Entergy CorporationThe Role of Fuel Oil in Power Production

2008 Fuel Oil/Energy Buyers’ ConferenceMiami, Florida

Mark BrodeurSystem Planning & Operations

Entergy Corporation is a large integrated energy company

• Engaged primarily in:– Electric power production– Retail electric distribution operations– Retail provider of natural gas (179,000 customers)

• Owns and operates approximately 30,000 MW of electric generating capacity

• The second-largest nuclear generator in US• Delivers electricity to 2.7 million utility customers in Arkansas,

Louisiana, Mississippi, and Texas• Annual revenues in excess of $11 billion and more than 14,300

employees

Entergy is comprised ofregulated and unregulated entities

Regulated (Entergy Classic) Unregulated (SpinCo) Utilities – regulated separately by their Non Utility Nuclear business State jurisdictions Entergy Texas, Inc. (ETI) Enexus Corporation (5,000 MWS) Entergy Gulf States Louisiana, LLC (EGSLA) Palisades Nuclear Plant – Michigan Entergy Mississippi, Inc. (EMI)* Vermont Yankee – Northeast Entergy Louisiana, Inc. (ELI)* Pilgrim Plant – Plymouth, Mass Entergy New Orleans, Inc. (ENOI)* James Fitzpatrick Plant – New York Entergy Arkansas, Inc. (EAI)* Indian Point Plant – New York * Jointly owns System Fuels, Inc. (SFI) EquaGen LLC (Owned 50/50) by Entergy and Enexus Provides management services to Nuclear plants owned by Enexus and Entergy and also performs management of Cooper Station in Nebraska

Regulated entities are spread across Texas,Louisiana, Arkansas and Mississippi

Mabelvale

Independence

Moses

Ritchie

WhiteBluff

Lynch

Lake Catherine

Couch

ARKANSAS

Natchez

Baxter Wilson Rex Brown

Delta

Gerald Andrus

MISSISSIPPI

Little Gypsy Paterson Michoud

Waterford

Buras

Sterlington

Monroe

LOUISIANA

TEXAS

Lewis Creek

SPO

Nelson

Louisiana Station Willow Glen

Big Cajun

Sabine

Hot Springs

Arkansas Nuclear One

Little Rock

Lake Charles

Baton Rouge

River Bend

New OrleansNine Mile

Grand Gulf

Jackson

Carpenter Dam

Remmel Dam

Toledo Bend

Beaumont

Diversity is the key . . .

Diverse source of electricity for Entergy's regulated customers - 2007

Nuclear

Coal

Gas

Oil

Hydro

System Purchases

QF_Put

Dollars spent to produce or purchase electricity

Nuclear

Coal

Gas

Oil

Hydro

System Purchases

QF_Put

Co-Ow ner Excess

Aux/Other

Natural gas and oil typically compete

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$/MMBtu

"Burnertip"Gas Price

"Burnertip" OilPrice

Actual oil burn has varied significantly

Barrels

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2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2000 2001 2002 2003 2004 2005 2006 2007

Barrels

Our primary no. 6 oil plants are located inLouisiana and Mississippi

No. 4 Oil Plants Approx. Capacity (in mws) Location Mile Marker TransportationGerald Andrus 740 Greenville, MS 535 Lower Miss River

Baxter Wilson 1200 Vicksburg, MS 435 Lower Miss River Inland Barge

Delta 200 Cleveland, MS N/A Truck

Waterford 800 Taft, LA 128 Lower Miss River

Michoud 500 New Orleans, LA 3 Gulf Intercoastal East

Willow Glen 1000 St. Gabriel, LA 200 Lower Miss River Inland Barge

Nine Mile and Little Gypsy burn no. 4 fuel oil

No. 4 Oil Plants Approx. Capacity (in mws) Location Mile Marker TransportationNine Mile 1500 Weswego, LA 105 Lower Miss River Inland Barge

Little Gypsy 400 Laplace, LA 128 Lower Miss River

Diesel is another option

Diesel Plants Approx. Capacity (in mws) Location TransportationWillow Glen 200 St. Gabriel, LA Inland Barge

Sterlington 190 Sterlington, LA

Buras 12 Buras, LA TruckLynch 5 N. Little Rock, ARK

Rex Brown 7 Jackson, MS

How much oil to retain?

• Factors which are considered:– Distance from market and time necessary to re-supply– The estimated rate of consumption

• At some sites we can easily consume a barge load in 3-4 days

– Is the oil burned because of reliability or economics?– A site like Gerald Andrus is located upstream of many sources of

supply and re-supply could take 7 – 14 days– Size of on- site useable tank capacity could be a limiting factor

• Un-useable inventory is a necessary but unwanted “sunk cost”• Reduction of un-useable may be reduced thru piping modifications

– Tank cleaning program often complicates things• At times we may sell oil to empty a tank

Our SFI oil specifications

#6 Oil Key Purchase items

• Purchases are on a “delivered” basis– Liability of loss while “in transit” is minimized

• 5-day payment terms after ROI.• +/- 5% volume tolerance is our norm• Quality determined by volumetric barge composite

after loading• Quantity determined by shore tank measurement after

discharge into a “static” tank

Pricing format - #6 oil purchases

• Prompt deliveries are bought at a fixed price • Forward purchases usually compete with natural gas alternatives,

so we price them at a discount to natural gas using the Henry Hub index. Sellers tie the transaction to the NYMEX gas market. – When oil is cheaper than gas, a “basis” relationship between gas and oil

develops and that basis is what is agreed on. Therefore only the basis in known and it is later subtracted from the actual price of natural gas

– To protect against an “upward” tick in the gas market, we may agree to buy an “embedded cap” to establish a ceiling of which the gas would not exceed

– This cap costs something and results in some of the discount being “given up” in the overall transaction

An example of an oil price tied to gas with an embedded cap

• Oil = $26/bbl., or $4.00/mmbtu using a 6.5 btu conversion• Gas = $5.00/mmbtu• Fix the price of oil to the gas price and lock in the current

$1/mmbtu “basis” • If a cap is secured, then cost of such cap is deducted from

that “basis”. Example: if premium of that cap costs $0.10/mmbtu to guarantee gas will not exceed $6.00/mmbtu, then the differential equals $0.90/mmbtu

• Oil price = (gas index minus $0.90/mmbtu) * 6.5• Cap guarantees that oil price will never exceed

$5.10/mmbtu , or $33.15/bbl.

The outlook for oil is very uncertain

Whether or not we burn oil is dependent on:

• Relationship of oil and natural gas prices• The amount of cheaper merchant energy available• Costs required to maintain oil-fired capability• Environmental regulations and policies

Entergy CorporationThe Role of Fuel Oil in Power Production

2008 Fuel Oil/Energy Buyers’ ConferenceMiami, Florida

Mark BrodeurSystem Planning & Operations