Public Service Enterprise Group PSEG Earnings Conference Call 4 th Quarter & Year-end 2013 February 20, 2014 EXHIBIT 99.1 |
1 Forward-Looking Statement Certain of the matters discussed in this communication about our and our subsidiaries’ future performance, including, without limitation, future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used herein, the words “anticipate,” “intend,” “estimate,” “believe,” “expect,” “plan,” “should,” “hypothetical,” “potential,” “forecast,” “project,” variations of such words and similar expressions are intended to identify forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward looking statements made by us herein are discussed in filings we make with the United States Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K and subsequent reports on Form 10-Q and Form 8-K and available on our website: http://www.pseg.com. These factors include, but are not limited to: All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business prospects, financial condition or results of operations. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if internal estimates change, unless otherwise required by applicable securities laws. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. adverse changes in the demand for or the price of the capacity and energy that we sell into wholesale electricity markets, • adverse changes in energy industry law, policies and regulation, including market structures and a potential shift away from competitive markets toward subsidized market mechanisms, transmission planning and cost allocation rules, including rules regarding how transmission is planned and who is permitted to build transmission in the future, and reliability standards, • any inability of our 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 our operations, • changes in nuclear regulation and/or general developments in the nuclear power industry, including various impacts from any accidents or incidents experienced at our facilities or by others in the industry, that could limit operations of our nuclear generating units, • actions or activities at one of our nuclear units located on a multi-unit site that might adversely affect our ability to continue to operate that unit or other units located at the same site, • any inability to balance our energy obligations, available supply and risks, • any deterioration in our credit quality or the credit quality of our counterparties, • availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs, • changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units, • delays in receipt of necessary permits and approvals for our construction and development activities, • delays or unforeseen cost escalations in our construction and development activities, • any inability to achieve, or continue to sustain, our expected levels of operating performance, • any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to obtain sufficient coverage or recover proceeds of insurance with respect to such events, • cybersecurity attacks or intrusions could adversely impact our businesses, • Increases in competition in energy supply markets as well as competition from certain transmission projects, • any inability to realize anticipated tax benefits or retain tax credits, • challenges associated with recruitment and/or retention of a qualified workforce, • adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in funding requirements, and • changes in technology, such as distributed generation and micro grids, and including in our leveraged leases, greater reliance on these technologies and changes in customer behaviors, including energy efficiency, net metering and demand response. |
2 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 gains or losses associated with Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting, and other material one-time items. 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. Slide 35 at the end of this presentation includes a list of items excluded from Net Income to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears. |
PSEG 2013 Q4 and Full Year Review Ralph Izzo Chairman, President and Chief Executive Officer |
4 Q4 Earnings Summary – Strong finish to 2013 Quarter ended December 31 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. $ millions (except EPS) 2013 2012 Operating Earnings $ 248 $ 207 Reconciling Items, Net of Tax (48) 17 Net Income $ 200 $ 224 EPS from Operating Earnings* $ 0.49 $ 0.41 |
5 Full-year Earnings Summary – EPS exceeded guidance Twelve Months ended December 31 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. $ millions (except EPS) 2013 2012 Operating Earnings $ 1,309 $ 1,236 Reconciling Items, Net of Tax (66) 39 Net Income $ 1,243 $ 1,275 EPS from Operating Earnings* $ 2.58 $ 2.44 |
6 PSEG – 2013 Highlights Strong 2013 financial performance – exceeded guidance Achieved operating earnings of $2.58 per share compared to $2.44 per share in 2012, up 5.7% PSE&G posted double digit earnings growth, representing 47% of consolidated operating earnings with the growth in transmission investment Power’s operating earnings exceeded high end of guidance Continued operational excellence Power set record output at Linden CCGT and Salem 2 nuclear PSE&G’s control of O&M supported results PSE&G and Power successfully responded to record summer and winter demand, while our customers have benefitted from savings in gas costs PSE&G recognized for the 12th consecutive year as the Mid-Atlantic region’s most reliable electric utility Disciplined capital investment – producing results Five major transmission projects in construction – on schedule and on budget New PJM transmission projects add to utility rate base growth beyond 2015 Power adding 150 MWs through uprates at CCGTs S&P ratings upgrades for Power (BBB+), PSE&G (A) and PSEG (BBB+); Moody’s recently upgraded PSE&G’s senior secured rating to Aa3 |
PSE&G Energy Strong Proposal -- Update 7 Multi-year, $2.6 Billion Infrastructure Program filed with the NJBPU to strengthen PSE&G’s electric and gas system focusing on hardening and resiliency PSE&G’s Infrastructure proposal includes: Over 90 NJ municipalities, including 9 county governments, have passed resolutions supporting PSE&G’s Energy Strong proposal Proposed filing creates ~5,800 jobs and stimulates economic activity for New Jersey businesses Protecting 29 utility installations from severe storms Making the electric grid smarter and easier to repair Adding backup distribution lines and system redundancies Undergrounding 20 miles of overhead distribution lines Modernizing the gas distribution system |
PSEG Annual Dividend – Increased 2.8% A long history of returning cash to shareholders combined with opportunity for consistent, sustainable growth Payout Ratio 70% 63% 66% 43% 44% 43% 44% 50% 58% 56% 56%* 5-year Rate of Growth 2.2% 10-year Rate of Growth 3.0% PSEG Annual Dividend Rate *2014 PAYOUT RATIO REFLECTS THE MIDPOINT OF 2014 OPERATING EARNINGS GUIDANCE OF $2.55-2.75 PER SHARE. **INDICATED ANNUAL RATE. 8 $1.10 $1.12 $1.14 $1.17 $1.29 $1.33 $1.37 $1.37 $1.42 $1.44 $1.48 ** 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 |
9 $2.55 - $2.75E PSEG 2014 Guidance – Building on Success $2.44 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. E = Estimate. $2.58 2014 guidance reflects increased level of investment, pension savings and assumes normal weather and unit operations 2012 Operating Earnings* 2013 Operating Earnings* 2014 Operating Earnings Guidance |
PSEG 2013 Q4 Operating Company Review Caroline Dorsa EVP and Chief Financial Officer |
11 Q4 Operating Earnings by Subsidiary Quarter ended December 31 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 115 $ 126 $ 0.23 $ 0.25 PSE&G 144 75 0.29 0.15 PSEG Enterprise/Other (11) 6 (0.03) 0.01 Operating Earnings* $ 248 $ 207 $ 0.49 $ 0.41 |
12 PSEG EPS Reconciliation – Q4 2013 versus Q4 2012 Higher Capacity 0.10 Market Pricing and Lower Supply Costs 0.02 Higher Volume 0.01 Lower Hedge Pricing (0.09) O&M (0.08) Other 0.02 Transmission 0.04 O&M (Distribution) 0.04 Taxes 0.04 Demand & Weather 0.01 Other 0.01 Q4 2013 Operating Earnings* Q4 2012 Operating Earnings* PSEG Power** PSE&G** PSEG Enterprise/ Other Tax Adjustment (0.03) Asset Sales and Other (0.01) $0.41 0.14 $0.49 (0.02) (0.04) 0.00 0.10 0.20 0.30 0.40 0.50 0.60 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. ** Prior quarter results for reconciling items may not add to year-to-date (YTD) totals due to rounding. |
13 Strong Full-year Operating Earnings Delivered Twelve Months ended December 31 •See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 710 $ 663 $ 1.40 $ 1.31 PSE&G 612 528 1.21 1.04 PSEG Enterprise/Other (13) 45 (0.03) 0.09 Operating Earnings* $ 1,309 $ 1,236 $ 2.58 $ 2.44 |
14 $2.44 0.09 0.17 $2.58 (0.12) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 PSEG EPS Reconciliation – Full-year 2013 versus Full-year 2012 Higher Capacity 0.34 Market Pricing and Lower Supply Costs 0.05 Gas Send-out and Fixed Cost Recovery 0.05 Higher Volume 0.02 Lower Hedge Pricing (0.25) O&M (0.13) Other 0.01 Transmission 0.14 Renewables and CIP 0.02 O&M (Distribution) 0.02 Other 0.02 D&A (0.01) Higher Taxes (0.02) 2013 Operating Earnings* 2012 Operating Earnings* PSEG Power** PSE&G** PSEG Enterprise/ Other Absence of Tax Settlement (0.07) Tax Adjustment (0.03) Asset Sales and Other (0.02) * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. ** Prior quarter results for reconciling items may not add to year-to-date (YTD) totals due to rounding. |
PSEG Power 2013 Q4 Review |
16 PSEG Power – Q4 EPS Summary * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. **Includes the financial impact from Mark-to-Market positions with forward delivery months. $ millions (except EPS) Q4 2013 Q4 2012 Variance Operating Revenues $ 1,245 $ 1,282 $ (37) Operating Earnings $ 115 $ 126 $ (11) Pro Forma Adjustments, Net of Tax** (48) (13) (35) Net Income $ 67 $ 113 $ (46) EPS from Operating Earnings* $ 0.23 $ 0.25 $ (0.02) |
17 $0.25 0.04 $0.23 (0.06) 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 Higher Capacity 0.10 Market Pricing and Lower Supply Costs 0.02 Higher Volume 0.01 Lower Hedge Pricing (0.09) PSEG Power EPS Reconciliation – Q4 2013 versus Q4 2012 Q4 2013 Operating Earnings* Q4 2012 Operating Earnings* Higher O&M (0.08) Other 0.02 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. |
18 Quarter ended December 31 Total Nuclear Total Coal* Oil & Natural Gas * Includes figures for Pumped Storage. Includes Hudson and Mercer when run on gas. PSEG Power – Generation (GWh) 11,744 12,471 Quarter ended December 31 PSEG Power – Capacity Factors (%) 2012 2013 Combined Cycle PJM and NY 45.3% 53.1% Coal* NJ (Coal/Gas) 1.3% 3.2% PA 64.0% 87.3% CT 2.9% 29.1% Nuclear 87.3% 81.7% 7,169 6,712 1,122 1,797 3,453 3,962 0 7,500 15,000 2012 2013 PSEG Power – Q4 Generation Measures – Volume up 6.2% |
19 29,773 29,495 5,777 7,323 16,961 16,640 0 10,000 20,000 30,000 40,000 50,000 60,000 2012 2013 Twelve months ended December 31 Total Nuclear Total Coal* Oil & Natural Gas * Includes figures for Pumped Storage. Includes Hudson and Mercer when run on gas. PSEG Power – Generation (GWh) 52,511 53,458 Twelve months ended December 31 PSEG Power – Capacity Factors (%) 2012 2013 Combined Cycle PJM and NY 56.5% 56.0% Coal* NJ (Coal/Gas) 10.9% 11.3% PA 67.5% 81.4% CT 2.9% 19.7% Nuclear 91.1% 90.3% PSEG Power – Full-Year Generation Measures – Volume up 1.8% |
20 PSEG Power – Fuel Costs Quarter ended December 31 ($ millions) 2012 2013 Coal 32.8 47.3 Oil & Gas 117.6 134.9 Total Fossil 150.4 182.2 Nuclear 50.9 53.6 Total Fuel Cost 201.3 235.8 Total Generation (GWh) 11,744 12,471 $ / MWh 17.14 18.91 PSEG Power – Fuel Costs Twelve months ended December 31 Coal Oil & Gas Total Fossil Nuclear Total Fuel Cost 1027.7 Total Generation (GWh) 52,511 53,458 2012 175.1 525.5 700.6 201.6 902.2 2013 188.7 618.8 807.5 220.2 17.18 19.22 $ / MWh ($ millions) |
21 PSEG Power – Gross Margin Performance $0 $10 $20 $30 $40 $50 $60 2011 2012 2013 $0 $10 $20 $30 $40 $50 $60 2011 2012 2013 $49 $46 Quarter ended December 31 Twelve Months ended December 31 $52 $45 Margins benefit from higher capacity pricing through mid-2014 Higher year-over-year spot market prices throughout 2013 Lower cost Marcellus gas continued to benefit fuel cost savings in Q4 PSEG Power Gross Margin ($/MWh) $46 $47 Regional Performance Region 2013 Gross Margin ($M) 2013 Performance PJM $2,392 Decline in hedged energy prices offset by higher capacity prices, improved spark spreads, increased volume and improved market pricing on open position for the year. New England $78 Favorable pricing and generation. New York $48 Major maintenance outage limited production during Q3. |
22 Full Requirements Component Capacity Markets/RPM Growing Renewable Energy/Transmission Component for Market Risk Market Perspective – 2014 BGS Auction Results … reflects an increase from the prior year driven primarily by transmission costs Note: BGS prices reflect PSE&G Zone; results from the 2012-2014 auctions will be the new blended prices beginning June 1, 2014. Three-Year Average Round the Clock PJM West Forward Energy Price Capacity Load shape Transmission Congestion Ancillary services Risk premium Green $97.39 ~ $47 $95.77 $94.30 ~ $48 ~ $46 ~ $53 $83.88 ~ $59 $92.18 $45 - $47 $37 - $38 $39 - $40 $48 - $50 $38 - $39 2010 2011 2012 2013 2014 |
23 Hedging Update… Contracted Energy* * Hedge percentages and prices as of February 11, 2014. Revenues of full requirement load deals based on contract price, including renewable energy credits, ancillary, and transmission components but excluding capacity. Hedges include positions with MTM accounting treatment and options. 2014 2015 2016 Volume TWh 35 35 35 Base Load % Hedged 100% 75-80% 30-35% (Nuclear and Base Load Coal) Price $/MWh $48 $51 $53 Volume TWh 20 19 19 Intermediate Coal, Combined % Hedged 35-40% 0% 0% Cycle, Peaking Price $/MWh $48 $51 $53 Volume TWh 53-55 53-55 53-55 Total % Hedged 75-80% 45-55% 20-30% Price $/MWh $48 $51 $53 |
24 PSEG Power – Q4 2013 Operating Highlights Q4 output up 6.2% from Q4 2012, with absence of Sandy outages, strong performance at Salem station and Peach Bottom 2 and Linden CCGT Nuclear capacity factor of 90.3% for 2013; record generation at Salem 2 Major CCGT maintenance at BEC; began CCGT upgrades Hope Creek and Peach Bottom 3 refuelings in Q4 Operations Regulatory and Market Environment Financial 2014 BGS auction priced higher at $97.39/MWh vs. $92.18/MWh in 2013 and $83.88 in 2012 for the PSE&G contract 2014 anticipated base load output hedged at an average price of $48 MWh 2014 BGS load projected at 11 TWhs Power markets adjusting to heightened volatility, winter peak demand, less liquidity Power’s total debt as a percentage of capitalization at year-end was 31% |
PSE&G 2013 Q4 Review |
26 PSE&G – Q4 Earnings Summary * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. $ millions (except EPS) Q4 2013 Q4 2012 Variance Operating Revenues $ 1,571 $ 1,597 $ (26) Operating Expenses Energy Costs 633 779 (146) Operation & Maintenance 435 416 19 Depreciation & Amortization 214 183 31 Taxes Other than Income Taxes 18 26 (8) Total Operating Expenses 1,300 1,404 (104) Operating Earnings / Net Income $ 144 $ 75 $ 69 EPS from Operating Earnings $ 0.29 $ 0.15 $ 0.14 |
$0.15 0.05 0.04 0.05 $0.29 0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 27 PSE&G EPS Reconciliation – Q4 2013 versus Q4 2012 Q4 2013 Operating Earnings* Q4 2012 Operating Earnings* Transmission Margin 0.04 Demand and Weather 0.01 O&M (Distribution) Taxes 0.04 Other 0.01 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. |
28 PSE&G – Q4 Operating Highlights Construction of 5 major transmission lines continues on schedule and on budget PJM assigned the “Double Circuit” project to PSE&G to enhance reliability of the Bergen-Linden line to 345-kV; expected in service date is June 2018 Annual FERC formula rate revenue increase of $171 million effective January 1, 2014 BPU continues to review Energy Strong infrastructure proposal PSE&G recognized for the 12th consecutive year as the Mid-Atlantic region’s most reliable electric utility; specifically recognized by EEI for excellence in its storm response during Sandy PSE&G earned its authorized return in 2013 Moody’s recently upgraded PSE&G’s senior secured debt rating to Aa3 Operations Regulatory and Market Environment Financial Q4 weather slightly colder vs. Q4 2012 and normal: Heating degree days 5.2% above Q4 2012 and 3.5% higher vs. normal weather Absence of Sandy costs Electric & Gas demand and volume up (weather adjusted) over Q4 2012 |
PSEG Enterprise/Other 2013 Q4 Review |
30 PSEG Enterprise/Other – Q4 Earnings Summary * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. $ millions (except EPS) Q4 2013 Q4 2012 Variance Operating Earnings $ (11) $ 6 $ (17) Lease Transaction Activity - 30 (30) Net Income $ (11) $ 36 $ (47) EPS from Operating Earnings* $ (0.03) $ 0.01 $ (0.04) |
PSEG |
32 PSEG Financial Highlights Introducing 2014 operating earnings guidance of $2.55 - $2.75 per share Focused on maintaining operating efficiency and customer reliability PSE&G expected to provide over 50% of 2014 operating earnings Energy Strong infrastructure proposal remains under consideration: First 5-year request to invest $2.6 billion to strengthen resiliency of PSE&G’s distribution infrastructure Executing existing transmission capital spending program on schedule and pursuing new RTEP, FERC 1000, and 345 kV projects Financial position remains strong: Positive cash from Power and increasing cash flow from operations at PSE&G supports dividend growth and funds capital spending program without the need to issue equity Debt as a percentage of capitalization was 42% at December 31, 2013 Increased common dividend 2.8% to indicative annual rate of $1.48 per share Increasing regulated earnings mix supports growing dividend |
33 PSEG 2014 Operating Earnings Guidance - By Subsidiary $ millions (except EPS) 2014E 2013 2012 PSE&G $705 – $ 745 $612 $528 PSEG Power $550 – $610 $710 $663 PSEG Enterprise/Other $35 – $40 $(13) $45 Operating Earnings* $1,290 – $1,395 $1,309 $1,236 Earnings per Share $2.55 – $2.75 $2.58 $2.44 * See Slide 35 for Items excluded from Net Income to reconcile to Operating Earnings. E = Estimate. |
Expiration Total Available Company Facility Date Facility Usage Liquidity ($Millions) PSE&G 5-year Credit Facility Mar-18 $600 1 $73 $527 5-Year Credit Facility (Power) Mar-17 $1,600 $70 $1,530 5-Year Credit Facility (Power) Mar-18 $1,000 2 $0 $1,000 5-Year Bilateral (Power) Sep-15 $100 $100 $0 5-year Credit Facility (PSEG) Mar-17 $500 $8 $492 5-year Credit Facility (PSEG) Mar-18 $500 3 $0 $500 Total $4,300 $4,049 1 PSE&G Facility to be reduced by $29M on April 15, 2016 $439 2 Power Facility to be reduced by $48M on April 15, 2016 *PSE&G ST Investment $0 3 PSEG Facility to be reduced by $23M on April 15, 2016 $4,488 Total Parent / Power Liquidity $3,961 PSEG / Power *PSEG Money Pool ST Investment PSEG Liquidity as of December 31, 2013 34 Total Liquidity Available |
35 Items Excluded from Net income to Reconcile to Operating Earnings Please see Slide 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. 2013 2012 2013 2012 Earnings Impact ($ Millions) Operating Earnings 248 $ 207 $ 1,309 $ 1,236 $ Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 11 3 40 52 (52) 23 (74) (10) Lease Related Activity (PSEG Energy Holdings) - 30 - 36 Storm O&M, net of insurance recoveries (PSEG Power) (7) (39) (32) (39) Net Income 200 $ 224 $ 1,243 $ 1,275 $ Fully Diluted Average Shares Outstanding (in Millions) 508 507 508 507 Per Share Impact (Diluted) Operating Earnings 0.49 $ 0.41 $ 2.58 $ 2.44 $ Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.02 - 0.08 0.10 (0.11) 0.05 (0.14) (0.02) Lease Related Activity (PSEG Energy Holdings) - 0.06 - 0.07 Storm O&M, net of insurance recoveries (PSEG Power) (0.01) (0.08) (0.07) (0.08) Net Income 0.39 $ 0.44 $ 2.45 $ 2.51 $ (a) Includes the financial impact from positions with forward delivery months. December 31, December 31, Reconciling Items, net of tax PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED (Unaudited) Three Months Ended Year Ended Gain (Loss) on Mark-to-Market (MTM) Gain (Loss) on MTM (a) (a) (PSEG Power) (PSEG Power) |