Entergy 2008 Annual Report Download - page 6

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.
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 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
MEETING THE CHALLENGE:
For Entergy, flexibility and optionality are preferable to a
4