Entergy 2002 Annual Report Download - page 19

ENTERGY CORPORATION AND SUBSIDIARIES 2002 17
Entergy’s generating fleet
is one of the cleanest in
the nation. Approximately
85 percent of Entergy’s
power comes from clean
nuclear and natural gas
generation. As a result,
emissions of sulfur
dioxide, nitrogen oxide,
and mercury from Entergy
plants are far below the
industry average.
RECOGNITION
Corporate Leadership
In September 2002,
Entergy was notified that
it had met stringent
qualifications criteria and
was being added to the
Dow Jones Sustainability
Index World – one of only
three U.S. utilities among
15 worldwide listed on this
300-company index.
Membership on the DJSI
is awarded to those
companies that score in the
top 10 percent of eligible
companies in terms of
economic, environmental,
and social performance.
The NRC noted that “significant additional
resources have been committed by Entergy to
improvement initiatives. New plant management
has brought higher performance standards and
levels of accountability to the station.”
We’ve increased already strong security at all
of our nuclear sites. We’ve stepped up security
measures at a cost of approximately $1 million
per plant – a significant commitment to security,
but a small increase in overall costs.
Generating continued growth
Entergy Nuclear is driving growth by bringing the
newly acquired plants’ operating costs and capacity
factors to Entergy levels. The average production
cost of Entergy’s legacy plants for 2002 was
$15 per MWh. All our newly acquired plants have
higher production costs. We expect it to take
two to four years to bring these plants to Entergy
cost levels, adjusted for regional cost-of-living
differences. Total potential savings (some of
which have already been achieved) are expected to
be as much as $300 million a year.
Power uprates provide cheap new capacity with
the low marginal production cost of nuclear
generation. In summer 2002, Grand Gulf began
generating about 20 megawatts more electricity when
an auxiliary cooling tower project was completed.
We believe that significant opportunity for
consolidation remains in the nuclear industry.
Nuclear plants have substantially more value as
part of a large-scale operation, and most nuclear
companies operate less than 2,000 megawatts.
Entergy has a proven track record in successfully
closing nuclear plant transactions and delivering
earnings from acquired plants.
We’re also pursuing opportunities with nuclear
operators who may not want to sell, but still seek
the advantages of Entergy’s scale and expertise.
Through operating agreements or other innovative
arrangements, we hope to produce savings for
owners and share in the upside.
We’re also assisting other nuclear owners in the
re-licensing process. Providing these services not
only produces revenues and earnings, but also
provides a way to build relationships.
ntergy-Koch, LP, our energy trading and
marketing and gas pipeline business, has
maintained consistently profitable results in up,
down, and flat markets through a balanced and
disciplined approach. We’ll sustain growth through
market leadership and product innovation in
trading, and by capturing efficiencies and growth
opportunities in gas transportation and storage.
Consistent, balanced performance
Entergy-Koch delivers balanced earnings
from its regulated pipeline business, which
contributed about 40 percent of Entergy-Koch’s
2002 earnings, and its energy trading business,
which contributed roughly 60 percent.
Entergy-Koch Trading is itself a balance of
three complementary businesses. In addition to
its proprietary energy trading operations, EKT
provides two services to customers:
Physical optimization, which manages
customers’ power, gas storage, and
transportation assets to reduce their
costs and risk.
Financial optimization, which manages
customers’ price risks in the market to
protect business value.
EKT gathers market information and uses
advanced analytics to develop and apply its
market point of view. EKT’s disciplined approach
identifies upside opportunities while managing
downside risk.
Both EKT and Gulf South Pipeline contributed
to continued strong earnings in 2002.
Entergy-Koch Trading has maintained
consistent profitability in unusually challenging
industry conditions. EKT avoided the problems
affecting energy trading in 2002 and improved
EE
Sources of Generation
46%
15%
39%
Gas
Coal
Nuclear
ENTERGY-KOCH: DISCIPLINE AND BALANCE