EXHIBIT 99 We have the energy to make things better … for you, for our investors and for our stakeholders. |
Forward-Looking Statement 2 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: • any deterioration in our credit quality or the credit quality of our counterparties, including in our leveraged leases, • 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 that 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 greater reliance on these technologies and changes in customer behaviors, including energy efficiency, net metering and demand response. 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, |
3 GAAP Disclaimer PSEG presents Operating Earnings in addition to its Income from Continuing Operations/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 Income from Continuing Operations/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 A at the end of this presentation includes a list of items excluded from Income from Continuing Operations/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. |
4 2014 PSEG Conference Agenda Presentation Presenter Welcome and Introductions Kathleen Lally PSEG Ralph Izzo PSE&G Ralph LaRossa PSE&G Transmission Kim Hanemann PSEG Long Island Ralph LaRossa Q&A Session Break PSEG Power William Levis Power ER&T Shahid Malik Q&A Session Financial Review & Outlook Caroline Dorsa Summary and Q&A Conference Conclusion |
PSEG INTRODUCTION & OVERVIEW Ralph Izzo C H A I R M A N , P R E S I D E N T A N D C H I E F E X E C U T I V E O F F I C E R |
PSEG’s Strategy – delivering results Our businesses’ focus on cost- effective, reliable operations yields strong cash flow We are funding growth-oriented investments aligned with customer needs and state energy policies We are enhancing the competitiveness of our environmentally well-positioned generation business The results of our financial strategy support a credit profile capable of meeting our corporate objectives and providing sustained dividend growth for our shareholders 6 ENGAGED WORKFORCE DISCIPLINED INVESTMENT FINANCIAL STRENGTH OPERATIONAL EXCELLENCE |
Two complementary businesses Strong asset platform, performing well and positioned for the future 7 Electric & Gas Delivery and Transmission needs as we respond to state and federal energy policy and economic growth objectives program - focused on transmission – that produces double-digit rate base growth through 2016 2013 Assets $20B Operating Earnings $612M Regional Competitive Generation Strategy: Fuel diverse fleet is geographically and environmentally well positioned, with investments to enhance competitiveness free cash flow in current environment and poised for price recovery 2013 Assets $12B Operating Earnings $710M A S S E T S A N D O P E R A T I N G E A R N I N G S A R E F O R T H E Y E A R E N D E D 1 2 / 3 1 / 2 0 1 3 . P S E & G A N D P O W E R D O N O T A D D T O T O T A L D U E T O P A R E N T . P S E G L O N G I S L A N D A N D E N E R G Y H O L D I N G S A C T I V I T Y . S E E S L I D E A F O R I T E M S E X C L U D E D F R O M I N C O M E F R O M C O N T I N U I N G O P E R A T I O N S / N E T I N C O M E T O R E C O N C I L E T O O P E R A T I N G E A R N I N G S . Strategy: Positioned to meet customers’ Value Proposition: A $10 billion infrastructure Value Proposition: Provides substantial |
8 Delivering on commitments and pursuing opportunities for growth Operational Excellence • Power: Record 2013 output at Linden CCGT and Salem 2; nuclear capacity factor greater than 90% for 9 straight year • PSE&G: Mid-Atlantic Reliability Award (12 consecutive year) • PSEG Long Island: Went “live” on January 1, 2014 • PSEG: Cost-control benefits continue Financial Strength • Strong cash flows supported credit rating increases • Pension more than fully funded • Dividend increased Disciplined Investment • PSE&G Transmission capital program execution and growth Energy Strong program under discussion Solar 4 All Extension and Solar Loan III programs • Power: Investments to enhance the fleet’s competitiveness – 130 MW Nuclear uprate, 150 MW CCGT uprate and efficiency improvement th th |
9 Operating Earnings Guidance Building on the successful implementation of our strategy S E E S L I D E A F O R I T E M S E X C L U D E D F R O M I N C O M E F R O M C O N T I N U I N G O P E R A T I O N S / N E T I N C O M E T O R E C O N C I L E T O O P E R A T I N G E A R N I N G S . E = E S T I M A T E . $2.44 $2.58 $2.55 - $2.75E 2012 2013 2014 Guidance |
10 Operating Earnings Mix Long term investment program has driven increased earnings contribution from stable, regulated business * S E E S L I D E A F O R I T E M S E X C L U D E D F R O M I N C O M E F R O M C O N T I N U I N G O P E R A T I O N S / N E T I N C O M E T O R E C O N C I L E T O O P E R A T I N G E A R N I N G S ; D I S C O N T I N U E D O P E R A T I O N S R E F L E C T T E X A S . E = E S T I M A T E * * 2 0 1 4 P E R C E N T S U S E M I D P O I N T O F E A R N I N G S G U I D A N C E . Power’s diverse fuel mix and dispatch flexibility continues to generate earnings and free cash flow PSE&G’s investment in transmission has diversified its asset base and, coupled with other investments and cost controls, supported compound annual earnings growth of ~18% over 2009 – 2013 Operating Earnings* Contribution by Subsidiary (%) PSE&G Power Other $2.44 $2.58 $2.55 - $2.75E $3.12 $2.74 $3.09 20% 27% 38% 43% 47% 54% 76% 69% 62% 54% 54% 43% 2009 2010 2011 2012 2013 2014E** |
11 Maintaining a robust capital program focused on growth PSEG 2014 - 2018E Capital Spending $11.8 Billion PSEG 2009 - 2013 Capital Spending $11.3 Billion N O T E : P O W E R 2 0 0 9 – 2 0 1 3 A C T U A L S A R E R E S T A T E D T O I N C L U D E S O L A R C A P I T A L S P E N D . P O W E R C A P I T A L S P E N D I N G E X C L U D E S N U C L E A R F U E L . E = E S T I M A T E . Power $1.6B PSE&G $10B Power $2.8B PSE&G $8.4B $3.3 $1.0 $4.1 $0.8 $1.2 $0.8 $0.1 $2.9 $0.3 $6.8 $1.0 $0.4 $0.2 $0.2 |
PSEG’s business profile has been transformed through significant growth in utility capital spending 3 YR AVG 3 YR AVG ENDED AVERAGE PSE&G CAPITAL SPENDING FOR THE 3-YEAR PERIOD ENDING IN BASE YEAR. PSE&G TOTAL CAPITAL SPENDING IN BASE YEAR. 3 YR AVG 3 YR AVG 3 YR AVG 3 YR AVG 3 YR AVG 3 YR AVG 12 $620 $729 $958 $1,138 $1,443 $1,749 $761 $855 $1,257 $1,302 $1,770 $2,175 $0 $500 $1,000 $1,500 $2,000 $2,500 2008 2009 2010 2011 2012 2013 3 YEAR AVERAGE PSE&G CAPITAL SPENDING GREW AT A RATE OF 23% PER YEAR FROM 2008 - 2013 |
13 recognizes need to Energy Strong is: A $2.6 Billion investment program over 5 years as the first phase of a 10-year, $3.9 Billion infrastructure program Proposal is based on contemporaneous recovery of investment, subject to NJ Board of Public Utilities (BPU) review Energy Strong proposal would harden 29 electric substations, modernize the gas distribution system, make the grid smarter, and improve the system’s ability to communicate with customers Over 100 New Jersey municipalities support Energy Strong Proposed Energy Strong program would create approximately 5,800 jobs and stimulate NJ’s economy Energy Strong Proposal strengthen and harden the distribution system |
14 PSEG Power – Value-advantaged through asset diversity, fuel flexibility, location and installed environmental controls Load Following Peaking Base load 1% 44% 27% 9% 1% 18% <1% 30% 55% 2% <1% 13% 43% 23% 34% Gas Pumped Storage Nuclear Oil Coal* Solar 2 0 1 3 P E R I O D * I N C L U D E S N E W J E R S E Y C O A L U N I T S T H A T F U E L S W I T C H T O G A S . Fuel Diversity Total MW: 13,450 Energy Produced Total GWh: 54,264 Energy Market Served Total MW: 13,450 |
PSEG Power – Our diverse fleet and flexible portfolio allow us to capture opportunities arising from market volatility *AT THE BEGINNING OF EACH YEAR. **EXCLUDES BGSS. 15 $40 $45 $50 $55 2011 2012 2013 PSEG Power Gross Margin** Hedges + Forwards* Actual |
Balance Sheet Strength 16 2009 – 2013: Reduced risk profile and transformed business mix • Invested $8.4 billion in PSE&G • Improved credit ratings • Monetized and de-risked Holdings’ portfolio 2014 – Forward: Strong cash flows and increasingly regulated business mix fully support: • PSE&G’s $10B approved investment program through 2018 • Consistent and sustainable dividend growth • Additional investment capacity to deploy in opportunities beyond those in the current capital plan • No need to issue equity |
17 Where we’re going … actions taken to focus on more predictable growth S E E S L I D E A F O R I T E M S E X C L U D E D F R O M I N C O M E F R O M C O N T I N U I N G O P E R A T I O N S / N E T I N C O M E T O R E C O N C I L E T O O P E R A T I N G E A R N I N G S . E = E S T I M A T E . PSEG Focus Opportunity for consistent, sustainable growth Operating Earnings Per Share • O&M Growth per year • PSE&G Rate Base • Transmission • E&G Distribution • EE and Solar • Nuclear Generation • CC Equivalent Availability • PSEG LI Earnings •(0.7%) (forecast³) •$13,700 •$6,500 •$6,600 4 •$600 4 •31.4TWh •91% •$0.07 5 2016E ($ Millions except as noted) • 1.5% (actual²) • $10,400 • $3,800 • $6,000 • $600 • 29.5TWh • 89% • $0 2013 • 2.4% (planned¹) • $6,800 • $866 • $5,900 • $0 • 29.3TWh • 90% • $0 2008 $1.29 $1.44 Common Dividend Per Share $70 $38 $38 6 PJM West RTC ($/MWh) $2.58 $2.91 ( 1 ) P l a n n e d c o m p o u n d a n n u a l g r o w t h r a t e 2 0 0 8 – 2 0 1 3 . ( 2 ) A c t u a l c o m p o u n d a n n u a l g r o w t h r a t e 2 0 0 8 – 2 0 1 3 . ( 3 ) P l a n n e d c o m p o u n d a n n u a l g r o w t h r a t e 2 0 1 3 – 2 0 1 6 . ( 4 ) I n c l u d e s a p p r o v e d s o l a r p r o g r a m s . ( 5 ) I n c l u d e s m a n a g e m e n t f e e f o r T & D o p e r a t I o n s u n d e r e x p a n d e d O S A a n d f u e l a n d e n e r g y p r o c u r e m e n t c o n t r a c t .. ( 6 ) F o r w a r d m a r k e t a s o f 2 / 2 6 / 2 0 1 4 . |
18 PSEG Annual Dividend – A long history of growth and returning cash to shareholders with a financial position that provides opportunity for consistent and sustained growth Payout Ratio 70% 63% 66% 43% 44% 43% 44% 50% 58% 56% 56%** PSEG Annual Dividend Rate * I N D I C A T E D A N N U A L R A T E . * * 2 0 1 4 P A Y O U T R A T I O R E F L E C T S T H E M I D P O I N T O F O P E R A T I N G E A R N I N G S G U I D A N C E . E = E S T I M A T E 10-YEAR COMPOUND ANNUAL RATE OF GROWTH 3.0% $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 2014E |
19 Value Proposition PSEG is positioned to expand its investment in PSE&G projects that provide reasonable, risk-adjusted returns, in ways that meet customer needs and state goals, given strong cash flow of Power and growing cash contribution from PSE&G. PSEG will maintain a strong financial profile that provides the opportunity to achieve our growth objectives and maintains our track record of returning cash to shareholders. |
We have the energy to make things better … for you, for our investors and for our stakeholders. |
PSE&G P R E S I D E N T A N D C H I E F O P E R A T I N G O F F I C E R P U B L I C S E R V I C E E L E C T R I C & G A S Ralph LaRossa |
22 Agenda • Company Overview • Financial Performance • Capital Investment • Energy Strong • In-depth Transmission Review |
23 PSE&G strategy Building a sustainable platform that balances reliability, customer rates and public policy to ensure growth at reasonable returns DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH ENGAGED WORKFORCE |
PSE&G is the largest electric and gas distribution and transmission utility company in New Jersey * W E A T H E R N O R M A L I Z E D - E S T I M A T E D A N N U A L G R O W T H P E R Y E A R O V E R F O R E C A S T P E R I O D . ** S P E C I F I C P R O J E C T S A P P R O V E D F O R I N C E N T I V E R A T E T R E A T M E N T W I T H A D D I T I O N A L R O E . Electric Gas Customers Growth (2009 – 2013) 2.2 Million 0.6% 1.8 Million 0.6% Electric Sales and Gas Sold and Transported 41,286 GWh 3,813M Therms Projected Annual Load Growth (2014 – 2016) 0.6%* 0.5%* Projected Annual Load Growth Transmission (2014 – 2016) 1.1% Sales Mix Residential 33% 60% Commercial 57% 36% Industrial 10% 4% Transmission Electric Gas Approved Rate of Return 11.68% ROE** 10.3% ROE 10.3% ROE Renewables and Energy Efficiency Approved Programs 2009-2013 Total Program Plan Solar Loan Capacity 79 MW 178.5 MW Solar 4 All Capacity 79 MW 125 MW Energy Efficiency Annual Electric savings 182 GWh 204 GWh Energy Efficiency Annual Gas savings 5M Therms 6M Therms 24 |
25 12 time Mid-Atlantic ReliabilityOne award winner and Outstanding Response to a Major Event |
26 PSE&G’s operating earnings grew ~18% over the 5-year period with increased investment, cost control and supportive rate mechanisms * S E E S L I D E A F O R I T E M S E X C L U D E D F R O M I N C O M E F R O M C O N T I N U I N G O P E R A T I O N S / N E T I N C O M E T O R E C O N C I L E T O O P E R A T I N G E A R N I N G S . PSE&G Operating Earnings* Per Share $0.63 $0.85 $1.03 $1.04 $1.21 2009 2010 2011 2012 2013 |
Focus on controlling O&M and lower pension costs support decline in expenses PSE&G O&M* 2009–2014 CAGR: (1.0%) * EXCLUDES REGULATORY CLAUSES ** INCLUDES $40M IMPACT FROM SUPERSTORM SANDY. E = ESTIMATE 27 0 200 400 600 800 1,000 1,200 2009 2010 2011 2012 ** 2013 2014E |
28 Growth in rate base is driven by investments with constructive recovery mechanisms PSE&G’s rate base has grown ~9% annualized with investment focused on meeting customers’ requirements PSE&G Rate Base 84% 58% 15% 36% 2009 2013 Solar & Energy Efficiency Transmission Distribution $10.4B $7.3B 1% 6% |
29 Successfully worked with regulators to develop multiple solutions for New Jersey’s energy and economic development goals Invested ~$2.0B through 2013; plan to invest additional ~$0.3B through 2018 in approved programs NOTE: SPENDING THROUGH 2013 UNLESS INDICATED OTHERWISE • Solar Loan I – 2008 • Solar Loan II – 2009 • Solar 4 All – 2009 • Solar Loan III – 2013 • Solar 4 All Ext – 2013 RENEWABLES – creative solutions to install solar generation: $0.7B • Carbon Abatement – 2008 • Energy Efficiency – 2009 • Demand Response – 2009 • Energy Efficiency Ext – 2011 ENERGY EFFICIENCY – assisting customers with controlling energy usage: $0.3B • NJ Capital Infrastructure Program 1 (CIP 1) – 2009 • NJ Capital Infrastructure Program 2 (CIP 2) – 2011 • Energy Strong – Pending DISTRIBUTION – improving the electric and gas delivery infrastructure: $1.0B |
A 40% increase to $10 billion, in our 5-year investment program, with further opportunity from Energy Strong PSE&G’s Capital Expenditures 2013-2017E $7.0 Billion 2014-2018E $10.0 Billion E = E S T I M A T E 30 33% 2% 65% 29% 3% 68% Distribution Solar/Energy Efficiency Transmission |
31 PSE&G’s capital program has been expanded and continues to focus on delivering energy solutions PSE&G’s Capital Expenditures E = ESTIMATE 0 500 1,000 1,500 2,000 2,500 3,000 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E Distribution Transmission Solar/Energy Efficiency Previous Forecast for 2013-2017 Approved Programs |
PSE&G’s capital program could expand further with the addition of Energy Strong PSE&G’s Capital Expenditures E = ESTIMATE 32 0 500 1,000 1,500 2,000 2,500 3,000 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E Distribution Transmission Solar/Energy Efficiency Energy Strong - as filed Previous Forecast for 2013-2017 Approved Programs |
33 Energy Strong filing for resiliency and hardening to support customers’ needs in the wake of Superstorm Sandy • Filed 5-year $2.6 billion capital program with NJ Board of Public Utilities (BPU) in February 2013 • Program addresses system resiliency and hardening by: • Protecting distribution substations from severe storms • Making the electric grid smarter and easier to repair • Adding backup distribution lines and system redundancies • Moving overhead distribution lines underground • Modernizing the gas distribution system • Currently in confidential negotiations with Staff of BPU and major intervenors; hearings conclude March 7, 2014 • Anticipate a final order following either settlement or litigated decision by the end of April 2014 |
Over 70% of PSE&G’s $10 billion investment program will be recovered through contemporaneous mechanisms Clause Recovery Mechanisms Solar/Energy Efficiency FERC Formula Rates Transmission Traditional Recovery Mechanisms Distribution Base Rates E = E S T I M A T E 34 3% 68% 29% 2014-2018E PSE&G Capital Spending by Recovery Method $10.0 Billion |
The Energy Strong impact to customer bills is expected to be fully offset PSE&G’s Typical Average Residential Bill Consumer Price Index 35 $0 $1,000 $2,000 $3,000 $4,000 2008 2014 2015 2016 2017 2018 2019 Customer Bill - Electric Customer Bill - Gas Transitional Energy Facility Assessment Securitization Non-Utility Generation Energy Strong Proposal O U T – Y E A R B G S / B G S S , S B C , A N D D I S T R I B U T I O N R A T E S H E L D C O N S T A N T A T C U R R E N T 2 0 1 4 R A T E S . R A T E S R E L A T E D T O E L E C T R I C R E S T R U C T U R I N G : S E C U R I T I Z A T I O N ( S T C ) , N O N – U T I L I T Y G E N E R A T I O N C H A R G E ( N G C ) , & T R A N S I T I O N A L E N E R G Y F A C I L I T I E S A S S E S S M E N T ( T E F A ) , A R E R E D U C E D T O Z E R O B Y 2 0 1 7 . T H E R G G I R E C O V E R Y C H A R G E ( R R C ) , S O L A R P I L O T R E C O V E R Y C H A R G E ( S P R C ) , A N D C A P I T A L E C O N O M I C S T I M U L U S I N F R A S T R U C T U R E I N V E S T M E N T P R O G R A M E X T E N S I O N ( C I P I I ) B I L L I M P A C T S A R E I N C L U D E D I N T H E I R R E S P E C T I V E G A S A N D E L E C T R I C B A R S A N D F O R E C A S T E D I N O U T – Y E A R S B A S E D U P O N L A T E S T E S T I M A T E . E N E R G Y S T R O N G B I L L I M P A C T S A R E B A S E D U P O N C U R R E N T F O R E C A S T . |
IN-DEPTH TRANSMISSION REVIEW V I C E - P R E S I D E N T D E L I V E R Y P R O J E C T S A N D C O N S T R U C T I O N Kim Hanemann |
Transmission has delivered, and has grown to represent ~36% of rate base PSE&G’s Transmission Capital Expenditures 37 - 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2009 2010 2011 2012 2013 Burlington-Camden Mickelton-Gloucester-Camden North Central Reliability Northeast Grid Susquehanna-Roseland Remaining Transmission Transmission represented ~36% of rate base at YE 2013 up from ~15% at YE 2009 |
PSE&G’s existing major transmission investment program remains on schedule and on budget Major Transmission Projects Approved ROE Inclusion of CWIP in Rate Base 100% Recovery of Costs Due to Abandonment Project Estimate Up To ($ Millions) Expected In-service Date Susquehanna-Roseland 12.93% $790 June 2014 / June 2015 Northeast Grid Reliability 11.93% $907 June 2015 North Central Reliability 11.68% $390 June 2014 Burlington–Camden 230kV 11.68% $399 June 2014 Mickleton–Gloucester–Camden 230kV 11.68% $435 June 2015 38 |
Susquehanna-Roseland consists of constructing 150 miles of 500kV circuit (46 miles in NJ) with two new 500kV GIS switching stations at Roseland and Hopatcong * P R O J E C T I S S H A R E D W I T H P P L . P R O J E C T E S T I M A T E R E P R E S E N T S P S E & G ’S C O N S T R U C T I O N R E S P O N S I B I L I T Y F O R T H E N J P O R T I O N . 39 Project Estimate Up To* Through Year-end 2013 Expected In-service Date $790M $661M June 2014 / June 2015 • PJM RTEP project b0489 • ROE of 12.93% (including 1.25% incentive) • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Customer Benefit: Improves reliability and reduces congestion Project Status: Major permitting & siting complete, outside plant construction in progress, inside plant construction is complete and commissioning is in progress |
Northeast Grid Reliability consists of upgrading approximately 50 overhead circuit miles of 138kV transmission line to 230kV, constructing ~18 miles of new underground 230kV lines, and converting/upgrading 12 existing stations to 230kV operation 40 Project Estimate Up To Through Year-end 2013 Expected In-service Date $907M $228M June 2015 • PJM RTEP project b1304 • ROE of 11.93% (including 0.25% incentive) • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment • Project estimate has increased ~$12M associated with hardening related scope changes as a result of Superstorm Sandy Customer Benefit: Improves reliability and increases transfer capability Project Status: Nearing completion of engineering/design and licensing/permitting phase. Outside and inside plant construction are in progress |
North Central Reliability consists of upgrading 55 circuit miles of 138kV transmission line to 230kV, and converting six existing stations to 230kV operation Project Estimate Up To Through Year-end 2013 Expected In-service Date $390M $349M June 2014 • PJM RTEP project b1154 • ROE of 11.68% • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Customer Benefit: Improves power quality and increases transfer capability Project Status: Major permitting & siting complete, outside and inside plant construction is essentially complete, commissioning is in progress 41 |
Burlington-Camden 230kV consists of upgrading 37 circuit miles (30 miles of overhead and 7 miles of underground) of 138kV transmission line to 230kV, converting the existing stations to 230kV operation Project Estimate Up To Through Year-end 2013 Expected In-service Date $399M $301M June 2014 42 • PJM RTEP project b1156 • ROE of 11.68% • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Customer Benefit: Addresses voltage reliability and increases transfer capability Project Status: Major permitting & siting complete, outside plant construction is complete, and inside plant construction and commissioning is in progress |
Mickleton-Gloucester-Camden 230kV consists of upgrading 10 circuit miles of overhead transmission, installing ~16 circuit miles of new 230kV underground, 10 circuit miles of new 230kV overhead, and modifications/upgrades at five existing stations Project Estimate Up To Through Year-end 2013 Expected In-service Date $435M $122M June 2015 43 • PJM RTEP project b1398 • ROE of 11.68% • 100% CWIP in rate base during development • 100% recovery of prudently incurred costs due to abandonment Customer Benefit: Addresses thermal reliability and increases transfer capability Project Status: Major permitting & siting complete, outside and inside plant construction in progress |
Bergen-Linden Corridor is a recently approved project which will provide a double-circuit 345kV line to maintain reliability Project Estimate Up To Through Year-end 2013 Expected Completion Date $1,200M - June 2018 44 • PJM RTEP project b2436 • 30 miles of underground cable • New ~ 23 miles • Reconductor (Upgrade of 138 to 345) ~7 miles • 13 miles of double circuit overhead conductor (replacing double circuit 138 with double circuit 345) • 11 station upgrades to 345kV Customer Benefit: Addresses thermal and short-circuit reliability Project Status: Engineering |
Planned transmission spend of $6.8 billion is driven by PJM reliability projects, 69kV conversions and life-cycle replacement projects PSE&G’s Transmission Capital Expenditures E= ESTIMATE 45 |
PSE&G’s processes and culture are the foundation for project execution success Diverse, well-rounded team Culture with a focus for on-time, on-scope and on-budget execution Successful recruitment, development and retention strategies Strong unions and supplier relationships Cradle to grave project execution organization Processes designed to be scalable, repeatable and improvable Emphasis on best practices and lessons learned sharing Improvements driven by performance metric management Collaborative relationship with regulatory agencies Innovative design and construction practices to minimize environmental impacts Robust environmental compliance system 46 People Process Environment |
PSE&G’s demonstrated ability to successfully execute large projects leaves us well positioned to pursue new opportunities Future RTEP as identified by PJM Near-term participation in RTO competitive open planning windows PJM MISO NYISO Anticipate participating in future competitive solicitations under FERC 1000 47 |
PSE&G’s 2014 operating earnings to benefit from increased investment in transmission and on-going cost control E=ESTIMATE 48 *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
PSEG LONG ISLAND CHAIRMAN OF THE BOARD PSEG LONG ISLAND Ralph LaRossa |
PSEG was selected to operate Long Island Power Authority’s (LIPA) electric transmission and distribution system for 12 years starting in 2014 Pursuant to the Operating Services Agreement (OSA), all expenses and capital costs to operate the system are pre-funded by LIPA and passed through to their customers Compensation consists of a fixed fee and an incentive fee Fixed compensation fee for 2014 with scheduled increases in 2015 and 2016 Starting in 2015 PSEG Energy Resources and Trading (ER&T) begins managing fuel/energy contracts PSEG Long Island expected to contribute $0.03 to operating earnings in 2014 increasing to $0.07 per share in 2016 including contribution at ER&T Potential for an 8-year extension of the OSA 50 |
PSEG Long Island commenced operations on January 1, 2014 51 Key elements of Operating Services Agreement Increased PSEG scope and control Performance metrics NY Department of Public Service oversight Potential for “Utility 2.0” investment Use of PSEG brand as PSEG Long Island 3-Year rate freeze (2013-2015) Early performance Successful transition to PSEG Long Island Stakeholder communication Winter storm response |
We have the energy to make things better … for you, for our investors and for our stakeholders. |
PSEG POWER PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER William Levis |
PSEG Power strategy Excellence in operating our units safely, reliably, cost- competitively and in an environmentally, responsible manner DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH ENGAGED WORKFORCE 54 |
Agenda • Delivering Value • Fleet Advantage, Location, Flexibility and Fuel Diversity • Nuclear Operation • Fossil Operation • Financial Performance • Expansion Opportunities • Regulatory • Engaged Workforce 55 |
PSEG Power creating value by responding to changing markets and regulations Safety/Environmental Focus Fleet Diversity/Efficiency Focus Financial/Economic Focus Regulatory Focus • Nuclear units continue to achieve strong operational results, operating at over 90% capacity factors for the 9 th consecutive year • Fleet diversity across the dispatch curve and fuel types provide flexibility to meet changing conditions • Linden CCGT and Salem 2 nuclear unit achieved record output in 2013 • “Getting the most out of existing fleet” • Locational advantage • O&M control programs have delivered a CAGR of 1.6% between 2009 and 2014 • Sites offer competitive advantage for expansion • Strong regulatory performance • Industry leadership in the changing business environment 56 |
• Maximize value of existing generating plants through implementation of the Operational Excellence Model (OEM) • Workforce engagement and development • Deliver on Business Plan Commitments • Maintain competitive markets and improve constituent communication on issues important to Power • Successfully complete the Advanced Gas Path (AGP) uprates • Seek new opportunities in target markets (PJM, ISO-NE, NYISO) • Develop our renewables business (solar) • Maintain new nuclear option by successfully managing the Early Site Permit (ESP) process • OEM implemented and achieving measures • Resource sharing program initiated • Exceeded earnings guidance in 2013 • Ongoing effort in key markets showing success • Successful court outcome against subsidized generation • Accelerated schedule for AGP to maximize opportunity • LIPA contract for fuel and generation dispatch • Completed 19 MW solar project, 4 MW project under construction, established robust pipeline • Nuclear ESP is expected in 2015 57 Financial Strength Disciplined Investment Operational Excellence PSEG Power Delivering on priorities |
PSEG Power met 2013 challenges Storm and weather challenges • SuperStorm Sandy impacted our generating sites • Cold and hot weather extremes created challenging operating environment, but also presented opportunities Market challenges • Unit outages and planned transmission outages resulted in pressure on basis • Lower gas cost impacted dark spread pressuring coal unit dispatch • Load impacted by economy Value delivered • Optimized unit dispatch across fleet during storm recovery • Expedited return from storm outages, restored margin opportunities • High availability when needed • Achieved fuel cost savings • Captured value through coal/gas switching, unit flexibility • Coal & oil sales optimized inventory • Flexibility of portfolio captured real- time basis opportunities 58 |
PSEG Power exceeded 2013’s earnings guidance $630-$685M $710M $535M-$600M Winter/ Summer Volatility Lower Gas Cost Basis Volatility Spark/ Dark Spread Fuel Flexibility SOLAR/ KALAELOA $15M* GUIDANCE RANGE Over $100M of additional value gained from fleet flexibility, locational advantage and market volatility Initial Guidance Actual Revised Guidance OPERATING EARNINGS FOR PSEG POWER IN 2013; SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. *ASSETS TRANSFERRED TO POWER AT YEAR-END 2013. 59 |
PSEG Power has generating assets in three competitive markets • Assets near loads • Low cost portfolio • Fuel flexibility with gas cost advantage • Poised to benefit from volatility in real-time markets • Fleet will maintain diversity and efficiency after HEDD • Most sites suitable for expansion ISO New England New Haven Bridgeport Bethlehem Energy Center (Albany) Conemaugh Keystone Peach Bottom Bergen Kearny Essex Sewaren Edison Linden Mercer Burlington National Park Hudson Hope Creek Salem Yards Creek New York ISO PJM 60 |
PSEG Power will maintain diversity and efficiency after a realignment of the fleet due to HEDD • Maintain fuel diversity • Maintain load-serving capability • Maintain low cost structure • Environmental improvement • Peach Bottom (PB) uprate • Advanced Gas Path (AGP) • Kalaeloa and Solar transfer adds ~200MW of capacity Objective 2013 2017 13,450 MW 11,900 MW Fuel Diversity 55 - 56 TWh 54 TWh 61 2013 2017 2013 2017 Solar Kalaeloa Oil Pumped Storage HEDD Other gas Peakers AGP/PB EPU CCGT Coal Nuclear CCGT Coal Nuclear AGP/PB EPU Peakers Oil, Other gas, HEDD, Pumped storage, Kalaeloa, Solar Energy Produced |
Power’s PJM assets along the dispatch curve reduce the risk of serving full requirement load contracts and can take advantage of volatile market conditions Energy Revenue X X X Capacity Revenue X X X Ancillary Revenue X X Dual Fuel X X Illustrative Salem Hope Creek Keystone Conemaugh Hudson 2 Linden 1,2 Bergen 1 Mercer 1, 2 Bergen 2 Peach Bottom Burlington 8-9-11 Edison 1-2-3 Essex 10-11-12 Sewaren 6 Linden 5-8 / Essex 9 National Park Salem 3 Bergen 3 Mercer 3 Sewaren 1-4 Burlington 12 Yards Creek Base Load Units Peaking Units Load Following Units Kearny 9-12-13-14 Nuclear Coal Coal/Gas Combined Cycle Steam Combustion Turbine / Pumped Storage • Base Load ensures cash flow certainty • Load Following provides ability to serve load shape • Peaking takes advantage of real-time prices and reduces operational risk • Dual fuel flexibility for >60% of fleet 62 |
PSEG Power Nuclear is a critical element of our success Hope Creek • Operated by PSEG Nuclear • PSEG Ownership: 100% • Technology: Boiling Water Reactor • Total Capacity: 1,178 MW • Owned Capacity: 1,178 MW • License Expiration: 2046 • Next Refueling • Spring 2015 Salem Units 1 and 2 • Operated by PSEG Nuclear • PSEG Ownership: 57% • Technology: Pressurized Water Reactor • Total Capacity: 2,365 MW • Owned Capacity: 1,358 MW • License Expiration: 2036 and 2040 • Next Refueling • Unit 1 -- Fall 2014 • Unit 2 – Spring 2014 Peach Bottom Units 2 and 3 • Operated by Exelon • PSEG Ownership: 50% • Technology: Boiling Water Reactor • Total Capacity: 2,251 MW • Owned Capacity: 1,125 MW • License Expiration: 2033 and 2034 • Next Refueling • Uprate: 130 MW in 2015/2016 63 • Unit 2 – Fall 2014 • Unit 3 – Fall 2015 |
PSEG Power Nuclear is core to the fleet and has competitive advantages *STRATEGY KNOWN AS THE “DIVERSE AND FLEXIBLE MITIGATION CAPABILITY” OR FLEX, ADDRESSES RECOMMENDATIONS OF THE NUCLEAR REGULATORY COMMISSION’S FUKUSHIMA TASK FORCE. 64 • Continued strong nuclear operations: nine consecutive years of >90% capacity factor • Significant earnings contributor • Top quartile of cost performance/MWh • One third new staff, recruitment of the best new and experienced talent, and attractive training program • Fukushima action plan in response to NRC staff review FLEX* plan submitted with implementation starting with Fall outage • Peach Bottom extended power uprate, 130 MW Power’s share, scheduled in service 2015/2016 • Active and influential participation at INPO, NEI, EPRI, USA Alliance |
Power’s nuclear fleet is well positioned with significantly lower-than-average US cost structure *SOURCE: ELECTRIC UTILITY COST GROUP ** SOURCE: PSEG NUCLEAR Total Fuel, Capital and O&M Costs* 3 YEAR AVERAGE 2010 - 2012 65 0 25 50 All US* PSEG Nuclear** |
PSEG Power’s Fossil Fleet Performance has shown improvement *LM6000 AND 7EA UNITS Capacity Factor NJ Coal EFORp Peaking Start Success* NJ Combined Cycle EFORp • Fossil Capacity Factor rebounded with market • Peaking Units maintain high start success • Coal EFORp improving • CC EFORp less than 1% in 2013 • Consistent recipient of EFORp payments 66 |
PSEG Power improvements achieved in combined cycle fleet efficiency Actions Taken to Create Value • Operational Excellence Model • Training programs • Unit testing initiative • Outage work to restore efficiency • Second gas line at BEC • Heat rate improvement 2008-2013 translates to meaningful fuel savings at current market prices • Advanced Gas Path (AGP) investments 2014 through 2018 to provide additional fuel savings AGP projected efficiency improvement 2014-2018 2018 67 7,300 7,400 7,500 7,600 7,700 7,800 2008 2009 2010 2011 2012 2013 Combined Cycle Operating Heat Rate |
Investing to expand CCGT capacity and improve efficiency o Expand Power’s CCGT fleet, one of the largest gas-fired portfolios in PJM, with incremental base and peaking MWs o Retrofit Bergen, Linden and BEC with Advanced Gas Path (AGP) components at cost of ~$120M over 2014 - 2018 AGP Project Benefits PSEG Power - CCGT Uprate Project CCGT capacity uprates of ~150 MW: - Bergen (31MW – 2015) - BEC (58 MW – 2017-18) Increases Efficiency - Combined Cycle (CC) heat rate improvement ~ 1.2% Upgrades technology and extends maintenance outage cycles 68 - Linden (63 MW – 2014) |
PSEG Power’s fleet is among the lowest emitting in the industry • Mercury reduced 80% across the timeframe above • More efficient testing and improved operational flexibility through utilization of Continuous Emission Monitoring System testing • Cost control through testing coordination program 69 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2006 2007 2008 2009 2010 2011 2012 2013 Generation SO2 NOx |
PSEG Power’s capital expenditures for environmental requirements are essentially complete* COMPLETION OF CONEMAUGH SCR/FGD MODS IN 2015 70 $0 $100 $200 $300 $400 $500 $600 $700 2009 2010 2011 2012 2013 2014E 2015E 2016E Growth Environmental / Regulatory Maintenance *BASED ON CURRENTLY KNOWN AND QUANTIFIABLE ENVIRONMENTAL REQUIREMENTS. E=ESTIMATE |
71 $0 $500 $1,000 $1,500 2009 2010 2011 2012 2013 2014E 2009 to 2014 CAGR = 1.6% Power O&M Expense* *EXCLUDES IMPACTS FROM STORM RECOVERY COSTS E=ESTIMATE PSEG Power’s focus on costs has resulted in moderate increase in O&M for six years Cost control actions taken: • Fossil plant assessment • CCGT material condition assessment • Contract renegotiations • Nuclear maintenance productivity study • Nuclear outage efficiency initiative • Materials management |
72 PSEG Power is well-positioned for growth when market conditions warrant Available locations Our sites possess infrastructure advantages • Bergen • Burlington • Essex • Edison • Kearny • Hudson • Linden • Sewaren • Bridgeport Harbor • Electric Transmission Interconnections • Access to Gas Pipelines • Space • Emissions |
73 Shasta California (4 MW) Expected COD March 2014 Polycrystalline - single axis tracker Investment $13 million est. 20 year PPA with PG&E Hackettstown (Mars) New Jersey (2 MW) COD September 2009 Thin film panels – fixed tilt Investment $13 million 15 year PPA with Mars, Inc. Wyandot Ohio (12 MW) COD May 2010 Thin film panels – fixed tilt Investment $45 million 20 year PPA with AEP JEA Florida (15 MW) COD September 2010 Thin film panels – fixed tilt Investment $59 million 30 year PPA with JEA Queen Creek Arizona (25 MW) COD October 2012 Polycrystalline - single axis tracker Investment $79 million 20 year PPA with SRP Milford Delaware (15 MW) COD December 2012 Polycrystalline - fixed tilt Investment $49 million 20 year PPA with DEMEC Badger I Arizona (19 MW) COD November 2013 Polycrystalline - single axis tracker Investment $50 million 30 year PPA with APS • Continue to seek high quality projects with creditworthy off-takers. • Solar portfolio delivers strong EBITDA post- construction period. PSEG Solar Source owns 88 MW of operating solar facilities and has one project under construction |
74 PSEG Power is an established leader within the industry INPO • Board of Directors • National Nuclear Accrediting Board NEI • Chair Communications Advisory Committee • Board of Directors • Board of Directors Executive Committee • Chair Emergency Preparedness Working Group • Security Working Group • Fukushima Response Steering Committee • Nuclear Strategic Issues Advisory Committee Steering Group EPRI • Chairman Nuclear Power Council • Executive Committee Nuclear Power Council BWR Owners Group • Vice Chair of the Executive Oversight Committee USA Alliance • Chair EPSA • Executive committee member UWAG • Chair of the Cooling Systems Committee PJM/NY/ISO-NE • Chair of NEPOOL Participants Committee • Member of various Committees at PJM • Vice-Chair of the Supplier Sector of the NEPOOL • Chair of the NEPOOL Budget & Finance Subcommittee from 2008 through 2013 • Seat on the ISO-NE Board of Directors Joint Nominating Committee • Founding member of NEPGA (New England Power Generators Association) – trade association, position on Board of Directors |
75 Developing People to drive operational excellence and to optimize the workforce • Succession planning and development planning • Training & development of employees • Outreach programs • Employee engagement • Shared resources between Fossil and Nuclear (outage support) |
PSEG POWER ER&T Shahid Malik PRESIDENT, PSEG ENERGY RESOURCES & TRADE |
77 Portfolio Management Strategy Optimize value of assets Manage risk vs. reward Directly engage with regulatory agencies ENGAGED WORKFORCE DISCIPLINED INVESTMENT OPERATIONAL EXCELLENCE FINANCIAL STRENGTH |
78 Agenda Market Review PSEG’s Competitive Advantage PSEG’s Sustainable Advantage |
79 • Energy and gas prices appear to have stabilized • Environmental restrictions may tighten market • Insufficient gas infrastructure continues to place upward pressure on fuel prices during seasonal peaks NYMEX Natural Gas Price PJM West RTC PJM West Spark Spreads Market Review: Prices have stabilized F=FORWARDS AS OF 12/31/2013 |
80 Forecast Reserve Margin (PJM January 2014) • PJM forecasts a declining Reserve Margin through 2018, which may improve forward prices • Brattle estimates energy prices could rise at least $3-4/MWh from today’s prices *PJM AS OF FEBRUARY 20, 2014 SOURCE OF CHART DATA: PJM Cumulative Generation Retirements* Market Review: New generation in PJM not keeping pace with coal retirements |
81 ISSUE / POLICY REGULATORY GAINS PJM SUBSIDIZED GENERATION (NJ and MD) • Comprehensively defeated in federal court (appeals currently pending) DEMAND RESPONSE RULES • PJM and ISO-NE enacted stricter rules of eligibility and deployment ENERGY PRICE FORMATION • Concerted drive to improve price formation for generation and ancillary services • Waiver of price caps during extreme market conditions NYISO TRANSMISSION • Significant progress made to relieve bottling of upstate generation ISO-NE CAPACITY • Improvement in price formation to better reflect tight supply conditions • Implementation of sloping demand curve in Forward Capacity Auction (FCA) 9 ENERGY • Demand response required to participate in Day Ahead markets FEDERAL GAS to ELECTRIC • Better coordination between pipelines and ISO’s will promote efficiency ENVIRONMENTAL REGULATIONS • HEDD, HAPS/MACT may lead to tightening of supply in 2015+ timeframe Market Review: Regulatory framework showing signs of improvement |
82 Market Review PSEG’s Competitive Advantage PSEG’s Sustainable Advantage PSEG Power: Enjoys real and competitive advantages in the merchant generation space Fuel Flexibility Heat Rate Diversity Access to Marcellus Shale Gas Trading & Asset Flexibility Volatile Power Basis to PJM-West Location |
83 Competitive Advantage: Heat Rate Diversity & Flexible Dispatch Illustrative Salem Hope Creek Keystone Conemaugh Hudson 2 Linden 1,2 Bergen 1 Mercer 1, 2 Bergen 2 Peach Bottom Burlington 8-9-11 Edison 1-2-3 Essex 10-11-12 Sewaren 6 Linden 5-8 / Essex 9 National Park Salem 3 Bergen 3 Mercer 3 Sewaren 1-4 Burlington 12 Yards Creek Base Load Units Peaking Units Load Following Units Kearny 9-12-13-14 Nuclear Coal Coal/Gas Combined Cycle (gas/oil) Steam (gas/oil) Combustion Turbine / Pumped Storage (gas/oil) PJM Dispatch Curve |
84 Shale Supply 0.6 BCF/D Storage 0.9 BCF/D Competitive Advantage: PSEG’s extensive gas asset portfolio gives unparalleled access to Marcellus Shale gas Gulf Coast Supply 0.7 BCF/D |
85 Competitive Advantage: ~25% of Power’s gas for generation comes from Marcellus • Our combined cycle and peaking assets have been able to take advantage of locational gas price volatility driven by production and logistical constraints • Lower cost shale supply provides additional savings during periods of lower residential gas demand Spot Natural Gas Prices: Jun-Dec 2013 Market Prices for Natural Gas Access to Lower Cost Shale Gas in Marcellus and Utica |
86 Competitive Advantage: Locational advantage from short term basis volatility $45 - $47 $37 - $38 $56 - $58 $39 - $40 ANNUAL FORWARD BASIS TO PJM-WEST AS OF 12/31/2013. • Annual basis benefits baseload units • Intermediate units flexible to seasonal opportunities • Combined Cycle and Peaking units positioned to optimize daily and hourly volatility PS Zone Annual Basis to PJM-W PS Zone Day Ahead On Peak Monthly Basis to PJM-W PS Zone Real Time On Peak Hourly Basis to PJM-W |
87 High gas market at $58/MMbtu setting power prices in PS zone on 1/7/14 PSEG Zone LMP’s on January 7, 2014 Higher basis to generation On Peak Basis to PJM-W on January 7, 2014 Additional steam and peaking generation available above day ahead commitment to gain value from real time market Fuel flexibility with coal/gas/oil optionality among available units Hourly Generation and Load on January 7, 2014 Competitive Advantage: Trading & Asset Flexibility Base load and load following generation sufficient to cover load and hedge obligations |
88 High demand in constrained northern NJ Base load and load following generation sufficient to cover load and hedge obligations Additional generation available above obligations to gain value from real time market spikes Gas advantage in procuring low cost shale supply to capture savings PSEG Zone LMP’s on July 18, 2013 On Peak Basis to PJM-W on July 18, 2013 Hourly Generation and Load on July 18, 2013 Competitive Advantage: Trading & Asset Flexibility |
89 Market Review PSEG’s Competitive Advantage PSEG’s Sustainable Advantage • • • Long-term access to discounted Marcellus gas Robust capacity market pricing in one of the most concentrated load pockets in the US PSEG Power: Enjoys real and sustainable advantages in the merchant generation space Positive cash-flow hedging into the long-term |
90 Capacity Load shape Transmission Congestion Ancillary services Risk premium Green ~ $53 BGS sales account for about a quarter of our forward portfolio of hedges 3 Year Average Round the Clock PJM West Forward Energy Price $94.30 $83.88 ~ $46 $92.18 ~ $47 ~ $48 ~ $43 ~ $53 ~ $59 $97.39 $48 - $50 $68 - $71 $48 - $50 Sustainable Advantage: BGS Auction provides excellent opportunity to forward hedge our generation $37 - $38 $45 - $47 $39 - $40 $38 - $39 $95.77 $/MWH; BGS PRICES REFLECT PSE&G ZONE; RESULTS FOR 2012-2014 WILL BE THE NEW BLENDED PRICES BEGINNING JUNE 1, 2014. |
91 2014 2015 2016 Volume TWh 35 35 35 Base Load % Hedged 100% 75-80% 30-35% Price $/MWh $48 $51 $53 Volume TWh 20 19 19 % Hedged 35-40% 0% 0% 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 Sustainable Advantage: Hedging strategy designed to protect gross margin while leveraging the portfolio Intermediate Coal, Combined Cycle, Peaking (Nuclear and Base Load Coal) 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. EXCLUDES SOLAR AND KALAELOA. |
92 $/MW-day 2012 / 2013 2013 / 2014 2014 / 2015 2015 / 2016 2016 / 2017 Power’s Average Prices $153 $244 $162 $167 $166 Rest of Pool Prices $16 $28 $126 $136 $59 10,400 10,600 10,300 9,000 8,600 2017/2018 RPM Auction Influenced By: • Updated Demand Curve • Updated Transfer Capabilities • Environmental Retirements • New Build/Cost of New Entry • Minimum Offer Price Rule • Demand Response Sustainable Advantage: PJM’s capacity market is expected to continue to recognize locational value Sustainable Advantage: PJM’s capacity market is expected to continue to recognize locational value Power’s Capacity (MW) |
93 Forward curve shows that Marcellus shale supply averages over $1.50/MMbtu discount year-round through 2018 Basis to Henry Hub 2013 AVERAGE 6/1/13-12/31/13; F= FORWARDS AS OF 12/31/13. LEIDY BASIS FROM ICE/BROKER QUOTES Sustainable Advantage: Fuel advantage continues throughout the curve |
94 Market Review • Gas, Power, Spark Spreads • Regulatory construct PSEG’s Competitive Advantage • Fuel flexibility • Heat Rate diversity • Access to Marcellus Shale gas • Asset flexibility PSEG’s Sustainable Advantage • Positive cash-flow hedging into the long-term • Robust capacity market pricing in most concentrated load pocket in US • Long-term access to discounted Marcellus gas PSEG Power: Enjoys real and sustainable advantages in the merchant generation space |
95 PSEG Power’s Value Proposition • Well-positioned fleet of merchant generating assets concentrated in PJM market • Advantaged by low cost structure, fuel diversity and dispatch flexibility • Low environmental capital requirements • Capacity uprates to enhance value of nuclear and combined cycle stations • Consistent hedging strategy recognizes asset flexibility • Continue to meet commitments and to provide free cash flow |
We have the energy to make things better … for you, for our investors and for our stakeholders. |
PSEG EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER Caroline Dorsa |
98 Strong financial position to support our business initiatives 2013 Financial Position 2014 and Beyond Exceeded upwardly revised 2013 earnings guidance Pension fully funded Strong balance sheet and upgraded credit ratings Continued positive earnings trend in 2014 Controlled O&M growth Balance Sheet and Cash Flow support investments without equity issuance Growth in PSE&G investments with contemporaneous returns Diversified Power assets with a balanced hedge profile Growth in PSE&G Cash from Operations, with continued significant Cash from Operations/FFO at Power Increased Dividend by $0.04 to indicative annual rate of $1.48 for 2014 Opportunity for consistent and sustainable dividend growth |
99 *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. NOTE: 2012 OPERATING EARNINGS RE-STATED FOR TRANSFER OF ASSETS FROM PSEG HOLDINGS TO PSEG POWER. Exceeded upwardly revised guidance in both businesses PSEG Operating Earnings $ Millions (except EPS) 2012 2013 PSE&G $528 $612 PSEG Power $663 $710 Other $45 ($13) Operating Earnings $1,236 $1,309 Operating EPS* $2.44 $2.58 Upwardly Revised Earnings Guidance (Nov 2013) $2.40 - $2.55 Earnings Guidance (Feb 2013) $2.25 - $2.50 |
100 Power Cash from Ops ~$1.3B Power Capital Investment ~0.6B Dividend to Parent ~$0.7B Net Debt ~$0.2B Free Cash Flow ~$0.7B Cash ~$0.2B ~$0.9B Available for PSEG In 2013, Power had significant free cash flow Power 2013 Cash Flows |
101 PSE&G Cash from Ops (1) ~$1.4B PSE&G Capital Investment ~$2.2B (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$220 MILLION. Cash ~$0.1B In 2013, PSE&G invested over $2B, using $1.4B of internally generated cash flow and debt, while maintaining its capital structure PSE&G 2013 Cash Flows Parent Capital Contribution ~$0.1B PSE&G Net Debt ~$0.6B |
102 In 2013, Power’s Free Cash Flow supported PSE&G’s capital program and shareholder dividend (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$220 MILLION. (2) OTHER CASH FLOW INCLUDES HOLDINGS NET CASH FLOW AND PARENT CASH. Power Cash from Ops ~$1.3B PSE&G Cash from Ops (1) ~$1.4B PSE&G Capital Investment ~$2.2B Power Capital Investment ~$0.6B Shareholder Dividend ~$0.7B Net Debt Issuances ~$0.7B PSEG Consolidated 2013 Sources and Uses Other Cash Flow (2) ~$0.1B |
103 PSEG growth spend of ~$5.4B represents ~72% of total investment with Energy Strong potentially enhancing the profile PSEG 2014 – 2016E Capital Investment Power & Other Maintenance PSE&G Distribution Maintenance Power Growth PSE&G Transmission Growth PSE&G Solar and New Business PSE&G Energy Strong Approved Growth Investment ~$5.4B E = ESTIMATE; CAPITAL INCLUDES AFUDC AND IDC. PSEG Potential Spend Maintenance ~$2B PSEG Approved Programs Potential Energy Strong ~$0.9B ~$0.3B ~$1.1B ~$0.8B ~$4.3B ~$1.3B ~$8.7B ~$7.4B |
104 PSE&G’s Capital Program drives double-digit growth in rate base and earnings over the 2013 to 2016 period Distribution 2013 Rate Base Potential 2016E Rate Base ~$10.4B ~$13.7B ~$6.6B ~$3.8B ~$2.7B ~$6.5B ~$0.6B ~$1.3B ~$7.2B Transmission Growth Energy Strong Solar and New Business ~$15.0B ~$6.5B ~$8.5B Approved 2016E Rate Base Approved Rate Base ~$3.3B Potential Energy Strong Transmission 2013 – 2016E Rate Base CAGR in approved Growth of ~10% E = ESTIMATE |
105 PSE&G’s Cash from Operations and Power’s Free Cash Flow support growth investments without the need for new equity 2014 – 2016E PSE&G Cash from Ops (1) PSE&G Capital Investment PSE&G Net Debt 2014 – 2016E PSEG Sources and Uses (1) PSE&G CASH FROM OPERATIONS ADJUSTS FOR SECURITIZATION PRINCIPAL REPAYMENTS OF ~$500M FROM 2014-2016 (2) OTHER CASH FLOW INCLUDES PSEG LI, HOLDINGS NET CASH FLOW, CASH, AND SHORT TERM DEBT E = ESTIMATE PSE&G Cash from Ops (1) PSE&G Capital Investment PSE&G Net Debt Approved Programs With Energy Strong Shareholder Dividend Power Cash from Ops Other Cash Flow (3) Shareholder Dividend Power Cash from Ops Power Net Debt Power Capital Investment Power Capital Investment Other Cash Flow (2) Power Net Debt Sources Uses Sources Uses |
106 Power’s key credit metric supports incremental investment opportunities E = ESTIMATE PSEG Power Funds From Operations / Debt (1) 2014-2016E Average Increased contribution to earnings from the more stable regulated business allows us to reset Power’s FFO/Debt threshold from 35% to 30%, providing additional financial flexibility Power’s annual Cash From Operations and Funds From Operations each average ~$1.1B over the 2014 to 2016 period supported by: Capacity Revenues Hedged Generation O&M Control Financial strength can be used to pursue future growth in both businesses beyond current plans (1) ESTIMATE BASED ON APPROVED PROGRAMS 0% 10% 20% 30% 40% 50% 60% 70% 80% 2012 2013 |
Pension: Our Long Term Asset allocation strategy resulted in a ~17% increase in pension assets during 2013 Trust Assets 12/31/2012 Cash Contributions Investment Return Gross Benefits Paid Trust Assets 12/31/2013 $4.36B $5.12B ~$0.15B ~$0.86B ~($0.25B) $0.0 $1.0 $2.0 $3.0 $4.0 $5.0 $6.0 107 PBO Funded Ratio 83% Fully Funded Pension 106% |
Our Pension Management is expected to result in pension income in 2014 and over the planning horizon Pension (Expense)/Income 2013 to 2014 Drivers 2013 2014E 2015E 2016E Expense ($110) M Discount Rate ~$40M Investment Return ~$70M Other (1) ~$15M ($125) ($75) ($25) $25 Income ~$15M per annum 108 (1) OTHER REFLECTS UPDATES TO THE POPULATION OF OUR EMPLOYEES AND RETIREES E=ESTIMATE |
109 (1) POWER EXCLUDES IMPACTS FROM STORM RECOVERY COSTS AND POTENTIAL RELATED INSURANCE PROCEEDS NM = NOT MATERIAL E = ESTIMATE. 2013 - 2016E CAGR: ~(0.5)% 2013 – 2016E CAGR Transmission ~(0.8)% Distribution ~(0.9)% Power ~(0.7)% Other: N.M. PSEG O&M Expense (1) Ongoing cost control efforts, including pension, expected to reduce O&M over the forecast period $0 $500 $1,000 $1,500 $2,000 $2,500 2013 2014E 2015E 2016E |
110 Improving Operating Earnings and increased contribution from PSE&G PSEG Operating Earnings $ Millions (except EPS) 2012 2013 2014E PSE&G $528 $612 $705 - $745 PSEG Power $663 $710 $550 - $610 Other $45 ($13) $35 - $40 Operating Earnings* $1,236 $1,309 $1,290 - $1,395 Operating EPS* $2.44 $2.58 $2.55 - $2.75 Regulated % of Earnings 43% 47% 53% - 55% *SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. NOTE: 2012 OPERATING EARNINGS RE-STATED FOR TRANSFER OF ASSETS FROM PSEG HOLDINGS TO PSEG POWER. E=ESTIMATE. |
111 $1.33 $1.37 $1.37 $1.42 $1.44 $1.48 $0.60 $0.80 $1.00 $1.20 $1.40 2009 2010 2011 2012 2013 2014E PSE&G EPS $1.47 $1.39 Annual Dividend Per Share (10 YEAR HISTORICAL CAGR ~3%) (1) THE 2014 PAYOUT RATIO IS BASED ON THE MIDPOINT OF PSEG'S 2014 OPERATING EARNINGS GUIDANCE OF $2.55-$2.75E PER SHARE. SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. Opportunity for consistent and sustainable dividend growth supported by strong cash flow from both businesses 2.8% increase Payout Ratio 43% 44% 50% 58% 56% 56% ( 1) E = ESTIMATE $1.60 |
112 PSEG’s longer-term outlook is influenced by Power’s hedge position and increased investment at PSE&G 2015E 2016E Segment EPS Drivers E = ESTIMATE Sensitivities derived from typical annual market variability* * Estimated annual variability approximating one standard deviation based on 2011 – 2013 historical data and forward curve estimates applied to PSEG Power open positions Each $0.75/mcf Change in Natural Gas Each $2/MWh Change in Spark Spread Each $5/MWh Change in Dark Spread Each 1% Change in Nuclear Capacity Factor Each $100 Million of Incremental Investment Each 1% Change in Sales Electric Gas Each 1% Change in O&M Each 10 bp Change in ROE $0.01 $0.01 $0.01 $0.01 $0.01 $0.12 - $0.15 $0.04 $0.04 $0.01 $0.04 - $0.07 $0.04 $0.04 $0.01 $0.01 $0.01 $0.01 $0.01 $0.01 |
113 PSEG Summary • Our 2013 earnings of $2.58 exceeded our upwardly revised operating earnings guidance of $2.40 - $2.55 per share • Double digit earnings growth at PSE&G on one and three year basis from 2013 to 2016, driven by transmission investments and approved programs • Power’s continued focus on operational excellence, market expertise and financial strength delivers value in current price environment • Strong Balance Sheet and Cash Flow support full capital program and new potential opportunities without the need for equity • Long history of returning cash to the shareholder through the common dividend, with opportunity for consistent and sustainable growth |
PSEG EXECUTIVE PROFILES |
115 CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Ralph Izzo Ralph Izzo was elected chairman and chief executive officer of Public Service Enterprise Group Incorporated (PSEG) in April 2007. He was named as the company’s president and chief operating officer and a member of the board of directors of PSEG in October 2006. Previously, Mr. Izzo was president and chief operating officer of Public Service Electric and Gas Company (PSE&G). Since joining PSE&G in 1992 Mr. Izzo was elected to several executive positions within PSEG’s family of companies, including PSE&G senior vice president – utility operations, PSE&G vice president – appliance service, PSEG vice president - corporate planning, and PSE&G vice president - electric ventures. In these capacities he broadened his experience in the areas of general management, strategic planning and finance. Mr. Izzo is a well-known leader within the utility industry, as well as the public policy arena. He is frequently asked to testify before Congress and speak to organizations on matters pertaining to national energy policy. Mr. Izzo’s career began as a research scientist at the Princeton Plasma Physics Laboratory, performing numerical simulations of fusion energy experiments. He has published or presented over 35 papers on magnetohydrodynamic modeling. Mr. Izzo received his Bachelor of Science and Master of Science degrees in mechanical engineering and his Doctor of Philosophy degree in applied physics from Columbia University. He also received a Master of Business Administration degree, with a concentration in finance from the Rutgers Graduate School of Management. He is listed in numerous editions of Who’s Who and has been the recipient of national fellowships and awards. Mr. Izzo has received Honorary Degrees from the New Jersey Institute of Technology (Doctor of Science), Thomas A. Edison State College (Doctor of Humane Letters), Bloomfield College (Doctor of Humane Letters), and Rutgers University (Doctor of Humane Letters). Mr. Izzo serves as chair of the New Jersey Chamber of Commerce, and on the Rutgers University Board of Governors, the board of directors for The Williams Companies, the New Jersey Utilities Association, the Edison Electric Institute (EEI), the Nuclear Energy Institute (NEI), the National Center on Addiction and Substance Abuse at Columbia University (CASA), and The Center for Energy Workforce Development. He is also a member of the Columbia University School of Engineering Board of Visitors and the Princeton University Adlinger Center for Energy and the Environment Advisory Council, as well as a member of the Visiting Committee for the Department of Nuclear Engineering at MIT. |
116 J. A. Bouknight, Jr. (Lon) J.A. Bouknight, Jr. (“Lon”) was named executive vice president and general counsel in January, 2010. He had been Executive Vice President – Law since November 2009. In his current position, he has general supervisory responsibilities for the law department, office of the corporate secretary, business assurance and resilience, and Federal public affairs and sustainability. Mr. Bouknight was a partner in the Washington law office of Steptoe & Johnson, where he served as a member of the regulatory and industry affairs department and as former chairman of the firm. His practice focused on the electric power and natural gas industries and on antitrust and competition issues in both regulated and unregulated industries. From 2005 to 2008, Mr. Bouknight served as executive vice president and general counsel of Edison International, a major electric company based in California. A graduate of Wofford College and Duke University School of Law, Mr. Bouknight has authored a number of articles and lectured extensively on energy industry and competition topics. EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG SERVICES CORPORATION, EXECUTIVE VICE PRESIDENT AND PSEG POWER |
117 EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED, PUBLIC SERVICE ELECTRIC AND GAS COMPANY, PSEG POWER LLC AND PSEG SERVICES CORPORATION Caroline Dorsa Caroline Dorsa was named executive vice president and chief financial officer for Public Service Enterprise Group Incorporated (PSEG) in April 2009. She is also the executive vice president and chief financial officer of Public Service Electric and Gas Company (PSE&G), PSEG Power and PSEG Services Corporation. Ms. Dorsa is responsible for all financial functions, including Internal Audit Services and Investor Relations. Given the array of financial instruments which serve as the primary means of selling wholesale energy to customers, Ms. Dorsa also has responsibility for the Risk Management function, which provides independent oversight of the PSEG Power trading organization. In addition to her financial responsibilities, Ms. Dorsa leads the Information Technology and Procurement organizations. She is a member of PSEG’s Executive Officer Group. In her role as chief financial officer, she has overseen the execution of the Company’s financial strategy, which has involved a significant deleveraging of the balance sheet and enhancement of the company’s financial strength. The company is in the midst of a major capital investment program focused on deploying more than $6 billion over three years to ensure the reliability and efficiency of the energy generation and distribution system in New Jersey. PSEG has an uninterrupted record of paying dividends to shareholders for 105 years. Ms. Dorsa had been a member of the PSEG Board of Directors for six years, and a member of PSEG's Audit, Corporate Governance and Finance Committees before joining the company’s management. Her previous management position had been with Merck & Co., where she was senior vice president – global human health, strategy and integration. Prior to this, Ms. Dorsa served as senior vice president and chief financial officer at Avaya, Inc. Earlier in her career, she held a range of financial positions at Merck, including serving as vice president and treasurer of the company for over 12 years. She was also the Secretary of the Finance Committee of Merck's Board of Directors. Before joining Merck, Ms. Dorsa worked for Mayor Edward Koch of the City of New York promoting economic development in midtown Manhattan. Ms. Dorsa is a member of the Junior Achievement of New Jersey State Board of Directors. She is a member of the Board of Directors and the financial expert for the Finance and Audit Committee of Biogen Idec (NASDAQ: BIIB), a biopharmaceutical company located in Cambridge, MA. Ms. Dorsa is also a member of the Board of Directors and Chairman of the Audit Committee of Joule, a privately financed solar fuels company based in Bedford, MA. Ms. Dorsa holds a B.A. from Colgate University and an M.B.A from Columbia Business School. |
118 PRESIDENT AND CHIEF NUCLEAR OFFICER PSEG NUCLEAR Thomas P. Joyce Thomas P. Joyce was named president and chief nuclear officer of PSEG Nuclear (Nuclear), in October 2008. He had been senior vice president – operations of Salem/Hope Creek for Nuclear, since June 2007. Mr. Joyce was also vice president – Salem, since January 2007, and previously assumed the role of PSEG Nuclear’s site vice president as part of the Nuclear Operating Services Agreement between PSEG and Exelon Corporation in 2005. PSEG Nuclear’s Salem and Hope Creek Generating stations comprise the second largest commercial nuclear power facility in the United States. Together the units provide enough electricity for three million homes. Together the plants also provide 49 percent of New Jersey’s electricity. Mr. Joyce has more than 38 years of experience in commercial nuclear power operations. Under his leadership as president and chief nuclear officer, Salem and Hope Creek combined to set a new site generation record in 2009. In 2011, the stations also received approval from the Nuclear Regulatory Commission (NRC) to extend their operating licenses an additional 20 years. Reinforcing the company’s strong ties to the local community, the license renewal approvals did not encounter any formal legal contentions like many other plants across the country. While leading Salem, the station completed two successful reactor vessel head replacement outages. Salem Unit 1 completed its outage capturing the world record for shortest head replacement outage. Prior to coming to PSEG Mr. Joyce was site vice president at Exelon Nuclear’s Braidwood Station. During his tenure the station achieved overall performance improvements and retained their excellent INPO rating. The plant completed a refueling in 15 days, 14 hours – setting a record for outage efficiency among U.S. pressurized water reactors. Before serving at Braidwood he held leadership positions at Exelon’s Byron, Dresden, and Zion Stations, and in the corporate offices of both Exelon Corporation and Exelon Nuclear. Mr. Joyce holds a Bachelor of Science degree in nuclear engineering from the University of Missouri at Rolla, and a Master of Business Administration degree from the Keller Graduate School of Management. While at Byron, he earned his senior reactor operators (SRO) license. A recognized leader in the nuclear industry, Mr. Joyce currently serves as chairman of the Utilities Service Alliance (USA). The organization is comprised of eight of America’s leading electric utilities operating 14 nuclear reactors located at 10 stations. Its two major objectives are to improve individual plant and fleet performance and to reduce operating and maintenance costs. Mr. Joyce also chairs the Nuclear Energy Institute’s (NEI) Emergency Preparedness Working Group and the EPRI Nuclear Power Council. |
119 Ralph A. LaRossa PRESIDENT AND CHIEF OPERATING OFFICER PUBLIC SERVICE ELECTRIC AND GAS COMPANY Ralph A. LaRossa was named president and chief operating officer of Public Service Electric and Gas Company (PSE&G), in October 2006. Prior to this position he was vice president - electric delivery for PSE&G. In addition to his responsibilities with PSE&G, he also oversees the communications and state governmental affairs organizations. On January 1, 2014, Mr. LaRossa became Chairman of the Board of PSEG Long Island, a subsidiary of Public Service Enterprise Group (PSEG), which manages the electric transmission and distribution systems on Long Island and in the Rockaways. Mr. LaRossa joined PSE&G in 1985 as an associate engineer and advanced through a variety of management positions in the utility’s gas and electric operations. In 1998 he received Gas Industry Magazine’s Outstanding Manager of the Year Award. PSE&G is New Jersey’s largest electric and gas utility. Mr. LaRossa is a graduate of Stevens Institute of Technology and has completed the Harvard Business School’s Program for Management Development. He serves on the board of directors for the American Gas Association (AGA), New Jersey Utilities Association (NJUA), New Jersey Performing Arts Center (NJPAC), Partnership for a Drug-Free NJ, Choose New Jersey, and Bergen County’s United Way. He also serves on the board of trustees for Montclair State University and the Newark Alliance. |
PRESIDENT PSEG ENERGY RESOURCES & TRADE Shahid Malik was elected President of PSEG Energy Resources & Trade (ER&T) in December, 2011. PSEG operates one of the most balanced portfolios in the country, both in terms of fuel mix and market segment (base load units, load following units and peaking units), and Mr. Malik is essentially responsible for managing these assets and taking them to market. He oversees PSEG’s generation portfolio and the purchase and sale of all energy commodities. Mr. Malik has an extensive background in the energy industry across the oil, gas, electric and renewable energy sectors in Europe and the United States. Previously, he was with Pittiglio, Rabin, Todd & McGrath (PRTM) in Pittsburgh, PA and was responsible for all aspects of growing the global energy practice, with a primary focus on the North American utility sector. Prior to that he served as President & CEO of Strategic Energy, Great Plains Energy’s unregulated retail marketing subsidiary and a provider of energy and services to business clients in North America. He was accountable for the Company’s strategy and operations and led a successful turnaround of the company, achieving significant growth in products and services while reducing costs. Mr. Malik’s career has included Executive Leadership positions with several energy companies including Entergy Corporation, Reliant Energy and BP Oil Company. In addition, he served on the Board of Directors of South Jersey Industries (NYSE: SJI) immediately prior to joining PSEG. Mr. Malik has been in the energy business for more than 20 years, since receiving his Economics degree from Manchester University in England and an MBA from Rice University, Houston. He sits on the Executive Committee of the Board of Trustees of Newark Museum. Shahid Malik 120 |
121 Margaret M. Pego, SPHR SENIOR VICE PRESIDENT – HUMAN RESOURCES AND CHIEF HUMAN RESOURCES OFFICER PSEG SERVICES CORPORATION Margaret M. Pego was named senior vice president – human resources and chief human resources officer of PSEG Services Corporation in December 2006. Prior, she had been vice president – human resources. Ms. Pego joined PSEG in 1974, and has held a variety of management positions in the human resources department. Ms. Pego holds a Bachelor of Arts degree in business administration from William Paterson College, and a Master of Business Administration degree with a concentration in management and labor relations from Seton Hall University. In addition, she holds a certificate in EEO studies from Cornell University, and has completed the Human Resources Executive Program at the University of Michigan. She is also certified as a senior professional in human resources. Ms. Pego was named one of 2013’s HR Top 10 Breakaway Leaders by Evanta, a leading organization that fosters leadership development and collaborative exchange among North America’s top executives. Ms. Pego is active in several local and national organizations, including the EEI Chief HR Executive Advisory Committee; the American Gas Association HR Policy Committee; the Conference Board Advisory Council of HR Management – Council of HR Executives; and the Society for Human Resources Management. In addition, she is a member of the board of trustees of the College of Saint Elizabeth, Rutgers Business School and she is first vice chair of the Children’s Specialized Hospital board and chair of the board’s HR committee. She is the former Chair of the Center for Energy Workforce Development (CEWD) Executive Council. She is a former member of the Supreme Court of New Jersey Attorney Ethics Committee. Ms. Pego is a 2002 Leadership New Jersey fellow, 1997 TWIN Honoree, 2006 Executive Woman of New Jersey Honoree and 2008 NJ Best 50 Women in Business Honoree. |
122 William Levis PRESIDENT AND CHIEF OPERATING OFFICER PSEG POWER William Levis is president and chief operating officer of PSEG Power, a position he’s held since June 2007. PSEG Power is a major, merchant power producer in the U.S. with four main subsidiaries: PSEG Nuclear, PSEG Fossil, PSEG Energy Resources and Trade (ER&T) and PSEG Power Ventures. PSEG Power operates one of the most balanced portfolios in the country, both in terms of fuel mix and market segment (based load units, load following units and peaking units). Its low-cost, load following fleet is geographically well positioned in competitive markets. Its 13,450 MWs represent a diverse fuel mix which includes 44 percent natural gas, 27 percent nuclear, 18 percent coal, 9 percent oil, 1 percent solar, and 1 percent pumped storage. Before coming to PSEG, Mr. Levis was Exelon Nuclear’s vice-president – Mid-Atlantic operations. During his years at Exelon, Mr. Levis oversaw significant improvements, setting records for total annual megawatt production and establishing efficiency records for refueling outages. Prior to joining Exelon, Mr. Levis worked at Ontario Hydro’s Pickering Plant and held several positions over a five-year period with Carolina Power and Light’s Brunswick facility. During this time, the station was removed from the NRC Watch List and set new records in the areas of safety, production, and cost. Mr. Levis has a Bachelor of Science degree in marine engineering from the U.S. Naval Academy and holds an SRO (senior reactor operator) certification. He retired as a commander in the Naval Reserves and attained his professional engineer license in 1985. Mr. Levis serves as a member of Pennsylvania Congressman James Gerlach’s Service Academies Selection Committee. He is also a member of Nuclear Energy Institute’s (NEI) Board of Directors, and serves as a member of the Institute of Nuclear Power Operations (INPO) National Nuclear Accrediting Board. He is a member of the Philadelphia Archdiocese Catholic Charities Appeals Board and its Operations Committee, and is a member of the CEO Council for Growth based in Philadelphia. |
123 Richard P. Lopriore PRESIDENT PSEG FOSSIL Mr. Lopriore has been a valuable part of the electric generation industry for more than 40 years. Prior to joining PSEG Fossil, he had been senior vice president - mid-Atlantic operations for Exelon Nuclear, responsible for oversight of the Limerick, Peach Bottom, Oyster Creek and Three Mile Island stations. During his tenure, Three Mile Island achieved INPO 1 status (2007). From 1997-1999, Mr. Lopriore was an Executive Advisor for Ontario Hydro Nuclear Power Plant’s recovery and performance improvement program. Mr. Lopriore joined Exelon as plant manager of Byron Stations in 1999 and was promoted to site vice president in 2001. In 2003 he became corporate vice president - operations support at Exelon’s nuclear headquarters, responsible for both the Midwest and mid-Atlantic regions. He then became vice president - operations, Midwest boiling water reactors in 2004 responsible for the Dresden, LaSalle County, Quad Cities and Clinton nuclear plants. Prior to Exelon, Mr. Lopriore held several key management positions at the Brunswick Nuclear Plant in North Carolina, including plant manager. At Vermont Yankee, he achieved an operational SRO certification for Boiling Water Reactors. Mr. Lopriore received his Bachelor of Science degree from Southern Vermont College and is a member of the American Nuclear Society. He also served in the National Guard. Richard P. Lopriore was elected president of PSEG Fossil in May 2007. He oversees operations for 13 generation facilities spanning four states. He is also responsible for the oversight of two service groups: Laboratory & Testing Services, and Maintenance & Repair Services. Additionally, he is responsible for Construction, Capital Projects and Engineering. The PSEG Fossil fleet is comprised of natural gas, coal and oil-fired electric generating units that contribute about 9,700 megawatts of electricity to PSEG Power’s generation portfolio. This includes an ownership interest of 1,000 megawatts in three jointly-owned facilities. Under Lopriore’s leadership, nine LM6000 peaking units were constructed. Fossil also outfitted its two New Jersey coal plants with about $1.5 billion in new pollution control equipment resulting in substantial reductions in emissions. These plants are among the cleanest, most responsible coal stations in the country. Mr. Lopriore instituted an in-depth Operational Excellence Model (OEM), one of the first programs in the nation to drive standardization across a Fossil fleet. The program resulted in consistent improvement in operating results, reliability and fleet performance and the achievement of all-time generation records. He also revamped PSEG Fossil’s training program. Two industry-first, award-winning mobile training trailers were developed to take training directly to the work sites reducing costs and increasing productivity. |
124 VICE PRESIDENT – DELIVERY PROJECTS AND CONSTRUCTION PUBLIC SERVICE ELECTRIC AND GAS COMPANY Kim C. Hanemann is vice president-delivery projects and construction, for PSE&G, where she is responsible for ensuring the on-time, on-scope and on-budget execution of all large utility construction projects, which includes overseeing project management, project controls, and licensing and permitting. Her organization also includes a mobile construction workforce. Ms. Hanemann joined PSE&G as an engineer in 1986. She has held numerous leadership positions in both electric and gas field operations as well as in utility support operations. She was named a director in 2007, overseeing three different groups (Transmission Engineering and Construction, Utility Operations Support, and Delivery Projects and Construction) before her promotion to vice president in 2010. Ms. Hanemann holds a Bachelor of Science degree in mechanical engineering from Lehigh University and an MBA from the Rutgers Graduate School of Management. Kim C. Hanemann |
PSE&G APPENDIX 125 |
126 PSE&G provides high reliability at below average cost which creates superior value to customers SAIDI = SYSTEM AVERAGE INTERRUPTION DURATION INDEX, A MEASURE OF AVERAGE OUTAGE DURATION FOR ALL CUSTOMERS SERVED. |
127 PSE&G prioritizes public safety while maintaining value to customers LEAK RESPONSE RATE = PERCENTAGE OF UTILITY RESPONSES TO REPORTED LEAKS WITHIN ONE HOUR. |
PSEG POWER AND ER&T APPENDIX 128 |
129 Nuclear fuel needs have been hedged through 2016 Anticipated Nuclear Fuel Cost Hedged $0 $5 $10 2014 2015 2016 |
130 Power’s coal hedging reflects 2014 supply matched with 2014 sales Station Coal Type Pricing ($/MWh)* Comments Bridgeport Harbor Adaro Low $40’s Higher price, lower BTU, enviro coal Hudson CAPP Mid $40’s Flexibility after BET in 2010 Mercer Metallurgical CAPP/NAPP Low $40’s More limited segment of coal market Keystone NAPP Mid $20’s Prices steady Conemaugh NAPP Mid $20’s Prices steady % Hedged (left scale) $/MWh (right scale) $20 $30 $40 $50 40% 60% 80% 100% 0% 20% 2014 2015 2016 $0 $10 *COMMODITY PLUS TRANSPORTATION. Contracted Coal |
131 The full requirements BGS rate recognizes the forward PJM capacity market price |
PSEG FINANCIAL APPENDIX 132 |
133 December 31, 2013 $ Billions PSEG PSE&G Power Cash Investments $0.4 $0.0 N/A (2) Short Term Debt $0.1 $0.1 N/A (2) Long Term Debt (3) 8.1 5.6 2.5 Common Equity 11.6 5.9 5.9 Total Capitalization $19.8 $11.5 $8.4 Total Debt / Capitalization 41% 49% 30% PSE&G Regulated Equity Ratio (1) 51% Our balance sheet remains strong (1) REGULATED EQUITY RATIO INCLUDES CUSTOMER DEPOSITS OF ~$95 MILLION AND EXCLUDES SHORT-TERM DEBT (2) N/A BECAUSE POWER INVESTS AND BORROWS SHORT-TERM THROUGH INTERCOMPANY ARRANGEMENT WITH PSEG PARENT (3) DOES NOT INCLUDE SECURITIZATION DEBT OF $496MILLION. |
134 PSEG Liquidity as of December 31, 2013 Expiration Total Available Company Facility Date Facility Usage Liquidity ($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 Total Liquidity Available $4,488 Total Parent / Power Liquidity $3,961 PSEG / Power PSEG Money Pool ST Investment |
135 PSEG Energy Holdings Investment Portfolio *BOOK BALANCE EXCLUDING DEFERRED TAX ACCOUNTS. **EME AND ITS SUBSIDIARIES FILED CHAPTER 11 BANKRUPTCY ON 12/17/2012. ON 10/18/2013, NRG ENERGY ANNOUNCED AN ACQUISITION OF EME ASSETS THAT WOULD CURE ALL MONETARY DEFAULTS AT CLOSING AND PRESERVE HOLDINGS’ ENTIRE EQUITY VALUE. Merchant Energy Leases GenOn (REMA) Edison Mission Energy (EME)** Regulated Energy Leases Merrill Creek Grand Gulf Real Estate Leveraged Leases Real Estate Operating Leases Generation Legacy Assets Other Equipment Keystone, Conemaugh & Shawville (PA) 3 coal-fired plants (1,162 equity MW) Powerton & Joliet Generating Stations (IL) 2 coal-fired generating facilities (1,640 equity MW) Reservoir in NJ (PECO, MetEd, Delmarva Power & Light) Nuclear station in Mississippi (175 equity MW) GM Renaissance Center; Wal-Marts; E-D (shopping) Centers Office Towers, Shopping Centers - 30 properties GWF (in wind down stage), Bridgewater, GSOE Land & Receivables Investment Balance * at 12/31/13 ($millions) $343 $218 $191 $ 73 $70 $5 $7 Total Holdings Investments $907 |
136 Strong, full year 2013 operating earnings delivered 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 Twelve Months ended December 31 * SEE SLIDE A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/NET INCOME TO RECONCILE TO OPERATING EARNINGS. |
137 PSEG EPS Reconciliation– Full Year 2013 versus Full Year 2012 $2.44 0.09 0.17 $2.58 (0.12) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 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 A FOR ITEMS EXCLUDED FROM INCOME FROM CONTINUING OPERATIONS/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. |
A Items Excluded from Income from Continuing Operations/Net Income to Reconcile to Operating Earnings PLEASE SEE PAGE 3 FOR AN EXPLANATION OF PSEG’S USE OF OPERATING EARNINGS AS A NON-GAAP FINANCIAL MEASURE AND HOW IT DIFFERS FROM NET INCOME. (a) Includes the financial impact from positions with forward delivery months. 2013 2012 2011 2010 2009 2008 Operating Earnings 1,309 $ 1,236 $ 1,389 $ 1,584 $ 1,567 $ 1,478 $ Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 40 52 50 46 9 (71) Gain (Loss) on Mark-to-Market (MTM) (a) (PSEG Power) (74) (10) 107 (1) (11) 14 Lease Transaction Activity (Energy Holdings) - 36 (173) - 29 (490) Storm O&M (PSEG Power) (32) (39) - - - - Market Transition Charge Refund (PSE&G) - - - (72) - - Gain (Loss) on Asset Sales and Impairments (Energy Holdings) - - 34 - - (13) Income from Continuing Operations 1,243 $ 1,275 $ 1,407 $ 1,557 $ 1,594 $ 918 $ Discontinued Operations - - 96 7 (2) 270 Net Income 1,243 $ 1,275 $ 1,503 $ 1,564 $ 1,592 $ 1,188 $ Fully Diluted Average Shares Outstanding (in Millions) 508 507 507 507 507 508 Operating Earnings 2.58 $ 2.44 $ 2.74 $ 3.12 $ 3.09 $ 2.91 $ Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.08 0.10 0.10 0.09 0.02 (0.14) Gain (Loss) on MTM (a) (PSEG Power) (0.14) (0.02) 0.21 - (0.02) 0.03 Lease Transaction Activity (Energy Holdings) - 0.07 (0.34) - 0.05 (0.96) Storm O&M (PSEG Power) (0.07) (0.08) - - - - Market Transition Charge Refund (PSE&G) - - - (0.14) - - Gain (Loss) on Asset Sales and Impairments (Energy Holdings) - - 0.06 - - (0.03) Income from Continuing Operations 2.45 $ 2.51 $ 2.77 $ 3.07 $ 3.14 $ 1.81 $ Discontinued Operations - - 0.19 0.01 - 0.53 Net Income 2.45 $ 2.51 $ 2.96 $ 3.08 $ 3.14 $ 2.34 $ For the Year Ended December 31, (Unaudited) Reconciling Items, net of tax Earnings Impact ($ Millions) Per Share Impact (Diluted) PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED |