Wolfe Research Utilities & Energy Conference Utilities - PowerPoint PPT Presentation

Wolfe Research Utilities & Energy Conference Utilities Transition Stories discussion October 3, 2018

1 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. Such forward-looking statements include, among other things, statements of Entergy’s plans, beliefs or expectations included in this presentation. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this presentation. Except to the extent required by the federal securities laws, Entergy undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Forward-looking statements are subject to a number of risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements, including (a) those factors discussed elsewhere in this presentation and in Entergy’s most recent Annual Report on Form 10-K, any subsequent Quarterly Reports on Form 10-Q and Entergy’s other reports and filings made under the Securities Exchange Act of 1934; (b) uncertainties associated with (1) rate proceedings, formula rate plans and other cost recovery mechanisms, including the risk that costs may not be recoverable to the extent anticipated by the utilities and (2) implementation of the ratemaking effects of changes in law; (c) uncertainties associated with efforts to remediate the effects of major storms and recover related restoration costs; (d) nuclear plant relicensing, operating and regulatory costs and risks, including any changes resulting from the nuclear crisis in Japan following its catastrophic earthquake and tsunami; (e) changes in decommissioning trust fund values or earnings or in the timing or cost of decommissioning Entergy’s nuclear plant sites; (f) legislative and regulatory actions and risks and uncertainties associated with claims or litigation by or against Entergy and its subsidiaries; (g) risks and uncertainties associated with strategic transactions that Entergy or its subsidiaries may undertake, including the risk that any such transaction may not be completed as and when expected and the risk that the anticipated benefits of the transaction may not be realized; (h) effects of changes in federal, state or local laws and regulations and other governmental actions or policies, including changes in monetary, fiscal, tax, environmental or energy policies; and (i) the effects of technological changes and changes in commodity markets, capital markets or economic conditions, during the periods covered by the forward-looking statements. This presentation includes the non-GAAP financial measure of normalized ROE when describing Entergy’s results of operations and financial performance. We have prepared a reconciliation of this financial measure to the most directly comparable GAAP measure, which can be found in the appendix of this presentation. Further information can be found in Entergy’s investor earnings releases, which are posted on our website at www.entergy.com.

2 Entergy: We Power Life Customers Employees Communities Owners Earn top-quartile Achieve Deliver Deliver organizational top-decile top-quartile top-quartile health score corporate social customer returns and top-decile responsibility satisfaction safety performance performance

3 In transition, our objective is two-fold Steady, predictable growth at the Utility… …while managing risk  Customer-centric capital plan  Earnings growth at our Utility,  Progressive regulatory Parent & Other segment  Dividend growth constructs  Disciplined project management  Orderly wind-down of EWC

4 Successfully executing over the past few years Investing in the Utility EWC wind-down Constructive regulation  $13B capital investment  Arkansas legislation /  Decisions to close or sell merchant nuclear over the last five years E-AR forward test year FRP plants  Major generation  E-LA FRP projects approved • FitzPatrick sale improvements  Transmission expansion • Agreements to sell  E-MS FRP with forward- VY, Pilgrim and  Joined MISO in 2014 looking features Palisades  MTEP 15, 16 and 17  E-TX DCRF and TCRF  IPEC license renewal completed  Revenue price risk  System Agreement  AMI under way reduction termination  E-LA business  Focus on nuclear combination operations  Employee support

5 Exiting the merchant business - finishing strong at EWC FitzPatrick Vermont Yankee Pilgrim Indian Point Palisades Shutdown Sold (2017) Planned Planned Planned (2014) shutdown shutdown shutdown (2019) (2020 / 2021) (2022) Agreement Agreement IP2 in final Agreement to sell to sell to sell operating (targeted 2018) (targeted 2019) (targeted 2022) cycle

6 A clear and robust Utility capital plan will fuel growth 2018E–2020E as of Analyst Day Power generation–$2.6B Nuclear–$1.6B $11.0B Transmission–$2.7B Distribution and utility support–$4.2B Capital plan as of June 2018; does not reflect potential developments and/or updates since June 2018, including the Choctaw Energy Facility planned acquisition (announced 8/22/18)

7 Lowest customer rates Goal to maintain rate advantage 2017 average retail price by parent company ; ₵ per kWh ETR 7.58 Source: S&P Global Market Intelligence Regulated Retail Price of Electricity published 7/19/18

8 Efficient cost recovery mechanisms ~90% of capital plan recovered through timely mechanisms Illustrative Capital plan recovery by mechanism Rate cases Forward-looking FRPs Riders Traditional FRPs Chart reflects 2018E–2020E capital investment as of June 2018, not rate base; capital projects will be reflected in rate base when they are closed to plant; for multi-year projects there will be a timing difference; does not reflect potential developments and/or updates since June 2018, including the Choctaw Energy Facility planned acquisition (announced 8/22/18)

9 Longer-term, we are shifting from supplier to partner From supplier To partner

10 Focused on delivering tailored customer solutions Technology advances make it possible

11 Strategic investments to further our journey Building an integrated energy network Grid infrastructure Enabling Distributed technologies resources replacements / upgrades Generation Customer Distribution Transmission

12 Entergy is positioned to seize growth opportunities Track record Efficient of successful regulatory execution frameworks Efficient vertical Low rates integration Environmental Prepared for and social change responsibility Clean Economic generation development

13 Appendix and Regulation G reconciliations

14 Utility overview 2017 electric retail sales 1 ; % E-LA E-AR Governmental 2 • Electric utility • Electric and gas utility Industrial • 709,000 customers • Number of customers 30 – Electric 1,078,000 • Authorized ROE range: Residential – Gas 93,000 42 9.25%–10.25% • Authorized ROE ranges: • Forward test year FRP – Electric 9.95% (2017 26 test year); 9.2%–10.4% (2018 − 2019 test years) Commercial – Gas 9.45%–10.45% • Electric FRP, gas RSP 2017 generation portfolio 2 ; % E-MS E-NO E-TX CT/CCGT/ Coal hydro/solar • Electric utility • Electric and gas utility • Electric utility 10 • 449,000 customers • Number of customers • 448,000 customers Nuclear 30 – Electric 200,000 • Authorized ROE range: • Authorized ROE: 9.8% 24 – Gas 106,000 9.28%–11.36% • Rate case • Authorized ROE ranges: • FRP with forward-looking – Electric 10.7%–11.5% features 36 – Gas 10.25%–11.25% • Rate case Legacy gas/ oil Customer counts at the end of period 12/31/17 1 Percent of 2017 weather-adjusted GWh electric retail sales 2 Percent of owned and leased MW capability for generation portfolio as of 12/31/17

15 Entergy Arkansas E-AR (currently in rates) Metric Detail Authorized ROE 9.25%–10.25% Rate base $7.095B retail rate base (2018 test year) WACC (after-tax) 4.67% Equity ratio 31.69% (45.48% excluding $2.2B of ADIT 2 at 0% cost rate) Regulatory Forward test year FRP (2017–2021 construct annual test years); result outside authorized ROE range resets to midpoint; maximum rate change 4% of filing year total retail revenue; true-up of projection to actuals netted with future LTM 6/30/18 ROE; % projection Last rate change $71M increase effective 1/2/18 8.1 7.9 Riders MISO, capacity costs, Grand Gulf, tax adjustment, energy efficiency, fuel and 1 purchased power As-reported Normalized 1 Excludes special items and normalizes weather and income taxes; does not reflect regulatory ROE, which includes other adjustments 2 The $2.2B of ADIT reflects the pre tax reform federal tax rate (35%); will continue to reflect that amount in its cost of capital calculation by including the regulatory liability for the excess ADIT until the value of the excess ADIT has been refunded to customers