E                   A           R
             2006
    NTERGY              NNUAL       EPORT
ENTERGY CORPORATION and SUBSIDIARIES 2006


  Entergy Corporation is an integrated energy company engaged primarily in ele...
2006
             ENTERGY       CORPORATION          AND    SUBSIDIARIES




Top-quartile shareholder returns. Unlimited e...
To Our Stakeholders:


                                                                                                   ...
2006
                                        ENTERGY    CORPORATION          AND    SUBSIDIARIES




                     ...
Mississippi
    We made our second five-year               that lead their field in terms of corporate
■

                ...
2006
                                      ENTERGY     CORPORATION          AND    SUBSIDIARIES




                      ...
A Lasting Contribution
                                     Robert v.d. Luft


      n 2006, Robert v.d. Luft retired as t...
2006
                                       ENTERGY   CORPORATION           AND    SUBSIDIARIES




continued from page 5
...
Imagine. Aspire. Achieve.                                                                           premature to consider ...
2006
                                       ENTERGY    CORPORATION           AND    SUBSIDIARIES




  to contribute to th...
2006
                        ENTERGY        CORPORATION        AND    SUBSIDIARIES




by delivering top-quartile
sharehol...
Delivering Superior Results to Society                  gas emissions. Entergy was judged among the best
Total Shareholder...
2006
                                     ENTERGY        CORPORATION     AND    SUBSIDIARIES




environment that fosters ...
2006
                         ENTERGY       CORPORATION           AND    SUBSIDIARIES




 by safely generating and
 deliv...
acquire the 322-megawatt, natural gas-fired,
                            In early 2006, we issued a Request for Proposal
O...
2006
                                       ENTERGY       CORPORATION     AND     SUBSIDIARIES




worked to establish sto...
2006
                       ENTERGY       CORPORATION           AND       SUBSIDIARIES




by operating safe, secure and
v...
capacity improvements. Increasing our nuclear           for an additional 20 years, through 2031. Finally,
  Northeast Nuc...
2006
                                      ENTERGY        CORPORATION     AND    SUBSIDIARIES




15 percent open during t...
Our aspirations are clear and will guide our                   We aspire to a workforce that performs every job safely
str...
C L I MATE C H A N G E :

The Defining Issue
  of Our Time
cp1
Climate Change: The Defining Issue of Our Time
J. Wayne Leonard


THE SCIENCE IS REAL. THE PROOF IS EVERYWHERE.

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entergy 2006 AR FINAL

  1. 1. E A R 2006 NTERGY NNUAL EPORT
  2. 2. ENTERGY CORPORATION and SUBSIDIARIES 2006 Entergy Corporation is an integrated energy company engaged primarily in electric power production and retail distribution operations. Entergy owns and operates power plants with approximately 30,000 megawatts of electric generating capacity and it is the second-largest nuclear generator in the United States. Entergy delivers electricity to 2.6 million utility customers in Arkansas, Louisiana, Mississippi and Texas. Entergy has annual revenues of more than $10 billion and approximately 14,000 employees. HIGHLIGHTS CHANGE 2005 CHANGE 2004 2006 FI NANCIAL RESU LTS (in millions, except percentages and per share amounts) Operating revenues $10,932 8.2% $10,106 4.3% $9,685 Consolidated net income $ 1,133 26.2% $ 898 (1.3%) $ 910 Earnings per share Basic $ 5.46 27.9% $ 4.27 6.5% $ 4.01 Diluted $ 5.36 27.9% $ 4.19 6.6% $ 3.93 Average shares outstanding (in millions) Basic 207.5 (1.2%) 210.1 (7.4%) 226.9 Diluted 211.5 (1.4%) 214.4 (7.3%) 231.2 Return on average common equity 14.2% 26.8% 11.2% 4.7% 10.7% Net cash flow provided by operating activities $ 3,419 132.9% $ 1,468 (49.9%) $2,929 UTI LITY ELECTRIC OPERATI NG DATA Retail kilowatt-hour sales (in millions) 96,663 1.6% 95,153 (6.9%) 102,225 Peak demand (in megawatts) 20,887 (2.4%) 21,391 1.0% 21,174 Retail customers – year end (in thousands) 2,595 (1.3%) 2,629 (1.2%) 2,662 13,814 (2.3%) 14,136 (2.0%) 14,425 TOTAL EMPLOYEES – YEAR EN D Letter to Stakeholders 2 Financial and Societal Aspirations 10 Utility Operational Aspirations 14 Nuclear Operational Aspirations 18 Immediately preceding the Financial Review in this year’s annual report, we present a special section on global climate change. In this centerpiece, we offer for your consideration our Climate Change: The Defining Issue of Our Time Centerpiece point of view on this urgent issue as well as the views of six independent, well-respected experts from academia, environmental non-governmental organizations and the media. Financial Review 23 Investor Information 96 Directors and Officers 97
  3. 3. 2006 ENTERGY CORPORATION AND SUBSIDIARIES Top-quartile shareholder returns. Unlimited energy. Affordable power. Clean air and water. Safety and security. A healthy, educated and productive society where no one suffers in poverty. Imagine achieving not just one or two of these ideals; imagine having it all. At Entergy, we believe it is our responsibility to imagine having it all. First we imagine, and then we aspire and seek to achieve. In setting our aspirations, we adhere to the principles of sustainable growth. It is our firm belief that only by consistently delivering superior financial, operational and societal results can we build a company that is worthy of your investment and trust. 1
  4. 4. To Our Stakeholders: you articulate your point of view when The theme of this year’s annual report is from what we really did well. Every “having it all.” Obviously, that phrase decision seemed to come down to doing so only attracts more of the herd back to your side of the pasture? means different things to different people. either/or, and in hindsight many of the To many of our customers it’s the dream choices seemed all wrong. How do you articulate the value of sustainable growth or being a business of home ownership, stable employment, We vowed to dig out of that hole and adequate healthcare and seeing their children never make the same mistakes again – in with a conscience without sounding like you’ve forgotten investors bought the head off to college for the first time in their particular, as my mother would say, “having family’s history. Unfortunately, to a great eyes bigger than your stomach.” Through a stock for one reason – to make money? How do you articulate what 34 years in many, it seems little more than a dream. lot of good fortune and the incredible For some “having it all” means the efforts of 14,000 players, those dark times the business have taught you about the importance of having dedicated employees freedom to use the air and water or other are a distant memory. But the temptation natural resources as if they’re free for to get away from what got us here always who know that the values of the company align with their own? Or the boost it gives the taking or the sole property of this exists. Particularly when the market is generation. To others, it may mean always looking for the next big thing. employee spirit in knowing we have no hesitation in telling investors or customers simply accumulating more of anything Compared to many others, our stated than you can possibly use. strategy sounds just too complicated or that the safety of our employees always comes before anything else; something we When I joined Entergy over eight years too fluid. It doesn’t fit on a bumper sticker. ago we were on the brink. Having strained How do you describe a point-of-view prove in our actions every day? You can count diversity in the our financial resources in order to seek driven strategy when that point of view “growth,” we were rapidly losing touch constantly changes as the “herd” moves in organization in any number of ways. But how do you compute the real value of with what really mattered, moving away unison from one idea to the next? How do 2
  5. 5. 2006 ENTERGY CORPORATION AND SUBSIDIARIES in financial, operational and societal cultural, socio-economic or ethnic As the rebuilding process began, we ■ performance, but to separate Entergy from diversity when it comes to making the worked to educate and influence the rest. We have demonstrated it is everyday decisions that affect one of the communities to adopt environmentally possible to deliver consistently superior most diverse customer bases in the smart building standards in order to shareholder returns (multiples of country? What is the increased value of lower future utility bills for our customers the industry average), create a safe and serving communities that know the and reduce environmental emissions. inclusive workplace, preserve our company is making a difference in the We redoubled our efforts in support of ■ environment and contribute to a lives of the people who can least afford our wetland restoration to reduce flooding productive society. Using our dynamic product; not because we have to but risks from future storms in New point-of-view driven business model, because it’s simply the right thing to do? Orleans and other communities along our aspirations will be tomorrow’s What is the value to the bottom line of the Gulf Coast. benchmark for what “having it all” adhering to the principles of sustainable We successfully advocated for ■ means in business. growth whether the times are good or not? securitization legislation to preserve Whether it’s expedient or not? Whether it affects this generation or the next? How do you explain to investors the “The principles of sustainable growth have worked for seeming paradox that “having it all” Entergy … contributed to the achievement of the highest total means giving back and taking no more shareholder return in the industry over these eight years.” than absolutely essential from other stakeholders as you go? The fact is, I’ve never felt overly compelled to woo those looking to get rich overnight. Maybe because I’ve never affordable rates for our customers and Sustainability in Good Times and Bad figured how to do that. The principles of The 2005 hurricanes put everything we worked to establish storm reserves to sustainable growth have worked for believe and have practiced to the test. lower future risks for both our Entergy even though I couldn’t predict 2006 could easily have been consumed customers and our owners. how or how much eight years ago when with the near-term recovery of storm- We continued to issue Requests ■ I was given the opportunity to become related costs but we maintained our for Proposals for long-term and CEO, nor can I even explain today how it long-term commitment to the principles limited/intermediate-term resources contributed to the achievement of the of sustainability. For example, even as we under our utility Resource Supply highest total shareholder return in the pushed diligently for storm restoration Plan in order to drive down prices industry over these eight years. Entergy’s cost recovery at local, state and federal for our customers and to maintain average annual TSR was almost three levels in 2006: superior reliability. times the industry average. And we started We continued to set new standards in We reached an agreement to purchase the ■ ■ with no financial headroom or margin for emergency restoration not only in our 798-megawatt Palisades Nuclear Plant, error and have had our share of adversity own service area, but in assisting others. continuing the impressive profitable along the way, like the unprecedented We were honored to receive Edison growth in our nuclear business. 120,000 square miles of damage from Electric Institute’s Emergency Assistance We operated our nuclear plants more ■ hurricanes Katrina and Rita in 2005. Award. Entergy has received either EEI’s reliably than ever, setting new records Today, we continue to assert that the Emergency Assistance Award or for total output at both our regulated principles of sustainable growth are the Emergency Response Award for nine and Northeast plants. only way to run the business. We continue consecutive years. to set aspirations to not only be a leader 3
  6. 6. Mississippi We made our second five-year that lead their field in terms of corporate ■ Last June, the Mississippi Public Service commitment to voluntarily stabilize sustainability on a global basis. This year Commission approved recovery of $89 our CO2 emissions at 20 percent below we were the only company in the U.S. million in storm restoration costs for year 2000 levels from 2006 to 2010 electricity sector to be so honored. In the Hurricane Katrina with no finding of after successfully completing our first electricity sector, Entergy ranked best in imprudence. Ninety cents on the dollar commitment with emission levels that class for social responsibility, corporate was funded by the $81 million were 23 percent lower than our target. governance, climate strategy, corporate Community Development Block Grant In 2006, we delivered total shareholder citizenship/philanthropy, stakeholder ■ funding received in October. The balance, return of 38 percent relative to the 20 engagement and occupational health plus $40 million to increase the storm percent returned by the Philadelphia and safety. All of which is evidence that reserve and lower future risks for Entergy Utility Index – reinforcing our belief the principles of sustainable growth work Mississippi and its customers, is being that the real market is not just day – in good times and bad. funded by securitized bonds to be issued by the state of Mississippi. “We made our second five-year commitment to New Orleans voluntarily stabilize our CO2 emissions at 20 percent below In October, the City Council of New year 2000 levels from 2006 to 2010 after successfully Orleans unanimously approved a completing our first commitment with emission levels that settlement agreement that calls for a were 23 percent lower than our target.” phased-in rate increase, and the creation of a $75 million storm reserve and an emergency rate relief provision in the event of another Katrina-type disaster. traders looking at a screen for a quick Entergy is a stronger company today The settlement also called for an buck, but sophisticated investors who than it was before the hurricanes hit in independent process for certification of understand long-term value. We 2005. That does not happen when you storm costs. In early 2007, the City restored market confidence by build on sand, only when you have a solid Council advisors issued their reports on demonstrating that Entergy’s long-term foundation of support from employees storm costs incurred through December value proposition remains intact. For and the communities you serve. One that 2006 with no finding of imprudence. the year 2006, Entergy’s as-reported is built on trust and mutual respect. This rate relief outcome, combined with earnings were $5.36 per share, up 28 the award by the Louisiana Recovery percent from $4.19 per share in 2005. Recovering Storm Costs, Managing Risks Authority of a $200 million Community Operational earnings were $4.72 per We began 2006 with a comprehensive Development Block Grant, will assist share, up seven percent from $4.40 per total storm cost recovery plan that sought Entergy New Orleans with its efforts to share in 2005. to minimize the impact on our customers. emerge from bankruptcy. Most importantly, in 2006, our We successfully pursued recovery from ■ employees achieved the safest year in insurance carriers, federal funds allocated Texas the history of the company. for community development and state In December, the Public Utility securitization of remaining costs. All of Commission of Texas unanimously In 2006, for the fifth consecutive year, which substantially lowered the remaining approved a constructive settlement that Entergy was named to the Dow Jones costs to customers. included $353 million of hurricane Sustainability Index – World, an index Here are the basic elements of our storm recovery costs, an amount net of that tracks the performance of companies recovery results in each jurisdiction. 4
  7. 7. 2006 ENTERGY CORPORATION AND SUBSIDIARIES 2006 Results: Generating Clean, anticipated insurance proceeds, with States-Louisiana and Entergy Louisiana Affordable, Reliable Power no finding of imprudence. In February storm restoration cost recovery cases. Both for Our Customers 2007, the Public Utility Commission the staff and intervenors expressed support The physical aspects of the storm of Texas voted to approve securitization for securitization of costs and the creation restoration effort may well have been the of the $353 million with an offset of of a storm reserve. While the cases are still greatest challenge this company has ever $31.6 million which the commission pending, we are encouraged that the faced. The cost and financial recovery determined was the net present value of resolution will be as constructive as the process consumed considerable time and accumulated deferred income tax results achieved in Mississippi, New resources as well. Nonetheless, we refused benefits related to storm costs. A Orleans and Texas. to let the storms slow down momentum financing order is expected from the In 2007, we expect closure for all in other initiatives in our utility and commission authorizing issuance of remaining storm-related regulatory matters, nuclear businesses. securitized debt in March 2007. receipt of additional insurance proceeds, receipt of funds from the securitization Utilities: Executing the process and the removal of the remaining Louisiana Resource Supply Plan Testimony was filed in early 2007 by the negative credit agency outlook triggered as In 2006, we continued to execute our Louisiana Public Service Commission staff a result of the hurricanes. Resource Supply Plan to meet our and intervenors in the Entergy Gulf continued on page 7 Climate Change THE DEFINING ISSUE OUR TIME OF At Entergy, we believe that we are at a defining point in time as a society – a time that future generations will look back on with either admiration or despair. Today, our global society is emitting greenhouse gases at ever-escalating rates. While scientists, politicians and academics debate the extent of the impact of greenhouse gas emissions, we as a society are running out of time. C L I MATE C H A N G E : The Defining Issue of Our Time When we look up at the sky at night we see the light from stars that was emitted millions of years ago, only now completing its journey to earth. Greenhouse gas can be viewed the same way. Once emitted into the atmosphere, the outcome is inevitable. CO 2 stays in the atmosphere for approximately 100 years. Every day that goes by our future becomes more certain. There is no ability to turn back. At Entergy, we believe now is the time to act. We know the issue is complex and the necessary actions difficult. To further both discussion and action, we have invited experts on climate change to share their thoughts in the centerpiece to this year’s annual report. We invite you to form your own opinion and support action on climate change – the defining issue of our time. 5
  8. 8. A Lasting Contribution Robert v.d. Luft n 2006, Robert v.d. Luft retired as the chairman of our Board of Directors after eight years of service in that position. Under his leadership, Entergy’s market capitalization grew from less than $7 billion at the time Bob became chairman to more than $19 billion at the end of 2006. A retired senior vice president of DuPont who also served as chairman of the board of DuPont Dow Elastomers, president of DuPont Europe and chairman of DuPont International, Bob was elected chairman of Entergy Corporation in mid-1998. Shortly after Bob became chairman, the Board of Directors launched a turnaround strategy designed to increase shareholder value by narrowing the company’s focus on fewer businesses that were aligned with Entergy’s core competencies, by divesting underperforming businesses and by restoring the company’s overall financial health. The strategy has delivered strong results for owners and earned recognition from various industry organizations. Entergy was recognized by Edison Electric Institute for having the top total shareholder return for the five-year periods ending September 30, 2003 and September 30, 2004. The company twice received EEI’s highest honor, the Edison Award, in 2002 and 2005 and was named 2002 Power Company of the Year and 2003 Global Energy Company of the Year by Platts/Business Week Global Energy Awards. With his focus, discipline, attention to the details that matter most to our customers and owners, and generosity of spirit in dealing with employees, Bob has had a significant impact on our organization – an impact that has forever changed the way we do business and the way we see the world around us. 6
  9. 9. 2006 ENTERGY CORPORATION AND SUBSIDIARIES continued from page 5 Nuclear: Strong Earnings acquisitions, management service contracts customers’ demand for power, diversify and Opportunity and other types of agreements. We have and modernize our generation fleet and We continue to focus on safety and also continued to preserve our option to create opportunities to lower our customers’ security first in all our nuclear operations. pursue new nuclear development through rates. Our portfolio transformation While our operational excellence is second the construction and operating license framework assures consistency with our to none and our aspiration is to continue initiatives at Grand Gulf Nuclear Station market-based point of view in order to our growth in this business, we have and River Bend Station. produce the long-term least cost to remained disciplined investors. customers after considering and pricing In 2006, we seized an opportunity that all risks. We are actively pursuing a number The Time to Aspire for More aligned with how we create value for of attractive opportunities to meet our By any measure, 2006 was a defining year sellers of plants and for our owners. We customers’ demand requirements for Entergy. Thanks to a lot of hard work announced our intent to purchase the conditioned on the receipt of regulatory by our employees, the support of our 798-megawatt Palisades Nuclear Plant approval for rate recovery. customers, communities and owners and near South Haven, Michigan, for a net We also continued to pursue constructive the collaborative efforts of too many to amount of $350 million, or $303 per KW. resolution of other outstanding regulatory mention at the federal, state and local issues in 2006. Proving the value of creativity and persistence, our Independent Coordinator of Transmission was approved, “Most importantly, in 2006, our employees achieved the installed and began performing all of its safest year in the history of the company.” functions, including tariff administration, available flowgate capacity calculation, transmission planning and operation of the Entergy OASIS. Crossing these milestones The Palisades plant is of a design and were significant events for Entergy, as we jurisdiction levels, we recovered from two vintage that is problematic for most have worked for nearly a decade to align unprecedented storms that devastated our operators. Entergy’s experience with this our transmission operations with changing service territories and much of our technology and its technical challenges federal policy, while meeting local infrastructure. Then we moved beyond was a clear advantage in constructing the regulators’ and policymakers’ needs. In a survival and recovery. We took steps to successful bid. We are confident in our testament to the hard work of all parties manage our regulatory and operating risks, operating plan to maintain the reliability involved, on November 17, 2006, the reduce our impact on the environment and safety of the plant as it meets technical transition was completed seamlessly. and ensure our customers have access to challenges in the years ahead. When this We still have work ahead to resolve reliable, affordable power for years to transaction closes – expected in the second outstanding issues associated with the come. Our shareholder return was top- quarter of 2007 – we will own and operate System Agreement litigation and Entergy quartile at 38 percent for the year. While 11 nuclear plants in the South, Northeast Arkansas’ decision to provide its eight-year we are pleased to report progress, we are and Midwest. We also continue to operate notice to exit from this agreement. We also far from done. We recognize that after the Cooper Nuclear Station under a service expect Entergy Gulf States to separate into overcoming such adversity there is a great contract with the Nebraska Public Power Louisiana and Texas operating companies temptation to become satisfied and District. With our positive point of view by the end of 2007, allowing the separate complacent. Instead, now is the time to relative to clean, affordable nuclear companies to develop plans that are aspire for more. power generation, we continue to seek consistent with local public policy, opportunities to further expand our including potentially the pursuit of nuclear business portfolio through retail customer choice in Texas. 7
  10. 10. Imagine. Aspire. Achieve. premature to consider dividend action at We aspire to consistently deliver top- ■ The legacy of 2005 and 2006 was not that this time. I assure you, it is at the top of quartile total shareholder returns. we proved we had achieved our aspirations our list when more certainty and clarity We aspire to grow earnings per share by of operational excellence or financial is achieved on other initiatives. $1.00 each year through 2010, earn resilience. What we proved was as an returns at or above our risk-adjusted organization we are capable of more than cost of capital and maintain solid We aspire to provide clean, ■ we might have ever imagined. The investment grade credit with flexibility reliable and affordable power adversity in the last two years was beyond to manage risk and act on opportunities. in our utility business. anything the industry has experienced. We aspire to return cash to our owners We aspire to safe, efficient and effective The organization’s response was equally through common stock repurchases of operations in all areas – generation, unprecedented. As 2006 drew to a close, up to $500 million each year and/or transmission and distribution. Our we took a hard look at our aspirations. We dividends targeting a 60 percent payout service area has unique operational and assessed our current position, evaluated ratio over time. economic challenges. We strive to address these challenges while continually improving customer satisfaction, increasing productivity and decreasing costs. “Entergy was named to the Dow Jones Sustainability Index – World, the only company in the U.S. electricity sector to be so honored.” We aspire to operate safe, secure ■ and vital nuclear resources in an environment that is both growing and carbon-constrained. multiple scenarios using our dynamic At the end of 2006, we ended the Safety and security come first in our points of view on market conditions, suspension of and completed our 2004- nuclear operations. After that, we our stated strategies, our change in risk 2006 $1.5 billion common stock aspire to uninterrupted operations profile and our experiences over the last repurchase program. In January 2007, and continuous improvement in few years, and refined our aspirations. we announced a new $1.5 billion productivity. We are committed to Underlying our refined aspirations is common stock repurchase program to aggressively pursue opportunities to our timeless belief in the principles of be implemented over the next two years. expand our nuclear fleet more fully, sustainable growth, the unlimited human These actions were consistent with our utilizing our talented and deeply potential and basic human goodness. commitment to fairly compensate skilled workforce. The long-term success of our company those who provided capital for storm depends on our ability to ensure our restoration and those who made that We aspire to break the cycle of ■ employees’ safety, meet our customers’ possible by continuing to believe in our poverty for our customers and expectations, deliver superior returns to long-term value proposition and not contribute to a society that is our owners, conserve and protect our selling into a market when we were healthy, educated and productive. environment and contribute to a healthy, issuing securities. Our societal aspirations encompass our educated and productive society. It takes Regarding the dividend, no one needs communities, our employees and our steady progress along every dimension to to remind us that the current level is well environment. No one should have to generate lasting growth and value. With below our 60 percent target and also well choose between food and heat. We that in mind, our five-year aspirations for below the average relative to our peers. strive to make our service as affordable 2006 through 2010 are outlined below: Your Board of Directors continues to be as possible. But we do not accept that as disappointed that we believe it is still the end of our responsibility. We strive 8
  11. 11. 2006 ENTERGY CORPORATION AND SUBSIDIARIES to contribute to the eradication of focused, financially healthy organization giving us the ability to adapt our strategies poverty in our utility service territories. driven to produce tangible benefits for and positions quickly as market conditions We aspire to eliminate lost-time customers and owners. Safety is Bob’s change. Finally, our commitment to accidents in every area of our business passion. He has engrained that passion in sustainability and our focus on total and create a workforce as diverse as the the entire Entergy organization. Bob has shareholder return set a clear framework communities in which we operate. We been an inspirational leader and mentor to for all our decisions and actions. Entergy strive to be the cleanest power generator me personally. We know Bob’s contribution as an organization remains committed, in America – one that voluntarily to the good of mankind, while already focused and ready to adapt to whatever adheres to greenhouse gas emission great, is far from finished. We wish him the future may bring. levels and conserves natural resources in all the best in retirement. As a leadership team, we are always as many ways as possible. With Bob Luft’s retirement from the mindful of our fiduciary obligations to chairman role, the Board of Directors our owners and our moral responsibilities While all aspirations involve some elected Gary W. Edwards as the Presiding to our customers and communities. We stretch, our refined aspirations are firmly Director. Gary is widely respected for his believe we have the power to not only grounded in the reality of our current character and unwavering commitment to financially succeed in the years ahead, business as well as the future scenarios we the highest standards of conduct. With but to help assure the sustainability of believe most likely based on our current Gary’s leadership, the Board will continue to the world around us. At Entergy, point of view. We put these aspirations operate at these same standards of corporate “having it all” means no less. before you to share our vision for what we governance and provide meaningful and believe is possible and to challenge expert insights to our management team. ourselves to continuously reach beyond our current grasp. The Power to Sustain We begin 2007 with great momentum and anticipation. Our diverse, dedicated family J. Wayne Leonard A Lifetime of Achievement Chairman and Chief Executive Officer In 2006, Robert v.d. Luft retired as the of employees continues to deliver truly chairman of our Board of Directors after outstanding performance, whatever the eight years of service in that position. obstacles. Our point-of-view driven Under Bob’s guidance, Entergy became a business model continues to serve us well, Wayne Leonard (left) was elected Chairman and Chief Executive Officer in August 2006 by Entergy’s Board of Directors, following the announcement of Bob Luft’s retirement as Chairman. Gary Edwards (right), an independent Entergy board member, was elected to the position of Presiding Director. 9
  12. 12. 2006 ENTERGY CORPORATION AND SUBSIDIARIES by delivering top-quartile shareholder returns through the generation of safe, clean, affordable power to a healthy, educated, productive society where none of our customers live in poverty. t Entergy, we are committed to the pursuit We assessed our current position, evaluated of sustainable growth. We aspire to deliver multiple scenarios using our dynamic points of superior returns to our owners while view on market conditions and our stated simultaneously making progress toward specific strategies, and refined our aspirations for 2006 societal goals. In 2006, we delivered returns to our through 2010. Our overarching financial aspiration shareholders that ranked in the top quartile of is to achieve top-quartile total shareholder returns. our peer group. In 2006, we were also gratified to We will do so by growing earnings per share by be named to the Dow Jones Sustainability Index – $1.00 each year, earning returns at or above our World for the fifth consecutive year. We are proud risk-adjusted cost of capital, all the while to be a leader in sustainable development, the only maintaining solid investment grade credit with company in the U.S. electricity sector to be flexibility to manage risk and act on opportunities. included in the 2006 DJSI – World. We also aspire to return cash to our owners through common stock repurchases of up to $500 million each year and/or dividends targeting a 60 Delivering Top-Quartile Financial Returns percent target payout ratio over time. In January We aspire to consistently deliver top-quartile total 2007, we announced a new $1.5 billion common shareholder returns. In the past five years, we have stock repurchase program to be implemented over twice been honored with EEI’s award in recognition the next two years. Regarding the dividend, we are of the highest total shareholder return for a large-cap well aware that the current level is considerably electric utility over a five-year period. below our 60 percent target and also well below the We restored market confidence by demonstrating average of our peers. Considering our last dividend that Entergy’s long-term value proposition remained increase was in 2004, we continue to be disappointed intact. As a result, we saw Entergy stock rebound that we believe it is still premature to consider from post-hurricane weaknesses and deliver top- dividend action at this time. It is at the top of our list quartile returns to our owners. when more certainty and clarity is achieved on While delivering top-quartile returns over other initiatives. the past five years, we continually focused on While there is stretch, we believe our refined constraining risks – financial, regulatory, financial aspirations are realistic and achievable. operational, commodity – in our day-to-day We also believe they are aligned with our societal operations. Our risk profile has changed aspirations. Our commitments to strengthen our substantially in recent years as our business has environment and our communities are embodied evolved. That change, combined with other factors, in our societal aspirations. led us to take a hard look at our aspirations. 11
  13. 13. Delivering Superior Results to Society gas emissions. Entergy was judged among the best Total Shareholder Return 2006, % As we refined our financial aspirations, we also in the North American electric power sector. reaffirmed our societal aspirations. We are convinced In another of our societal commitments, we aspire 38 that being a leader in environmental excellence, to contribute to the eradication of extreme poverty in meeting the particular needs of our low-income the region served by our utilities. We are taking steps customers and fostering a safe, inclusive work to meet the needs of our low-income customers with 20 environment are more important than ever to the programs designed to improve the flow of public 16 long-term success of our company and our society. funds, better manage energy usage and address the We aspire to be the cleanest generator in underlying causes of poverty. Of special note in 2006 America, to conserve natural resources and to be a were our coordinated jurisdiction efforts to secure strong advocate for establishing mandatory increased funding for the federal Low Income Home ETR greenhouse gas levels. More than 80 percent of the Energy Assistance Program. We worked to maximize Philadelphia power we generate comes from clean sources such funding for Entergy states through meetings with Utility Index as nuclear and natural gas. We continue to invest in members of Congress and an aggressive media S&P 500 clean technologies like combined-cycle gas turbine campaign in all our jurisdictions. Entergy states plants. We also have programs in each jurisdiction received over $75 million in additional LIHEAP to inform and help our customers conserve energy funding in 2006 and we made extensive outreach Total Shareholder Return 1999-2006, % in their homes and businesses. efforts to our LIHEAP-eligible customers to help them We strongly believe that greenhouse gas secure assistance with their bill payments. In 2006, 288 emissions harm our environment. In 2001, we Entergy advocacy efforts such as these were recognized became the first electric utility to commit to a again by the Edison Electric Institute’s Advocacy voluntary five-year target to stabilize our CO2 Excellence Award – the second consecutive year we’ve emissions. In 2006, we made a second five-year been so honored. commitment to voluntarily stabilize our CO2 We faced many challenges in 2006 and made 96 emissions at 20 percent below year 2000 levels over great strides, including another record year in terms 31 the next five years. Our actions demonstrate that it of safety. However, our proudest day, now clearly in is possible to economically stabilize greenhouse gas sight, will be when our dedicated employees achieve emissions. Regardless of the outcome of any debate no lost-time accidents. We completed 2006 with no ETR on the climate change issue, these are actions we fatalities and reached several safety milestones in Philadelphia Utility Index should and will take now. our operations. For example, our transmission team S&P 500 Our approach to climate change was recognized of approximately 1,000 employees worked one in 2006 by the Carbon Disclosure Project, an million hours in 2006 without a lost-time accident. We aspire to consistently deliver international secretariat for the world’s largest In addition, eight sites earned Star status under the top-quartile total institutional investor collaboration on the business shareholder returns. OSHA Voluntary Protection Program in 2006 – We restored market implications of climate change. For the third year in the highest possible safety rating for an industrial confidence by demonstrating that a row, Entergy was named to the Climate Leadership work site. As of the end of 2006, 36 of our nuclear, Entergy’s long-term Index, a prestigious index for global corporations fossil, distribution and transmission sites have value proposition remained intact. As a addressing the challenges of climate change. achieved OSHA VPP Star status. result, we saw Entergy Members of the index were judged to be We also aspire to a workforce that reflects the stock rebound from post-hurricane distinguished by their strategic awareness of the diversity of our communities. We have a diversity weaknesses and deliver top-quartile risks and opportunities of a carbon-constrained strategy that positions our company as an employer returns to our owners. environment as well as the quality and effectiveness of choice, a business partner of choice and a good of programs put in place to reduce overall greenhouse corporate citizen. The commitment to create an 12
  14. 14. 2006 ENTERGY CORPORATION AND SUBSIDIARIES environment that fosters creativity, productivity At all levels of our organization, we continue to LIHEAP Funding in Arkansas, Louisiana, and mutual respect for all people reaches from use our point-of-view driven business model to Mississippi and Texas $ millions the office of our CEO throughout our entire develop our strategies and action plans. From organization. We believe there is no substitute for setting our CO2 emission stabilization targets to 167.5 the experience and insight of a diverse, focused evaluating the purchase of a generation asset, our Entergy team. dynamic model enables us to form decisive points 93.2 of view incorporating sophisticated analyses and extensive market knowledge. We then execute on From Aspire to Achieve Rounding out our financial and societal aspirations, our points of view using discipline and the we also have operational aspirations to guide our experience of our talented team of employees. 2000 2006 utility and nuclear businesses. Our operational By definition, our aspirations will at times seem aspirations are outlined in the following sections of out of reach. However, we believe our management We aspire to break the cycle of poverty this report along with a discussion of our 2006 team and employees have the expertise and the will for our customers operational performance. to achieve superior financial, operational and and contribute to a society that is societal results consistent with our aspirations. healthy, educated and productive. The federal Low Income Home Energy Assistance Program helps needy families pay their energy bills.
  15. 15. 2006 ENTERGY CORPORATION AND SUBSIDIARIES by safely generating and delivering clean, reliable and affordable power while structuring our utility business to meet the objectives of all stakeholders. enerating and delivering electricity is a consecutive years, every year that the awards have unique business. Companies that provide been offered. We are the only utility in the country power are viewed and regulated as public to have achieved this recognition. servants yet still must earn equitable returns for private We also continued to make progress in ensuring owners in order to attract capital. While the goals of the safety of our employees. In 2006, seven of our our various stakeholders can sometimes diverge, we distribution sites and one transmission site earned believe it is possible to operate our utilities in a way OSHA Voluntary Protection Program Star status – that consistently meets the objectives of our bringing our total number of Star sites to 36 as of customers, regulators, communities and owners. the end of 2006. Another nine sites completed the rigorous process of applying for OSHA VPP Star status in 2006. Ensuring the safety of all employees in all our Customer Service, Reliability and Safety operations continues to be our number one priority. Customer satisfaction is driven largely by the day-to- day operation of our utility business; by maintaining transmission lines, responding to customer calls and Affordable, Available Power safely providing power to meet fluctuating demands. We strive to provide clean, reliable and affordable We continue to invest in our utilities to ensure we meet power to all our customers over the long term. our customers’ expectations for safe, reliable service. Currently our customers’ demand for power exceeds In 2006 we began the year challenged by a our generation capacity by two to four gigawatts. At number of customer service issues related to the the same time, approximately 18 gigawatts of new storms of 2005. However, as we progressed through merchant capacity have been commissioned in our the year our performance along a variety of customer service territories in the last six years. This provides service and reliability measures continued to improve us with the opportunity to meet our capacity as it has consistently over the past eight years. As of shortfall as well as offer high-quality generation year-end 2006, routine outage frequency decreased sources to our customers. 48 percent and outage duration decreased 32 percent Our Resource Supply Plan is designed to meet our over the eight-year period from 1998 to 2006. customers’ demand for power, diversify and modernize Regulatory outage complaints dropped to 81 in our generation fleet and create opportunities to lower 2006 from 535 in 1998. our customers’ rates. It’s a comprehensive plan that In 2006, we were once again honored to receive calls for the contract purchase of power, the acquisition the Edison Electric Institute’s Emergency Assistance of highly efficient assets, as well as the evaluation of Award. Entergy has won either EEI’s Emergency new fuel and new capacity alternatives, conditioned Assistance or Emergency Response award for nine on the receipt of regulatory approval. 15
  16. 16. acquire the 322-megawatt, natural gas-fired, In early 2006, we issued a Request for Proposal Outage Frequency average number per simple-cycle Calcasieu Generating Facility in for 2,000 MW of long-term supply-side resources. customer per year southwestern Louisiana. This modern, quick-start We received 35 proposals for combined-cycle gas 3.54 peaking generation resource has substantial turbine resources and eight proposals for solid fuel advantages because of its close proximity to big resources. A year later, we narrowed the field and industrial customers with large potential load entered further negotiations for two CCGT 1.83 swings. This natural gas-fired, simple-cycle facility resources representing over 1,300 MW of capacity can be dispatched on extremely short notice, which and two solid fuel resources representing between is critical in a region where there are natural approximately 730 and 880 MW of capacity. The limitations – such as the Gulf of Mexico – on the solid fuel resources include the selection of Entergy’s ability to import power. Little Gypsy repowering self-build option identified 1998 2006 We also continue to see potential in the in the RFP. At Little Gypsy, we expect to repower Outage Duration development of new nuclear capacity at our this gas-fired facility to use petroleum coke as fuel. average minutes per customer per year Grand Gulf Nuclear Station and River Bend As a refinery waste product, pet-coke is readily and Station. Nuclear generation is emission-free, less economically available in southern Louisiana. The 278 exposed to fuel price volatility and subject to pet-coke option also introduces more solid fuel federal incentives. With necessary legislative capacity into the Louisiana generation fleet, which is 189 heavily dependent on natural gas with its greater support, including loan guarantee and production price volatility. tax credit incentives, and state regulatory In addition to executing our Resource Supply mechanisms to enable timely cost recovery, the Plan, we took several actions to ensure power is prospect of new nuclear could become a reality. readily available and affordable to our customers Finally, we continuously strive to reduce our over the long term. operating costs. Improving efficiency and 1998 2006 In January 2006, we completed the purchase of productivity in our generation fleet is one of the most We aspire to safe, the 480-megawatt, natural gas-fired, combined- important steps we can take to ensure our customers efficient and effective operations in our cycle Attala facility near Kosciusko, Mississippi. have ready access to affordable power. utility business. We We have purchased the output from the Attala strive to continually improve customer plant since mid-2004. Through this acquisition, A Constructive Regulatory Environment satisfaction. Since 1998, outage frequency we added a highly efficient plant to our generation In many respects we experienced a very constructive has decreased 48 portfolio as we did in 2005 with the purchase of regulatory environment in 2006. For example, we percent and outage duration has decreased the 718-megawatt, natural gas-fired, combined- pushed diligently for storm restoration cost 32 percent. cycle Perryville plant in Louisiana. recovery at the local, state and federal levels. After initiating negotiations in late 2006, we We also advocated for securitization legislation to announced in February 2007 an agreement to preserve affordable rates for our customers and 2006 CO2 Emissions tons, millions We made a second voluntary commitment to Goal 42.6 stabilize our greenhouse gas emissions at 20 percent Actual 38.9 below year 2000 levels from 2006 to 2010. As of year-end 2006, our CO2 emissions were nearly 10 percent below target. 16
  17. 17. 2006 ENTERGY CORPORATION AND SUBSIDIARIES worked to establish storm reserves to lower future Competition filing at the end of 2006. In its plan, Regulatory Outage Complaints risks for both our customers and our owners from Entergy Gulf States-Texas proposed to join the the effects of future storms. Electric Reliability Council of Texas. We expect that 535 Local regulators in New Orleans have been the billion dollar investment to electrically connect supportive of our efforts as Entergy New Orleans our Texas business with ERCOT will provide continues to make progress in its reorganization plan. customer benefits exceeding this investment. We are planning to have Entergy New Orleans However, there are important conditions that must emerge from Chapter 11 in mid-2007 as a financially be met in order to proceed. The Texas PUCT will be stable utility. Going forward, we will continue to deciding these issues in the coming years. 81 work with the New Orleans City Council to ensure Looking ahead to 2007, we expect closure for all 1998 2006 that the company remains on solid ground financially remaining storm-related matters. We will continue and to minimize its exposure to future storm risk. to implement the Federal Energy Regulatory The number of regulatory outage In early 2007, we received approval from the Commission’s rough production cost equalization complaints dropped Louisiana Public Service Commission to divide remedy for the System Agreement, and at the same from 535 in 1998 to 81 in 2006. Entergy Gulf States into two separate operating time, we will pursue a replacement agreement that companies – one in Louisiana and one in Texas. meets the needs of our utility customers without We expect to complete the separation by the end provoking undue disputes and litigation. In of 2007 – allowing each company to develop Arkansas, we will pursue constructive resolution of operating strategies that are consistent with the the rate case we filed in August 2006 as well as the public policy direction in its jurisdiction. outstanding fuel recovery proceeding. In Texas, we Pursuant to the legislation passed in 2005, Entergy will file our first base rate increase case in 16 years Gulf States-Texas made its required Transition to to be effective when the legislative-imposed rate freeze ends on June 30, 2008.
  18. 18. 2006 ENTERGY CORPORATION AND SUBSIDIARIES by operating safe, secure and vital resources in a way that maximizes the inherent asset value and enhances the opportunity to grow this business, all in an environment that does not pose a threat to future generations. n the pursuit of sustainable growth, goals often measures, security force and operator training, appear to be at odds: affordable power or clean controlled access and behavioral observation air but not both. To sustain growth, however, programs. We work closely with outside security solutions must be found that drive progress toward experts to continually enhance and reinforce the multiple goals simultaneously. At Entergy, we firmly security programs at all our nuclear sites. believe that safe, affordable and emission-free nuclear generation is vital to sustainable growth. Operating and Management We are currently the second-largest nuclear Expertise That Makes a Difference operator in the United States. We own and operate With strong leadership and an experienced, talented 10 plants in the Northeast and South and operate team of engineers, technicians and operators, we another in the Midwest under a service agreement. have consistently delivered industry-leading In 2006, we reached an agreement to purchase the performance in our nuclear operations. For example: Palisades Nuclear Plant near South Haven, Michigan, Our fleet average capability factor was 94 ■ from Consumers Energy for a net amount of $350 percent in 2006, compared to an industry million. With our positive point of view on nuclear average of 90 percent. generation, we continue to aggressively pursue Production costs in our regulated fleet remained ■ opportunities to expand our nuclear business. flat at $16.3 per MWh. We also achieved our first uninterrupted breaker-to-breaker run at Arkansas Nuclear One Unit 2. Safety and Security First In each of our nuclear plants, we work diligently Our Northeast fleet achieved an average INPO ■ to maintain safety and security at the highest levels. Index of 97.6 in 2006, up more than 30 percent Only then do we seek to improve operating since we acquired these plants. efficiency and productivity. Our safety performance is world-class. Six of our In 2006, we placed an additional 95 MW of nuclear plants are currently designated OSHA VPP capacity into production at our Vermont Yankee Star status. Our Vermont Yankee nuclear plant Nuclear Power Station. Approval from the Nuclear received Merit designation, which is considered an Regulatory Commission to increase the power effective stepping stone to Star status. output came after the most extensive engineering Each of our nuclear sites meets or exceeds the review of any uprate. The review process took 29 security standards set by the Nuclear Regulatory months and resulted in a unanimous approval Commission. These standards are the highest of any recommendation. Through 2006, we have added American industry and include site security 512 MW of nuclear capacity through uprates and 19
  19. 19. capacity improvements. Increasing our nuclear for an additional 20 years, through 2031. Finally, Northeast Nuclear Fleet Capacity Factor generation through uprates and high capacity factors in November 2006, we formally announced our % enables us to meet our customers’ growing demand intention to extend the license of our Indian Point 95 for energy without increasing harmful emissions. Energy Center. Former New York City Mayor Currently, about one-third of our generation capacity Rudy Giuliani and Greenpeace Co-founder 77 is supplied by nuclear power. Dr. Patrick Moore joined us in announcing our In 2006, the Nuclear Regulatory Commission “Right for New York” license extension campaign. accepted our applications to renew our operating We maintain dynamic points of view on licenses for an additional 20 years at the Vermont external factors such as commodity prices, the Yankee Nuclear Power Station in Vermont, the regulation of carbon emissions and infrastructure Pilgrim Nuclear Power Station in Massachusetts constraints in the generation and transmission of Before ETR and the James A. FitzPatrick Nuclear Power Plant energy. We use our points of view to guide our ownership in New York. The operating licenses for Vermont hedging strategy for the output of our Northeast 2006 Yankee, Pilgrim and FitzPatrick are currently fleet. Our hedging strategy seeks to balance the We strive to increase scheduled to expire in 2012, 2012 and 2014, risks and rewards of volatile commodity prices. our nuclear generation respectively. In 2006, the NRC renewed the We layer in hedges to avoid the risk of timing through high capacity factors to meet the operating license for the Palisades Nuclear Plant the market but retain the ability to leave up to growing demand for power. 20
  20. 20. 2006 ENTERGY CORPORATION AND SUBSIDIARIES 15 percent open during the year. At the end of dozen small nuclear fleet operators exist across the Northeast Nuclear Fleet Production Costs 2006, 95 percent of our planned generation for United States that have either below industry $ per MWh 2007 was under contract, 85 percent for 2008 and average capacity factors, above average costs, 29 64 percent for 2009 at average energy prices per regulatory issues or event risk. We remain open to MWh of $49, $53 and $57, respectively. expanding our portfolio of nuclear businesses in 20 the future through acquisitions, management service agreements or other deal structures. Opportunities to Drive Growth and Create Value We continue to seek opportunities to grow and We are also preserving our option to participate create value in our nuclear business. We will strive to in the next generation of new nuclear development. close the Palisades acquisition in the second quarter Entergy is on track to receive one of the first early of 2007 and successfully transition the plant into the site permits to be issued by the Nuclear Regulatory Before ETR Entergy fleet over the course of 2007. Commission in first quarter 2007, qualifying the ownership We also believe opportunity exists to further Grand Gulf Nuclear Station near Port Gibson, 2006 expand our fleet. We have grown our fleet from Mississippi, as an acceptable site for a new nuclear We aspire to operate five nuclear units eight years ago to 11 units with reactor. We are also pursuing a combined safe, secure and vital the pending acquisition of Palisades. In addition, construction and operating license for the new unit resources.We strive to deliver industry-leading the service contract under which we operate the at Grand Gulf, as well as our River Bend Station performance.We have Cooper Nuclear Station has also contributed to near St. Francisville, Louisiana. Our decision to driven significant improvement in growth in this business. However, while not proceed with any new nuclear development is production costs in our Northeast fleet. currently on the market, we believe a number of contingent on achieving the necessary legislative consolidation opportunities remain in the U.S. and regulatory actions to enable efficient financing market for nuclear generation. Roughly two and timely cost recovery. Entergy OSHA VPP Star Sites We aspire to a work environment that is free of 9 2003 accidents. We use the OSHA Voluntary Protection 19 2004 Program as the model for outstanding safety performance. We have made steady progress under 28 2005 OSHA VPP. As of year-end 2006, 36 sites had earned 36 2006 Star status – the highest possible safety rating for an industrial work site. 21
  21. 21. Our aspirations are clear and will guide our We aspire to a workforce that performs every job safely strategies and decision-making in the years ahead. and that reflects the diversity of our communities. We continue to aspire to a balanced set of financial As diligently as we will work in the years ahead aspirations, with top-quartile total shareholder toward our aspirations, we will continue to imagine returns as the overarching aspiration. a world beyond what we can achieve today. An While we strive to realize our financial aspirations, environment that poses no threat to future we strive to meet our societal commitments to all our generations. A society where no one suffers in stakeholders. We aspire to meet our second five-year poverty. A world with unlimited energy and CO2 stabilization commitment. We aspire to meet unlimited possibilities. Imagine having all that. the particular needs of our low-income customers. Imagine, then Aspire and Achieve. 22
  22. 22. C L I MATE C H A N G E : The Defining Issue of Our Time
  23. 23. cp1 Climate Change: The Defining Issue of Our Time J. Wayne Leonard THE SCIENCE IS REAL. THE PROOF IS EVERYWHERE. cp2 Unequivocal Evidence of a Human Role in Climate Change Richard H. Moss, Ph.D. cp3 Ecosystem Response to Climate Change Camille Parmesan, Ph.D. cp4 Clean Energy or No More Crawfish, Cher Mike Tidwell WE C R EATED TH IS PROB LEM. WE CAN SOLVE IT. cp5 The Defining Economic Opportunity of the 21st Century Fred Krupp cp6 A Call for New Approaches, New Technologies David Victor, Ph.D. cp7 A Post-2012 International Agreement Eileen Clausen cp8 Our Point of View Is Clear. We’re Taking the Right Path Forward. J. Wayne Leonard

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