EX-99.1
Public Service Enterprise Group
PSEG Earnings Conference Call
4th Quarter and Year-End 2008
February 3, 2009
Forward-Looking Statement
Readers are cautioned that statements contained in this presentation about our and our subsidiaries’ future performance, including future
revenues, earnings, strategies, prospects and all other statements that are not purely historical, are forward-looking statements for purposes of
the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Although we believe that our expectations are based on
reasonable assumptions, we can give no assurance they will be achieved. The results or events predicted in these statements may differ
materially from actual results or events. Factors which could cause results or events to differ from current expectations include, but are not
limited to:
Adverse changes in energy industry, policies and regulation, including market structures and rules.
Any inability of our energy transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from
federal and state regulators.
Changes in federal and state environmental regulations that could increase our costs or limit operations of our generating units.
Changes in nuclear regulation and/or developments in the nuclear power industry generally, that could limit operations of our nuclear generating
units.
Actions or activities at one of our nuclear units that might adversely affect our ability to continue to operate that unit or other units at the same
site.
Any inability to balance our energy obligations, available supply and trading risks.
Any deterioration in our credit quality.
Availability of capital and credit at reasonable pricing terms and our ability to meet cash needs.
Any inability to realize anticipated tax benefits or retain tax credits.
Increases in the cost of or interruption in the supply of fuel and other commodities necessary to the operation of our generating units.
Delays or cost escalations in our construction and development activities.
Adverse investment performance of our decommissioning and defined benefit plan trust funds, and changes in discount rates and funding
requirements.
Changes in technology and increased customer conservation.
For further information, please refer to our Annual Report on Form 10-K, including Item 1A. Risk Factors, and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this presentation. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our estimates change, unless otherwise required by applicable securities laws.
1
GAAP Disclaimer
PSEG presents Operating Earnings in addition to its Net Income reported
in accordance with accounting principles generally accepted in the United
States (GAAP). Operating Earnings is a non-GAAP financial measure that
differs from Net Income because it excludes the impact of the sale of
certain non-core domestic and international assets and material impairments and lease-transaction-related charges. PSEG presents Operating Earnings
because management believes that it is appropriate for investors to consider
results excluding these items in addition to the results reported in
accordance with GAAP. PSEG believes that the non-GAAP financial
measure of Operating Earnings provides a consistent and comparable
measure of performance of its businesses to help shareholders understand
performance trends. This information is not intended to be viewed as an
alternative to GAAP information. The last slide in this presentation includes
a list of items excluded from Income from Continuing Operations to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears.
2
PSEG
2008 Q4 Review
Ralph Izzo
Chairman, President and Chief Executive Officer
Q4 2008 Earnings Summary
6
(3)
Discontinued Operations
$ 0.53
$ 0.49
EPS from Operating Earnings*
225
234
Net Income
219
237
Income from Continuing Operations
(53)
(13)
Asset Sales and Impairments
$ 272
$ 250
Operating Earnings
Quarter ended December 31,
2007
2008
$ millions (except EPS)
4
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
Full-year 2008 Earnings Summary
For the year ended December 31,
1,325
983
Income from Continuing Operations
$ 2.72
$ 2.92
EPS from Operating Earnings*
10
205
Discontinued Operations, net of tax
1,335
1,188
Net Income
(60)
(14)
Asset Sales and Impairments
---
(490)
Lease Reserves
$ 1,385
$ 1,487
Operating Earnings
2008
2007
$ millions (except EPS)
5
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
PSEG – 2008: Answering Challenges – Meeting Objectives
2008 earnings within guidance
Focused on operational excellence
Record generation production
Top decile reliability standards maintained at PSE&G
Controlling operating and maintenance expenses to meet challenging economic environment
Foundation laid for future
Carbon abatement
Capital infrastructure and energy efficiency capital programs
Generation environmental upgrades on target; within budget
Financial position strengthened; risk reduced
Major international assets sold
Debt reduced
Credit targets achieved
Additional reserve for LILO/SILO tax risk recognized
6
PSEG – 2009: Meeting the Challenge
2007 Operating Earnings*
2008 Operating Earnings*
2009 Guidance
$2.72
$2.92
$3.00 – $3.25
7
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
PSEG
2008 Q4 Operating Company Review
Tom O’Flynn
Executive Vice President and Chief Financial Officer
Q4 Operating Earnings by Subsidiary
$ 272
(20)
10
77
$ 205
2007
$ 250
(10)
(23)
76
$ 207
2008
Operating Earnings
Earnings per Share
(0.04)
(0.02)
Enterprise
$ 0.53
$ 0.49
Operating Earnings*
0.02
(0.04)
PSEG Energy Holdings
0.15
0.15
PSE&G
$ 0.40
$ 0.40
PSEG Power
$ millions (except EPS)
2007
2008
Quarter ended December 31,
9
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
Full-year 2008 Operating Earnings by Subsidiary
$ 1,385
(63)
123
376
$ 949
2007
$ 1,487
(24)
101
360
$ 1,050
2008
Operating Earnings
Earnings per Share
(0.12)
(0.05)
Enterprise
$ 2.72
$ 2.92
Operating Earnings*
0.24
0.20
PSEG Energy Holdings
0.74
0.71
PSE&G
$ 1.86
$ 2.06
PSEG Power
$ millions (except EPS)
2007
2008
For the year ended December 31,
10
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
PSEG EPS Reconciliation – Q4 2008 versus Q4 2007
$.53
.00
.00
(.06)
.02
$.49
0.60
0.40
0.20
0.00
Recontracting
and Strong
Markets .07
O&M .03
NDT (.10)
Weather .01
Gas Margin
(.01)
O&M .04
Depreciation
and Taxes (.04)
Texas – MTM (.05);
Operations (.02)
2007 Asset Sales
and Settlements
(.03)
Lease Income (.02)
Effective Tax Rate
and Other .05
Interest Expense .01
Interest
Q4 2007
operating
earnings*
PSEG Power
PSE&G
PSEG Energy
Holdings
Enterprise
Q4 2008
operating
earnings*
11
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
$2.72
.20
(.03)
(.04)
.07
$2.92
1.00
2.00
3.00
Margin – Gas,
Electric and
Transmission
(.04)
Weather (.01)
O&M .02
Depreciation,
Interest and
Other (.02)
Effective Tax
Rate .02
PSEG EPS Reconciliation – Full-year 2008 versus Full-
year 2007
2008
operating
earnings*
2007
operating
earnings*
Interest
Recontracting
and Strong
markets .43
MTM and BGSS
.03
NDT (.16)
O&M (.07)
Depreciation,
Interest and Taxes
(.03)
2007 Asset Sales
and Settlements
(.13)
Lease Income (.04)
Texas – MTM (.03)
Operations .05
Interest Expense
.07
Effective Tax Rate
and Other .04
PSEG Power
PSE&G
PSEG Energy
Holdings
Enterprise
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
12
PSEG Power
2008 Q4 Review
PSEG Power – Q4 2008 EPS Summary
2
205
207
Operating Earnings
---
$ 0.40
$ 0.40
EPS from Operating Earnings*
2
205
207
Income from Continuing Operations/
Net Income
$ 177
$ 1,762
$ 1,939
Operating Revenues
Variance
Q4 2007
Q4 2008
$ millions (except EPS)
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
14
PSEG Power EPS Reconciliation – Q4 2008 versus Q4 2007
0.50
$.40
.07
(.10)
.03
$.40
0.00
Recontracting and Strong Markets
NDT
O&M
Q4 2007 operating earnings*
Q4 2008 operating earnings*
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
15
PSEG Power – Generation Measures
PSEG Power – Generation (GWh)
Quarter ended December 31,
Twelve months ended December 31,
15,000
12,391
12,518
2,761
2,516
10,000
3,089
2,642
5,000
6,541
7,360
60,000
53,197
55,292
11,820
13,090
40,000
13,014
12,918
20,000
28,363
29,284
0
0
2007
2008
Total Nuclear
2007
2008
Total Coal*
Total Oil &
Natural Gas
* Includes figures for Pumped Storage
16
PSEG Power – Fuel Costs
PSEG Power – Fuel Costs
Quarter ended December 31,
Year ended December 31,
($ millions)
2007
2008
($ millions)
2007
2008
Coal
84
92
Coal
336
423
Oil & Gas
200
192
Oil & Gas
847
1,141
Total Fossil
$284
$284
Total Fossil
$1,183
$1,564
Nuclear
28
33
Nuclear
122
129
Total Fuel Cost
$312
$317
Total Fuel Cost
$1,305
$1,693
Total Generation
(GWhr)
12,391
12,518
Total Generation
(GWhr)
53,197
55,292
$ / MWh
$25.20
$25.30
$ / MWh
$24.50
$30.60
17
Strong Pricing Supports Margin Improvement
PSEG Power Gross Margin* ($/MWh)
Quarter ended December 31,
Twelve months ended December 31,
$60
$40
$51
$56
$60
$40
$50
$55
$57 - $58
2007
2008
2007
2008
2009E
18
*Includes MTM
PSEG Power – Q4 Operating Highlights
Operations
4Q output +1%; full-year increase of 3.9% leading to record production.
4Q nuclear capacity factor at 91.3%; full-year at 92.6%.
Coal plant availability affected by BET related work.
Environmental work at Hudson and Mercer proceeding on schedule; on budget.
Regulatory and Market Environment
Renegotiated contract with Indonesian coal supplier.
Seeing impact on pricing from declining economic growth.
CAIR reinstated; too early to predict impact of change in administration on energy and environmental policy.
Financial
$25 million dividend paid to Enterprise in 4Q; $500 million for full-year.
Successful launch of $500 million retail MTN program.
19
PSE&G
2008 Q4 Review
Variance
Q4 2007
Q4 2008
PSE&G – Q4 2008 Earnings Summary
$ millions (except EPS)
$ 135
$ 2,153
$ 2,288
Operating Revenues
Operating Expenses
130
1,415
1,545
Energy Costs
(16)
361
345
Operation & Maintenance
(2)
142
140
Depreciation & Amortization
---
35
35
Taxes Other than Income Taxes
112
1,953
2,065
Total Operating Expenses
(1)
77
76
Operating Earnings
(1)
77
76
Income from Continuing Operations/
Net Income
---
$ 0.15
$ 0.15
EPS from Operating Earnings*
21
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
0.20
0.10
0.00
$.15
.01
(.01)
.04
(.04)
$.15
Weather
Gas Margin
O&M
Depreciation
and Taxes
PSE&G EPS Reconciliation – Q4 2008 versus Q4 2007
Q4 2008
operating
earnings*
Q4 2007
operating
earnings*
22
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
PSE&G – Q4 Operating Highlights
Operations
Declining economic growth having impact on sales growth.
O&M costs remain under control.
Focused on containing impact of economic fallout on customers and accounts through support of outreach programs.
Regulatory and Market Environment
PSE&G filed for NJ BPU approval to construct the Susquehanna – Roseland transmission line. The $750 million project is scheduled to be in-service by year-end 2012.
NJ BPU approved a four-year $46 million program to curb energy consumption and reduce CO2 emissions.
PSE&G proposed a two-year $888 million capital program supporting energy infrastructure ($698 million) and energy efficiency ($190 million).
Financial
Outlook for electric sales growth hurt by weak economy.
Capital to be invested in areas with regulatory support.
23
PSEG Energy Holdings
2008 Q4 Review
PSEG Energy Holdings – Q4 2008 Earnings Summary
($ 33)
$ 10
($ 23)
Operating (Loss) / Earnings
($0.06)
$ 0.02
($ 0.04)
EPS from Operating (Loss) / Earnings*
(2)
(37)
(39)
Net Loss
(9)
6
(3)
Discontinued Operations
7
(43)
(36)
Loss from Continuing Operations
(40)
53
13
Asset Sales and Impairments
Variance
Q4 2007
Q4 2008
$ millions (except EPS)
25
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
$.02
(.07)
(.03)
(.02)
.05
(.04)
.01
0.05
0.00
-0.05
-0.10
-0.15
Texas -
Operations (.02)
MTM (.05)
2007 Asset
Sales and
Settlements
Lease
Income
Effective
Tax Rate
and Other
Interest
Expense
PSEG Energy Holdings EPS Reconciliation – Q4 2008
versus Q4 2007
Q4 2008
operating
earnings*
Q4 2007
operating
earnings*
26
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
PSEG Energy Holdings – Q4 Operating Highlights
Operations
Texas – 2,000 MW gas-fired combined cycle capacity
1,000 MW Guadalupe facility experienced improved capacity factor and spark spreads.
1,000 MW Odessa facility experienced a reduction in capacity and availability.
Spark Spread
Production (GWh)
4Q 2007
4Q 2008
2007
2008
4Q 2007
4Q 2008
2007
2008
Guadalupe
Odessa
$10.30
$26.88
$14.83
$26.37
$14.77
$23.16
$24.56
$32.72
.85
.82
1.15
.45
4.20
4.30
4.98
2.85
Regulatory and Market Environment
Submitted RFP on 500 MW of 1,000 MW Odessa plant for a 10-15 year agreement to provide energy and capacity.
Change in administration and energy policy could favor development of renewables.
Financial
Recognized impairment of investments in PPN and Turboven.
Remaining international investments total $24 million.
Received approximately $700 million from Q3 and Q4 international asset sales.
27
PSEG
PSEG Power
14.0
76.0
2.0
4.0
Other
TOTAL
31.0
160.0*
Discount Rate
6.50%
6.80%
PSE&G
$15.0*
$80.0*
January 2009 Estimate**
2008 Actual
Outlook for Pension Expense
29
* After capitalized amount; pre-tax figure.
** The January 2009 estimate represents an increase from our October 2008 forecast of $110 - $120 million pre-tax.
2009 Operating Earnings Guidance
$ 0 – $ 20
$ 101
Enterprise
$ 1,520 – $ 1,650
$ 1,487
Earnings per Share
$ 2.92
$ 3.00 – $ 3.25
($ 10) – $ 0
($ 24)
Operating Earnings
$ 320 – $ 345
$ 360
PSE&G
$ 1,210 – $ 1,285
$ 1,050
PSEG Power
PSEG Energy Holdings
2009E
2008A*
$ millions (except EPS)
30
* See page 32 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings.
PSEG Liquidity as of December 31, 2008
Company
PSEG
Available Liquidity
12/31/2008
Usage at
12/31/2008
Primary
Purpose
Total
Facility
Expiration
Date
Facility
5-year Credit Facility
12-Dec
$1,000
Bilateral Credit Facility
9-Jun
$100
Uncommitted Bilateral Agreement
N/A
N/A
Power
5-Year Credit Facility
12-Dec
1,600
Bilateral Credit Facility
9-Jun
100
Bilateral Credit Facility
9-Mar
150
Bilateral Credit Facility
9-Sep
50
10-Jun
Bilateral Credit Facility
10-Mar
100
10-Jun
PSE&G
5-year Credit Facility
12-Jun
600
Uncommitted Bilateral Agreement
N/A
N/A
Energy
Holdings
5-year Credit Facility
10-Jun
136
1
CP Support/Funding/LCs
$13
$987
CP Support/Funding
$0
$100
Funding
0
N/A
3
Funding/LCs
222
1,378
Funding/LCs
0
100
Funding/LCs
52
98
Funding
0
50
Funding/LCs
14
86
2
CP Support/Funding/LCs
20
580
Funding
0
N/A
Funding/LCs
21
115
Total
$3,836
$3,494
1
PSEG Facility reduces by $47 million in 2012
2
PSE&G Facility reduces by $28 million in 2012
3
Power Facility reduces by $75 million in 2012
31
Items Excluded from Income from Continuing Operations to
Reconcile to Operating Earnings
Pro-forma Adjustments, net of tax
For the Quarters Ended
December 31,
For the Twelve Months Ended
December 31,
2008
2007
2008
2007
Earnings Impact (in Millions)
Asset Sales and Impairments:
Impairment of PPN
Impairment of Turboven
Loss on Sale of Chilquinta and Luz del Sur
Premium on Bond Redemption
Total Asset Sales and Impairments
Lease Reserves
Total Pro-forma to Operating Earnings
Fully Diluted Average Shares Outstanding (in Millions)
Per Share Impact (Diluted)
Asset Sales and Impairments:
Impairment of PPN
Impairment of Turboven
Loss on Sale of Chilquinta and Luz del Sur
Premium on Bond Redemption
Total Asset Sales and Impairments
Lease Reserves
Total Pro-forma to Operating Earnings
Please see Slide 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how
it differs from Net Income.
$ (9)
$ (2)
$ (9)
$ (2)
(4)
-
(4)
(7)
-
(23)
-
(23)
-
(28)
(1)
(28)
(13)
(53)
(14)
(60)
-
-
(490)
-
$ (13)
$ (53)
$ (504)
$ (60)
507
510
508
509
$ (0.02)
$ -
$ (0.02)
$ -
(0.01)
-
(0.01)
(0.01)
-
(0.05)
-
(0.05)
-
(0.06)
-
(0.06)
(0.03)
(0.11)
(0.03)
(0.12)
-
-
(0.96)
-
$ (0.03)
$ (0.11)
$ (0.99)
$ (0.12)
32