Exhibit 99.1
Public Service Enterprise Group
PSEG Earnings Conference Call
2nd Quarter 2007
August 1, 2007
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. The last
slide in this presentation includes a list of items excluded from Net Income
to reconcile to Operating Earnings, with a reference to that slide included
on each of the slides where the non-GAAP information appears. These
slides are only intended to be reviewed in conjunction with the oral
presentation to which they relate.
2
PSEG
2007 Q2 Review
Tom O’Flynn
Executive Vice President and Chief Financial Officer
President – PSEG Energy Holdings
Q2 2007 EPS Summary
($177)
-
Loss from RGE
$ 217
($ 18)
Discontinued Operations, net of tax
$ 0.68
$ 1.15
EPS from Operating Earnings
$ 209
$ 275
Net Income
($ 8)
$ 293
Income from Continuing Operations
($ 3)
-
Merger Costs
$ 172
$ 293
Operating Earnings
Q2 2006
Q2 2007
$ millions (except EPS)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
4
YTD EPS Summary
($ 177)
-
Loss from RGE
$ 215
($ 23)
Discontinued Operations, net of tax
$ 1.52
$ 2.47
EPS from Operating Earnings
$ 412
$ 604
Net Income
$ 197
$ 627
Income from Continuing Operations
($ 8)
-
Merger Costs
$ 382
$ 627
Operating Earnings
2006
2007
$ millions (except EPS)
Six months ended June 30,
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
5
PSEG – Q2 Operating Highlights
Solid Earnings Growth
PSEG Power continues to deliver improved earnings
Improving margins from energy and capacity prices
BGSS margins at typical levels
PSE&G performance improves
Rate relief supporting returns
Normal weather
Electric demand growth despite weak industrial sales
Holdings earnings decline
Lower spark spreads in Texas
Extended outage in Italy
Ongoing impact of new accounting standards
6
PSEG – Meeting Commitments
Results on track to meet earnings guidance
Meeting commitment to system reliability with major expansion of
transmission system
Addressing NJ’s clean energy commitments
Solar initiative
PSE&G to use more energy efficient equipment and vehicles
Focus on core businesses
Transmission investment
Hudson environmental commitment
Electroandes sale
Meeting our balance sheet goals
S&P outlook revised to stable; commercial paper ratings upgraded
7
PSEG – Markets remain attractive
Reliability Pricing Model
PJM capacity market auctions underway
Reasonable pricing
Capacity largely open to market prices for 2009-2010 and future years
Latin American asset values remain strong
Electroandes sale expected to close around year-end
Actively exploring strategic options for Latin American investments
Investment required in critical infrastructure
8
NJ Global Warming Response Act
Landmark legislation enacted July 6, 2007
Codifies Governor’s pledge
20% reduction in electric demand by 2020
20% renewable resource supply requirement by 2020
20% reduction in carbon by 2020 with 80% reduction by 2050
Addresses “leakage” issue under RGGI with support for emissions
portfolio standard for energy sold in NJ
PSEG, a partner with New Jersey in addressing this environmental
challenge
PSEG working on federal response
9
PSEG
2007 Q2 Operating Company Review
Q2 Operating Earnings by Subsidiary
$ 172
(18)
70
86
$ 34
2006
$ 293
(15)
59
187
$ 62
2007
Operating Earnings
Per Share
$ Millions (except EPS)
(0.07)
(0.06)
Enterprise
$ 0.68
$ 1.15
PSEG
0.28
0.24
PSEG Energy Holdings
0.34
0.73
PSEG Power
$ 0.13
$ 0.24
PSE&G
2006
2007
Quarter ended June 30,
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
11
YTD Operating Earnings by Subsidiary
$ 382
(32)
95
208
$ 111
2006
$ 627
(33)
61
406
$ 193
2007
Operating Earnings
Per Share
$ Millions (except EPS)
(0.12)
(0.13)
Enterprise
$ 1.52
$ 2.47
PSEG
0.38
0.24
PSEG Energy Holdings
0.82
1.60
PSEG Power
$ 0.44
$ 0.76
PSE&G
2006
2007
Six months ended June 30,
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
12
Revising 2007 Operating Earnings Guidance
$4.90 - $5.30
$1,245 - $1,370
($55) – ($45)
$120 - $135
$340 - $360
$840 - $920
Current
($50) – ($40)
Parent
$4.90 - $5.30
Earnings per Share
$1,245 - $1,370
Operating Earnings
$130 - $145
PSEG Energy Holdings
$ 340 - $360
PSE&G
$ 825 - $905
PSEG Power
Prior
$ millions (except EPS)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
13
PSE&G
2007 Q2 Review
PSE&G – Q2 2007 EPS Summary
$ 0.11
$ 0.13
$ 0.24
EPS from Operating Earnings
$ 29
$ 33
$ 62
Income from Continuing Operations/
Net Income
$ 28
$ 34
$ 62
Operating Earnings
$ 258
$ 1,490
$ 1,748
Operating Revenues
Variance
Q2 2006
Q2 2007
$ millions (except EPS)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
15
.13
.07
.03
.03
(.02)
.24
0.00
0.10
0.20
0.30
Rate Relief
Gas .04
Electric .03
PSE&G EPS Reconciliation – Q2 2006 versus Q2 2007
Q2 2007
operating
earnings
Q2 2006
operating
earnings
Weather:
Gas .03
Other
Other .01
Depreciation (.02)
O&M (.01)
Volume/
Demand:
Gas .01
Electric .02
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
16
PSE&G – Q2 Operating Highlights
Operations
Sales growth reflects:
Weather normalized growth in residential and commercial electric customer demand of 3.9% and
2.8%, respectively
Industrial electric demand reflects customer loss
Normal weather
O&M increase less than inflation
Regulatory
PJM approves construction of 500kV Susquehanna to Roseland transmission line
In-service date: June 2012
PSE&G endorses construction of new transmission to improve long-term electric reliability in
New Jersey
New Freedom to Deans – 80 mile, 500kV line
Branchburg to Roseland – 30 mile, 500kV line
Financial
Transmission projects represent potential $1 billion investment over 5-8 years beginning
2008
S&P outlook revised to stable; ratings for commercial paper upgraded
PSE&G issued $350 million 5.8% MTNs due 2037 in May 2007
17
PSEG Power
2007 Q2 Review
PSEG Power – Q2 2007 EPS Summary
$ 176
$ 1,129
$ 1,305
Operating Revenues
$ 0.39
$ 0.34
$ 0.73
EPS from Operating Earnings
$ 107
$ 77
$ 184
Net Income
$ 5
($ 8)
($ 3)
Discontinued Operations, net of tax
$ 102
$ 85
$ 187
Income from Continuing Operations
$ 101
$ 86
$ 187
Operating Earnings
Variance
Q2 2006
Q2 2007
$ millions (except EPS)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
19
.34
.37
.03
.04
(.04)
(.01)
.73
0.00
0.25
0.50
0.75
1.00
Recontracting
PSEG Power EPS Reconciliation – Q2 2006 versus Q2 2007
Q2 2007
operating
earnings
Q2 2006
operating
earnings
O&M
BGSS returns
to normal
levels
Mark-to-
Market
Depreciation,
Interest &
Other
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
20
Prices and operations yield margin
$0
$10
$20
$30
$40
$50
$60
Q2 2006
Q2 2007
PSEG Power Realized Gross Margin
($/MWh)
$36
$48
21
RPM Capacity Auction – Transparent Pricing Model
2007- 2009 Capacity Auction Results
N/A
N/A
$111.92
$29.53
$180.58
$210.11
$5.29
$143.51
$148.80
2008/
2009
2008/
2009
2008/
2009
2007/
2008
2007/
2008
2007/
2008
($/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
Auctions scheduled in the next six months provide transition through the 2010-2011
delivery year.
Future auction pricing to be influenced by increase in number of zones (2010 – 2011
delivery year), load growth, avoided cost for units, and capacity available (unit capability,
retirements, new build).
* 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
PJM released results on July 13 from its second capacity auction under the Reliability
Pricing Model (RPM) for the 2008-2009 delivery year.
May 2008
2011 – 2012
January 2008
2010 – 2011
Annual base auction in May of each subsequent year
October 2007
2009 – 2010
Auction Date
Planning Year
(6/1 to 5/31)
22
Capacity Position
* Delivery year runs from June 1 – May 31
Only a portion of PSEG Power’s capacity was open to realize prices in
the recent PJM-RPM auctions. Increasing amounts are open to realize
prices in future years.
A significant percent of Power’s capacity was contracted as part of
New Jersey’s 3-year BGS* auction (Power currently serving 11
tranches from the 2005 auction, 20 tranches from 2006 and 19
tranches from 2007), as well as other contracting activity.
The balance of Power’s PJM capacity has obtained price certainty
through May 31, 2009 from the first two RPM auctions.
All of Power’s New England capacity has obtained price certainty
through May 31, 2010 as a result of the fixed price nature of the
transitional FCM auction.
Existing capacity hedges support our forecast year-over-year
improvement in capacity margin for 2007 of $125 - $175 million with
similar improvement in 2008.
23
PSEG Power – Q2 Operating Highlights
Operations:
Output increased 2.6%
Nuclear fleet capacity factor unchanged from a year ago at 90%
Combined cycle fleet performance more than offset decline in output from coal-fired capacity
Decision to pursue Hudson back end technology
Continued progress toward independent operation of Nuclear
Markets:
Benefiting from roll-off of below market contracts
Updated BGS contract pricing
Improved pricing in NY and New England
Favorable market conditions support BGSS margins
Financial:
Lawrenceburg sale closed
$325 million in proceeds plus $100 million of tax benefits
$450 million dividend paid to Enterprise
2007-2011 capital budget increase of $200 million to $2.65 billion reflects higher spending to
meet environmental requirements and option on new nuclear
24
PSEG Power - New nuclear under consideration
Power’s 3,496MW of nuclear capability is a critical
resource that provides clean, low-cost power in heavily
constrained markets
Power is targeting $50 million of spending over 2007-
2011 to explore an investment in new nuclear capacity
Hope Creek site available
Efforts focused on understanding licensing and construction risks
Power does not expect to meet the 2008 Federal tax credit
deadline for filing a construction operating license
New nuclear capacity represents a potential solution to
carbon reduction goals
25
PSEG Energy Holdings
2007 Q2 Review
PSEG Energy Holdings – Q2 2007 EPS Summary
$ 177
($ 177)
-
Loss from RGE
($ 0.04)
$ 0.28
$ 0.24
EPS from Operating Earnings
($ 74)
$ 118
$ 44
Net Income
($ 240)
$ 225
($ 15)
Discontinued Operations, net of tax
$ 166
($ 107)
$ 59
Income from Continuing Operations
($ 11)
$ 70
$ 59
Operating Earnings
Variance
Q2 2006
Q2 2007
$ millions (except EPS)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
27
.24
(.01)
.04
(.05)
(.02)
.28
0.00
0.10
0.20
0.30
0.40
PSEG Energy Holdings EPS Reconciliation – Q2 2006 versus Q2 2007
Q2 2007
operating
earnings
Q2 2006
operating
earnings
Lower G&A,
Interest &
Other .04
International:
SAESA .01
PPN .01
Italy (.06)
2006 Sale of RGE
(.01)
Lower lease
income
Global
Texas :
MTM .01
Lower realized
prices (.03)
Resources
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
28
PSEG Energy Holdings – Q2 Operating Highlights
Operations:
Global
Italian biomass generation plant resumed operations in June after extended
outage; full capacity anticipated during third quarter
Markets:
Global
Distribution businesses performing well
Valuations remain strong for international assets
Texas near-term spark spreads lower with mild weather
Financial:
Global
Positive Electroandes buyer interest; assets moved to Discontinued
Operations
SAESA incremental debt ($150 million) expected in August
29
PSEG
2007 Q2 Review
.68
.11
.39
(.04)
.01
1.15
0.00
0.25
0.50
0.75
1.00
1.25
1.50
Utility
Rate relief .07
Weather .03
Volume/
Demand .03
Depreciation (.02)
PSEG EPS Reconciliation – Q2 2006 versus Q2 2007
Q2 2007
operating
earnings
Q2 2006
operating
earnings
Enterprise
Interest .01
Power
Recontracting .37
BGSS .03
O&M .04
Holdings
Lower G&A,
Interest & Other
.04
Other
International
.01
Texas – MTM &
Operations
(.02)
Italy (.06)
Resources
Lease Income
(.01)
Other (.01)
Mark-to-
Market (.04)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
31
1.52
.32
.78
(.14)
(.01)
2.47
0.00
0.50
1.00
1.50
2.00
2.50
Utility
Rate relief .17
Weather .09
Volume/
Demand .05
O&M and Other .04
Depreciation (.03)
PSEG EPS Reconciliation – YTD 2006 versus YTD 2007
Q2 2007
operating
earnings
Q2 2006
operating
earnings
Enterprise
Interest and
Donations (.01)
Power
Re-contracting .60
BGSS .19
O&M .02
Holdings
Lower G&A,
Interest & Other
.03
Sale of Tracy
Project .02
Other
International
.01
Texas – MTM &
Operations
(.10)
Italy (.07)
Resources
Lease Income
(.03)
Depreciation,
Interest and
Other (.03)
* See page 40 for Items excluded from Net Income to reconcile to Operating Earnings
32
Summary of Q2 fundamental factors
Operations
Generation output increased 2.6% over last year’s levels
Distribution and transmission assets provide safe and secure supply under
severe weather conditions
Markets
Markets recognizing value of capacity in constrained zones
Location enhances value for capacity
International asset values above expectations
Financials
S&P revised outlook to stable on PSEG, PSE&G and Power; and
upgraded credit ratings for commercial paper
33
Capital Program – Growth identified
PSEG’s capital initiatives have grown by $1.25 billion over
2007-2011 to $7.0 billion from the $5.75 billion program
outlined at 2006 year-end.
PSE&G’s capital commitment expands to $4.1 billion from
$3.0 billion
Transmission investment of $650M to improve system reliability
Installation of the integrated customer system platform (iPower) over
2007-2009 at a cost of $150 - $175 million
Financing for 30MW of solar capacity over 2008-2009 at a cost of
$100 million
PSEG Power’s capital commitment has increased by $200
million over 2007-2011 to meet environmental obligations
and option on new nuclear.
34
Capital spending by subsidiary
($ Millions)
Capital Spending Update
$1,295
$375
$273
$197
$368
$82
TOTAL
2
1
-
(1)
3
(1)
Parent
1
-
-
-
-
1
PSEG Energy Holdings
217
(22)
(86)
64
190
71
PSEG Power*
$1,075
$396
$359
$134
$175
$11
PSE&G
Change from 2006 10-K
$7,047
$1,201
$1,414
$1,408
$1,681
$1,343
TOTAL
23
31
176
$971
2011
135
24
23
31
34
Parent
170
30
40
31
38
PSEG Energy Holdings
2,668
441
580
816
655
PSEG Power*
$4,074
$919
$765
$803
$616
PSE&G
TOTAL
2010
2009
2008
2007
* Figures for PSEG Power exclude Nuclear Fuel
35
Balance sheet improvement underway
S&P revised its outlook for the credit ratings of PSEG,
PSE&G and Power from negative to stable and upgraded
its rating for the commercial paper of PSEG and PSE&G
from A3 to A2.
Sale of Electroandes is expected around year-end.
36
Cash outlook – Forecast intact
We remain comfortable with a forecast improvement in
cash
Operating income in line with expectations
Asset sales on schedule
Planned rate mechanisms for transmission investments
would provide cash recovery during construction
Excess cash between $1.5 billion and $2.0 billion will be
available through 2011
Excess cash expected to be used to retire debt through
first half of 2008, thereafter for incremental growth and/or
share repurchase
37
196
227
347
262
446
515
120-135
340-360
840-920
(71)
(66)
(55)-(45)
2005
2006
2007
2008
$5.60 - $6.10
Strong earnings growth in 2007 and 2008
$3.77*
$3.71**
$4.90 - $5.30
Holdings
PSE&G
Power
Parent
Operating Earnings by Subsidiary
37%
15%
» 0
* 2005, as reported: Excludes ($.14) Merger Costs, ($.07) Cumulative Effect of an Accounting Change and ($.85) Discontinued Operations
** 2006, as reported: Excludes ($.03) Merger Costs, ($.70) Loss on Sale of RGE, and ($.05) Discontinued Operations
38
Common dividend – targeting long-term payout of 50%
Strong earnings growth provides flexibility to consider
increase in dividend above recent levels
Dividend increase to be evaluated January 2008
Targeting sustainable long-term payout ratio in the range
of 50%
39
Items excluded from Net Income to reconcile to Operating Earnings
Please see Slide 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how
it differs from Net Income.
$ Millions (except EPS)
2007
2006
2007
2006
2007
2006
2007
2006
Merger related Costs:
PSE&G
-
$
(1)
$
-
$
(1)
$
Power
-
(1)
-
(2)
Enterprise
-
(1)
-
(5)
Total Merger Related Costs
-
$
(3)
$
-
$
(8)
$
-
$
(0.01)
$
-
$
(0.03)
$
Loss on sale of RGE (Holdings)
-
$
(177)
$
-
$
(177)
$
-
$
(0.70)
$
-
$
(0.70)
$
Discontinued Operations:
Power - Lawrenceburg
(3)
$
(8)
$
(9)
$
(17)
$
(0.02)
$
(0.03)
$
(0.04)
$
(0.07)
$
Holdings:
Elcho and Skawina
-
$
223
$
-
$
227
$
Electroandes
(15)
2
(14)
5
Total Holdings
(15)
$
225
$
(14)
$
232
$
(0.05)
$
0.89
$
(0.05)
$
0.92
$
Total Discontinued Operations
(18)
$
217
$
(23)
$
215
$
(0.07)
$
0.86
$
(0.09)
$
0.85
$
Quarter Ended June 30,
Six Months Ended June 30,
Impact to PSEG EPS
Quarter Ended June 30,
Six Months Ended June 30,
40