1. 1 Building a Resilient Coast is Vitally Important Even in Today's Climate The Future of the Gulf Coast – Adapting to Environmental Vulnerability October 20, 2010 Rod West Executive V.P. & Chief Administrative Officer

2. 2 We have three choices: mitigation, adaptation and suffering. Were going to do some of each. The question is what the mix is going to be? Dr. John Holdren, Science Advisor to President Obama Adaptation is substantially more expensive than mitigation Adaptation is substantially more expensive than mitigation Adaptation without mitigation is just a band aid not a solution Adaptation without mitigation is just a band aid not a solution Real adaptation by itself is so expensive (and endless) that it is almost impossible to imagine that the U.S. taxpayer would fund it. Real adaptation by itself is so expensive (and endless) that it is almost impossible to imagine that the U.S. taxpayer would fund it. The goal should be to choose a mix that minimizes the sum of mitigation, adaptation and suffering costs The goal should be to choose a mix that minimizes the sum of mitigation, adaptation and suffering costs Even with todays climate we need to invest in a more resilient coast Even with todays climate we need to invest in a more resilient coast

3. 3 Coasts are already experiencing hazards related to climate and sea level rise (very high confidence) The Business Case As a company serving the Gulf Coast, Global Climate Change effects put at risk: Our customer base Welfare of our employees, their families and our communities Billions of dollars of investment 1839 1870 1993 2020 Louisiana coast line loses 24 square miles a year.

4. 4 Coasts will be exposed to increasing risks over coming decades due to many compounding climate change factors (very high confidence) Rise in sea level of 1.0 m by 2100; Rise in sea level of 1.0 m by 2100; Rise in sea surface temperature 3 o C; Rise in sea surface temperature 3 o C; Intensified storms Intensified storms Storm Surge (Cat 3 = 3-4m); Storm Surge (Cat 3 = 3-4m); Subsidence 1.0 m by 2100 Subsidence 1.0 m by 2100

5. 7/21/20065 Recent hurricanes put a face on what life will be like if we fail to address Climate Change

6. 6 Areas Impacted by Storms Entergy Nuclear Utility Hurricane Rita Category 3 Hurricane Katrina Category 4

7. 7 New Orleans Times Picayune

8. 8 Levees Broke and Floodwaters Inundated New Orleans and Vicinity Katrina Storm Surge Approaches Entergys Michoud Plant Post-Katrina Flooding in New Orleans and Surrounding Areas Photo by Entergys Michoud plant manager Don McCroskey

9. 9 ETR restoration costs ~ $1.5 billion for Katrina & Rita. Katrina – 1.1 million left without power, 800,000 Louisiana outages Over 300,000 Mississippi outages

10. 10 1.87 million total electric customers 145,000 gas customers 28,900 Distribution Poles replaced 522 Transmission lines out of service 29 Fossil / 1 Nuclear units Shutdown Scope of Restoration

11. 11 Katrinas unique challenges… Corporate HQ evacuated Corporate HQ evacuated Employees homes destroyed Employees homes destroyed Resources pre-dedicated to Florida Resources pre-dedicated to Florida Security threats in New Orleans Security threats in New Orleans Flooded gas facilities Flooded gas facilities Contractors bankruptcy fears Contractors bankruptcy fears Inoculations for workforce Inoculations for workforce Severe substation flooding Severe substation flooding Communications knocked out Communications knocked out Massive scale/logistics challenge Massive scale/logistics challenge Gasoline/Diesel shortages Gasoline/Diesel shortages Inaccessibility Inaccessibility DOE/DHS coordination & reporting DOE/DHS coordination & reporting

12. 12 …and Ritas challenges. Second worst storm in companys history - 800,000 outages Second worst storm in companys history - 800,000 outages Massive damage to transmission system; generation plants damaged & isolated Massive damage to transmission system; generation plants damaged & isolated Three days of rolling blackouts for 142,000 Texas customers Three days of rolling blackouts for 142,000 Texas customers Exhausted workforce Exhausted workforce Another huge logistical challenge Another huge logistical challenge Material shortages following Katrina Material shortages following Katrina Continued coordination with DOE Continued coordination with DOE Texas PUC Tiger Team Texas PUC Tiger Team

13. 13 What is at Stake

14. 14 What are the Physical Risks? Damage to power plants, T&D system & Operation Centers from more frequent, intense storms & flooding; Damage to power plants, T&D system & Operation Centers from more frequent, intense storms & flooding; Where will the load be and how much Where will the load be and how much Disruptions in supply chain from storm events; Disruptions in supply chain from storm events; Availability of insurance & cost; Availability of insurance & cost; Loss of customer base and employees from fear of future storm damage; Loss of customer base and employees from fear of future storm damage; Reduced economic well being of the area from investments needed to adapt to climate change; Reduced economic well being of the area from investments needed to adapt to climate change;

15. 15 New Orleans skyline Going forward, the risk we face is just going to increase, given economic growth, subsidence and climate change 1 Represents cumulative of average expected losses between 2010 and 2030 2Asset value (replacement cost) for New Orleans buildings are $60 bn SOURCE: Swiss Re; Moodys; FEMA; MMS; EIA; OGJ; Wood Mackenzie; Energy Velocity; team analysis; others To place this in context, ~$370 bn could be used to reconstruct New Orleans buildings six times over 2 2010 – 2030 cumulative losses 2010-2030Extremechange 387 2010-2030Averagechange 370 2010-2030 Todays climate 345 Cumulative annual expected losses $ Billions; 2010 dollars

16. 16 A set of resilience measures needs to be deployed, based on their cost/benefit characteristics Cost per unit of benefit (Dollars) Loss averted, 2030 Cost-benefit ratios calculated based on discounted present value estimatesMERELY ILLUSTRATIVE- OF C/B Actions below 1 $/$ line on the y axis provide net economic benefits (benefits refer to loss averted) Reduction of the expected loss in 2030, by countering the effects of climate risk 1 0

17. 17 A large range in cost-benefit assessments exists for the potential portfolio of measures Note: Costs and benefits refer to net present values Build all new residential buildings with 110-mph rated shingles, applied with adhesive strips Build all new residential buildings with 110-mph rated shingles, applied with adhesive strips Improved roof cover, new builds C/B ratio: ~0.3 Cost: $340 M Benefit: $990 M Homes affected: 1.7 M Increase vegetation management cycle frequency and remove hazard trees Increase vegetation management cycle frequency and remove hazard trees Vegetation management, distribution C/B ratio: ~1.0 Cost: $470 MM Benefit: $480 MM Miles affected: 51,000 All existing residential homes in the most flood-risk counties are elevated 10 ft All existing residential homes in the most flood-risk counties are elevated 10 ft Home elevation, retrofits C/B ratio: ~5.5 Cost: $6.3 Bn Benefit: $1.2 Bn Homes affected: 123,000

18. 18 Residential/ commercial 1 Building codes Oil and gas 6 Floating production systems 7 Replacing semi-subs with drill ships 8 Levees for refineries, petrochemical plants Infra- structure/ Environ- mental 3 Wetlands restoration 1 2 Beach nourishment 4 Levee systems 1 Electric utility 9 Resilience of electric utility systems 0.4 0.1 1.4 7.5 1.3 0.7 0.5 1.1 1.7 0.3 Loss averted, 2030 $ Billions And there are some key near term actions to protect our region – that are cost effective, and will help our economy and our environment 1 Included despite high C/B ratios due to strong co-benefits, risk aversion 2 Total capital investment, non-discounted, across 20 years 5 Improved standards offshore platforms Total C/B ratio x 0.7 1.3 1.6 0.7 0.5 3.3 0.7 3.8 0.9 CapEx required 2 $ Billions Public funding Private funding 18 25 1 12 1214476 15 5 11 18 16

19. 19 Implementing these key measures will require leadership and coordination across stakeholders Engagement that would need to occur 1.7 million new buildings affected 1.7 million new buildings affected 3.2 million buildings retrofitted 3.2 million buildings retrofitted Includes stronger roof covers and roof wall connections Includes stronger roof covers and roof wall connections ~230 miles of beach nourishment ~230 miles of beach nourishment ~1000 square miles of wetlands restored ~1000 square miles of wetlands restored ~120 miles of levees ~120 miles of levees 102 levees to protect refineries and petrochemical plants 102 levees to protect refineries and petrochemical plants 19 FPSOs deployed 19 FPSOs deployed 2.2 MM of boe in new offshore production capacity developed using higher specifications 2.2 MM of boe in new offshore production capacity developed using higher specifications ~540,000 miles of new, rebuild or retrofitted resilience distribution lines ~1,600 miles of new, rebuild or retrofitted resilience transmission lines Increasing vegetation management 1 Total capital expenditure, non-discounted, across 20 years FOR DISCUSSION Residential/Commercial $12 bn in CapEx 1 Infrastructure/Envionmental $44 bn CapEx 1 Oil and gas $50 bn CapEx 1 Electric utility $15 bn CapEx 1

20. 20 In order to implement these measures, significant leadership and coordination will be required across stakeholders Remove barriers and encourage adaptation measures (e.g., building codes, streamlined permitting, expand jobs and economic production Remove barriers and encourage adaptation measures (e.g., building codes, streamlined permitting, expand jobs and economic production Fund/accelerate key adaptation projects (e.g., wetlands restoration, beach nourishment) Fund/accelerate key adaptation projects (e.g., wetlands restoration, beach nourishment) Identify and start putting in place key economic measures for resilience Identify and start putting in place key economic measures for resilience we have taken a leadership role on the mitigation issue -- congress, regulators we plan to take a leadership role on resilience/adaptation....... Overall coordination (e.g., multi-stakeholder working group to lead and encourage better coordination across stakeholders) Overall coordination (e.g., multi-stakeholder working group to lead and encourage better coordination across stakeholders) THOUGHTSTARTERS Policymakers Private sector All

21. 21 Resilience vs. Suffering? Its our choice to make

22. The Clarion-Ledger, Jackson, MS