capex* and Flow from Cash Flow Sale
Slide 14: Business + Financial Strategy = Wealth Creation
Business + Financial Strategy = Wealth Creation CORPORATE WEALTH CREATION 413
Slide 15: Wealth Creation: Growing Earnings in a Mature Industry
Wealth Creation: Growing Earnings in a “Mature” Industry Operational Earnings 99-04 and 05 Guidance: $/share 4.60-4.85 4.25 sold 3.81 EK 3.80 Weather “ impact 3.12 3.23 $0.32 2.17 99 00 01 02 03 04 05 Guidance As- Reported 2.25 2.97 3.23 2.64 4.01 3.93 4.60-4.85 14
Slide 16: Wealth Creation: Share Price Grows with Earnings / Cash Flows
Wealth Creation: Share Price Grows with Earnings / Cash Flows Entergy Share Price 1/1/98-3/31/05; $/share $71.90/share CAGR Mar 05 i \ 60 40 20 *\$16.69/share 0 Mar 00 1/98 = 1/99 1/00 = 1/01 1/02 1/03, 1/04 1/05 Source: Bloomberg 15
Slide 17: Wealth Creation: Market Cap Grows with Share Price
Wealth Creation: Market Cap Grows with Share Price Market Capitalization Entergy Shares Outstanding 1/1/98-12/31/04; $B 1/1/98-12/31/04; M 250 (1) 12% | 20 15.5B 2] 16 230 12 220 8 240 200 4 $4.2B 1/98 1/99 1/00 1/01 1/02 1/03 1/04 Mar 0 0 @® 7/20/99 - ETR announced $0.75B share repurchase program ©
Slide 18: Wealth Creation + Owner Focus = Wealth Distribution
Wealth Creation + Owner Focus = Wealth Distribution CORPORATE WEALTH DISTRIBUTION 4
Slide 19: Distributing Wealth to Owners
Distributing Wealth to Owners Dividends Paid and Net Common Share Repurchases 99-04: $B 0.8 0.5 Net Share —» Repurchases Dividends —» 99 00 A Announced©$0.75B > Share repurchase program “Includes purchases to offset dilution from stock options 0.3 01 0.3 0.2 02 03 04 A A ae Divide! inced increase [5
Slide 20: Total Shareholder Return
Total Shareholder Return Total Shareholder Return Five years ending 9/30/03 and 9/30/04; % El Index Awar EEl Index Award ti a a on > Back to Back , i re = i > 9/30/98 through 9/30/03 150 100 50 Enterg S&P 500 -50 9/98 sf 9/99 9/00 9/01 9/02 Source: Bloomberg S&P Electrics 9/03 150 100 50 -50 9/30/99
Slide 21: The Same 'Timeless' Principles Will Determine Our Future
The Same ‘Timeless’ Principles Will Determine Our Future
Slide 22: Initiatives Have Been Identified for 2005
Initiatives Have Been Identified for 2005 Operational and As-Reported Guidance 05; $/share $4.60 - $4.85 05 Guidance Key Drivers Entergy Nuciéanl) Contract pricing Uprates Productivity improvements Accretion Utility/ Parent/Oteny) Sales growth Rate actions Interest savings Higher O&M Accretion Energ
Slide 23: Strategic Opportunities Have Been Identified for the Future
Strategic Opportunities Have Been Identified for the Future Financial Aspirations Future Strategic Opportunities Utility Recover ongoing investments in rate base to improve reli ity and service Earn incentives under performance-based EPS LNear-term: Growth Long-term: 5-6% Returns 9% ROIC rates and/o
Slide 24: Grow Rate Base to Improve Reliability and Service
Grow Rate Base to Improve Reliability and Service Utility Rate Base Examples of Growth Capital Expenditures 99 vs. 04; $B rye strat WS Perryville plant acquisition (application filed with LPSC March 04) T139% Attala plant acquisition announced 3/17/05 (application to be filed with MPSC) 12.0 Additio
Slide 25: Increase ROE Through Incentives
Increase ROE Through Incentives Regulatory Mechanisms 04: % of rate base 3/23/05 - Approved Basic Regulatory Objective An environment that allows routine, timely and full recovery of capital investments in a manner that benefits both customers and investors “Includes System Energy Resources real-tim
Slide 26: Acquire Generating Resources through Supply Plan
Acquire Generating Resources through Supply Plan New Generation by Region that reduce prices to customers Generation Statist ye ananaes Bale {Spetatonat a ete conetuston total sw ‘oul rchant Tar Merchant Capacity 37/05 \ Acquisitio: Announce Entergy Short ~3-5GW Position Entergy Units > _ aioe 35yrs
Slide 27: Aggressively Pursue Solutions for Entergy Gulf States — Texas
Aggressively Pursue Solutions for Entergy Gulf States — Texas The Beaumont Enterprise March 2, 2005 Entergy needs right to pursue rate increases —_/Bill Provisions ‘ . i Amends state uti code to recognize Legislation Filed 2/24/05 that customer choice is not in \ FILED #2224 5 public interest in the
Slide 28: And Contingency Plan if Legislative and Regulatory Solutions Stall
And Contingency Plan if Legislative and Regulatory Solutions Stall Alternatives to Legislative or Regulatory Solutions Filed appeal of rate case dismissal in Travis Coun; - No prescribed timeline - Past experience indicates at least six months Evaluate separating Entergy Gulf States into a Tex - Pro
Slide 29: Resolve Market Power Proceeding
Resolve Market Power Proceeding Uncommitted pivotal Pass in all supplier screen markets Can rival generation serve wholesale load? Uncommitted market —_‘ Fail in the share analysis Entergy Does utility have control area dominant position (20% market of uncommitted Delivered Price Test Pass, Can riva
Slide 30: Achieve Approval of Transmission Proposal
Achieve Approval of Transmission Proposal Customers Generatio ansmission Distribution Independent Load serving Merchants entities Key Functions: 3/22/05 - FERC accepts Administer OASIS proposal to establish ICT QFs Calculate available flowgate capacity Grant or deny service Also: Oversee Entergy’s t
Slide 31: Effectively Manage Nuclear Portfolio
Effectively Manage Nuclear Portfolio Unsold Energy at 12/04 Sensitivity to $9/MWh 05E-09E; % of planned generation or $1/MMBtu Price Change* $/share 2/23/05 - NYPA selects ; nservatio Entergy in long-term RFP 87 % Unsold Ris that requested contracts starting as early as 08 62 31 5 0.0. 0.04 11 05E 0
Slide 32: Expand Capacity, Reduce Costs at Entergy Nuclear
Expand Capacity, Reduce Costs at Entergy Nuclear Planned Uprates Entergy Nuclear Non-Fuel O&M 04-06E;: MW 02-05E; $M 4,200 800 cr vy 700 4,058 e 24/0. agleae 600 As-Reported Regulatory Commission g approves uprate } 500 04 05E O6E 02 03 04 05E Adjusted* “02 adjusted for full year of Vermont Yankee a
Slide 33: Grow Nuclear Business through Acquisitions and Contracts
~)\ Grow Nuclear Business through Acquisitions and Contracts U.S. Nuclear Market © Small Scale Plants ETR Owned Plants ETR Contracts x 01-03 Rolling Average Capacity Factors < 90% Potential Market Single owner / 1-2 units Duane Arnold 1st small scale (32) vs.11 to come on market since 03 Production
Slide 34: Cooper Success — More Reliable / Less Risk
Cooper Success — More Reliable / Less Risk a WANO Index 03-04; Index Cooper 764MW 04 Year in Review IWANO Index Factors 89 93% capability factor run of 321 days Operational 68 performance Safety systems Radiological Chemistry Fuel 03 04 “We inspected you often and thoroughly and you passed the test
Slide 35: Pursue Additional Opportunities?
Pursue Additional Opportunities? Includes: Transform nuclear asset portfolio into a business (i.e., add other generation types or short position) Evaluate M&A opportunities 34
Slide 36: Aspiring to Maintain Flexibility
Aspiring to Maintain Flexibility FINANCIAL STRATEGY Aspiration Status < 50% net debt to net capital Currently at 45% net debt to net capital Debt to capital at 47% Also monitoring total debt/total capital to remain within rating agency ranges Aspiration Status Continuous improvement in ratings and b
Slide 37: Aspiring to Create Long-Term Wealth
Aspiring to Create Long-Term Wealth CORPORATE WEALTH CREATION Aspiration Status Near-term: 8-10% Long-term: 5-6% 05 EPS guidance consistent with near- term 8-10% target 8-10% EPS growth targeted in 06 driven by intrinsic growth and accretion 5-6% targeted thereafter Aspiration Status 9% ROIC Current
Slide 38: Aspiring to Distribute Wealth to Owners
Aspiring to Distribute Wealth to Owners CORPORATE WEALTH DISTRIBUTION Aspiration Status Targeting top quartile annual dividend growth (~5%) 20% increase announced 10/04 Second stepwise increase in two years (29% increase announced 7/03) Aspiration Status Invest at positive spread to cost of capital
Slide 39: Appendix
Appendix D> i Entergy
Slide 40: Appendix: Reg G Reconciliation
Appendix: Reg G Reconciliation Table 1: Cash Generation and Investment - Reconciliation of GAAP to Non-GAAP Measures 1999-2004 ($ in billions) 1999-2004 Beginning cash, January 1, 1999 (a) 12 Cash flow provided by operating activities () 127 Less: Net nuclear fuel purchases (0.3) Decommissioning tru
Slide 41: Appendix: Reg G Reconciliations
Appendix: Reg G Reconciliations Table 2: Consolidated Earmings - Reconciliation of GAAP ts Non-GAAP Measures 4999-20056 (8 per share) 1998 ooo 2001 20022009 200420058. As-Reported Earnings @ 2.25 2.97 3.23 264 4.01 3.93 460-485 Less Special tems Utility, Parent § Other Regulatory and reserve adjustm
Slide 42: Appendix: Reg G Reconciliations
Appendix: Reg G Reconciliations Table 3: Entergy Nuclear Non-FuelO &M - Reconciliation of GAAP to Non-GAAP Measures 2002 -2005E ($ in millions) 2002 2003 2004 2005E Entergy Nuclear As-Reported Non-Fuel 0 &M @) 643 780 695 660 Adjustments Fullyear Vermont Yankee and refueling amortization 112 : - - V
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