Entergy Corporation The Role of Fuel Oil in Power Production 2008 Fuel Oil/Energy Buyers’ Conference Miami, Florida Mark Brodeur System 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 of regulated and unregulated entities

Regulated entities are spread across Texas, Louisiana, Arkansas and Mississippi Mabelvale  Independence  Moses  Ritchie  White Bluff  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 Orleans Nine Mile   Grand Gulf  Jackson Carpenter Dam Remmel Dam  Toledo Bend  Beaumont 

Diversity is the key...

Dollars spent to produce or purchase electricity

Natural gas and oil typically compete

Actual oil burn has varied significantly

Our primary no. 6 oil plants are located in Louisiana and Mississippi

Nine Mile and Little Gypsy burn no. 4 fuel oil

Diesel is another option

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 Corporation The Role of Fuel Oil in Power Production 2008 Fuel Oil/Energy Buyers’ Conference Miami, Florida Mark Brodeur System Planning & Operations