To Our Stakeholders. Letter to Stakeholders. Clear vision, clear progress Integrated Report

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1 VIDEO > 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 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 4

2 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. 5

3 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 singleunit plant in Michigan, operates under a favorable power purchase agreement that expires in 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. Our Commitment to Operational Excellence Operational excellence is integral to who we are at Entergy. We are committed to maximizing the value of our assets for our customers, owners, employees and communities through industry-leading operational performance. We did not meet this commitment in Two of our nuclear facilities Arkansas Nuclear One in our utility business and Pilgrim Nuclear Power Station in EWC were placed by the NRC in Column 4 of the Reactor Oversight Process Action Matrix, which is based on a scale of 1 to 5. As a result, both ANO and Pilgrim are currently under additional NRC oversight. As we work through the evaluation and inspection processes associated with returning these plants to Column 1, we are evaluating nuclear operations across our fleet from top to bottom to identify any systemic issues. We are disappointed in our performance and committed to strengthening a culture of operational excellence throughout our organization. 6

4 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 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. 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 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 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 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,

5 To Our Retiring Board Members: Thank You Lead director Gary Edwards will retire from the Entergy board of directors upon reaching mandatory retirement age. A member of our board since 2005 and lead director since 2006, Gary helped guide Entergy during a transformative period, when electric utilities adapted to technological innovations, proposed regulatory changes and dramatic shifts in commodities markets. Gary leads with confidence, experience and a commitment to creating sustainable value for all stakeholders. His contributions have helped position Entergy to operate successfully as a company in the years ahead. Gary s influence has been recognized inside and outside our company. In 2015, he was named by the National Association of Corporate Directors to the NACD Directorship 100, a list of the most influential people in the boardroom and corporate governance community who play a significant role in shaping the greater boardroom agenda. We thank Gary for his service to the board and Entergy, and for the lasting impact he has had on our company. Board member Steve Wilkinson will retire from the Entergy board of directors upon reaching mandatory retirement age. Steve s extensive public utilities, accounting and auditing expertise benefited our board and all of Entergy s stakeholders. Steve served on the Entergy board since 2003 and as the audit committee chair since Previously, he was an audit partner with Arthur Andersen for almost 25 years until his retirement in 1998, serving as director of the firm s North American utility practice. He has played a critical role in helping Entergy meet its objective of presenting information that is accurate, compliant and meaningful to users of financial statements, and provided valuable guidance to our management team. We thank Steve for his contributions to our board and our company. 8

6 To Our Retiring Team Members: Thank You We thank our retiring executives for their many contributions to our company. Jeff Forbes retired as executive vice president and chief nuclear officer in early 2016 after serving more than 12 years in the Entergy nuclear organization. Jeff oversaw 11 nuclear units before moving into the role of chief nuclear officer and directed regional operations for our utility nuclear plants. Mark Savoff retired as executive vice president and chief operating officer following 12 years of service in operations at Entergy. He led the company s transition to MISO, the construction of the Ninemile Point Unit 6 plant ahead of schedule and under budget, and the optimization of the utility fossil generation fleet. Hugh McDonald will retire as president and chief executive officer of Entergy Arkansas, Inc. in 2016, following a 34-year career with Entergy. Hugh s vision and leadership have been instrumental in making the right decisions on many critical issues, and he has been a passionate voice for our Arkansas customers and employees. To Our New Executive Team Members: Welcome We welcomed several new members to our executive team following retirements announced in Chris Bakken III will join our organization as executive vice president and chief nuclear officer in early He brings a unique combination of skills to our nuclear organization to help us perform at a sustained level of operational excellence. Paul Hinnenkamp, previously Entergy senior vice president, capital project management and technology, was named senior vice president and chief operating officer. Paul is responsible for supporting the utility s growth strategy with safe and reliable operations and disciplined fiscal and project planning for our capital spending plans. Rick Riley, currently group vice president of customer service and operations for Entergy Arkansas, will become president and chief executive officer of Entergy Arkansas in In that role, he will be responsible for customer service, economic development and resource planning to meet the needs of Entergy Arkansas stakeholders. 9

7 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 10