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Last year, the United States fell into the deepest recession since 1982, the same year the cult-classic film, Fast Times at Ridgemont High was released. One of the lead characters, Jeff Spicoli, played by recent Academy Award winner, Sean Penn, was perhaps the ultimate slacker, but spoke without the slightest regret or shame when responding to Mr. Hand, his stern instructor who had learned his craft and the lessons of his area of knowledge well.

In the movies, that kind of guiltless admission of our failings or limitations is refreshing, if not amusing.

In the real world, it’s not so funny. Not “knowing” is sobering. It tends to bring on fear, paralysis and avoidance. The complete truth is, like Jeff Spicoli, there is a lot “I don’t know” right now.

I don’t know how long the economic recession will last or how painful it will ultimately be. I don’t know when the financial markets will return to normal, or if normal is forever changed. I don’t know what natural gas and power prices will be at the end of the year given the above unknowns. I don’t know when new nuclear development will become a reality. I don’t know what the 2009 hurricane season holds in store for those on the Gulf Coast. I don’t know when we will have a smart power grid in the United States, what it will cost or whether the customers we serve will make lifestyle changes needed to realize its full value. I don’t know what action if any Congress will take on climate change. It’s a long list. There are a lot of “I don’t knows.”

On the other hand, there are some things I do know. I know at Entergy we will continue to operate our assets safely and efficiently. I know we will continue to make effective and efficient investments in our generation portfolio and transmission infrastructure based upon the best available information stressed under a wide range of scenarios. I know if we are to achieve greater energy independence as a nation, the nuclear option has to be part of our future and we will preserve the option to participate as issues sort out. I know we will be ready to act and transact when market conditions align with our points of view on risk, cost of capital, commodity prices and other critical market factors. I know we will continue to stabilize our own carbon emissions and advocate for thoughtful carbon legislation because we are true believers that climate change is real and the risk is totally unacceptable. I know that Entergy employees will face whatever challenges lie ahead with resilience, courage and optimism. I know this because they have proven it time and time again over the past 10 years.

Knowing these things gives me a bullish outlook, even as we face uncertainties of a magnitude we have not seen since possibly the Great Depression. As we’ve proven in years past, at Entergy, when we face extraordinary challenges or adversities, we generally find opportunities that we had not envisioned in a “steady state” economic or business climate.

Regardless of the market turmoil in 2008 – as frustrating and disappointing a year as I can recall – I can look back with pride on what our people did accomplish. Here are a few of their achievements during these turbulent times.

After being hit within a two-week period by two of the most destructive storms we’ve ever experienced, Entergy’s utility employees set records for the fastest and, most importantly, the safest storm restorations in company history. It was an exceptional, heroic effort by our employees and the result of extensive preparation, hard work and commitment. Entergy’s performance was once again recognized by the Edison Electric Institute with Entergy receiving both the Emergency Recovery and Emergency Assistance awards. Entergy is the only company recognized for these achievements every year since the inception of these awards in 1999.

We pursued an active regulatory agenda in each of our service territories to ensure we are well positioned to create long-term value for our Continued next page

Fast Times at Ridgemont High (1982)
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utility customers and Entergy shareholders. In keeping with our long-term aspiration to lower “real” base rates – with a base rate path less than projected inflation – even as we transform our generation fleet, provide better, more reliable service and reduce environmental emissions; Entergy’s utility operating companies held residential customer base rates flat in nominal terms in 2008.

We took the necessary steps to execute the spin-off of our non-utility nuclear assets to Enexus Energy Corporation and to establish our nuclear services joint venture, EquaGen LLC. We named leadership teams for both companies, worked to secure the required regulatory approvals, executed a $1.2 billion credit agreement on behalf of Enexus, in spite of being faced with some of the most turbulent financial markets in recent history, and took the necessary actions to ensure operational readiness for two new companies. As a result, we are now in a position of “rolling readiness,” prepared to act when acceptable regulatory approvals are received and financial market conditions are conducive to move forward.

The non-utility nuclear fleet closed out the year with an outstanding performance record, achieving the highest level of generating output under Entergy ownership.

As a result of routinely testing the adequacy of liquidity under various stress scenarios, Entergy executed operations throughout the year with sound financial measures. We ended the year with $2.6 billion of ready liquidity, including $1.9 billion of cash and cash equivalents on hand, without any forced need to access capital markets during those turbulent times.

In 2008, with investors’ confidence again badly shaken by headline failures in corporate governance and oversight, we were again recognized for our own corporate governance practices. Entergy received a perfect 10 rating from GovernanceMetrics International. Of 4,200 companies reviewed, just 1 percent received a perfect score. Institutional Shareholder Services Corporate Services awarded Entergy a 100 percent rating for corporate governance in its utility ranking. It awarded Entergy Corporation a 98.5 percent rating, placing us near the very top of performers in the S & P 500.

For the seventh year in a row, Entergy was named to the exclusive Dow Jones Sustainability World Index that recognizes the top 10 percent of the biggest 2,500 companies worldwide based on long-term economic, environmental and social criteria. This year marks the third consecutive year we were the only U.S. utility listed on the World Index. Entergy was also named to the Dow Jones Sustainability North America Index for the fourth consecutive year, every year since its inception.

In recognition of Entergy’s leading environmental and social performance, Storebrand Investments SRI recently recognized Entergy with “Best in Class” status. Entergy was one of only two U.S. companies to achieve this status.

Entergy was honored to receive a special Platts Global Energy Award of Excellence in recognition of standout performance year after year over the past decade.

In December 2008, Entergy was honored to receive a special Platts Global Energy Award of Excellence in recognition of standout performance year after year over the past decade. Entergy was cited for being a finalist 39 times in the Platts Global Energy Awards competition, far more than any other energy company. We are gratified to be one of only four companies in the world to be recognized with this special award. Continued next page

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Like Sean Penn who transformed from the slacker character Jeff Spicoli to a truly respected actor with an extraordinarily diverse body of work and two Academy Awards, we have come a long way from our reputation as an “underachiever” 10 years ago.

Financially, we maintained a 48 percent dividend payout ratio and returned approximately $1 billion to shareholders through dividends and share repurchases while reporting record earnings. Our as-reported earnings were $6.20 per share in 2008 and operational earnings were $6.51 per share. In spite of these achievements, disappointing doesn’t begin to describe our 2008 financial performance. Our total shareholder return was a dismal -28.3 percent.

Our mission is pretty simple, you entrust your money to us, we put it to good use, manage the risk and return it to you with a fair profit. In 2008 that didn’t happen. Despite the fact we had record accounting earnings, economically, your investment lost money (i.e., the stock price at which you can sell declined in value). Financial statements are just paper, and if the paper you hold (stock certificates) isn’t worth as much as it used to be then we aren’t achieving our goals or aspirations.

That was one year. And now we must dig out of that hole and get back on track to achieve our aspirations. As a point-of-view-driven company, we believe we can distinguish ourselves in turbulent times and that we have the processes and the mentality to change direction to seize unexpected opportunities, or adapt quickly to changed circumstances to protect our stakeholders.

Meeting the Challenge: For Entergy, flexibility and optionality are preferable to strategy locked in place based upon a“certain future.”

Our Utility Businesses: Focusing on What Really Matters

In the utility industry, what we do matters. Providing reliable, affordable and clean power, with safety above all else, matters to our customers, employees, regulators and shareholders. At Entergy, when we face challenges – regardless of how difficult or incredible they may be – we maintain a steady focus on what really matters.

In 2008, we turned in a record-setting response to two maximum Category 2 hurricanes that hit in a two-week period. Our utilities are the best in the business at restoring quality of life for our customers in the wake of storms, and our employees demonstrated a remarkable ability to stay focused on what really matters – safely restoring power as quickly as possible to our customers. Thanks to earlier constructive regulatory actions, storm reserves were funded in Louisiana and Mississippi, and there is precedent for innovative cost recovery mechanisms. Recovery of the costs we incurred in the $1.3 to $1.4 billion range for storm restoration is one of our top priorities for 2009.

We also continued to pursue a full regulatory agenda in 2008 that included storm cost recovery, rate filings and regulatory approval for portfolio transformation initiatives. Long term, we believe we can transform our utilities’ generation portfolio by replacing fuel cost with new and/or repowered, economic generation investments, enabling us to provide clean, reliable, affordable power to our utility customers.

In 2008, we closed on two modern, efficient resource acquisitions – the Ouachita Power Facility and the Calcasieu Generating Facility. Further, in response to rapidly changing financial and commodity markets and the economic outlook, we temporarily suspended other long-term resource procurement efforts under Continued  next page

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our portfolio transformation strategy in the third quarter (with one exception), considering it prudent to take a step back and re-evaluate a number of key considerations including new build construction cost estimates. While the utilities continue to have other resource needs, we believe the majority can be managed through shorter term procurements for some period of time.

Entergy also requested temporary suspension of federal regulatory reviews of two new nuclear license applications for Grand Gulf Nuclear Station and River Bend Station. This action does not reflect a change in our position on nuclear power as it relates to the goals of energy independence, environmental cleanliness and economic growth. The utilities continue to see cost-effective new nuclear technology to be a part of their future, but deemed it necessary to evaluate alternate technologies, vendors and appropriate timing.

Going forward, we see the need for additional regulatory action as Entergy Utilities enter a potentially capital-intensive investment phase. Investors today are demanding significantly higher compensation for investment risk, greater assurance as to the risk being taken and greater certainty that a deal is a deal. To ensure ongoing access to capital, each utility operating company must be given a reasonable opportunity to earn, year-in, year-out, a fair return on equity consistent with investments of similar risk in order to ensure continued access to capital. Our utilities will continue to work with local and state regulators to create opportunities to earn a fair return for investors while ensuring customers have ongoing access to affordable power.

Enexus/EquaGen: A Position of Rolling Readiness

In 2008, we made good progress in pursuit of the spin-off of Entergy’s non-utility nuclear business – Enexus – to our shareholders and the formation of a nuclear services joint venture – EquaGen – to be owned equally by Entergy and Enexus. The fundamental value proposition of this proposed transaction has not changed from what we described to you in last year’s annual report. We believe the ability to achieve an optimal capital structure (e.g., lowest long-term cost of capital) will enable Enexus to realize greater value for its shareholders, as well as the opportunity to execute its generation hedging strategy consistent with a merchant business risk profile. Finally, if anything, the current market turmoil illustrates the value to shareholders of having an option to trade Enexus stock separately from Entergy stock.

We continue to pursue regulatory approvals and take the operational steps required to execute the transaction. We call it a posture of rolling readiness. When financial market conditions align once again with our point of view and we have received acceptable regulatory approvals, we will be ready to pursue up to $4.5 billion of high-yield financing contemplated to complete the spin-off. We are not tied to a specific timeline and in fact, are in the enviable position of being able to wait.

Even as we pursue the spin-off, our teams of nuclear operators, engineers and managers remain 100 percent focused on operational excellence at our nuclear plants. In 2008, our non-utility nuclear fleet achieved the highest level of generating output since Entergy took ownership of these assets.

The capability factor for these assets reached 92 percent for outage cycles ending in 2008 on 4,998 MW of capacity, up from 76 percent for outage cycles ending in 1997 on 4,753 MW of capacity, before Entergy assumed ownership. That difference of 7.1 million MWh translates to value of nearly $250 million at the 2008 average realized energy price of $57 per MWh. In other words, increased reliability and power uprates have added significant value.

In September 2008, we secured license renewal through 2034 for the James A. FitzPatrick Nuclear Power Plant. We expect a Nuclear Regulatory Commission Continued next page

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decision by mid-2009 on license renewal for Pilgrim Nuclear Station and in the second half of 2009 on license renewal for Vermont Yankee Nuclear Power Station. We expect a decision in early 2011 on license renewals for Indian Point Energy Center Units 2 and 3.

We remain firmly committed to maximizing the value that exists in our asset portfolio. As markets and the economy change, we will align our strategies appropriately. The sequence of events that we employ to unlock that value will reflect the realities of the market. We are not sitting still; just waiting. We are considering all alternatives and exhausting all possibilities to ensure we achieve our stated goals and aspirations as soon as practical for our stakeholders.

Meeting the Biggest Challenge of Our Times

If you think the events of 2008 were bad, just think for a moment about a future world that is potentially uninhabitable for some species. We don’t always feel or see the impact of climate change in our daily lives, but the long-term implications are substantially more ominous than those of a cyclic economic downturn. As I have suggested, we have a choice. We can pursue a path of inaction and succumb to the irreversible impact of climate change on our planet with its dire consequences or we can embark on a concerted effort to invest in a sustainable, clean energy future.

I believe we are running an enormous risk – so great as to be unquantifiable in economic terms – if we continue to ignore the scientific community’s warnings regarding the impact of climate change. As a responsible, prudent nation we should be working to mitigate the chance of a truly catastrophic outcome by immediately reducing our carbon dioxide emissions.

It is clearly the responsibility of the United States to lead on the climate change issue. Americans use nearly six times the energy per capita as the Chinese and twice as much as other developed countries. The United States is in the best position to find and fund new technologies and set the standard for meaningful action on climate change. I believe that action should include an immediate, meaningful cap on future CO2 emissions in the United States through either a cap-and-trade system or carbon tax.

Conventional coal plants are the single largest source of greenhouse gases in the world, accounting for nearly a third of global energy-related CO2 emissions. Electricity consumption in China is projected to nearly triple by 2030 with more than 75 percent being supplied by coal. To meet that increase in demand, China and other developing economies are building new coal plants at a rapid pace. While millions of dollars are being spent to develop renewable sources of energy, the reality is that renewables are simply too expensive to replace the world’s growing installed base of coal plants. A postcombustion, carbon-capture solution for conventional coal plants is the single biggest opportunity we have to reduce greenhouse gas emissions. This should be the top priority for research and development spending and U.S. policies.

In the past year, Entergy leaders have spent significant time communicating our position on climate change to industry and government leaders. Even though there are many voices when it comes to climate change, I believe we speak from the most credible position because Entergy has already taken action on climate change. We made our second voluntary commitment to stabilize our own greenhouse gas emissions from 2006 to 2010 at 20 percent below year 2000 levels after successfully completing our first voluntary commitment which was made in 2001. In 2006, 2007 and again in 2008, we more than met our cumulative goal for curtailing CO2 emissions.

It’s time for our national leaders to act on this critical issue. The risks are simply too great to be ignored, and political expedience must take a back seat to intellectual honesty. Any plan that doesn’t also work for developing countries is no plan at all. Continued next page

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Taking the Long View of Challenging Times

Regardless of all the reasons we might have to feel badly about the economy or pessimistic about the future, I have great confidence we will figure it out and get it right. Some would say the world has changed forever. I don’t know about that. But I do know in business, ultimately, truth and substance win out

Entergy received a perfect 10 rating from GovernanceMetrics International for its corporate governance practices.

over a good “sales pitch.” For Entergy, flexibility and optionality are preferable to a strategy locked in place based upon a “certain future.” We exist to serve our stakeholders – whether customers, owners or society as a whole. Any strategy or mission that does not make the world better off is not sustainable. We cannot claim all of our stakeholders were made better off in 2008. But we do believe we have all that is necessary to change that including:

  • Extraordinary, dedicated employees,
  • Extraordinary support from a diverse and talented Board of Directors,
  • Extraordinary opportunities in a time of extraordinary uncertainty.

In Fast Times at Ridgemont High our slacker friend finds himself in the right place at the right time and realizes riches overnight. Unfortunately, his self-indulgence causes him to lose it almost as quickly.

Some might argue our financial success in nuclear was simply a matter of being in the right place at the right time. On the other hand, no one can argue that the value added has not been beyond anyone’s expectations and a direct result of hard work and considerable expertise. No one can credibly argue the value added from the proposed spin-off is not real nor substantial. The market is not conducive to finalize this effort at the moment, but it will be. Investors and lenders will ultimately return to the market; more carefully and smarter. As a result, in the long term Enexus is well positioned. Enexus represents real long-term value and substance. It makes something that makes the world better and it does it with a clean generating fleet and less expensively than alternatives offered by competitors. It creates value.

At the same time, this has not been a 10-year journey defined by one fortunate turn of events (i.e., nuclear acquisitions made valuable by rising fossil fuel prices). We are a point-of-view-driven company and we entered into these transactions fully expecting that outcome (in addition to creating increased reliability and safety). Over the last 10 years based on a dynamic point of view, we have completed nearly 40 transactions realizing substantial value (e.g., sale of Entergy-Koch Trading) or avoiding potential losses (e.g., canceling/selling turbines on order when the independent power market was showing early signs of weakness). Our point of view enabled us to be an early mover, while others let wishful thinking trump cold eyes analysis.

That same discipline, that same refusal to either follow the herd or remain in love with our own ideas, despite changing circumstances, will drive our actions going forward. We have created substantial value over the last 10 years and unlike our slacker friend, Spicoli, we will not succumb to self-indulgence and let it all slip away.

As distressing as 2008 was in many ways, we firmly believe we are focused, adaptable and ready to meet the challenges that lie ahead. We have the right checks and balances in place to ensure we are appropriately balancing risk and reward, stability and growth. While we may not be able to predict what comes next, or even be entirely predictable from the outside looking in, there is one thing you can count on. We will be relentless in seeking value and managing risk, and we will be well prepared to seize whatever opportunities may come our way in these uncertain times.