Well Prepared

Our point-of-view-driven strategies, clean generating fleet, adaptable employees and an unrelenting focus on what really matters create a real, sustainable advantage for our utilities. Entergy is well prepared to meet whatever challenges lie ahead.

We are not satisfied with the total shareholder return we delivered in 2008. We remain committed to our aspiration to continually deliver top-quartile, positive shareholder return as we have done over the past 10 years.

Entergy Corporation is more than a group of people or a collection of assets. It is an adaptive organization defined by its values and aspirations, and governed by its business model, policies and systems. Entergy strives to create sustainable value for its many stakeholders along financial, societal and environmental dimensions. This approach has proven effective in meeting a variety of challenges over the past decade.

In fact, Entergy has demonstrated consistent industry leadership in multiple areas as evidenced by the following performance and recognition:

• Over the past 10 years, Entergy has delivered a total shareholder return of 269 percent, compared to 70 percent for the Philadelphia Utility Index and -13 percent for the S&P 500.
• Entergy is routinely recognized for its excellent corporate governance practices. In 2008, we 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. Entergy received a 98.5 percent index rating, placing us among the very top performers in the S&P 500.
• In December 2008, Entergy was honored to receive a special Platts Global Energy Award of Excellence in recognition of a track record of standout performance over the past decade. Entergy is one of only four companies worldwide to receive this special award.

In 2008, we delivered a total shareholder return of -28.3 percent due largely to unprecedented stock market declines. This performance placed us in the third quartile of our peer group. We are not satisfied with this performance, and we remain committed to our overarching financial aspiration to continually achieve top-quartile shareholder return. In 2008, we maintained a 48 percent dividend payout ratio and continued to repurchase shares under our approved share repurchase program. We returned approximately $1 billion to our shareholders in 2008 through dividends and share repurchases.

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 within 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. In the long term, we believe we can transform our utilities’ generation portfolio by replacing fuel cost with new and/or repowered, economic generation investments, which will enable 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 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.

Enexus/EquaGen: A Position of Rolling Readiness

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-off 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-off 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-off 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-off transaction. We named management teams for Enexus and EquaGen. We secured regulatory approvals from the Nuclear Regulatory 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-off 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-off 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.

Built on Operational Excellence

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 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.

The Entergy Advantage

Following the spin-off of our non-utility nuclear assets, Entergy will be a utility company with unique advantages that include excellent operational capabilities, a clean generation fleet, an exceptional portfolio transformation opportunity and a point-of-view-driven strategy that enables early mover positions in developing opportunities. With these advantages, we expect the next 10 years will offer as many or more value creation opportunities for Entergy and its shareholders as the past 10 years.