Edgar Filing: ENTERGY CORP /DE/

FORM 425

Update

Entergy

Transmission

Spin-Merger

with

ITC

Meeting with

Arkansas Electric Energy Consumers

July 11, 2012

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

In 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

Financial Flexibility

Approvals Required

Benefits of ETR –

ITC Spin-Merge Transaction

Rate Effects of Spin-Merge Transaction

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

Agenda

Financial Flexibility

Approvals Required

Benefits of ETR –

ITC Spin-Merge Transaction

Rate Effects of Spin-Merge Transaction

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

Challenges

facing the

electric

utilities

industry

Addressing

challenges

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

Industry Is Responding to Capital Investment

Challenges with Different Approaches

Achieve greater certainty in regulations

Align business model with capital needs

e.g., AEP Transco

e.g., FPL Rate Hike Request

Consolidate

Build

Regulatory

Flexibility /

Certainty

Change

Business

Model

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

specific rider recovery, CWIP in rates, etc.

Create larger footprint; upsize balance sheet

Duke / Progress

Northeast Utilities / NSTAR

PPL / LG&E

First Energy / Allegheny

Exelon / Constellation

5.3

7.2

2011-2014

2007-2010

2015-2021

2003-2006

4.3

+21%

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

Capital

Trends

–

Rising

Capital

for

Entergy’s

Transmission

Business

Entergy Projected Transmission Capital Investment

2012E-2014E

100

200

300

400

500

600

2012E

2013E

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

Capital Trends –

Rising Capital for EAI

2015-2021

2011-2014

1.8

2007-2010

1.4

2003-2006

1.2

+17%

???

Effect of regulation?

EAI Capital Investment

Total Spend

???

Effect of regulation?

Infrastructure

improvements?

+28%

Note: Excludes storm CapX for historical data

Capital spending could significantly increase over the next

10 years due to the potential for new environmental

regulations and improvement of infrastructure

Rate Effects of Spin-Merge Transaction

Financial Flexibility

Agenda

Benefits

ETR

–

ITC

Spin-Merge

Transaction

Approvals Required

Significant Variability in Average Residential Bills –

Yearly Variation between $3 and $17 over 2001-2011

Illustrative

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

87.65

150

100

Henry Hub Gas Index

$/mmBtu

2001

93.53

EAI

Typical

Monthly

Residential

Bill

1,000

kWh

2010

2006

94.23

2008

90.25

-13%

2011

97.78

2009

2002

97.81

2007

95.15

98.17

108.00

2004

73.15

2003

83.28

2005

13% reduction in

customer bills since 2009

Henry Hub Gas Index

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

+2.67

(+3%)

EAI

Avg.

Monthly

Residential

Bill

1,000

kwh($)

+17.10

(+23%)

Typical EAI Customer Bill

Non-Fuel

11.9%

4.5%

83.6%

Transmission

Fuel

Transmission Constitutes ~4.5% of

Typical EAI 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

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

•

Current

estimation

reflects

effect

paying

load

ratio

Transmission

cost factoring in zonal investment and retail share of Transmission

investments

Other

Effects

Illustrative

*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

$0.51

in 2014 due to

conversion to forward test

year –

reflects amounts that

would have been collected in

future years

120

~1.47

2014 Rate

Construct

Effects from

FERC

regulated

model

100

EAI Residential Bill -

1,000 kWh

Illustrative

Bill if ETR

owns

T assets –

current state

~(0.25)

~0.00

~95.45

2014 Benefits

From Higher

Credit Quality

resulting from

Rate

Construct

110

Illustrative

Bill if ITC

owns

T assets

post

transaction

~1.22

1.3%

2014 Net

Other

Effects*

94.23

Expected

Rate Construct

Effects *

EAI Typical Residential Customer Bill Expected to 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

–

Reliability, System

Performance, Scale

Efficiencies, etc.

•

Independent and

transparent ITC model,

which supports robust

markets and competition

Illustrative

*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

$45.87 in 2014 due to

conversion to forward test

year –

reflects amounts that

would have been collected in

future years

500

1,000

6,500

2014 Benefits

From Higher

Credit Quality

resulting from

Rate

Construct

~(22.76)

2014 Rate

Construct

Effects from

FERC

regulated

model

~133.06

Illustrative

Bill if ETR

owns

T assets –

current state

7,241.79

2014 Net

Other

Effects*

~0.00

~7,352.09

Illustrative

Bill if ITC

owns

T assets

post

transaction

7,000

~110.30

1.5%

8,000

EAI LGS Bill -

250 kW, 55% Load Factor, Summer

7,500

Expected

Rate Construct

Effects *

EAI Typical LGS Customer Bill Expected to Increase

1.5% –

Expected Mitigation by Customer Benefits

Over the long term, customer

bill effects expected to be

mitigated by...

•

Enhanced Financial

Flexibility

•

Operational Excellence

–

Reliability, System

Performance, Scale

Efficiencies, etc.

•

Independent and

transparent ITC model,

which supports robust

markets and competition

Rate Effects of Spin-Merge Transaction

Financial Flexibility

Agenda

Benefits of ETR –

ITC Spin-Merge Transaction

Approvals Required

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 requirements 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