 Entergy
Transmission Business
Cities Meeting
March 29, 2012
Overview of
Entergy Transmission
Spin/Merger
Filed by Entergy Corporation Pursuant to
Rule 425
Under the Securities Act of 1933
Subject Company: Entergy Corporation
Commission File No. 001-11299 |
 1
1
1
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 Annual Report on Form 10-K for the year ended December
31, 2011 and other filings made by Entergy with the Securities and Exchange Commission; (ii) the
following transactional factors (in addition to others described elsewhere in this presentation
and in subsequent securities filings) 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, 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. |
 Additional
Information and Where to Find It 2
ITC and Transco will file registration statements with the Securities and Exchange Commission
(“SEC”) registering share of ITC common stock and Transco common units to be issued to
Entergy shareholders in connection with the proposed transactions. ITC will also file a
proxy statement with the SEC that will be sent to the shareholders of ITC. Entergy
shareholders are urged to read the prospectus and/or information statement that will be included in
the registration statements and any other relevant documents, because they contain important
information about ITC, Transco and the proposed transactions. ITC shareholders are urged
to read the proxy statement and any other relevant documents because they contain important
information about Transco and the proposed transactions. The proxy statement, prospectus and/or information
statement, 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 be obtained free of charge from Entergy upon written request to 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 of their respective directors and executive officers and certain other
members of management and employees may be 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 2011 Annual Report on Form
10-K filed with the SEC on February 28, 2012, and its definitive proxy statement relating to its
2011 Annual Meeting of Shareholders filed with the SEC on March 24, 2011. Information about the
directors and executive officers of ITC may be found in its 2011 Annual Report on Form 10-K
filed with the SEC on February 22, 2012, and its definitive proxy statement relating to its 2011
Annual Meeting of Shareholders filed with the SEC on April 21, 2011. |
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|
 Transco
Transaction Builds on Key Strategic Objectives
Why a Transco?
•
Complete independence (divestiture)
•
Singular focus in one critical area
–
Substantial investment
–
Technological change
–
Investment needs > depreciation level
4
•
Protects / improves credit quality of Operating Companies
•
Consistent with Congress and FERC direction |
 5
Transaction Consistent with FERC Policy
FERC Presumption
on Independence |
 The
Merger Transaction – End State
•
Entergy Utility Operating Companies
comprised of:
–
Generation
–
Distribution
•
Entergy to issue ~ $1.775B of debt, to be
assumed by ITC at close, with proceeds
anticipated to be used primarily to retire
operating company debt
•
Each Operating Company's capital
structure anticipated to be consistent with
current state following the transaction
•
Prior to the merger, ITC expects
to effectuate a $700M
recapitalization currently
anticipated to be a special
dividend
•
Entergy shareholders to merge
spun transmission business
with ITC merger subsidiary
•
New Holdco to survive
•
Entergy shareholders to receive
50.1% of ITC stock
Entergy
Shareholders
Parent
Creditors
Entergy
Utility
OpCos
Entergy
Wholesale
Commodities
OpCo
Creditors
Entergy
Shareholders
Mid South
TransCo LLC
(New Holdco)
ITC
Shareholders
ITC
ITC Merger
Sub
Transco Subs
Illustrative
6 |
 Why This
Transaction? . . . and Rising Capital for Entergy too
Entergy Projected Transmission Capital Investment
2012E –
2014E; $M
Projected
Depreciation
Expense
7
0
100
200
300
400
500
600
12E
13E
14E |
 Entergy
Customers and Other Stakeholders to Benefit From Independent Transmission
Company Ownership Increases flexibility of Entergy’s investment
alternatives Protects credit quality of Entergy and its OpCos
Supports efficient infrastructure investment
Improves access to capital for Entergy’s transmission business
Combines best operating practices of both Entergy and ITC
Brings ITC’s experience and track record of safe and reliable
operations to ensure continued strengthening of overall grid
performance
Leverages Entergy employees’
knowledge and experience and
fully utilizes Entergy’s world-class storm restoration process
Provides singular focus on transmission system performance,
planning and operations
Aligns with national policy objectives to facilitate investment in
local, regional and inter-regional transmission, advance open
access initiatives and promote access to competitive energy
markets
Financial
Flexibility
and Growth
Operational
Excellence
Independent
and
Transparent
ITC Model
8 |
 MISO
Approval Process Is Separate From ITC Approval Process
•
The Merger Agreement requires Entergy to obtain all necessary
approvals to allow the transmission business to become a member of
MISO
(1)
as a condition to closing. Either party may refuse to close or
may terminate the transactions if this condition to closing is not
satisfied. As such, it is important that the MISO
(1)
approval be
obtained within a timeframe specified by the Merger Agreement.
•
The Operating Companies' decision to join
MISO is separate and apart
from
the decision to transfer ownership of their transmission systems
to ITC.
The Operating Companies intend to pursue membership
in
MISO separate from the
pursuit of
regulatory approval
of the
transaction with ITC, and the Operating Companies intend to
join
MISO regardless of
the transaction with ITC.
(1)
Or other mutually agreed RTO
9 |
 Pathway
to Completion – Required Approvals
Jurisdiction / Authority
Approval(s)
Entergy retail
regulators
(APSC, LPSC, MPSC,
PUCT, CCNO)
•
Change of control of transmission assets
•
Authorization to incur debt in some jurisdictions
FERC
•
Change of control of transmission assets
•
Establishment of new regulatory construct for new
ITC subsidiaries
•
Authorization for operating company financings
•
Entergy System Agreement Changes
Hart-Scott-Rodino Act
(DOJ / FTC)
•
Pre-merger notification to review potential antitrust
and competition issues
IRS Private Letter
Ruling
•
Ruling regarding tax-free treatment of the distribution
of Mid South TransCo LLC (new HoldCo)
ITC shareholders
•
Merger
•
Amendment to ITC Articles of Incorporation to
increase the number of authorized shares
•
Authorization for issuance of greater than 20% of
outstanding shares
Approvals Required*
*Approvals may be required in Missouri due to limited assets in those territories.
Approval may be required in Oklahoma for ITC. 10
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