Entergy 2010 Annual Report Download - page 25

ENTERGY CORPORATION AND SUBSIDIARIES 2010
EWC employees achieved impressive
nuclear results in 2010. Due in part to
the increased focus of the new EWC
organization, 2010 hedging activities
were aggressively stepped up.
to an abundance of shale gas production. While shale gas may continue
to limit power prices, possible environmental restrictions on hydraulic
fracturing could exert upward pressure on production costs. Some recent
announcements by U.S. natural gas producers to shift focus to wet or oil-
focused plays and expiring cash-generating hedges will help drive natural
gas rig count reductions and an eventual return to a balanced market.
EWC continues to monitor developments in natural gas markets as part
of maintaining a well-informed point of view on forward power prices.
Forward prices for 2011 through 2014 ended the year $9.25 to $12.50 per
MWh below 2009 levels in the New York Independent System Operator and
ISO-New England regions.
In light of a bearish point of view on power prices, EWC increased its
sold-forward position on planned nuclear production in 2010. A greater
percentage of planned generation equating to nearly 13 terawatt hours for
the three-year forward period was under contract at year-end 2010 than
at year-end 2009. EWC is currently one of the best-positioned non-utility
generators in the country relative to near-term commodity prices.
Evaluating Growth Opportunities
At current forward prices with its existing asset portfolio and in-the-
money hedges that will roll off in the coming few years, EWC is expected
to deliver declining adjusted earnings before interest, taxes, depreciation
and amortization for the period through 2014 compared to 2010. However,
several growth opportunities and potential upsides exist for this business.
On an ongoing basis, EWC evaluates opportunities to acquire and
develop other generation assets including nuclear, hydro, natural gas and
other fossil assets. In addition, Entergy’s experienced nuclear team is well
positioned to offer construction management, operations, license renewal
and decommissioning services to other nuclear operators. EWC continues
to believe expanding nuclear services is a viable growth strategy.
EWC also offers a valuable long-term option from the potential positive
effects of ongoing economic growth (driving increased load, market
heat rates, capacity prices and natural gas prices), new environmental
legislation and/or enforcement of additional environmental regulation.
As the economic recovery gains traction, increased demand for power
is expected to have a positive impact on power prices. In addition,
environmental legislation and regulation represents a substantial
upside for clean and affordable nuclear power. We are strong advocates
for effective public policy to stabilize and then reduce emissions of
greenhouse gases to mitigate the extreme and very real risks posed by
climate change. We continue to believe global leaders will eventually
recognize the risks and act. Regardless, EWC remains focused on the safe
and secure operations of its vital generation assets.
Nuclear Generation
Sold-Forward Position
2009 vs. 2010
% of planned generation
96
88
87
74
40
31
2009
2010
One
Year
Out
Two
Years
Out
Three
Years
Out
2010 Nuclear Plant
Operational Successes
■
Palisades
recorded its best
refueling outage generation
performance and second longest
run in its 38-year history.
■
Indian Point Unit 2
recorded the
highest generation for a cycle
and
Indian Point Unit 3
set a
new run record for Westinghouse 4
loop plants.
■
FitzPatrick
entered a refueling
outage after its longest run ever
of 702 days – the seventh longest
run for a reactor of its type in
U.S. history.
■
Pilgrim
completed a record run
of 642 days in early 2011.
■
Vermont Yankee
recorded its
second longest run ever of 532 days.
■
Cooper
was online in its longest
Cooper
run ever of 413 days as of year-end.
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