(Title Slide)
Good afternoon. It is good to see so many of you still with us – here at the end of the AABE conference in New Orleans – in spite of the all-night festivities of Mardi Gras. Glad you made it through the past few nights.

(Slide 2 – Two Things)
Let’s talk about the future. Entergy doesn’t have a crystal ball … but there are two things we know. There is a finite supply of oil and gas. And second, environmental rules and regulations are going to get stricter … and stricter. World oil supply is predicted to crest in 2010 and slowly decline thereafter. Natural gas supply is expected to crest later in the decade, about 2017.

(Slide 3 – Who Is Entergy?)
First, let me tell you a little about Entergy – who we are and what we do. Entergy is the fourth largest utility in the U.S.

As you can see, Entergy has been recognized in the last couple of years for its stellar performance in several areas. And Entergy’s stockholders have recognized our above-average performance – they have bid up Entergy stock from $45 a share a year ago today to trading around $60 today.

(Slide 4 – Who Is Entergy in Air Emissions)
Entergy today is one of the cleanest electric utilities in the U.S., as you can see from this chart. Entergy is among the lowest emitters of all four of the principal pollutants today – carbon dioxide in the upper left, nitrogen dioxide in the upper right, sulfur dioxide in the lower left and mercury in the lower right. The small orange bar shows where Entergy is, measured by pounds of pollutant per megawatt- or terawatt-hour.

(Slide 5 – Entergy: A Premier Nuclear Operator)
Entergy has grown into the second largest nuclear operator, just in the last four years. We’re the fastest-growing nuclear operator, having acquired five  nuclear units in the Northeast to match our five operating units in the South. And we are going to continue our nuclear growth strategy.

Last year, we opened a new line of business – we signed a 10-year agreement to furnish top management support to help run the Cooper Nuclear Station for the Nebraska Public Power District. It was the first time we have taken over responsibility for someone else’s nuclear plant.

We think it could be a wave of the future and a whole new business for us. We can bring the best operating standards, best management practices, the economies of scale in purchasing, inventory management, and personnel training of a large fleet to a single unit like Cooper. And make a real difference in operating performance over time.

Yes, nuclear is a long-term growth strategy for Entergy. We put together a special small engineering team to prepare applications to renew the operating licenses for another 20 years of our 10 units. And they became so accomplished at doing aging and other engineering studies, they suggested we start selling their license renewal know-how to other nuclear plants.

And business was so good, we joined with Framatome ANP, a longtime provider of engineering services to the U.S. nuclear industry. And the Entergy-Framatome team is now the largest provider of license renewal services to the nuclear power industry.

(Slide 6 – Nuclear – A Growth Strategy)
Here you can see our nuclear growth geographically. In the last four years we have acquired all of the nuclear power plants show across the top row – and we call them our Entergy Nuclear Northeast fleet.

Pilgrim is just south of Boston, a plant we purchased from Boston Edison in the nation’s first competitive sale of a nuclear power plant. We purchased the FitzPatrick and Indian Pont 3 plants from the New York Power Authority. We closed the transaction and took over operations of the other Indian Point unit, unit 2, from Con Edison just five days after 9-11.

And we have been struggling to re-assure the residents of the Indian Point Energy Center area that the two units are safe, secure and vital to the economy of New York City. Both units are running at 100 per cent power today, so I think it is fair to say the majority of residents are appreciative of our efforts to provide them with the lowest cost power in New York City without emitting any air pollutants. Our most recent acquisition has been Vermont Yankee, acquired in 2002.

Entergy has owned and operated the Entergy Nuclear South fleet across the bottom of the chart, for 25 plus years and we are looking to acquire more plants and manage plants for others.

(Slide 7 – Nuclear Capacity Factor)
All of us in the nuclear power industry are proud of this chart. Few other industries in America, if any, can show this remarkable improvement in performance. The nation’s 103 nuclear plants have gone from running about 60 percent of the time in the 1980s to 90-91 percent of the time in 2002, the latest data available. That’s an astounding increase in performance – equal to the output of another 23 nuclear plants – over the past 10 years.

And I believe we can get even more improvement in performance.

(Slide 8 – Nuclear costs at all-time low)
What is even more impressive is – we have achieved those production gains while also reducing our costs. As you can see here, production (or O&M costs) have been trending down at the nation’s nuclear plants since the late 1980s when they were close to four cents a kilowatt-hour. In 2002, nuclear O&M costs actually dipped under coal-fired costs for the first time, dropping to 1.7 cents for nuclear compared to 1.85 cents for coal.

(Slide 9 – Sources of Emission Free Electricity)
Most people don’t realize it, but nuclear has tremendous value to our environment. Every day, especially important to our more populous regions like the Northeast, nuclear is making a huge contribution to cleaner air. Of all the sources of emission-free generation, nuclear is by far the largest at 76 percent, compared to hydro at 22 percent and solar, wind and geothermal at two percent.

(Slide 10 – Nuclear: A valuable asset in clean air)
To help us understand the value of nuclear’s contribution to our environment, we asked the Electric Power Research Institute in Palo Alto, CA, to calculate the contribution of all non-emitting sources of power generation in dollars. EPRI calculated the cost of just buying the air emission permits that would be required if all kilowatt-hours generated by nuclear, wind, solar and biomass power plants had to be replaced by average fossil-fired generation. The total came to $90 million a year per nuclear plant, or $750 million of net present value per plant.

As you can see, the value of wind, solar and biomass were a good deal less, principally because the capacity factor of wind and solar, for example, is only about 25 percent. The wind blows strong enough to permit the turbine to produce full power only about 25 percent of the time, compared to that 90 percent and above figure I mentioned early for nuclear.

(Slide 11 – The Waste Volume)
I know some people – and probably some in this room – are concerned about used nuclear fuel or nuclear waste. I wanted to recognize that concern and say the waste volume involved is very manageable. As this chart shows, if you took all the used fuel produced by all nuclear power plants in the U.S. over their entire 40-year operating lifetime, about 40,000 metric tons, you could put it on one football field about five yards high.

Today about a third of nuclear plants, including a couple of Entergy’s 10 operating units, are safely storing used fuel in large, concrete dry casks on the plant grounds. That is certainly a workable, although expensive, solution for the short term. Most people don’t know it, but every nuclear plant has been paying one-tenth of a cent for every kilowatt-hour generated into the U.S. Nuclear Waste Fund since each one began operating. Today that fund has a balance of more than $20 billion specifically to pay for long-term used fuel storage built and maintained by the federal government. In fact the government was supposed to begin taking ownership of used fuel in 1998. The U.S. nuclear power industry is the only industry in America that is paying for its own cleanup as it operates.

As most of us know, Yucca Mountain in Nevada has been approved by Congress and the President as the site for long-term storage and the Department of Energy is now preparing an application to license Yucca Mountain. Hopefully that long-term disposal facility will open as scheduled in 2010.

Some critics have already begun raising concerns about the danger of shipping used fuel from nuclear plants to Yucca Mountain. The U.S. Navy has been shipping used nuclear fuel from the nation’s fleet of nuclear submarines to inland storage locations, and has made more than a million shipments to date without a single accident. The Navy has proven it can be done safely.

(Slide 12 – Entergy Nuclear’s 2-track approach)
What does Entergy believe the future of nuclear is? Very promising. A future with great potential to be realized. Entergy is taking a two-track approach to new nuclear plants. The first track is to encourage the building of a next-generation light water reactor from today’s new, advanced safety designs within the next decade. The second track is to pursue simultaneously the development of a new type of reactor that could be built underground and therefore more secure, that would be virtually meltdown proof because it shuts itself off if it overheats, and that could produce large volumes of either electricity or low-cost hydrogen from water. It would take probably 15-20 years of development and engineering before commercialization.

(Slide 13 – The Freedom Reactor)
As a responsible nuclear operator planning for the future, Entergy is also encouraging the development of a new type of reactor, a high-temperature gas-cooled reactor. We call it The Freedom Reactor. This gas-cooled reactor can operate at higher temperatures (in the 900 degree C range, compared to 350- to 400-degree C range of today’s light water reactors), which makes them capable of splitting water into hydrogen and oxygen and providing a low-cost, large volume source of hydrogen for a new hydrogen economy.

(Slide 14 – Simple design – less equipment)
This new reactor has even greater safety features than advanced light water reactors I just mentioned. For example, a gas-cooled reactor would automatically shut down if it overheated, making it virtually meltdown proof. In addition, its fuel particles would have a ceramic coating making it even more difficult to separate into material from which a terrorist or foreign government might make a nuclear weapon. Finally, the worldwide supply of uranium is capable of meeting our fuel needs for decades. 

(Slide 15 – A Freedom Reactor Demonstration)
The 2003 energy bill, still being debated by the U.S. Congress, had $1 billion in it to design and build this new type of reactor as a demonstration at the Idaho National Energy and Environmental Lab. We hope that high-temperature reactor demonstration plant is approved because it would provide a solid technical basis for several key issues – such as proving its design, its capability of producing electricity during the day and hydrogen at night. Only the government can build a first-of-a-kind plant to prove technical details like this. No energy company can afford to take such a financial risk.

(Slide 16 – A Hydrogen-Nuclear Economy)
But that risk could certainly be worth it for all of us. Nuclear energy and hydrogen could benefit our society in several ways it’s worth pursuing.

(Slide 17 – A Hydrogen Economy)
Hydrogen is not energy itself. Hydrogen is just another convenient carrier of energy, like electricity. It can be produced by almost any form of energy today – renewables, nuclear, oil, coal and natural gas. Hydrogen can be a fuel for many uses, including cars and trucks, heating and cooling and computers. And it’s byproduct of combustion is water.

(Slide 18 – Hydrogen Advantages)
Switching to hydrogen would benefit our economy and our society in important ways. It would reduce our reliance on foreign oil and gas and provide an abundant supply of energy in this country, stabilize our energy costs independently of world oil prices, and do it without emitting air pollutants and greenhouse gases. And hydrogen could be renewables best friend, by serving as a battery storing energy from intermittent sources like wind and solar for use at a time when it is needed most and therefore most valuable.

A hydrogen economy only makes sense if you can produce the hydrogen without polluting the air.

(Slide 19 – Hydrogen Today)
And today, we use a lot of hydrogen and release a lot of carbon dioxide, the greenhouse gas. For every ton of hydrogen we produce today, we produce and release into the air about seven tons of carbon dioxide.
 
As this chart shows, the world is using about four times more hydrogen than the U.S., and 96 percent of it is coming from breaking down natural gas, contributing to ever higher demand for the finite supply of natural gas. Half of the hydrogen today is going into making anhydrous ammonia fertilizer for growing food and fiber on our farms, but the second largest use – oil refining – is growing even faster and eventually is likely to overtake fertilizer as the largest hydrogen consumption.

Why do oil refineries use hydrogen? To improve the feedstock of their refinery. The Texas sweet crude oil is largely used up, and the sour crude oil coming in the U.S. hydrogen in the refining process to maintain the quality of the refinery’s downstream products. The more gasoline, diesel oil, fuel oil, and jet fuel we use, the more hydrogen we’ll need. And the more hydrogen we need, the more natural gas we will use up to get the hydrogen. Clearly that will put upward pressure on the price of natural gas, the primary fuel we are depending upon to run all the power plants built in the last decade. Not too wise.

Our use of hydrogen in this country is growing at 10 per cent a year, doubling every seven years. That’s a steep growth curve that is sure to have a significant effect on the price of the natural gas feedstock.

(Slide 20 – 2015)
The promising potential of nuclear energy is: – nuclear is one of the few ways we know to produce large volumes of hydrogen at low cost without any air emissions. And nuclear can do that using only water.

Today hospitals are using an electrolysis machine in a basement somewhere, fed only by water and power, to break down water into hydrogen and oxygen and the hydrogen is usually vented. Machines using the same proven process called electrolysis, requiring only a power line and a water line, could be installed at today’s gas stations to fill hydrogen tanks on cars. But making hydrogen by electrolysis is small scale, capital intensive and too expensive to compete with today’s gasoline prices. With proper government incentives, that could be a way to transition to cars and trucks fueled by hydrogen. Today there are six cars driving around Washington every day running on hydrogen, as a demonstration by the auto industry.

 
By scaling up to nuclear power plant size, as this conceptual drawing shows, engineering studies show that either high temperature electrolysis or thermo-chemical water splitting could be an abundant, non-polluting source of hydrogen at low, stable cost. That is the objective of the high temperature gas-cooled reactor demonstration being proposed for the Idaho national lab at a cost of $1 billion. Compared to the more than $15 billion that the government has already spent on research with the auto industry to develop a fuel cell for cars and trucks, which would run on hydrogen, spending $1 billion to develop a source of hydrogen seems reasonable. If we don’t, where else are we going to get the hydrogen?

(Slide 21 – New Nuclear Plants: Competitive Position)
Are national nuclear companies like Entergy going to build a new nuclear plant soon? Absolutely not. It is too great a financial risk for any single company to take today. This chart shows why. It all depends on the price of natural gas, the most volatile energy we have today.

A new nuclear plant (the green bar) costing $1,000 a kilowatt to build, could produce power at about $51 a megawatt-hour. That is about competitive with natural gas at $5 per million cubic feet and progressively better off with gas prices at $6 or higher. A year ago, natural gas was selling at $2.50-$3 and today gas is $5.60 or so. But no one can be sure natural gas will stay above $5 for the next 10 years it takes to build a new nuclear plant and also during the 40 years of operating life of the new plant.

(Slide 22 – U.S. Public Opinion)
There is public support, however. You can readily see that when the California power crisis occurred in January 2001, public attitudes rose from 45 to 66 percent saying definitely, build more nuclear plants. Two out of three adults favored nuclear until 9-11 that fall. After 9-11, fears of terrorism temporarily reduced public sentiment in favor of nuclear until about mid-2002 when it began to rebound. The August 14 blackout of the Northeast last year has pushed nuclear support back up into the 2 out of 3 people range.

(Slide 23 – What’s Needed)
So what is it going to take to tap the promising potential of new nuclear? Here is my take on the three items needed. First, it seems clear the government is going to have to cover the First Of A Kind costs of the first few nuclear units because no individual company can take that financial risk. There are today NRC-certified designs of next generation reactors that would have advanced passive safety systems and increased efficiency but no one today is ready to spend $1.5-2 billion to build one.

Second, for our energy independence in the long term, the government should spend $1 billion to build a high temperature, gas-cooled reactor, which we call The Freedom Reactor, at the Idaho national lab. That project would take 15-20 years but it would likely demonstrate that nuclear energy can make both electricity and hydrogen without polluting the air and at what cost.

Finally, the environmental value of nuclear energy must be recognized. Otherwise we as a society are not going to be choosing the best way to meet our needs for energy at the lowest cost.

How do you do that? One way would be for the government to treat all power generation the same when handing out permits to emit air pollutants, air emission allowances based on total power generation output, rather than issuing them just to owners of generation that pollutes. Then the owners of non-emitting generation would be able to sell their unneeded permits and the marketplace would be setting the true value of all types of power generation.

By tilting the field away from nuclear energy, as we are, intentionally or unintentionally, we are making energy choices that our children and grandchildren must live with. We owe them the best quality of life, as we have had. And we CAN give them the best choices.

Thank you for listening this afternoon. I hope you have found this information informative. I will be glad to respond to any questions.