Edgar Filing: ENTERGY CORP /DE/

Form 425

Update on

Entergy Transmission

Spin/Merger with ITC

June 18 –

20, 2012

Presented by Entergy Texas

Filed by Entergy Corporation Pursuant to Rule 425

Under the Securities Act of 1933

Subject Company: Entergy Corporation

Commission File No. 001-11299

Entergy Forward-Looking Information

this

communication,

and

from

time

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, its Quarterly Report on Form 10-Q for the

quarter ended March 31, 2012, 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

ITC and Transco will file registration statements with the Securities and Exchange Commission (“SEC”)

registering shares 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.

Agenda

ITC Spin-Merge Transaction Overview

Financial Flexibility

Rate Effects of Spin-Merge Transaction

Benefits

ETR

–

ITC

Spin-Merge

Transaction

Approvals Required

Storm Response

The Merger Transaction –

End State

•

Entergy Utility Operating Companies comprised of:

–

Generation

–

Distribution

•

~$1.775B of debt will be issued by Entergy in

connection with the internal separation of the

transmission business, the proceeds from which

will be used for debt reduction

•

Each Entergy Utility Operating Company's capital

structure after the spin-off and merger anticipated

to be consistent with capitalization prior to 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

receive

50.1%

ITC

stock

Illustrative

Entergy

Shareholders

Parent

Creditors

OpCo

Creditors

Utility

OpCos

Entergy

Wholesale

Commodities

Entergy

Shareholders

ITC

Shareholders

Mid South

TransCo LLC

(New Holdco)

ITC Merger

Sub

Transco Subs

Benefits of ETR –

ITC Spin-Merge Transaction

ITC Spin-Merge Transaction Overview

Agenda

Financial Flexibility

Rate Effects of Spin-Merge Transaction

Approvals Required

Storm Response

Overview of Benefits to Customers

Through Spin-Merge

•

Increases flexibility of Entergy’s investment alternatives

•

Protects credit quality of Entergy’s Operating Companies

•

Supports efficient infrastructure investment

•

Improves access to capital for 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

ITC Spin-Merge Transaction Overview

Agenda

Benefits

ETR

–

ITC

Spin-Merge

Transaction

Financial Flexibility

Rate Effects of Spin-Merge Transaction

Approvals Required

Storm Response

The Utility Industry Is Facing Huge Need for Capital –

Estimated at $2.2T Over the Next 20 Years

Growth / Investment

Issues Facing Utility Industry

Over Next 20 Years

Source: Internal analysis; Bloomberg

Generation

Transmission

Distribution

Projected Industry Capital Investments

Over Next 20 Years

???

Current Market Cap

Other = 0.15

Projected

Challenges

facing the

electric

utilities

industry

Addressing

challenges

"For an industry that is among the most capital-intensive in the United States,

failure to maintain investment grade could have significant upward cost implications"

•

"a sustained, collaborative and open working relationship among the principal vested

interests will be critical to the execution of corporate, environmental and public policy

initiatives"

•

"we view most favorably those commissions that establish rates that reasonably

reflect the costs incurred by a utility, including a return on equity, and where timely

adjustments to these rates are made to recognize changes in costs"

•

"a preference for expense deferrals may develop, and a proclivity for less competitive

authorized

returns

will

almost

certainly

prevail.

Such

turn

events

would

likely

result

in a shift of our stable outlook on overall U.S. electric utility credit quality to negative."

Note:

Comments

sourced

from

Energy

Biz

article

written

Richard

Cortright,

Jr.,

managing

director

Standard

Poor's

U.S.

Utilities

and

Infrastructure Ratings group dated Feb 07, 2012

Standard

and

Poor's

Outlook

–

"Utility

Credit

Ratings

Critical

Raising

Capital

–

Money Needed to Build Wires and Plants

Capital Trends –

Rating Agency Considerations

•

"the real tests lie ahead, when federal environmental mandates and consequent

spending requirements are more certain, when state renewable portfolio standards

begin to command heightened expenditures in earnest, and when an aging

infrastructure reveals its vulnerability"

•

"public service commissions continue to be reasonably supportive despite frequently

lower authorized returns."

Industry Is Responding to Capital Investment

Challenges with Different Approaches

Create larger footprint; upsize balance sheet

•

Duke / Progress

•

Northeast Utilities / NSTAR

•

PPL / LG&E

•

First Energy / Allegheny

•

Exelon / Constellation

Achieve greater certainty in regulations

•

e.g., Formula rate plans, future test years,

specific rider recovery, CWIP in rates, etc.

Align business model with capital needs

•

e.g., AEP Transco

•

e.g., FPL Rate Hike Request

Consolidate

Build

Regulatory

Flexibility /

Certainty

Change

Business

Model

5.3

7.2

2011-2014

2007-2010

2015-2021

2003-2006

4.3

Capital Trends –

Rising Capital for Entergy Overall

???

Effect of EPA rules?

???

Effect of EPA rules?

Infrastructure

improvements?

+37%

Note: Excludes storm CapX for historical data; ETR Utilities includes EAI, ELL, EGSL, EMI, ETI, ENOI, SERI, ESI, EOI, SFI

Entergy Utilities Capital Investment

Total Spend

Capital spending could significantly increase over the next

10 years due to the potential for new environmental

regulations and improvement of infrastructure

+21%

Capital Trends –

Rising Capital for Entergy’s Transmission Business

Entergy Projected Transmission Capital Investment

2012E-2014E

Projected

Depreciation

Expense

For ETR Utilities, Spend on Major Storms

Amounted to ~$3.2B Over 2005-2010

Event

Year

Spend

($M)

Hurricane Katrina

2005

1,117

Hurricane Rita

2005

645

Hurricane Gustav

2008

680

Hurricane Ike

2008

626

Ice Storm EAI 2009

2009

119

Ice Storm EAI Jan 2010

2010

In the past, ETR

utilities have had to

effectively respond

to major storms

which have required

unplanned capital

expenditures

~$3.2 billion over

2005-2010

Strong balance sheet and credit ratings critical for quickly

mobilizing capital and resources to respond to emergencies

Includes capital and O&M spend

Note: 2011 CapX estimated to be $2.11B. 2011 capital spend related to major storms was $112M

2015-2021

2011-2014

841

2007-2010

583

2003-2006

589

Note: Excludes storm CapX for historical data

-1%

Capital spending could significantly increase over the next

10 years due to the potential for new environmental

regulations and Entergy’s infrastructure

Capital Trends –

Rising Capital for ETI

???

Effect of EPA rules?

???

Effect of EPA rules?

Infrastructure

improvements?

+44%

ETI Capital Investment

Total Spend

Financial Flexibility

ITC Spin-Merge Transaction Overview

Agenda

Benefits of ETR –

ITC Spin-Merge Transaction

Storm Response

Rate Effects of Spin-Merge Transaction

Approvals Required

Storm Response Organization Will Be Modified to

Ensure Close Coordination and Interaction Between

Entergy and ITC

ETR System Incident

Commander (SIC)

John Mullins

ITC System Incident

Commander (SIC)

Greg Grillo

System Section

Chiefs

System Planning

Chief

Supply Chain

Operations

Resource

Logistics

Administration

Planning Support

Branch Director

Restoration

Prioritization

Risk Analysis

Situation Branch

ITC Storm

Response

Organization

ITC-ETR

liaison

(New

position)

ITC Technical/Mgmt

employee assigned to

ETR storm response

center in Jackson

Preliminary pre-design phase vision

Final design scheduled 9/2012

ITC employee

ETR employee

Functional Incident

Commanders

(ex. Fossil, Distribution,

Nuclear, Gas)

Storm Response

Financial Flexibility

ITC Spin-Merge Transaction Overview

Agenda

Benefits of ETR –

ITC Spin-Merge Transaction

Rate Effects of Spin-Merge Transaction

Approvals Required

4% reduction in customer

bills since 2008

Significant Variability in Average Residential Bills –

Yearly Variation Between $2 and $17 Over 2001-2011

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

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

150

100

-4%

Henry Hub Gas Index

$/mmBtu

-1.69

(-2%)

+17.15

(+17%)

2011

108.73

2010

98.06

2009

103.32

2008

113.06

2007

107.24

2006

116.92

ETI Avg. Monthly Residential Bill-

1,000 kWh

99.77

2004

86.55

2003

2005

2002

75.72

2001

89.41

88.24

Henry Hub Gas Index

ETI

Avg.

Monthly

Residential

Bill-

1,000

kWh($)

Typical ETI Customer Bill

Transmission

7.5%

Fuel

45.3%

Non-Fuel

47.2%

Transmission Constitutes ~7.5% of

Typical ETI Customer Bill

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

expected for ITC

Analysis assumes MISO base ROE for Entergy transmission business

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

(60% equity/40% debt)

Benefits of credit quality improvement

resulting

from

transition

FERC-

regulated rate construct partially offset ROE and capital structure 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

recovery

capital

investments

One time impact of conversion to forward test year

Reflects amounts that would have been collected in future years

MSS-2 construct eliminated post transaction

Current

estimation

reflects

effect

paying

load

ratio

Transmission

cost factoring in zonal investment and retail share of Transmission

investments

Other Effects

ETI Residential Bill-1,000 kWh

115

110

105

100

~(0.26)

(0.2%)

2014 Net

Other Effects*

~108.47

~(0.29)

2014 Benefits

From Higher

Credit Quality

resulting from

Rate

Construct

~(0.73)

2014 Rate

Construct

Effects from

FERC

regulated

model

Illustrative

Bill if ETR

owns

T assets –

current state

~0.76

108.73

ETI

Typical

Residential

Customer

Bill

Not

Expected

Illustrative

Expected Rate

Construct Effects*

Over the long term, customer

bill effects expected to be

mitigated by...

Enhanced Financial

Flexibility

Operational

Reliability, System

Performance, Scale

efficiencies etc.

Independent and

transparent ITC model,

which supports robust

markets and competition

*Refer to previous slide where rate construct and other assumptions are detailed

Note: Illustrative bill is the average of the 2011 Typical Monthly Bills for a residential customer using 1,000 kWh, excluding taxes. Calculation indicative of the

rate effects of Transaction and is not meant to project an actual future customer bill. Estimation does not include effects of move to MISO, changes in fuel

prices or rate cases between now and time of deal close.

Note:

Contents exclude estimated

one-time rate timing effect of

$0.37 in 2014 due to

conversion to forward test

year –

reflects amounts that

would have been collected in

future years

T assets post

transaction

if ITC owns

Illustrative Bill

Excellence

Increase Post Spin-Merge Due to Rate Construct Effects

168,000

166,000

4,000

2,000

~(3.33)

(0.0%)

Illustrative Bill if

ITC owns

T assets post-

transaction

~166,959.02

164,000

ETI LIPS Bill –

5,000 kWh, 80% load factor; $

170,000

2014 Net

Other

Effects*

~(451.91)

2014 Benefits

from higher

credit quality

resulting from

Rate Construct

~(22.29)

2014 Rate

Construct

Effects from

FERC-regulated

model

~470.87

Illustrative

Bill if ETR

owns

T assets –

current state

166,962.35

ETI

Typical

LIPS

Customer

Bill

Not

Expected

Increase Post Spin-Merge Due to Rate Construct Effects

*Refer to previous slide where rate construct and other assumptions are detailed

Note: Illustrative bill is the average of the 2011 Typical Monthly Bills for a Large Industrial Power Service (LIPS) customer using 5,000 kWh at an 80% Load

Factor, excluding taxes. Calculation indicative of the rate effects of Transaction and is not meant to project an actual future customer bill. Estimation does not

include

effects

move

MISO,

changes

fuel

prices,

rate

cases

between

now

and

time

deal

close.

Note:

Contents exclude estimated

one-time rate timing effect

of $228.18 in 2014 due to

conversion to forward test

year –

reflects amounts that

would have been collected

in future years

Illustrative

Expected

Rate Construct

Effects *

Over the long term, customer

bill effects expected to be

mitigated by...

Enhanced Financial

Flexibility

Operational

Reliability, System

Performance, Scale

Efficiencies etc.

Independent and

transparent ITC model,

which supports robust

markets and competition

Excellence

Storm Response

Financial Flexibility

ITC Spin-Merge Transaction Overview

Agenda

Benefits

ETR

–

ITC

Spin-Merge

Transaction

Approvals Required

Rate Effects of Spin-Merge Transaction

Pathway to Completion –

Required Approvals

Authority

Requirements

Entergy retail

regulators

•

Change of control of transmission assets

•

Affiliate transaction approvals related to steps in the spin / merge

•

Authorization to incur debt in some jurisdictions

FERC

•

Change of control of transmission assets (203 filing)

•

Acceptance of jurisdictional agreements (205 filing)

•

Authorization to assume debt / issue securities (204 filings)

•

Changes to System Agreement to remove provisions related to transmission

planning and equalization

•

ITC filing to establish new rate tariffs for the ITC operating companies

Hart-Scott-

Rodino Act

•

Pre-merger notification to review potential antitrust and competition issues

IRS

•

Private letter ruling substantially to the effect that certain require-ments for a tax-

free treatment of the distribution of Transco are met

Securities and

Exchange

Commission

•

ITC Form S-4 and Proxy Statement (including audited Transco financial statements

and disclosures), and

•

Transco Registration Statement

ITC

shareholders

Approvals required for:

•

Merger,

•

Issuance of shares to ETR shareholders, and

•

Amendment to ITC charter to increase authorized number of shares