Edgar Filing: ENTERGY CORP /DE/

425

ITC, ELL & EGSL

Technical Conference

March 6, 2013

Filed by Entergy Corporation Pursuant to Rule 425

Under the Securities Act of 1933

Subject Company: Entergy Corporation

Commission File No. 001-11299

Transmission Business

Entergy Forward-Looking Information

In this communication, and from time to time, Entergy makes certain “forward-looking statements” within the meaning of

the Private Securities Litigation Reform Act of 1995. Except to the extent required by the federal securities laws, Entergy

undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new

information, future events, or otherwise. Forward-looking statements involve a number of risks and uncertainties. There

are factors that could cause actual results to differ materially from those expressed or implied in the forward-looking

statements, including (i) those factors discussed in Entergy’s most recent Annual Report on Form 10-K , any subsequent

Quarterly Reports on Form 10-Q , and other filings made by Entergy with the Securities and Exchange Commission (the

“SEC”); (ii) the following transactional factors (in addition to others described elsewhere in this communication, in the

proxy statement/prospectus included in the registration statement on Form S-4 that was filed by ITC Holdings Corp.

(“ITC”) with the SEC in connection with the proposed transactions) involving risks inherent in the contemplated

transaction, including: (1) failure to obtain ITC shareholder approval, (2) failure of Entergy and its shareholders to

recognize the expected benefits of the transaction, (3) failure to obtain regulatory approvals necessary to consummate

the transaction or to obtain regulatory approvals on favorable terms, (4) the ability of Entergy, Mid South TransCo LLC

(“TransCo”) and ITC to obtain the required financings, (5) delays in consummating the transaction or the failure to

consummate the transaction, (6) exceeding the expected costs of the transaction, and (7) the failure to receive an IRS

ruling approving the tax-free status of the transaction; (iii) legislative and regulatory actions; and (iv) conditions of the

capital markets during the periods covered by the forward-looking statements. The transaction is subject to certain

conditions precedent, including regulatory approvals, approval of ITC’s shareholders and the availability of financing.

Entergy cannot provide any assurance that the transaction or any of the proposed transactions related thereto will be

completed, nor can it give assurances as to the terms on which such transactions will be consummated.

ITC Forward-Looking Information

This document and the exhibits hereto contain certain statements that describe ITC management’s beliefs concerning future

business conditions and prospects, growth opportunities and the outlook for ITC’s business, including ITC’s business and the electric

transmission industry based upon information currently available. Such statements are “forward-looking” statements within the

meaning of the Private Securities Litigation Reform Act of 1995. Wherever possible, ITC has identified these forward-looking

statements by words such as “anticipates”, “believes”, “intends”, “estimates”, “expects”, “projects” and similar phrases. These

forward-looking statements are based upon assumptions ITC management believes are reasonable. Such forward-looking

statements are subject to risks and uncertainties which could cause ITC’s actual results, performance and achievements to differ

materially from those expressed in, or implied by, these statements, including, among other things, (a) the risks and uncertainties

disclosed in ITC’s most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q filed with the SEC

from time to time and (b) the following transactional factors (in addition to others described elsewhere in this document, in the proxy

statement/prospectus included in the registration statement on Form S-4 that was filed by ITC with the SEC in connection with the

proposed transactions): (i) risks inherent in the contemplated transaction, including: (A) failure to obtain approval by the Company’s

shareholders; (B) failure to obtain regulatory approvals necessary to consummate the transaction or to obtain regulatory approvals

on favorable terms; (C) the ability to obtain the required financings; (D) delays in consummating the transaction or the failure to

consummate the transactions; and (E) exceeding the expected costs of the transactions; (ii) legislative and regulatory actions, and

(iii) conditions of the capital markets during the periods covered by the forward-looking statements.

Because ITC’s forward-looking statements are based on estimates and assumptions that are subject to significant business,

economic and competitive uncertainties, many of which are beyond ITC’s control or are subject to change, actual results could be

materially different and any or all of ITC’s forward-looking statements may turn out to be wrong. They speak only as of the date made

and can be affected by assumptions ITC might make or by known or unknown risks and uncertainties. Many factors mentioned in this

document and the exhibits hereto and in ITC’s annual and quarterly reports will be important in determining future results.

Consequently, ITC cannot assure you that ITC’s expectations or forecasts expressed in such forward-looking statements will be

achieved. Actual future results may vary materially. Except as required by law, ITC undertakes no obligation to publicly update any

of ITC’s forward-looking or other statements, whether as a result of new information, future events, or otherwise.

The transaction is subject to certain conditions precedent, including regulatory approvals, approval of ITC’s shareholders and the

availability of financing. ITC cannot provide any assurance that the proposed transactions related thereto will be completed, nor can

it give assurances as to the terms on which such transactions will be consummated.

Additional Information and Where to Find It

ITC filed a registration statement on Form S-4 (Registration No. 333-184073) with the SEC registering the offer and

sale of shares of ITC common stock to be issued to Entergy shareholders in connection with the proposed

transactions. This registration statement includes a proxy statement of ITC that also constitutes a prospectus of ITC.

This

registration

statement

was

declared

effective

the

SEC

February

25,

2013.

ITC

mailed

the

proxy

statement/prospectus to its shareholders on or about February 28, 2013. ITC shareholders are urged to read the

proxy statement/prospectus included in the ITC registration statement and any other relevant documents because

they contain important information about TransCo and the proposed transactions. In addition, TransCo will file a

registration statement with the SEC registering the offer and sale of TransCo common units to be issued to Entergy

shareholders in connection with the proposed transactions. Entergy shareholders are urged to read the proxy

statement/prospectus included in the ITC registration statement and the prospectus to be included in the TransCo

registration statement (when available) and any other relevant documents, because they contain important information

about ITC, TransCo and the proposed transactions.

The proxy statement/prospectus, prospectus and other documents relating to the proposed transactions (when they

are available) can be obtained free of charge from the SEC’s website at www.sec.gov. The documents, when

available,

can

also

obtained

free

charge

from

Entergy

upon

written

request

Entergy

Corporation,

Investor

Relations, P.O. Box 61000 New Orleans, LA 70161 or by calling Entergy’s Investor Relations information line at

1-888-

ENTERGY (368-3749), or from ITC upon written request to ITC Holdings Corp., Investor Relations, 27175

Energy Way, Novi, MI 48377 or by calling 248-946-3000.

This communication is not a solicitation of a proxy from any security holder of ITC. However, Entergy, ITC and certain

their

respective

directors

and

executive

officers

and

certain

other

members

management

and

employees

may

deemed to be participants in the solicitation of proxies from shareholders of ITC in connection with the proposed

transaction under the rules of the SEC. Information about the directors and executive officers of Entergy, may be

found in its 2012 Annual Report on Form 10-K filed with the SEC on February 27, 2013, and its definitive proxy

statement relating to its 2012 Annual Meeting of Shareholders filed with the SEC on March 23, 2012. Information

about the directors and executive officers of ITC may be found in its 2012 Annual Report on Form 10-K filed with the

SEC on March 1, 2013, and its definitive proxy statement relating to its 2012 Annual Meeting of Shareholders filed

with the SEC on April 12, 2012.

Agenda

Morning

Session

(10:00

–

12:30

pm)

Welcome

Logistics

–

10:00

–

10:15

Montelaro, Blair, Freese

Vision

for

Industry

Future

–

10:15

–

11:15

Welch, May

•

Why is this transformation necessary?

•

Why this structure?

•

Why with ITC?

•

Why now?

Rationale

for

Transaction

11:15

–

12:30

•

Independence

Welch

•

Operational

Excellence

Jipping,

Riley

–

Storm Response

•

Regional

Planning

Vitez

•

IPL

Transaction

Experience

Results

Jipping

•

Local Presence

Engagement

w/Retail

Regulators

Jipping

•

Financial

Flexibility

and

Growth

Lewis

•

Financial

Strength

ITC

Bready

Afternoon

Session

(1:00

–

4:00

pm)

Rate

Effects

1:00

–

2:30

Bready, Dingle, Lewis

•

ELL/EGSL Retail Customer Rate Effects

–

Rate Construct

–

Forward Test Year

–

Bill Effects

•

Any Potential Impacts on ELL/EGSL

Generation/Distribution Business

•

Wholesale Rate Effects Post-MISO

Break –

2:30 –

2:45

Transaction Structure & ELL/EGSL Specific

Implications

–

2:45

–

3:45

Bready, Lewis

Wrap

–

3:45

–

4:00

Fontan, Freese

03/06/13

ITC, ELL & EGSL Technical Conference

ELL/EGSL

Credit

Ratings

Impacts

Securitization

Transaction

Impact

ADIT

Liability

Transaction

Structure

•

Significant capital requirements to continue modernizing the grid best handled by

an independent company who can better manage the transmission portion of

capital spend

•

Affords the EOCs financial flexibility to manage the necessary investment in G&D

•

Independent ownership and operation of Entergy Transmission System (ETS)

extracts the greatest benefits in an RTO with a Day 2 market

•

Consistent with efforts towards independent transmission operation and ownership

•

Nation's first, largest, & only publicly-traded independent transmission company

•

A proven track record of best-in-class performance, improving reliability for ETS

•

Extensive

experience

with

MISO

and

committed

facilitating

the

MISO

Day

Market

•

Inter-RTO experience applicable to ETS's seams with SPP and other regions

•

Financially sound with strong investment grade credit ratings & access to capital

•

Opportunities for greater economies and efficiencies

•

Final step in over a decade of work to pursue best management structure for ETS

•

Eliminates perception of bias in transmission system planning and operations

•

Comparable

sizes

ITC's

and

the

EOCs’

(Entergy

Operating

Companies)

transmission businesses allows for a tax efficient transaction not necessarily

available in future

The right

transaction...

...with the

right

partner...

at the right

time

This transaction creates the right model

for the benefit of our customers...now and into the future

ITC Transaction is the Right Transaction

with the Right Partner at the Right Time

U.S. Transmission Grid –

Historically Fragmented and Inefficient

Historically, transmission

infrastructure development in

the U.S. primarily

focused on connecting load

and resources within

balancing authority areas,

with little interregional or

national perspective

In contrast,…

U.S. Electric Power Transmission Grid

•

More than 211,000 high voltage transmission

line miles

•

Operated by ~130 balancing authority areas

(ownership is even more fragmented)

Source: FEMA, NERC

•

Introduction

•

Industry Evolution

•

ITC’s Business Model

•

ITC’s Proven Track Record

•

Benefits Beyond MISO

•

Commitment to Louisiana & Communities we serve

•

Transaction Value for Louisiana

Strategic Overview

ITC

Agenda

Morning

Session

(10:00

–

12:30

pm)

Welcome

Logistics

–

10:00

–

10:15

Montelaro, Blair, Freese

Vision

for

Industry

Future

–

10:15

–

11:15

Welch, May

•

Why is this transformation necessary?

•

Why this structure?

•

Why with ITC?

•

Why now?

Rationale

for

Transaction

11:15

–

12:30

•

Independence

Welch

•

Operational

Excellence

Jipping,

Riley

–

Storm Response

•

Regional

Planning

Vitez

•

IPL

Transaction

Experience

Results

Jipping

•

Local

Presence

Engagement

w/Retail

Regulators

Jipping

•

Financial

Flexibility

and

Growth

Lewis

•

Financial

Strength

ITC

Bready

Afternoon

Session

(1:00

–

4:00

pm)

Rate

Effects

1:00

–

2:30

Bready, Dingle, Lewis

•

ELL/EGSL Retail Customer Rate Effects

–

Rate Construct

–

Forward Test Year

–

Bill Effects

•

Any Potential Impacts on ELL/EGSL

Generation/Distribution Business

•

Wholesale Rate Effects Post-MISO

Break –

2:30 –

2:45

Transaction Structure & ELL/EGSL Specific

Implications

–

2:45

–

3:45

Bready, Lewis

Wrap

–

3:45

–

4:00

Fontan, Freese

03/06/13

ITC, ELL & EGSL Technical Conference

ELL/EGSL

Credit

Ratings

Impacts

Securitization

Transaction

Impact

ADIT

Liability

Transaction

Structure

Transaction Rationale:

In the Public Interest

Independent model

•

Proven independent business model for owning and operating transmission systems

•

Independence from all buyers and sellers of electric energy allows ITC to plan

improvements to the electric transmission grid for the broadest public benefit

Singular focus

•

Transaction

results

two

companies

that

are

specialized

and

focused

—

ITC

on transmission and Entergy on generation and distribution

•

Operational excellence, cost efficiency, customer focus

Wholesale markets and a regional planning view

•

Transaction

facilitates

infrastructure

investment

and

fosters

competition

–

activities

that enhance wholesale electricity markets

•

Structural separation of the transmission business from generation and distribution

businesses encourages greater participation in the transmission planning process and

disclosure of information by third parties

•

Independent model aligns with national policy objectives

Financial strength and flexibility

•

Transaction will yield separate companies with strong balance sheets and greater

capability

finance

the

infrastructure

investment

requirements

today

and

the

future

Independent Model

Benefits of ITC Independent

Transmission Model

Transparency

Operational

Excellence

Reliability

Infrastructure

Investment

High Credit

Quality

Public Policy

Alignment

Facilitate Generator

Interconnection

Customer

Focus

•

Data from the SGS Study benchmarking study can be used to

quantify the resulting improved reliability

Operational Excellence:

Quantitative Value of Reliability

The calculation is based on data for the two largest load serving entities in Michigan from 2010 and 2011, with major storms excluded. The ITCT

and METC data reflect a three year average SAIDI from the SGS Study, given that performance changes year over year.

•

Compared to the performance of the median utility in the SGS Study,

this

amounts

value

about

$153

million

per

year

delivered

ITC’s Michigan utilities

•

The U.S. Department of Energy’s Office

of Electricity Delivery and Energy

Reliability has developed a tool to

estimate interruption costs and the

benefits associated with reliability

improvements

•

A one minute improvement in System

Average Interruption Duration Index

(SAIDI)

for

ITCTransmission

and

METC

results in one year savings of $7.7M

•

Utilize standard equipment when possible to drive greater

efficiencies (e.g. breaker replacement completed in two versus

six weeks)

•

Utilize equipment with track record of longer life, resulting in

lower maintenance and replacement costs

•

Engage in strategic alliances to ensure that needed equipment is

available to meet project timelines

•

Purchasing power leads to better pricing when buying large

volume of transmission equipment

Cost Efficiencies

Standardization and Specialization

•

Ability to attract and retain

personnel with high levels of

interest and expertise in electric

transmission avoids turnover and

training costs (important when

facing near-term shortage of

skilled workers)

Customer Focus

Dedicated Stakeholder Relations group for all stakeholders,

providing advocacy and issue resolution at ITC

Stakeholders include investor-owned, municipal and cooperative utilities,

independent power producers and retail load of large industrial and commercial

retail customers connected at transmission level voltages

Proactively meet with stakeholders to identify stakeholder issues

and resolve any concerns through one-on-one meetings and semi-

annual

“Partners

Business”

meetings

Energy policy, legislative and regulatory matters

Capital project, transmission planning and preventive maintenance

Operations preparedness for summer peak load and storm events

Transmission rates

Storm restoration

Planned outages to eliminate or

minimize any potential risk and costs to

industrial processes

Unplanned outages regarding cause,

estimated duration, and future prevention

Timely customer communication

Storm Response –

Utilizing Best Practices

ETR System Incident

Commander (SIC)

ITC System Incident

Commander (SIC)

System Section

Chiefs

System Planning

Section Chief

System Resource

Section

System Logistics

Section

Restoration

Prioritization Branch

Director

ITC Section

Chiefs

Entergy Liaison

Coord.

(New position)

ITC Technical/Management

employee assigned to

ETR System Command

Center in Jackson, MS

ITC employee

ETR employee

Functional Incident

Commanders

(ex. Fossil, EOC,

Nuclear, Gas)

Storm response organization will be modified to ensure

close coordination and interaction between Entergy and ITC

ELL/EGSL

Customer

ITC Planning

Section

ITC Logistics

Section

ITC Resource

Section

Transmission Prioritization

Resource Coordination

Logistics Coordination

Fosters Regional Planning

•

ITC has track record of planning its transmission systems to:

–

Address local, state, and regional reliability needs

–

Increase the economic efficiency of the overall grid

–

Respond to transmission needs identified in state and regional processes

•

When deficiencies are identified on the transmission system, such as

inadequate capacity to meet load under certain contingency conditions,

ITC plans, develops and constructs transmission projects to address

such deficiencies

•

ITC is committed to planning its transmission system in an open and

transparent manner; ITC has its own processes that supplement the

already open and transparent processes used by MISO

•

Transaction enhances customer benefits beyond what could be achieved

through the Entergy Operating Companies’

proposed MISO membership

•

ITC has proven it has the expertise, resources, and capital not only to

plan but also to construct needed investment

•

ITC’s regional approach to transmission planning will enhance

deliverability of generation throughout the region to provide a more

economic source of energy for customers

IPL Transaction Experience & Results

•

ITC has invested approximately $1.1 billion to improve the ITC

Midwest transmission system since acquisition of IPL assets

–

Projects needed to upgrade and improve existing lines and substations,

construct new lines to serve load growth and improve reliability, resolve

system constraints and provide interconnection for new load and generation

Major activities:

•

Built 26 new substations

•

Completed 32 major substation upgrades/expansions

•

Built nearly 26 miles of new line

•

Rebuilt nearly 400 miles of existing lines

•

Added four and replaced three major transformers

Key Project: Salem-Hazleton

•

81-mile,

345

line

connecting

Dubuque

and

Buchanan

Counties in eastern Iowa

•

Regional planning had long identified as needed to

resolve system constraints and reduce energy costs.

•

Expected completion: 2013

ITC Midwest reduced sustained outages from those experienced in 2008 (the last year

IPL operated and maintained the system) by 50% in 2009, 24% in 2010, and 58% in 2011

ITC Midsouth

Regulatory and External Affairs Organization

ITC

Chief Business Officer

ITC

Midsouth

Director,

Regulatory

Affairs

ITC Midsouth

Director,

State Gov’t

Affairs

ITC Midsouth

Director,

Local Gov’t

& Comm.

Affairs

ITC Midsouth

Director,

Stakeholder

Relations

An ITC executive (VP and BU Head)

will be responsible for the following

ITC Midsouth functions:

—

Regulatory Affairs

—

State Government Affairs

—

Local Government and

Community Affairs

—

Stakeholder Relations

ITC Midsouth staff will be located

throughout the Entergy footprint to

perform these functions

—

Regulatory Affairs Managers

will be located in each state

capital

—

Managers and other support

staff will be geographically

dispersed to cover the other

functions

These employees and functions will

report to ITC’s Chief Business

Officer

Louisiana

Arkansas

Mississippi

Texas

ITC Midsouth

VP and Business Unit Head

Louisiana

Arkansas

Mississippi

Texas

Louisiana

Arkansas

Mississippi

Texas

Louisiana

Arkansas

Mississippi

Texas

ETR Utilities’

Capital Needs

Could Total ~$12B-16B Over 2012-2018

Actual and Forecast Entergy Utilities

Investment

($B)

1999-2004

2005-2011

2012-2018

Average

= $1.8B -

$2.3B

Total = $12.3B -

$15.9B

Average

= $1.4B -

$1.7B

Total = $9.7B -

$11.7B

Average

= $1.1B

Total = $6.5B

???

Effect of EPA rules?

Aging infrastructure?

1. Range

based

actuals

plus

storm

capital.

Range

based

projections

ETR

Utilities’

base

capital

plan

plus

potential

spend

Potential

spend

related to potential economic development projects, potential new generation investment, potential environmental spend, and potential new storm

spend.

Potential storm spend for forward looking period is an estimate based on annual average spend over 2005-10 to illustrate potential of capital

requirements

event

risks.

Potential

spend

not

included

base

capital

plan

Note: ETR Utilities includes EAI, ELL, EGSL, EMI, ETI, ENO, SERI, ESI,

EOI, SFI; EOCs include EAI, ELL, EGSL, EMI, ETI, and ENO

Actual excluding storms (Transmission and Non-Transmission)

Potential spend

Past storm spend

Base case –

conservative (Transmission and Non-Transmission)

EOCs Transmission

EOC

Transmission

EOC

Transmission

ELL Total Capital Needs Could Total

~$3.1B -

$4.6B Over 2012-2018

Actual and Forecast Capital Investment

for ELL ($B)

1999-2004

2005-2011

2012-2018

2.5

Actual excluding storms (Transmission and Non-Transmission)

Potential spend

Past storm spend

Base case –

conservative (Transmission and Non-Transmission)

Average

= $445M -

$664M

Total = $3.1B -

$4.6B

Average

= $406M -

$505M

Total = $2.8B -

$3.5B

Average

= $208M

Total = $1.2B

???

Effect of EPA rules?

Aging infrastructure?

1. Range based on actuals plus storm capital. 2. Range based on

projections of ELL's base capital plan plus potential spend 3. Potential spend

related to potential economic development projects, potential new generation investment, potential environmental spend, and potential new storm

spend.

Potential storm spend for forward looking period is an estimate based on annual average spend over 2005-10 to illustrate potential of

capital requirements of event risks. Potential spend is not included in base capital plan.

Transmission

EGSL Total Capital Needs Could Total

~$1.5B -

$2.0B Over 2012-2018

Actual and Forecast Capital Investment

for EGSL ($B)

1999-2004

2005-2011

2012-2018

Average

$218M

$280M

Total = $1.5B -

$2.0B

Average

$192M

$225M

Total = $1.3B -

$1.6B

Average

$153M

Total = $0.9B

???

Effect of EPA rules?

Aging infrastructure?

Range

based

actuals

plus

storm

capital.

Range

based

projections

EGSL’s

base

capital

plan

plus

potential

spend

Potential

spend

related to potential economic development projects, potential new generation investment, potential environmental spend, and potential new storm

spend.

Potential storm spend for forward looking period is an estimate based on annual average spend over 2005-10 to illustrate potential of

capital requirements of event risks. Potential spend is not included in base capital plan.

Actual excluding storms (Transmission and Non-Transmission)

Potential

spend

Past storm spend

Base case –

conservative (Transmission and Non-Transmission)

Transmission

Note: Historical data excludes storm capital, as there is no capital associated with future storms in base capital plan projections.

Numbers presented are only for EOCs (EAI, EGSL, ELL, EMI, ETI, ENO) and excludes SERI/ESI

EOCs’

Transmission Capital

Could Total ~$3.6B Over 2012-2018

Average = $254M

Total = $1.8B

Average= $511M

Total = $3.6B

Actual and Forecast Transmission Investment for EOCs

($B)

2005-2011

1999-2004

2012-2018

Projected base case capital

plan as of August 2012

Actual

Average= $200M

Total = $1.2B

Transmission Capital Spending for EOCs Could Increase

Over 100% in the Next Seven Years

ELL Transmission Capital

Could Total ~$650M Over 2012-2018

Average = $74M

Total = $521M

Average= $93M

Total = $652M

Actual and Forecast Transmission Investment for ELL

($M)

750

1999-2004

2005-2011

2012-2018

375

Average= $35M

Total = $209M

Transmission Capital Spending for ELL Could Increase

Approximately 25% in the Next Seven Years

Projected base case capital

plan as of August 2012

Actual

Note: Historical data excludes storm capital, as there is no capital associated with future storms in base capital plan projections.

EGSL Transmission Capital

Could Total ~$545M Over 2012-2018

Average = $56M

Total = $392M

Average= $78M

Total = $545M

Actual and Forecast Transmission Investment for EGSL

($M)

600

1999-2004

2005-2011

2012-2018

300

Average= $75M

Total = $450M

Transmission Capital Spending for EGSL Could Increase

Approximately 39% in the Next Seven Years

Projected base case capital

plan as of August 2012

Actual

Note: Historical data excludes storm capital, as there is no capital associated with future storms in base capital plan projections.

ELL Transmission CapX as Multiple of Depreciation

Nearly Twice as High as Non-Transmission

ELL Average CapX as Multiple of

Depreciation (2012-18 Average)

For ELL,

Transmission

Constitutes ~31% of

Capital in Excess of

Depreciation, despite

being 12% of rate

base

2.4

1.6

Transmission

Non-

Transmission

Note: Based on figures filed in testimony at LPSC

EGSL Transmission CapX as Multiple of Depreciation

More Than Three Times as High as Non-Transmission

EGSL Average CapX as Multiple of

Depreciation (2012-18 Average)

For EGSL,

Transmission

Constitutes ~89% of

Capital in Excess of

Depreciation, despite

being 14% of rate

base

3.5

1.1

Transmission

Non-

Transmission

Note: Based on figures filed in testimony at LPSC

Benefits from Financial Flexibility for Entergy

Transmission-Related Cash

Capital Requirements Go Away

Utility Operating Cash Flow Minus

Cash Construction Expenditures

2014E –

2018E ($M)

Utility Debt Obligations

2018E ($M)

Stronger Utility Balance Sheet Improves Ability

to Invest in Generation and Distribution

Status Quo

With ITC

Transaction

Status Quo

With ITC

Transaction

6,000

2,000

4,000

2,000

6,000

4,000

8,000

10,000

4,716

5,580

Note: As detailed in direct testimony, Transaction has two separate effects on remaining entity's cash flow:

OCF: EOCs no longer earn on transmission rate base spun-off (negative effect on cash flow)

Cash Construction Expenditures: transmission related cash capital requirements go away (positive effect on cash flow for EOCs)

Net

effect

EOCs

positive

transmission

Cash

Construction

Expenditures

over

2014-2018

higher

than

transmission

OCF

18%

$2,755M

Benefits from Financial Flexibility for ELL

Transmission-Related Cash

Capital Requirements Go Away

ELL Operating Cash Flow Minus

Cash Construction Expenditures

2014E –

2018E ($M)

ELL Debt Obligations

2018E ($M)

Stronger Balance Sheet Improves Ability

to Invest in Generation and Distribution

Status Quo

With ITC

Transaction

Status Quo

With ITC

Transaction

2,000

1,000

500

1,500

2,500

3,000

2,000

1,000

2,093

2,164

Note: As detailed in direct testimony, Transaction has two separate effects on remaining entity's cash flow:

OCF: EOCs no longer earn on transmission rate base spun-off (negative effect on cash flow)

Cash Construction Expenditures: transmission related cash capital requirements go away (positive effect on cash flow for EOCs)

Net

effect

EOCs

positive

transmission

Cash

Construction

Expenditures

over

2014-2018

higher

than

transmission

OCF

$576M

Benefits from Financial Flexibility for EGSL

Transmission-Related Cash

Capital Requirements Go Away

EGSL Operating Cash Flow Minus

Cash Construction Expenditures

2014E –

2018E ($M)

EGSL Debt Obligations

2018E ($M)

Stronger Balance Sheet Improves Ability

to Invest in Generation and Distribution

Status Quo

With ITC

Transaction

Status Quo

With ITC

Transaction

1,500

1,000

500

2,000

1,000

500

1,500

1,011

1,113

Note: As detailed in direct testimony, Transaction has two separate effects on remaining entity's cash flow:

OCF: EOCs no longer earn on transmission rate base spun-off (negative effect on cash flow)

Cash Construction Expenditures: transmission related cash capital requirements go away (positive effect on cash flow for EOCs)

Net

effect

EOCs

positive

transmission

Cash

Construction

Expenditures

over

2014-2018

higher

than

transmission

OCF

10%

$359M

Financial Strength and Flexibility

•

Transaction offers the financial strength of ITC and improves that of ELL and

EGSL to support the escalating capital investment requirements facing the

electric industry

–

ITC has a singular focus with no internal competition or competing priorities for

capital or other resources; provides a stronger, separate balance sheet to support

the transmission capital requirements

–

ITC better positioned to efficiently capitalize the significant and sustained level of

transmission investment required in the Entergy region, including Louisiana

–

Post-close, ELL and EGSL would be better positioned to attract capital separately

to finance needed investments in generation and distribution at lower costs and to

manage future uncertainty regarding event risk (e.g., new regulatory requirements

or major storms)

•

ITC’s MISO operating companies are deemed to be of higher credit quality

than ELL and EGSL, as well as most vertically-integrated utilities

–

Enables consistent and predictable access to cost-effective capital, even during

challenging economic times; supports enhanced liquidity

–

Given significant and sustained level of transmission capital investment

requirements, as well as unforeseen needs, credit quality and access to capital are

paramount

Credit Quality Enhancement Overview

Debt Cost Savings

•

Expect new ITC operating companies to have ratings equivalent to

that of

ITC’s existing MISO operating companies

•

Merger between Entergy’s Transmission Business and ITC is expected to

lead to material interest expense savings, which will benefit Entergy’s

customers

–

Reflected in both the initial capitalization of the new ITC operating companies,

including ITC Louisiana, as well as future debt financings to fund transmission

investment requirements

–

Aggregate debt financing cost savings estimated in the range of $24 million to $27

million in 2014 (first full year of ownership) for the new ITC operating companies

–

Over a five-year period (2014-2018), estimate debt financing cost savings for the

new

ITC

operating

companies

range

approximately

$125

million

$156

million (in nominal dollars)

–

FERC rate construct utilized by ITC’s operating companies viewed favorably by the

rating agencies and investors, which supports lower debt financing costs

–

ITC is seeking FERC rate construct for its new operating companies as part of this

transaction

–

Results in lower borrowing costs of approximately 45 bps to 205 bps relative to the

status quo EOCs, depending on market conditions

Agenda

Morning

Session

(10:00

–

12:30

pm)

Welcome

Logistics

–

10:00

–

10:15

Montelaro, Blair, Freese

Vision

for

Industry

Future

–

10:15

–

11:15

Welch, May

•

Why is this transformation necessary?

•

Why this structure?

•

Why with ITC?

•

Why now?

Rationale

for

Transaction

11:15

–

12:30

•

Independence

Welch

•

Operational

Excellence

Jipping,

Riley

–

Storm Response

•

Regional

Planning

Vitez

•

IPL

Transaction

Experience

Results

Jipping

•

Local Presence

Engagement

w/Retail

Regulators

Jipping

•

Financial

Flexibility

and

Growth

Lewis

•

Financial

Strength

ITC

Bready

Afternoon

Session

(1:00

–

4:00

pm)

Rate

Effects

1:00

–

2:30

Bready, Dingle, Lewis

•

ELL/EGSL Retail Customer Rate Effects

–

Rate Construct

–

Forward Test Year

–

Bill Effects

•

Any Potential Impacts on ELL/EGSL

Generation/Distribution Business

•

Wholesale Rate Effects Post-MISO

Break

–

2:30

–

2:45

Transaction Structure & ELL/EGSL Specific

Implications

–

2:45

–

3:45

Bready, Lewis

Wrap

–

3:45

–

4:00

Fontan, Freese

03/06/13

ITC, ELL & EGSL Technical Conference

•

Transaction

Structure

•

Transaction

Impact

ADIT

Liability

•

Securitization

•

ELL/EGSL

Credit

Ratings

Impacts

Significant variability in average residential bills –

yearly variation between $2 and $26 over 2001-2011

Henry Hub

Gas Index

($/mmBtu)

2.7

3.1

5.4

5.9

8.3

6.5

6.9

9.0

3.8

4.4

4.0

2006

80.97

72.57

2002

100

2001

2004

2005

2011

150

ELL

Avg.

Monthly

Residential

Bill

–

1,000

kWh

($)

78.99

2008

84.12

95.93

99.55

96.83

93.70

2003

Henry Hub Gas Index

($/mmBtu)

2009

92.70

2010

2007

83.35

109.77

Henry Hub Gas Index

ELL Avg. Monthly Residential Bill-

1,000 kWh($)

Illustrative

Note: Residential bills are the average of the Typical Monthly Bills in that year for a residential customer using 1,000 kWh, excluding taxes.

Source: Entergy Regulatory Services, Typical Bill Report

(-24%)

-26.43

+2.23

(+2%)

-13%

13% reduction in customer

bills since 2008

Significant variability in average residential bills –

yearly variation between $1 and $27 over 2001-2011

Henry Hub Gas Index

($/mmBtu)

EGSL

Avg.

Monthly

Residential

Bill

–

1,000

kWh

($)

Henry Hub Gas Index

EGSL Avg. Monthly Residential Bill-

1,000 kWh ($)

Illustrative

14% reduction in customer

bills since 2008

Note: Residential bills are the average of the Typical Monthly Bills in that year for a residential customer using 1,000 kWh, excluding taxes.

Source: Entergy Regulatory Services, Typical Bill Report

2009

108.24

101.47

2011

108.99

101.34

87.16

80.95

2008

2010

75.12

2007

82.35

89.25

2006

2005

150

2004

2003

2002

100

2001

Henry Hub

Gas Index

($/mmBtu)

2.7

3.1

5.4

5.9

8.3

6.5

6.9

9.0

3.8

4.4

4.0

-14%

-26.64

(-24%)

-0.37

(0%)

93.55

93.91

Transmission Constitutes a Small Portion

of a Typical Louisiana Customer's Total Bill

3.7%

Transmission

Non-Transmission

96.3%

Typical

ELL

Customer

Bill

Typical EGSL Customer Bill

6.4%

Transmission

Non-Transmission

93.6%

Note: Average of January 2011 –

December 2011 typical bills for a residential customer using 1,000 kWh per month; non-transmission portion

monthly

bill

includes

fuel

and

portions

the

fixed

customer

charge

and

energy

charge

allocated

generation

and

distribution

functions,

well as the inclusion of various riders.

•

Transition from current retail rate construct to FERC-regulated rate construct

expected for ITC

•

Analysis assumes MISO base ROE for new ITC operating companies

(12.38%) and capital structure currently utilized by ITC operating companies

(60% equity/40% debt)

•

Benefits

credit

quality

improvement

resulting

from

transition

FERC-

regulated rate construct partially offset impacts

Rate Impacts Split into Rate Construct, Rate Timing,

and Other Effects for Retail Customers

Rate

Construct

Effects

Rate Timing

Effects

•

Forward Test Year: Eliminates regulatory lag in recovery of capital

investments

–

One-time impact of conversion to forward test year

–

Reflects amounts that would have been collected in future years

•

Schedule MSS-2 construct eliminated post-Transaction

•

Current

estimation

reflects

effect

paying

load

ratio

Transmission

cost factoring in zonal investment (single LA zone) and retail share of

Transmission investments

Other

Effects

Over the long term,

customer bill effects

expected to be mitigated

by...

•

Enhanced Financial

Flexibility

•

Operational Excellence

•

Independent and

transparent ITC model

•

Regional Planning

~0.52

0.5%

ELL

Residential

Bill

–

1,000

kWh

($)

120

100

Illustrative Bill

if ITC owns

T assets –

~96.45

2014

~(0.19)

2014

~0.71

Illustrative Bill

if ETR owns

T assets –

status quo

95.93

ELL Typical Residential Customer Bill

Expected

Increase

0.5%

–

Expected

Mitigation by Customer Benefits

Note:

Contents exclude estimated

one-time 2014 rate timing

effect of $0.64 due to

conversion to forward test

year –

reflects amount that

would have been collected

in future years

Note:

$95.93

the

average

the

2011

Typical

Monthly

Bill

for

residential

customer

using

1,000

kWh,

excluding

taxes.

Calculation

indicative of the rate effects of the spin-merge transaction and is not meant to project an actual future customer bill. Illustration does not

include rate timing effects such as adoption of forward test year.

Illustrative

WACC

Effects

Net

Other

Effects

post-transaction

93.55

EGSL

Residential

Bill

–

1,000

kWh

($)

120

100

~1.20

1.3%

Illustrative Bill

if ITC owns

T assets –

~94.75

2014

~0.38

2014

~0.82

Illustrative Bill

if ETR owns

T assets –

status quo

EGSL Typical Residential Customer Bill

Expected

Increase

1.3%

–

Expected

Mitigation by Customer Benefits

Over the long term,

customer bill effects

expected to be mitigated

by...

•

Enhanced Financial

Flexibility

•

Operational Excellence

•

Independent and

transparent ITC model

•

Regional Planning

Note:

Contents exclude estimated

one-time 2014 rate timing

effect of $0.63 due to

conversion to forward test

year –

reflects amount that

would have been collected

in future years

Note:

$93.55

the

average

the

2011

Typical

Monthly

Bill

for

residential

customer

using

1,000

kWh,

excluding

taxes.

Calculation

indicative of the rate effects of the spin-merge transaction and is not meant to project an actual future customer bill. Illustration does not

include rate timing effects such as adoption of forward test year.

Illustrative

Net Other Effects

WACC Effects

post-transaction

Modest

Bill

Effects

0.4

–

1.4%

Select

Commercial

and

Industrial

Classes

–

Expected

Mitigation by Customer Benefits

Note: Calculation indicative and illustrative of the rate effects of the spin-merge transaction and is not meant to project an actual future

customer

bill.

Contents

exclude

estimated

one-time

2014

rate

timing

effect

due

conversion

forward

test

year

–

reflects

amount

that

would

have been collected in future years. Based on August 2011 typical customer bill.

2014 Transaction Bill Effects

Selected

Retail Class

Description

Typical

Bill

WACC

Effects

Net

Other

Effects

Total

Effect

Change

ELL

SGS

50 kW, 35% Load Factor

$1,237.15

7.46

(1.99)

5.48

0.4%

LGS

300 kW, 55% Load Factor

$8,823.83

80.51

(21.44)

59.07

0.7%

EGSL

SGS

1,500 kWh

$167.61

1.26

0.58

1.84

1.1%

25 kW, 30% Load Factor, Summer

$488.23

4.73

2.17

6.90

1.4%

Illustrative

EGSL

–

$93.55

ELL

–

$95.93

EGSL

–

$93.55

Sensitivity of Residential Rate Effects

to Variations in Spend

ELL

–

$95.93

+ $0.11

O&M

Spend

+ $0.12

+ $0.04

Capital

Expenditure

Spend

+ $0.04

Typical Monthly

Residential Bill

Sensitivity to

10% Increase

in Spend

$0.52

$1.20

$0.52

$1.20

Total

Transaction

Bill Effect

Typical Monthly

Residential Bill

Sensitivity to

10% Increase

in Spend

Total

Transaction

Bill Effect

$0.11

$0.12

$0.04

Sensitivity to

10% Decrease

in Spend

Sensitivity to

10% Decrease

in Spend

1. Typical

ELL

bill

$95.93,

typical

EGSL

bill

$93.55

reflect

the

average

the

2011

Typical

Monthly

Bills

for

residential

customer

using

1,000 kWh, excluding taxes. Note: Calculation is indicative and illustrative of the rate effects of the spin-merge transaction and is not meant to

project an actual future customer bill.

ELL and EGSL face long-term generation supply

needs driving significant capital requirements

Load growth and replacement of aging

capacity are anticipated to drive

generation capacity shortages

•

By 2021, EGSL is expected to be short 1.3GW in generation

capacity

•

By 2031, ELL and EGSL are expected to be short 2.7 GW and

2.3 GW, respectively

•

Even after Ninemile 6 enters service, additional generation

investment required in Amite South and WOTAB

Aging generation needs to be replaced

•

Average age of the generating fleet in Amite South is 42 years

•

By 2020, additional resources needed in Amite South about

every 5 years

Local generation resources needed

Unit life extension is not the long-term fix

•

Sustainability spending ($180/kW to $250/kW) could extend the

useful life but such spending can only delay but not eliminate

the need to replace older generation

Resource needs for ELL

and EGSL could range

from $2.4B to $6.1B

over the 20 year

planning period –

this range reflects

uncertainty regarding

load growth, cost of new

capacity, and ability to

maintain sustainability

strategy

1.2012$,

under

the

assumption

that

all

the

resource

needs

are

self-built,

gas-fired

CTs

and

CCGTs.

ITC transaction enables ELL and EGSL to

better meet generation capital needs

•

Transaction strengthens balance sheets for ELL and EGSL by reducing

debt and improving cash positions, which would allow ELL and EGSL –

jointly

separately

–

fund

resource

acquisitions

lower

cost

•

Transaction allows the EOCs to shed transmission-business-related cash

capital requirements and negative cash flows

•

With its higher credit quality and singular focus on transmission, ITC can

efficiently build new transmission that keeps pace with the ELL and EGSL's

expected future generation needs

•

ITC's independent business model and regional view of planning can

facilitate infrastructure investments and foster increased competition in

wholesale

electricity

markets

–

activities

which

will

increase

resource

options to address generation needs of ELL and EGSL customers

ELL and EGSL will have

increased capability to

finance Generation

investments

ITC can build

Transmission to

complement Generation

needs and create access

to resource options for

ELL & EGSL

Change in How Wholesale Rates are Determined Due to

Adoption of MISO's 12 CP Demand Methodology

Note:

Amount

paid

remains

the

same

because

the

customer

consumes

the

same

amount

transmission

service

both

methodologies.

The

methodology affects the units of measuring rates and the units of measuring consumption but the amount paid is same and is reflective of services

consumed

In both methodologies aggregate amount paid by customer consuming a certain

amount

Transmission

service

will

remain

the

same

Current ETR OATT

ETR OATT with 12 CP

2014 Transmission Net Revenue Requirement

Same Revenue Requirement numerator

Single annual peak demand x 12 months

Aggregated 12 coincident peaks (CP) demand

over year

Single highest peak in a month x 12 months

Sum of peak demands in each month of year

Higher demand denominator

Lower demand denominator

$ 1.85 / kWm

$ 2.43 / kWm

Wholesale Rate Effects Reduced

for Louisiana Customers Post-Transition to MISO

Note:

Calculation

indicative

and

illustrative

not

meant

project

actual

future

customer

bill.

Estimates

are

preliminary

and

draft

prior

rate

filings

in first quarter of 2013

Wholesale rate

effects estimation

does not factor

in any production

costs savings and

other benefits to

be achieved

through transition

to MISO RTO

Rates

have

been

estimated

using

methodology

used

under

MISO

Attachment

Current

ETR

OATT

methodology

uses

single

annual

peak

rather

than

CP.

Change

methodology

does

not

imply

change

Revenue

Requirements

hence

customers do not pay different amounts under 12 CP employed by MISO vs. single annual peak employed by ETR. The

equivalent number to $2.43 /kWm under 12 CP would be a $1.85 /kWm under single annual peak. The per unit estimation may

be different but the amount paid by the customer is the same.

Illustrative

Includes estimated one-time rate

effect of ~$0.21 due to conversion to

forward

test

year

–

reflects

amounts

that would have been collected in

future years

Estimated 2014 Wholesale Transmission Rate Effects

***using 12 CP methodology***

($/kWm)

2.5

2.0

1.5

1.0

0.5

0.0

Estimated 2014 WS rates post

transition to MISO with 4

Transmission

Pricing

Zones

2.36

Estimated Net Rate Effect

of adopting default MISO

ROE and implementing 4

Transmission

Pricing

Zones

(0.07)

Estimated 2014 WS rates paid

under ETR OATT under One

Transmission Pricing Zone

2.43

Transaction-Related Filings Pending Before the

Federal Energy Regulatory Commission

Joint ITC/Entergy Corp/ESI/EOCs filing:

•

EC12-145-000

Transaction approval (FPA 203)

•

ER12-2681-000

Formula rate and related agreements approval (FPA 205)

•

EL12-107-000

Declaratory Order regarding dividend payments from capital

accounts (FPA 305)

•

ER12-2682-000

MISO

filing:

Module

B-1,

Interim

provisions

for

integration

the

transmission assets into MISO if Transaction closes before full

Entergy-MISO integration

•

ER12-2683-000

ESI

filing

behalf

EOCs:

Ancillary

services

tariff

(to

cover

potential period before MISO provision)

•

ER12-2693-000

ESI

filing

behalf

EOCs:

Amends

the

Entergy

System

Agreement to delete MSS-2 upon closing of the Transaction

•

ES13-5-000

ITC

filing:

Authorization

for

financing

(FPA

204)

•

ES13-6-000

ESI

filing

behalf

the

Wires

Subs:

Authorization

for

financing

(FPA 204)

•

ES11-40-002

EOCs

filing:

Authorization

for

financing

(FPA

204)

1Q2013, ELL, EGSL, and the other EOCs will file MISO Attachment O formula rate

at the FERC to be effective in the event the ITC transaction is not consummated

2014 Rate Effect from ITC Transaction for

Typical Louisiana Wholesale Customer –

Expected Mitigation by Customer Benefits

Note:

Includes estimated one-

time rate effect of ~$0.21

due to conversion to

forward test year –

reflects

amounts that would have

been collected in future

years; excludes offsetting

depreciation study impact

of ~$0.12

Estimated LAU Wholesale Transmission Rate Effects

($/kWm)

(1)

Customer bill effects

expected to be

mitigated by...

Operational Excellence –

Reliability, System

Performance, etc.

Credit Quality Impacts

(0.08)

0.14

Estimated ETR

Ownership in MISO *

2.36

2.41

Net Effect of

~$0.06 or 2.5%

ITC Ownership

Expected FERC Construct

Effects

* Reflects ETR transition into MISO including establishment of four transmission pricing zones

and 12.38% ROE

(1) Does not apply to GFA customers

Illustrative

Rate Construct

Effects from FERC

Regulated Model

Independent and

Transparent ITC Model

Enhanced Financial

Flexibility

Regional Planning

Agenda

Morning

Session

(10:00

–

12:30

pm)

Welcome

Logistics

–

10:00

–

10:15

Montelaro, Blair, Freese

Vision

for

Industry

Future

–

10:15

–

11:15

Welch, May

•

Why is this transformation necessary?

•

Why this structure?

•

Why with ITC?

•

Why now?

Rationale

for

Transaction

11:15

–

12:30

•

Independence

Welch

•

Operational

Excellence

Jipping,

Riley

–

Storm Response

•

Regional

Planning

Vitez

•

IPL

Transaction

Experience

Results

Jipping

•

Local Presence

Engagement

w/Retail

Regulators

Jipping

•

Financial

Flexibility

and

Growth

Lewis

•

Financial

Strength

ITC

Bready

Afternoon Session (1:00 pm –

4:00 pm)

Rate

Effects

1:00

–

2:30

Bready, Dingle, Lewis

•

ELL/EGSL Retail Customer Rate Effects

–

Rate Construct

–

Forward Test Year

–

Bill Effects

•

Any Potential Impacts on ELL/EGSL

Generation/Distribution Business

•

Wholesale Rate Effects Post-MISO

Break –

2:30 –

2:45

Transaction Structure & ELL/EGSL Specific

Implications –

2:45 –

3:45

Bready, Lewis

Wrap Up –

3:45 –

4:00

Fontan, Freese

03/06/13

ITC, ELL & EGSL Technical Conference

ELL/EGSL

Credit

Ratings

Impacts

Securitization

Transaction

Impact

ADIT

Liability

Transaction

Structure

Transaction Overview

Entergy

Shareholders

Transmission

Business

$1,775M of new

debt will be raised

~$1.2B of the new

debt will be raised

at the transmission

operating companies

~$575M will be

raised directly by

Entergy and will be

subject to a debt-

for-debt exchange

with debt issued by

MidSouth TransCo

Mid South

TransCo

OpCos

(Six)

Entergy will create

and distribute

shares of Mid South

TransCo to Entergy

shareholders

(Mid South TransCo

will own all of

Entergy’s

transmission

operating

companies upon

separation)

Immediately

prior to the

merger, ITC will

distribute $700M

to existing

shareholders,

funded by new

debt at ITC

Holdings

(Required to

align ITC’s

equity value with

that of the

Entergy

Transmission

Business)

ITC

Shareholders

Entergy

Shareholders

Mid South

TransCo

OpCos

(Six)

Entergy

Shareholders

ITC

Shareholders

Merger Sub

Mid South TransCo will immediately merge

with ITC Merger Sub and will become a

wholly-owned subsidiary of ITC; Entergy

shareholders will receive 50.1% ownership in

the combined company

Post Spin-Merge

Transaction Structure

100%

Entergy

Shareholders

Mid South

TransCo LLC

OpCos

ITC

Shareholders

ITC

OpCos

49.9%

Note: Chart represents ownership structure immediately upon closing of the transaction.

$1.775B of Debt Proceeds Used to Retire Preferred

and Pay Down Debt in Proportion to Transmission Assets

The allocations for ELL and EGSL were

estimated in order to:

•

Retire all Preferred at each Operating

Company

•

Target a post-transaction weighted

average cost of capital (WACC) that is

substantially unchanged from the pre-

transaction WACC

EOC

Amount ($M)

EAI

502

EGSL

263

ELL

413

EMI

290

ENO

ETI

284

Total

1,775

The amount of debt proceeds allocated to

each EOC is an estimate based on a forecast

The final amounts allocated to each EOC

may vary to the extent forecast assumptions

differ from the circumstances that exist at

the time of closing.

Source: Fourth Set of Data Requests of Marathon Petroleum Company, 4-17a and 4-22b

•

Comparable

equity

values

ITC

and

the

Entergy

Operating

Companies’

combined

T-business at this point

in time support execution of a Reverse Morris Trust

transaction structure where T-business is spun-off to existing ETR shareholders and

merged with ITC

•

Through

the

Reverse

Morris

Trust

Transaction

structure,

ELL

and

EGSL

will

not

incur

tax

liability

•

Under a taxable transaction, the tax basis of ELL and EGSL’s transmission assets

would

reset

and

Accumulated

Deferred

Income

Taxes

(“ADIT”)

would

re-

measured,

resulting

lower

balances

ADIT

and

higher

transmission

rate

base

•

Because ADIT ultimately lowers T-rates in cost of service ratemaking, re-measuring

ADIT would otherwise result in higher T-rates in a taxable transaction, all other

things being equal

•

result

the

RMT

transaction

structure,

ELL

and

EGSL’s

transmission

assets

will

have

the

same

tax

basis

post-transaction

they

had

prior

the

Transaction

•

Accordingly,

the

negative

rate

effects

for

customers

that

otherwise

would

have

resulted

from

change

tax

basis

under

taxable

transaction

are

avoided

RMT Structure Avoids Re-Measurement of ADIT Preserving

Tax Basis for ELL and EGSL and Protecting Customers

from Negative Rate Effects of a Taxable Transaction

Securitized Transmission Assets

Current Process:

Securitized

transmission

assets

are

carried

zero

book

value

EOCs

Recovery

these

securitized

transmission

assets

through

direct

charges

only

the

EOC’s

retail

customers

retail

rates

Adjustments

Entergy

OATT

(D17.1)

provides

for

recovery

System-wide

transmission

securitization

costs

from

wholesale

transmission

customers

Revenue

collected

from

these

adjustments

credited

the

EOC’s

retail

rates

retail

customers

only

pay

for

their

portion

these

securitized

transmission

assets

Post Spin/Merge:

Securitized

transmission

assets

transferred

ITC

zero

book

value

Recovery

these

securitized

transmission

assets

continues

through

direct

charges

only

the

EOC’s

retail

customers

retail

rates

New

Schedules

are

needed

MISO’s

tariff

provide

for

recovery

securitization

costs

from

wholesale

transmission

customers

(not

including

the

EOCs)

the

appropriate

TPZ

All

revenue

collected

MISO

for

these

new

schedules

will

remitted

the

EOCs

directly

for

crediting

retail

rates

retail

customers

only

pay

for

their

portion

these

securitized

transmission

assets

Louisiana Credit Metrics are Expected to be Maintained

or Improved Through the Transaction

Direct Testimony of Expert Witness Dr. Michael Tennican

•

“…will reduce the Operating Companies' total debt and total capitalization...”

•

“...will eliminate substantial capital expenditures for transmission…”

•

“...will significantly reduce the Operating Companies' debt financing needs...”

•

"...should help support the current bond ratings of the Operating

Companies...”

•

“...should reduce the interest costs that might have to be borne by Operating

Company customers...”

•

"...should not impair and may improve the Companies' current investment

grade credit ratings..."

•

"...should preserve access to debt capital on reasonable terms even in difficult

market conditions..."

Any potential credit ratings improvement for ELL or EGSL could result in

savings for Louisiana customers through lower cost of debt

1. Testimony of Dr. Michael Tennican before the LPSC, Docket U-32538

EEI Data: 54% of Utilities Ended at a

Lower Credit Grade in 2011 Compared to 2001

Cumulative % of Companies at Lower/Higher Rating

in 2011 Compared to 2001

Downgrades

No changes

Total

100

Upgrades

Source: EEI 2011 Q3 Credit Ratings Charts

Utility Bond Yields by

Credit Rating vs. Treasury

Bills (Ten-Year Average

Spreads)

-16

155

Baa3

400

200

-25

-37

-149

129

Baa1

Baa2

171

208

Ba2

357

bps

Transaction Protects ELL and EGSL from

Negative Impact to Credit Ratings

Estimates are hypothetical forecasts to illustrate effect on cost of debt and

benefits to customers –

exact values will depend on market conditions

Current ELL

and EGSL

credit ratings

at Baa2

Transaction

protects ELL from

credit downgrade

risk; one-notch

hypothetical

downgrade could

increase cost of

debt by 37 bps

Transaction

protects ELL from

credit downgrade

which could cost

customers

~$9.9M

in additional

interest costs

from 2014-2018

Transaction

protects EGSL from

credit downgrade

risk; one-notch

hypothetical

downgrade could

increase cost of

debt by 37 bps

Transaction

protects EGSL from

credit downgrade

which could cost

customers

~$4.1M

in additional

interest costs

from 2014-2018

Source: Bloomberg Fair Value 10-year credit ratings for utilities.

Illustrative

Agenda

Morning Session (10:00 am –

12:30 pm)

Welcome & Logistics –

10:00 –

10:15

Montelaro, Blair, Freese

Vision

for

Industry

Future

–

10:15

–

11:15

Welch, May

•

Why is this transformation necessary?

•

Why this structure?

•

Why with ITC?

•

Why now?

Rationale

for

Transaction

11:15

–

12:30

•

Independence

Welch

•

Operational

Excellence

Jipping,

Riley

–

Storm Response

•

Regional

Planning

Vitez

•

IPL

Transaction

Experience

Results

Jipping

•

Local Presence

•

Financial

Flexibility

and

Growth

Lewis

•

Financial

Strength

ITC

Bready

Afternoon Session (1:00 pm –

4:00 pm)

Rate

Effects

1:00

–

2:30

Bready, Dingle, Lewis

•

ELL/EGSL Retail Customer Rate Effects

–

Rate Construct

–

Forward Test Year

–

Bill Effects

•

Any Potential Impacts on ELL/EGSL

Generation/Distribution Business

•

Wholesale Rate Effects Post-MISO

Break –

2:30 –

2:45

Transaction Structure & ELL/EGSL Specific

Implications –

2:45 –

3:45

Bready, Lewis

Wrap Up –

3:45 –

4:00

Fontan, Freese

03/06/13

ITC, ELL & EGSL Technical Conference

•

Transaction Structure

•

Transaction Impact on ADIT Liability

•

Securitization

•

ELL/EGSL Credit Ratings Impacts

& Engagement

w/Retail

Regulators

Jipping