Clear vision, clear progress.

2015 Integrated Report

Leo P. Denault, Chairman of the Board and Chief Executive Officer of Entergy

To Our Stakeholders

At Entergy, we take a lot of pride in what we do. Powering life for our customers, owners, employees and communities is important work that holds tremendous opportunity. We are on a journey to capture that opportunity and create value for our stakeholders. Two years ago, we set a clear vision for our company: We Power Life; and a clear mission: create sustainable value for our customers, owners, employees and communities. In 2015, we made clear progress on numerous operational and regulatory priorities that are critical to creating sustainable value. Employees across our company pulled together as one team to achieve an aggressive to-do list and respond to multiple challenges. It was a terrific effort that demonstrates our commitment to aim high and act in the long-term interests of all our stakeholders.

Much of our work in 2015 was focused on building a foundation to become more predictable and deliver stable utility, parent and other earnings growth. Our ability to operate successfully as a company is predicated on delivering steady earnings and dividend growth and reducing risk. It is how we will continue to power life and create sustainable value for our stakeholders. We have developed strategies that will help us achieve this objective.

Our utility strategy includes aggressive investment plans to modernize our infrastructure and enhance reliability. We made significant progress in 2015 to meet our customers’ long-term need for clean, reliable power at reasonable rates. In generation, we pursued approvals for the acquisition of Union Power Station and selected the self-build option for a new combined-cycle gas turbine unit in Louisiana. The Union Power Station acquisition successfully closed in early March 2016. We launched utility-scale solar projects to provide access to renewable energy sources to customers in Arkansas, Mississippi and New Orleans. In transmission and distribution, we invested in projects to improve reliability and resiliency, connect new customers and better handle flow patterns made possible by our move to the Midcontinent Independent System Operator, Inc., or MISO. We initiated one of the largest transmission projects in our history and are moving forward with steps toward the installation of smart meters to benefit our customers and lay the foundation for the next generation of grid technologies on our system. We will continue to work to be more agile and efficient so that we are positioned to meet the technological and other developments that are changing the utility industry.

To facilitate our ability to make these types of productive investments for our customers, we work to mitigate the impact on customer bills. Our average monthly bills are more than 20 to 25 percent below the national average, a significant advantage for our customers and communities. We completed our second year in MISO, a move that resulted in immediate benefits and will continue to have meaningful long-term benefits in lowering costs for our customers through participation in a broader market. We advanced efforts to support industrial growth in our region, which drives demand for power and helps us maintain favorable rates. We also strengthened our ability to access capital to make investments through progressive regulatory mechanisms, a stronger balance sheet and financial flexibility. Positive developments in 2015 include the passage of legislation in Arkansas, Texas and Mississippi that supports our ability to meet our customers’ needs when and how they want us to; the combination of our two Louisiana companies into one utility to facilitate future investment; improved regulatory frameworks in Arkansas and Texas that are better aligned to facilitate future investments and the transfer of Algiers, Louisiana, assets to Entergy New Orleans, Inc. from Entergy Louisiana, LLC.

We took significant steps in 2015 to provide greater certainty around our Entergy Wholesale Commodities business and its ability to generate positive cash flows. EWC faces continued pressure – particularly in the Northeast – from low wholesale power prices, which further declined last year. We announced in the fourth quarter of 2015 difficult, but necessary, decisions to close two nuclear plants that are no longer financially viable – Pilgrim Nuclear Power Station in Massachusetts and James A. FitzPatrick Nuclear Power Plant in New York. These decisions affect more than 1,000 dedicated Entergy employees, as well as the communities that have been home to the plants’ operations for more than 40 years. We are committed to supporting our employees and communicating openly and honestly with all stakeholders affected by these closures.

We continue to focus on safe, secure, reliable operation of our remaining EWC nuclear assets. The three remaining nuclear units are financially viable at this time. Palisades Power Plant, a single-unit plant in Michigan, operates under a favorable power purchase agreement that expires in 2022. Indian Point Energy Center, a low-cost, two-unit plant in New York, is in an attractive market and expected to operate at least into the next decade as we work to secure license renewal from the Nuclear Regulatory Commission. We also have interests in several fossil and wind assets, and we continue to provide management services to the Nebraska Public Power District’s Cooper Nuclear Station.

We strengthened the foundation for a safe work environment and a healthy, engaged organization. We continue to evaluate our approach to safety and make improvements to ensure our employees and contractors work safely and go home safely every day after work. We launched a new companywide system to track and report safety-related incidents, developed a new safety manual based on input from more than 600 field personnel and created a new team within the utility organization to drive consistency and focus.

We also continue to emphasize throughout the organization the need and benefits of improving our organizational health. We are pushing culture change deeper in the organization and monitoring progress through regular employee surveys. Our emphasis is on working more effectively as a team across organizational boundaries to respond to challenges and achieve better outcomes.

We also continued to invest in the strong foundation we are building with our communities. Our efforts are directed toward education with an emphasis on workforce development. In 2015, we initiated a $5 million, five-year initiative to address workforce development issues and create competitive advantage in the communities we serve. In addition, we invested approximately $3 million with organizations such as Teach For America, STEM NOLA, Jobs for America’s Graduates and City Year to help ensure students, particularly in underserved communities, stay in school and graduate with the skills to achieve their goals.

We expect to build on the foundational accomplishments of 2015 with another year of clear progress.

We strengthened our leadership, refreshing our board of directors in 2015 and adding new members to our executive team. We welcomed three new board members in anticipation of the retirement of two valued members in 2016. By design, our board is diverse and balanced in terms of expertise and skills, gender and tenure. We believe this helps ensure ideas are critically evaluated from multiple perspectives. We also welcomed new members to our executive team. These seamless transitions are evidence of the strong and deep leadership team at Entergy plus our willingness to gain outside expertise where it is needed. At all levels of our organization, leaders are aligned to achieve our mission.

What Progress Looks Like at Entergy
  • Dedicated Ninemile Point Unit 6 into service, the first utility plant Entergy has built in approximately 30 years
  • Completed the Union Power Station acquisition
  • Selected self-build option for St. Charles Power Station in Louisiana in a competitive bid process
  • Issued request for proposals for long-term generation capacity in southeastern Louisiana
  • Issued request for proposals for long-term generation capacity in the western region of our Texas service area
  • Pursued utility-scale solar projects in Arkansas, Mississippi and New Orleans
  • Announced Lake Charles transmission project and received required certification
  • Secured approval for more than $700 million of transmission investments
  • Advocated for favorable legislation in Arkansas, Mississippi and Texas
  • Secured an improved framework and settlement of Entergy Arkansas rate case
  • Combined Entergy Gulf States Louisiana, L.L.C. and Entergy Louisiana, LLC into one utility after receiving final approval
  • Transferred Algiers, Louisiana, assets to Entergy New Orleans from Entergy Louisiana
  • Utilized distribution cost recovery factor and transmission cost recovery factor mechanisms in filings by Entergy Texas, Inc.
  • Received approvals to end the Entergy System Agreement
  • Announced decision to close Pilgrim Nuclear Power Station
  • Announced decision to close James A. FitzPatrick Nuclear Power Plant
  • Sold Rhode Island State Energy Center
  • Improved 2015 safety performance over prior year
  • Implemented new workforce safety system, manual and team
  • Launched $5 million, five-year initiative to support workforce development in our communities
  • Improved organizational health scores
  • Achieved nearly 3 percent growth in 2015 operational earnings per share over 2014
  • Increased dividend by 2.4 percent, first increase in five years
  • Added three members to our board of directors in anticipation of 2016 retirements

While much of our 2015 progress was focused on building a foundation for future growth, we also delivered solid results for the year. Our 2015 operational earnings per share grew nearly 3 percent over prior year. In 2015, our board of directors approved a 2.4 percent increase in our dividend, the first increase in more than five years. Our objective is a steady, predictable trajectory in our dividend payout going forward. Credit metrics remain strong across our operating companies. We focus on maintaining investment-grade ratings, which helps ensure we have access to the capital we need to invest in our business. Unfortunately, the progress we made in 2015 did not translate into returns for our shareholders. Our total shareholder return was -18.2 percent, which ranked in the fourth quartile of our peer group. However, following progress we made late in 2015, our total shareholder return improved to the top quartile for fourth quarter, which validates the momentum we see moving into 2016.

A more complete list of our 2015 accomplishments follows. Suffice it to say, it was a busy year. Not only did our employees address the items on our to-do list, they also responded quickly and effectively to numerous challenges that arose during the year. Their commitment to doing what’s right for our stakeholders is inspiring. And of course, we are already tackling an equally aggressive to-do list for 2016. We expect to build on the foundational accomplishments of 2015 with another year of clear progress. We are on a journey to power life and create sustainable value for our customers, owners, employees and communities. We have important work to do.

Leo P. Denault
Chairman of the Board and Chief Executive Officer
March 23, 2016