Entergy NON-UTILITY nuclear

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We are firm believers in the unmatched potential of clean nuclear power, generated by assets that are operated with exacting attention to safety and security.

Under the pending spin-off transaction, our non-utility nuclear fleet will be owned by Enexus Energy Corporation, a premier generation company, and operated by EquaGen LLC, a joint venture owned equally by Entergy Corporation and Enexus.

We pursued the spin-off of our non-utility nuclear assets in order to unlock the value of this business, value that has not been fully realized or recognized with the business embedded in a company that includes a regulated utility business. We believe the spin transaction can generate value in multiple ways including:

  • As an independent company, Enexus will have the opportunity to maintain an efficient risk profile for its business. That means optimizing its capital structure with increased borrowing capacity and pursuing a more flexible generation hedging strategy aligned with the risk profile of a merchant business rather than a utility. In addition, as a stand-alone entity, Enexus will have greater flexibility to acquire other assets and businesses.
  • Separating Entergy’s utility business from the non-utility nuclear business will ring-fence both businesses from risks that exist in the other. This will provide greater transparency to investors, rating agencies and other stakeholders for both businesses.
  • The spin transaction provides Entergy shareholders with the valuable option to trade the utility and non-utility nuclear businesses independently. We believe that good corporate governance dictates that the decision to buy, hold or sell the non-utility nuclear segment of our business be made available to individual shareholders to execute consistent with their individual points of view.

The value inherent in the spin transaction and the underlying non-utility nuclear plants exists today and will continue to exist in the future. We are in the enviable position of being able to wait to execute this transaction when conditions align with our long-term points of view.

Ready to Act When the Time Is Right

Throughout 2008, we worked diligently to be in a position to execute the spin transaction. We named management teams for Enexus and EquaGen. We secured regulatory approvals from the Nuclear Regulatory Continued next page

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Commission and the Federal Energy Regulatory Commission, obtained a private letter ruling from the Internal Revenue Service and continue to seek approvals from the Securities and Exchange Commission and the states of New York and Vermont. We also executed a $1.2 billion credit agreement on behalf of Enexus in spite of one of the most turbulent financial markets in recent history.

However, even as we prepared to execute the spin from an operational perspective, financial market conditions continued to deteriorate. In the third quarter, conditions reached a point where we were simply precluded from launching any of the planned high-yield financing for the transaction. Combined with pending regulatory approvals, the spin was unable to be completed in 2008. We are now in a position of rolling readiness, prepared to act promptly once we receive acceptable regulatory approvals and the timing is right to access financial markets.

Meeting the Challenge: Delivering clean, vital nuclear power with operational excellence

Built on Operational Excellence

Even as teams worked to prepare for a spin transaction, other teams of managers, operators and engineers focused on operational excellence at our non-utility nuclear fleet. In 2008, our non-utility nuclear fleet achieved its highest level of generating output under Entergy ownership. In addition, production costs for our non-utility nuclear fleet in 2008 were $22 per MWh and our capability factor reached 95 percent. By comparison, before Entergy took ownership of these assets, production costs were $30 per MWh and the capability factor was 73 percent.

Other operating milestones in 2008 include recognition by the Nuclear Energy Institute with a Top Industry Practice Award, for Entergy Nuclear’s team approach to implement an integrated operational data exchange to give the company access to the vendor’s engineering programs. These awards are given to nuclear energy operators for innovations that improve safety, economics or plant performance. In addition, in August 2008, Indian Point Energy Center successfully placed into service a new state-of-the-art siren system. Reliability testing was completed during the fourth quarter, with the three tests successfully exceeding the reliability threshold of at least 97 percent. The original siren system will remain in place in standby mode while performance evaluation of the new system continues.

Safety is our top priority in our nuclear operations, as it is in all Entergy operations. Within our non-utility nuclear fleet, our work sites at James A. FitzPatrick Nuclear Power Plant and Pilgrim Nuclear Station have earned Star status under the Occupational Safety and Health Administration’s Voluntary Protection Program, which is Continued next page

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the highest safety rating for an industrial work site. In addition, Vermont Yankee Nuclear Power Station received merit designation, which is considered an effective stepping stone to Star status.

Operating our nuclear fleet safely, securely and with industry-leading performance is quite simply part of our DNA at Entergy. This will continue to be our operating philosophy after the spin transaction, when the same team will operate Enexus’ nuclear assets as members of the EquaGen nuclear services joint venture organization.

License Renewal Process on Track

In September, the Nuclear Regulatory Commission renewed the license for the James A. FitzPatrick Nuclear Power Plant for another 20 years. We continue to make progress on license renewals for our other non-utility nuclear plants:

  • At the end of October, the Atomic Safety Licensing Board issued a favorable ruling on license renewal for Pilgrim Nuclear Station. We expect an NRC decision by mid-2009.
  • In November, the Atomic Safety Licensing Board ruled in favor of Vermont Yankee Nuclear Power Station license renewal on two of three contentions and imposed a conditional favorable ruling on the third contention. Vermont Yankee has since complied with the condition for the third contention. We expect the NRC decision on Vermont Yankee license renewal in the second half of 2009. We continue to work with Vermont regulators and legislators to gain state approvals for the required Certificate of Public Good to ensure local markets have continued access to clean, affordable power from this vital nuclear resource for another 20 years. In fact, overall conclusions from the recent State Reliability Study of Vermont Yankee affirmed its commitment to excellence, indicating that the plant is reliable and can be operated reliably in the future.
  • Indian Point Energy Center Units 2 and 3 are on track to receive an NRC decision on license renewal in early 2011. In furtherance of license renewal, in 2008 Entergy Nuclear embarked on an unprecedented independent evaluation of safety, security and emergency preparedness of the Indian Point Energy Center, performed by a 12-member panel of highly credentialed experts with over 400 years of industry and/or academic achievement. The Independent Safety Evaluation Panel reported its findings in July 2008, reaching two overarching conclusions. First, Indian Point is safe, meets NRC requirements and safety systems are well maintained and reliable with performance, comparing favorably to high-performing plants in most nuclear safety aspects. However, it also concluded that relationships with the general public and officials, particularly on matters of emergency preparedness, are not healthy and must be rebuilt. We applaud the panel’s effort and have responded to the report with action plans to implement panel recommendations. These plans will help Continued next page
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move the Indian Point site to an even higher performance level, consistent with the commitment to operational excellence that is a hallmark of Entergy-operated assets. Entergy Nuclear continues to work through the license renewal process with the NRC and most recently received draft environmental impact and safety evaluation reports.

Point-of-View-Driven Hedging Strategy

We continue to pursue opportunities with natural buyers and other market participants in the region served by our non-utility nuclear fleet who can commit for large blocks of power on a longer term basis and with other counterparties. We layer in hedges on an annual basis that are consistent with our dynamic points of view on factors affecting commodity prices, including carbon legislation and regional generation and infrastructure constraints. Our objective is to avoid risks associated with attempting to time the market.

As of year-end 2008, 86 percent of our planned generation for 2009 was under contract, 66 percent for 2010 and 46 percent for 2011 at average energy prices per MWh of $61, $60 and $56, respectively.

Opportunities for a Premier Generation Company

When the spin transaction is executed, Enexus will be a premier generation company. A number of short- and long-term growth opportunities exist for an entity with the assets and capabilities of Enexus.

In the short term, Enexus will be able to execute a flexible generation hedging strategy that is consistent with its risk profile as a merchant business. Despite the recent downturn, our point of view on power pricing over the long term in the Northeast remains bullish given capacity constraints in that market region and the likelihood of carbon legislation. In addition, Enexus will evaluate the opportunity to further increase its generation capacity through uprates at its existing fleet of plants. Past uprates have added 245 megawatts of generating capacity to the non-utility nuclear plants.

In the long term, Enexus growth opportunities also include potential acquisitions of existing U.S. nuclear assets, complementary generation assets or businesses with complementary assets. As a 50 percent owner of EquaGen, Enexus can also realize growth from the provision of EquaGen’s nuclear services to other operators. EquaGen has the ability to offer a complete life cycle of services including construction management, operations, license renewal processes and decommissioning.

Ultimately, we believe Enexus has the potential to deliver $2 billion in earnings before interest, taxes, depreciation and amortization through higher power prices and/or incremental investment. A combination of heat rate expansion, carbon legislation, capacity markets and/or changes in gas prices are expected to affect power prices.

Non-Utility Nuclear Fleet Capability Factor
Non-Utility Nuclear Fleet Production Costs

Even as we pursued plans to spin our non-utility nuclear fleet, our teams of nuclear engineers, operators and managers delivered another outstanding year of operating performance.