Public Service Enterprise Group
PSEG Earnings Conference Call
1st Quarter 2007
May 4, 2007
Exhibit 99.1
Disclaimer Statement
The statements contained in this communication about our and our
subsidiaries’ future performance, including, without limitation, future
revenues, earnings, strategies, prospects and all other statements that are
not purely historical, are forward-looking statements for purposes of the safe
harbor provisions under The Private Securities Litigation Reform Act of
1995. Although we believe that our expectations are based on information
currently available and on reasonable assumptions, we can give no
assurance they will be achieved. There are a number of risks and
uncertainties that could cause actual results to differ materially from the
forward-looking statements made herein. A discussion of some of these
risks and uncertainties is contained in our Annual Report on Form 10-K and
subsequent reports on Form 10-Q and Form 8-K filed with the Securities
and Exchange Commission (SEC), and available on our website:
http://www.pseg.com. These documents address in further detail our
business, industry issues and other factors that could cause actual results
to differ materially from those indicated in this communication. In addition,
any forward-looking statements included herein represent our estimates
only as of today and should not be relied upon as representing our
estimates as of any subsequent date. While we may elect to update
forward-looking statements from time to time, we specifically disclaim any
obligation to do so, even if our estimates change, unless otherwise required
by applicable securities laws.
1
GAAP Disclaimer
PSEG presents Operating Earnings in addition to its Net Income reported in
accordance with generally accepted accounting principles (GAAP). Operating
Earnings is a non-GAAP financial measure that differs from Net Income
because it excludes the impact of the sale of certain non-core domestic and
international assets and costs stemming from the terminated merger
agreement with Exelon Corporation. 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. A reconciliation of Operating Earnings to Net Income is
included on the slides where the information appears. These slides are only
intended to be reviewed in conjunction with the oral presentation to which they relate.
2
PSEG
2007 Q1 Review
Ralph Izzo
Chairman, President and Chief Executive Officer
Q1 2007 EPS Summary
($ 5)
($ 6)
Discontinued Operations, net of tax
$ 0.85
$ 1.32
EPS from Operating Earnings
$ 203
$ 329
Net Income
$ 208
$ 335
Income from Continuing Operations
($ 5)
-
Merger Costs
$ 213
$ 335
Operating Earnings
Q1 2006
Q1 2007
$ millions (except EPS)
4
PSEG – Q1 Operating Highlights
Solid Earnings Growth
PSEG Power delivered exceptional results
Roll-off of below market contracts
Sustained top quartile nuclear performance with fleet operating at 97% capacity
factor
Favorable natural gas market
PSE&G performing at more normal levels
Rate relief received in Q4 2006 supporting returns
More normal weather
Costs under control
Holdings earnings lower
Rising prices in Texas drive unrealized MTM loss on fixed-price contract
Completion of major maintenance positions assets for summer peak
Cash flow and liquidity remain strong
Parent debt reduced with dividends and returns of capital received
from subsidiaries
5
Markets remain attractive
BGS
Power a successful participant
Roll-off of below market contracts
RPM
Capacity markets - auctions underway
Carbon constraints – a growing focus
Favorably positioned
6
PSEG – Meeting challenges
Staffing progress / leadership team in place
Balance sheet continues to improve; positioned to participate
in opportunities
Advocating integrated energy solutions as key to meeting
environmental challenges
Efficiency, renewables, advanced fossil, nuclear
Solar Initiative
50% of two-year goal
$100M investment
Support cap-and–trade mechanism to achieve greenhouse
gas emission restrictions
Probable federal legislation in 2008
7
Solar Initiative – We deliver on Energy Master Plan promise
PSE&G will invest $100M over 2008-2009 to help finance installation
of 30MW of solar photovoltaic systems on municipal buildings,
businesses and homes.
The solar initiative is designed to fulfill 50% of the renewable portfolio
standard (RPS) requirements over a two year period.
Program will provide loans to developers to cover 40-50% of the cost
of solar installation project. The remaining cost of the project will be
funded by an equity partner (or host customer) who would also own
the solar panels.
PSE&G will be repaid the principal plus interest over 15 year period
in the form of credits called Solar Renewable Energy Certificates
(SREC’s) or, in cash. PSE&G will allocate SRECS to Load Serving
Entities (LSE) which will lower their renewable portfolio compliance
cost standards over time.
PSE&G would earn a return for the full cost of capital plus an
incentive for spurring the solar market.
8
Review of assets continues
Hired financial advisor to explore sale of Global’s 99%-owned
investment in Electroandes
4 hydro plants in Peru with 180MW of capacity and net
investment of approximately $160M
Significant amount of interest expressed in non-strategic asset
Opportunity to reallocate capital if valuations attractive
Sale of Lawrenceburg to close in Q2 2007
$425M of cash benefit
Proceeds expected to be applied to debt reduction
9
Summary of Q1 fundamental drivers
Operations
Nuclear baseload generation fleet that operates at top quartile levels
Distribution and transmission assets providing safe, secure and
reasonably priced energy supply and services
Markets
Deep, liquid markets with natural gas setting price for generation
Capacity values receiving recognition in constrained markets
Improved values for international assets
Financials
Free cash flow powers debt pay down and growth of incumbent utility
and generation businesses
10
Earnings Outlook – On growth trajectory
$0.00
$1.00
$2.00
Earnings
per Share
$3.00
$4.00
$5.00
$6.00
2006
Operating
Earnings
2007
Guidance
2008
Guidance
$4.90 - $5.30
$5.60 - $6.10
$3.71
*Excludes Loss on Sale of RGE of $0.70 per share, Merger costs of $0.03 per share and Loss from Discontinued Operations of $0.05 per share
**Percentage change in growth based on mid-point of guidance
***Raised 2007 guidance on March 26, 2007 from $4.60-$5.00 to $4.90-$5.30
*
***
Q1 2007
Operating
Earnings:
$1.32
11
PSEG
2007 Q1 Review
Tom O’Flynn
Executive Vice President and Chief Financial Officer
Q1 2007 EPS Summary
($ 5)
($ 6)
Discontinued Operations, net of tax
$ 0.85
$ 1.32
EPS from Operating Earnings
$ 203
$ 329
Net Income
$ 208
$ 335
Income from Continuing Operations
($ 5)
-
Merger Costs
$ 213
$ 335
Operating Earnings
Q1 2006
Q1 2007
$ millions (except EPS)
13
Q1 Operating Earnings by Subsidiary
$ 213
(14)
28
121
$ 78
2006
$ 335
(18)
3
219
$ 131
2007
Operating Earnings
Earnings per Share
(0.06)
(0.08)
Enterprise
$ 0.85
$ 1.32
Operating Earnings
0.12
0.01
PSEG Energy Holdings
0.48
0.87
PSEG Power
$ 0.31
$ 0.52
PSE&G
2006
2007
YTD March 31, 2007
$ Millions (except EPS)
* 2006 excludes merger related costs of $1M at PSE&G, Losses from Discontinued Operations of $9M, or $0.04 per share at Power, Income
from Discontinued Operations of $4M, or $0.02 per share at Energy Holdings and merger related costs of $4M, or $0.02 per share at Enterprise
** 2007 excludes Losses from Discontinued Operations of $6M, or $0.02 per share at Power
**
*
14
.85
.21
.39
(.11)
(.02)
1.32
0.00
0.25
0.50
0.75
1.00
1.25
1.50
Utility
Rate relief .09
Weather .06
Volume/ Demand .03
O&M/ Other .02
Transmission .01
$ / share
EPS Reconciliation – Q1 2006 versus Q1 2007
Q1 2007
operating
earnings**
Q1 2006
operating
earnings*
Enterprise
Interest and
Donations (.02)
Power
Re-contracting /
Strong
operations .28
BGSS and Other
.11
Mark-to-Market
.04
Holdings
Other .01
Texas –
Mark-to-
Market (.06)
Texas –
maintenance
(.04)
Lease Income
(.02)
* Excludes $0.02 of merger related costs and $0.02 Loss from Discontinued Operations
** Excludes $0.02 Loss from Discontinued Operations
O&M (.02)
Depreciation/
Interest/NDT
(.02)
15
PSE&G
2007 Q1 Review
PSE&G – Q1 2007 EPS Summary
$ 0.21
$ 0.31
$ 0.52
EPS from Operating Earnings
$ 54
$ 77
$ 131
Net Income from Continuing
Operations
$ 53
$ 78
$ 131
Operating Earnings*
$ 193
$ 2,293
$ 2,486
Operating Revenues
Variance
Q1 2006
Q1 2007
$ millions (except EPS)
* Excludes $1M merger related costs in Q1 2006
17
0.31
0.09
0.06
0.03
0.03
0.52
0.00
0.15
0.30
0.45
0.60
Rate Relief:
Gas $.06
Electric $.03
$ / share
EPS Reconciliation – Q1 2006 versus Q1 2007
Q1 2007
operating
earnings
Q1 2006
operating
earnings
Weather:
Electric $.01
Gas $.05
Other:
Transmission
$.01
O&M & Other
$.02
Volume/
Demand
$.03
18
PSE&G – Q1 Operating Highlights
Operations
Sales growth reflects
Normal electric demand from residential and commercial customers
More normal weather
Degree days in 2007 were 2% colder than normal
Degree days in 2006 were 10% warmer than normal
Decline in industrial segment
Customer sensitivity to higher gas prices
\Regulatory
Solar initiative filed
$100M of loans to fund development of solar photovoltaics
Financial
Rate relief effective in Q4 2006 added $0.09 per share to earnings
Operating and maintenance expenses are under control
PSE&G announced it would proceed with capital program ($150M - $175M) for
installation of Integrated Customer Service Platform (ICSP)
19
PSEG Power
2007 Q1 Review
PSEG Power - Q1 2007 EPS Summary
$ 182
$ 1,967
$ 2,149
Operating Revenues
$ 0.39
$ 0.48
$ 0.87
EPS from Operating Earnings
$ 101
$ 112
$ 213
Net Income
$ 3
($ 9)
($ 6)
Discontinued Operations, net of tax
$ 98
$ 121
$ 219
Income from Continuing Operations
$ 98
$ 121
$ 219
Operating Earnings
Variance
Q1 2006
Q1 2007
$ millions (except EPS)
21
.48
.28
.11
.04
(.02)
(.02)
.87
0.00
0.20
0.40
0.60
0.80
Recontracting
and strong
operations
EPS Reconciliation – Q1 2006 versus Q1 2007
Q1 2007
operating
earnings**
Q1 2006
operating
earnings*
O&M
BGSS returns
to 2004-2005
levels
Mark-to-
Market
Depreciation,
Interest & NDT
* Excludes $0.04 Loss from Discontinued Operations
** Excludes $0.02 Loss from Discontinued Operations
$ / share
22
C&I Customers on BGSS Tariff
$ / MMBTU
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
Inventory Costs
C&I BGSS Tariff
Cost influenced by storage
refill during high April-
November 2005 spot price
Cost influenced by storage
refill during low April-
November 2006 spot price
Tariff based on
spot prices
Tariff trends upward
with rise in real time
spot prices
23
Prices and operations yield margin
$0
$10
$20
$30
$40
$50
$60
Q1 2006
Q1 2007
PSEG Power Realized Gross Margin
($/MWh)
$36
$44
24
RPM Capacity Auction – Transparent Pricing Model
2007- 2008 Capacity Auction Results
($/ MW-day)
N/A
N/A
$40.80
Rest of
Pool
$48.38
$140.16
$188.54
Southwest
MAAC
$20.16
$177.51
$197.67
Eastern
MAAC
CTR
Value*
Load
Price
Unit
Price
PJM released results on April 13 from its first
capacity auction under the Reliability Pricing
Model (RPM) for the 2007-2008 delivery year.
Three auctions are scheduled in the next nine
months to provide transition through the 2010-
2011 delivery year.
July: ’08 - ’09 Planning Year
October: ’09 – ’10 Planning Year
January: ’10 – ’11 Planning Year
Pricing in initial auction for Eastern MAAC
reflected close to the Net “Cost of New Entry”:
standard simple cycle gas turbine adjusted for
location and net revenues.
Future auction pricing could be influenced by
changes in: load growth, emergency transfer
capability (CETL), avoided cost for units, forced
outage rates, and unit derates / retirements.
Market prices support our forecast year-over-
year improvement in capacity margin of $125M -
$175M in 2007 with further improvement in 2008.
*CTR Value: Capacity Transfer Rights
Allocated to Load Serving Entities (LSE) in constrained zones to provide
them with access to supply from outside the zone.
25
PSEG Power – Q1 Operating Highlights
Operations:
Sustained improvement in performance
Nuclear fleet operated at 97% capacity factor
Successful completion of Salem No. 1 outage
23 day outage began on 3/27/07
Executed the Engineering, Procurement and Construction (EPC) agreement
for Mercer back-end environmental work
Markets:
Benefiting from roll-off of below market contracts
BGS February auction cleared at ~$99 per MWh
Capacity auction settles at ~$198/MW-day for EMAAC
Natural Gas pricing and weather improves BGSS margins
Financial:
$125M dividend payment to Enterprise
Lawrenceburg sale scheduled to close in Q2 2007
$425M of proceeds
26
PSEG Energy Holdings
2007 Q1 Review
PSEG Energy Holdings – Q1 2007 EPS Summary
($ 0.11)
$ 0.12
$ 0.01
EPS from Operating Earnings
($ 29)
$ 32
$ 3
Net Income
($ 4)
$ 4
-
Discontinued Operations, net of tax
($ 25)
$ 28
$ 3
Income from Continuing Operations
($ 38)
$ 90
$ 52
Operating Income
Variance
Q1 2006
Q1 2007
$ millions (except EPS)
28
.12
(.06)
(.04)
.01
(.02)
.01
0.00
0.05
0.10
$ / share
0.15
EPS Reconciliation – Q1 2006 versus Q1 2007
Q1 2007
operating
earnings
Q1 2006
operating
earnings*
Lease Income
Texas: O&M
Other
Resources
Global
Texas: MTM
* Excludes $0.02 Income from Discontinued Operations
29
PSEG Energy Holdings – Q1 Operating Highlights
Operations:
Global
Planned major maintenance program in Texas completed
Settlement of Konya-Ilgin (Turkey) arbitration
Markets:
Stronger forward market conditions in Texas versus year-end 2006 pricing
Financial:
Engaged financial advisor to act as financial advisor for potential sale of
Electroandes
Completed refinancing of GWF (CA) and sale of Tracy (CA)
$145M return of capital to PSEG in March
30
Gas prices and reserve margins have driven spark spreads higher, generating
strong results
Open position sensitivity to market (Calendar 2008):
Natural Gas: +/- $1/MMBtu = +/- $13 M
Heat Rate: +/- 500 Btu/KWh = +/- $25 M
Texas Market Update
$100
~19
15%
6.90
2007*
$130
19.42
16%
10.82
2006
$93
16.50
17%
6.34
2005
$48
11.97
25%
5.42
2004
EBITDA
($M)
Spark
Spread
Reserve
Margin
NYMEX
NYMEX = Forward curve at year-end
Reserve margin c/o ERCOT (both
actuals and June 06 report for
projections)
Spark Spread and EBITDA = actual
amount achieved and projected
(including ancillary revenues, but
excluding MTM gains)
*As of year-end 2006
31
$5.60 - $6.10
Strong earnings growth in 2007 and 2008
$3.77*
$3.71**
37%
15%
$4.90 - $5.30
Holdings
PSE&G
Power
Parent
Operating Earnings by Subsidiary
*Excludes ($.14) Merger Costs, ($.07) Cumulative Effect of an Accounting Change and ($.85) Discontinued Operations
**Excludes ($.03) Merger Costs, ($.70) Loss on Sale of RGE and ($.05) Discontinued Operations
446
347
196
515
262
227
825-905
340-360
130-145
0
(71)
(66)
(50)-(40)
2005
2006
2007
2008
32
Balance sheet improvement underway
Debt at 59% of consolidated capital (excluding
securitization debt) at March 31, 2007
Return of capital of $145M received from Holdings and
$125M dividend from Power in 1Q 2007
Proceeds from sale of Lawrenceburg ($425M) to be
received by end of 2Q and will be used to retire debt
PSEG called for redemption on May 15, 2007, $375M of
outstanding Senior Floating Notes due 2008
33
Summary
Summary
Solid earnings and operating performance
Attractive markets
Pricing signals remain strong
Assets well positioned
Meeting market challenges
Supporting carbon cap-and-trade
Solar initiative
Financial condition strengthening
Earnings growth on track
35