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Entergy Urges U.S. Companies to Spend on Safety Amid Growing Weather-Related Risks, an Industrial Info News Alert

NEW ORLEANS, LA -- (Marketwired) -- 04/03/14 -- Researched by Industrial Info Resources (Sugar Land, Texas) -- As the Electric Power Conference & Exhibition winds down on Thursday in New Orleans, we at Industrial Info have had a great time at our Market Outlook sessions and at our networking event on Wednesday, and have enjoyed meeting those who have stopped by our booth. With a combination of large sessions that filled an auditorium, and several breakout sessions covering 10 different tracks from emergency response to environmental compliance, there is a tremendous amount of information flowing from the conference side of the show.

One of this year's keynote speakers was Rod West, executive vice president and chief administrative officer for integrated energy company and electric power provider Entergy Corporation (NYSE:ETR) (New Orleans, Louisiana). West's speech, "Utility Investment Decisions in an Age of Catastrophic Events," focused on an issue that Entergy, which has key assets along the U.S. Gulf Coast region and Northeast, has become all too familiar with in recent years. Disasters such as Superstorm Sandy and hurricanes Katrina, Ike and others have wreaked havoc on the company's facilities.

Avoiding any debate about climate change and weather patterns, West presented the facts, plain and simple: In the 1980s, there was, on average, one weather event exceeding $1 billion in cumulative losses each year in the entire U.S. In the 1990s, this went up to two events per year. In the 2000s, there were an average of five such events per year, and the 2010s has brought an average of about 11 events.

While such incidents are tragedies for those who are directly affected, West noted that the economic consequences in heavily industrialized areas, such as the Gulf Coast, which is prone to hurricanes and an ever-diminishing wetlands area, are devastating to the entire U.S. economy. West noted that the Gulf Coast region is home to almost half of the U.S. refining capacity and $2 trillion of assets. With the current planned construction of LNG, petrochemical, and other facilities, another $1 trillion worth of assets is expected to be added to the region by 2030.

"This is not just a utility issue, it is an economy-wide issue," West said.

On the whole, because of the value of its industrial asset base and the proneness to weather-related incidents, approximately 7% to 8% of investment made in the Gulf Coast region is spent on mitigating losses, most of which are caused by thunderstorms, winds and tornados, as opposed to making other growth investments.

West pointed out that while utilities can play a big part in investing in damage prevention, the problem of weather-related risk mitigation is ultimately one that must be embraced by the entire industrial sector and communities as a whole. West said that following Hurricane Rita in 2005, it took four weeks to restore the transmission infrastructure of the Sabine Cogeneration Power Plant (Orange, Texas), which had been knocked out. The surrounding areas were badly affected; employees at a nearby petrochemical plant were without work for a significant period of time.

Fast-forward three years later to Hurricane Ike, and the power transmission and distribution infrastructure of the Sabine plant held up well in sustained 90-mile-an-hour winds due to the investments made after Rita. However, the petrochemical plant was badly flooded and had ceased operations. People were again forced to stop working, and Entergy was without a customer until repairs could bring the plant back online.

While large risk mitigation projects, such as the restoration of wetlands, are extremely expensive, they are almost certainly worth it. Wetlands act as a first line of defense against flood surges and allow other structures, such as levies, to be the second tier.

"The costs of inaction are far more expensive than the investments we choose to make today," West said. And as continued investment in large-scale industrial projects along the Gulf Coast is set to greatly expand in the coming years, an ounce of prevention should certainly be on the radar for these project owners and the surrounding communities that rely on these facilities for jobs and economic growth.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. To contact an office in your area, visit the www.industrialinfo.com "Contact Us" page.

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