Public Service Enterprise Group PSEG Earnings Conference Call 4 th Quarter and Year-end 2010 February 22, 2011 Exhibit 99.1 |
1 Forward-Looking Statement Readers are cautioned that statements contained in this presentation about our and our subsidiaries' future performance, including future revenues, earnings, strategies, prospects, consequences 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. 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. Although we believe that our expectations are based on reasonable assumptions, they are subject to risks and uncertainties and we can give no assurance they will be achieved. The results or developments projected or predicted in these statements may differ materially from what may actually occur. Factors which could cause results or events to differ from current expectations include, but are not limited to: • 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 going forward, 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 operations of our generating units, • changes in nuclear regulation and/or developments in the nuclear power industry generally that could limit operations of our nuclear generating units, • actions or activities at one of our nuclear units 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 trading risks, • any deterioration in our credit quality, • availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs, • any inability to realize anticipated tax benefits or retain tax credits, • 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, • adverse changes in the demand for or price of the capacity and energy that we sell into wholesale electricity markets, • increase in competition in energy markets in which we compete, • adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in discount rates and funding requirements, and • changes in technology and customer usage patterns. For further information, please refer to our Annual Report on Form 10-K, including Item 1A. Risk Factors, and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this presentation. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws. |
2 GAAP Disclaimer PSEG presents Operating Earnings in addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non-GAAP financial measure that differs from Net Income because it excludes gains or losses associated with Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting, and other material one-time items. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. PSEG believes that the non-GAAP financial measure of Operating Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information. The last slide in this presentation includes a list of items excluded from Income from Continuing Operations to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears. |
PSEG 2010 Q4 Review Ralph Izzo Chairman, President and Chief Executive Officer * * * * * * * |
4 Q4 Earnings Summary $ millions (except EPS) 2010 2009 Operating Earnings $ 303 $ 334 Reconciling Items, Net of Tax (13) 40 Income from Continuing Operations 290 374 Discontinued Operations, Net of Tax (8) (25) Net Income 282 349 EPS from Operating Earnings* $ 0.60 $ 0.66 Quarter ended December 31 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
5 Full-year Earnings Summary $ millions (except EPS) 2010 2009 Operating Earnings $ 1,584 $ 1,567 Reconciling Items, Net of Tax (27) 27 Income from Continuing Operations 1,557 1,594 Discontinued Operations, Net of Tax 7 (2) Net Income 1,564 1,592 EPS from Operating Earnings* $ 3.12 $ 3.09 For the twelve months ended December 31 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
6 PSEG – 2010: Balanced asset mix met market’s challenges 2010 Earnings Within Guidance Operating earnings of $3.12 compared with guidance of $3.00 - $3.25 Results reflect the removal of Texas generating assets to discontinued operations A Year of Accomplishments Completed installation of the Back-End Technology at NJ coal stations Record year for generation for Power Hope Creek received a 100 INPO rating PSE&G won its 9 th consecutive Reliability One Award PSE&G’s electric & gas distribution rate settlement supported improved returns Holdings terminated all remaining international leveraged leases O&M Growth Contained with Focus on Operating Efficiency Balance Sheet Strengthened |
7 PSEG – 2011: Meeting market’s challenges Providing Operating Earnings Guidance for 2011 of $2.50 - $2.75 per share Power’s outlook influenced by lower prices and volume PSE&G benefits from increased investment and full year of rate relief Energy Holdings’ outlook influenced by absence of lease termination gains Responding to Market Challenges Complaint filed at FERC in response to NJ’s LCAPP Legislation U.S District Court action challenging constitutionality under Supremacy and Commerce clauses Foundation for Future Committed to $6.7 billion Capital Program over 2011-2013 Balance Sheet strong 2011 Represents 104 th Year of Paying an Annual Dividend on an Uninterrupted Basis Indicated annual rate of $1.37 per share for 2011 |
8 2009 Operating Earnings* 2010 Operating Earnings* 2011 Guidance $2.50 - $2.75E PSEG – Introducing 2011 Guidance $3.09 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. $3.12 |
PSEG 2010 Q4 Operating Company Review Caroline Dorsa EVP and Chief Financial Officer * * * * * * * |
10 Q4 Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2010 2009 2010 2009 PSEG Power $ 212 $ 260 $ 0.42 $ 0.51 PSE&G 83 68 0.16 0.13 PSEG Energy Holdings 5 12 0.01 0.03 Enterprise 3 (6) 0.01 (0.01) Operating Earnings* $ 303 $ 334 $ 0.60 $ 0.66 Quarter ended December 31 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
11 Full-year Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2010 2009 2010 2009 PSEG Power $ 1,091 $ 1,193 $ 2.15 $ 2.35 PSE&G 430 321 0.85 0.63 PSEG Energy Holdings 49 43 0.10 0.09 Enterprise 14 10 0.02 0.02 Operating Earnings* $ 1,584 $ 1,567 $ 3.12 $ 3.09 For the year ended December 31 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
12 $.66 (.09) .03 (.02) .02 $.60 0.00 0.35 0.70 PSEG EPS Reconciliation – Q4 2010 versus Q4 2009 Q4 2010 operating earnings* Q4 2009 operating earnings* Higher Prices partially offset by Lower Volume .01 WPT (.03) Migration (.01) O&M (.02) Taxes (.04) PSEG Power Electric & Gas Margins (including Rate Increases) .03 O&M .02 D&A (.02) PSE&G PSEG Energy Holdings Enterprise Lower Lease Sales (.03) Other .01 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. Interest |
13 $3.09 (.20) .22 .01 .00 $3.12 0.00 0.65 1.30 1.95 2.60 3.25 PSEG EPS Reconciliation – Full-year 2010 versus Full- year 2009 2010 operating earnings* 2009 operating earnings* 2009 Debt Exchange Benefit (Eliminated in Consolidation) (.04) Interest .04 Higher Volume offset by Lower Prices .00 WPT (.10) Migration (.04) Nuclear (.03) O&M (.01) Taxes (.04) Other .02 PSEG Power Electric & Gas Margin (including Rate Increases) .12 Transmission Margin .04 O&M .04 Weather .02 D&A (.03) Other .03 PSE&G PSEG Energy Holdings Enterprise Lower Lease Sales and Impairment (.09) 2009 Debt Exchange Costs (Eliminated in Consolidation) .04 Interest .03 Other .03 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
14 PSEG – Meeting Challenges by: Delivering superior results on our fleet of well positioned assets Achieving earnings targets with focus on attaining top quartile performance across the enterprise Investing in areas with attractive risk-adjusted returns Maintaining a strong balance sheet |
PSEG Power 2010 Q4 Review * * * * * * * |
16 PSEG Power – Q4 2010 EPS Summary $ millions (except EPS) Q4 2010 Q4 2009 Variance Operating Revenues $ 1,575 $ 1,678 ($ 103) Operating Earnings 212 260 (48) NDT Funds Related Activity, Net of Tax 15 8 7 Mark-to-Market, Net of Tax (28) 3 (31) Income from Continuing Operations 199 271 (72) Discontinued Operations, Net of Tax (8) (25) 17 Net Income 191 246 (55) EPS from Operating Earnings* $ 0.42 $ 0.51 ($ 0.09) * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
17 $.42 (.02) (.03) (.04) $.51 0.00 0.25 0.50 0.75 Higher Prices partially offset by Lower Volume .01 WPT (.03) Migration (.01) PSEG Power EPS Reconciliation – Q4 2010 versus Q4 2009 Q4 2010 operating earnings* Q4 2009 operating earnings* O&M (.02) * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. Taxes (.04) |
18 30,283 29,571 8,899 10,932 12,982 16,224 0 30,000 60,000 2009 2010 PSEG Power – Generation Measures 7,531 6,993 2,509 2,286 3,547 3,532 0 7,500 15,000 2009 2010 Quarter ended December 31 Total Nuclear Total Coal* Oil & Natural Gas – excluding Texas * Includes figures for Pumped Storage PSEG Power – Generation (GWh) 13,587 12,811 Twelve months ended December 31 52,164 56,727 |
19 PSEG Power – Fuel Costs Quarter ended December 31 ($ millions) 2009 2010 Coal 97 82 Oil & Gas 172 160 Total Fossil 269 242 Nuclear 40 41 Total Fuel Cost 309 283 Total Generation (GWh) 13,587 12,811 $ / MWh 23 22 PSEG Power – Fuel Costs* Twelve months ended December 31 ($ millions) 2009 2010 Coal 336 418 Oil & Gas 625 763 Total Fossil 961 1,181 Nuclear 150 164 Total Fuel Cost 1,111 1,345 Total Generation (GWh) 52,164 56,727 $ / MWh 21 24 *Excludes Texas. |
20 PSEG Power – Gross Margin Performance $0 $25 $50 $75 2009 2010 $0 $25 $50 $75 2009 2010 $51 $53 Quarter ended December 31 Twelve months ended December 31 $60 $54 4Q aided by improvement in higher wholesale prices Hope Creek 26-day refueling outage, and planned testing for BET Regional Performance Region 2010 Gross Margin ($M) 2010 Performance PJM $2,953 2010 contribution to gross margin ($M) declined by 1.1% versus year ago; strong production from fossil units combined with weather related summer demand helped to offset the impact of lower prices and customer migration. New England $79 Bridgeport Harbor hurt by low contract prices. New York $48 Low contract prices partially offset by an increase in generation. PSEG Power Gross Margin ($/MWh)* * Excludes Texas. |
21 PSEG Power – Q4 2010 Operating Highlights Q4 output down 5.7%; full-year increase of 8.7% 2010 capacity factor for PS share of nuclear fleet at 91.2% Fossil output for the year at record level Availability of fleet in 4Q allowed Power to take advantage of higher spark spreads Operations Regulatory and Market Environment Financial 2011 BGS auction priced at $94.30/MWh versus $111.50/MWh for expiring contract Approximately 95% of 2011 anticipated coal and nuclear output hedged at average price of $68/MWh PSEG Power considering options as part of NJ procurement process Customer migration expanded to approximately 30% at year-end 2010 BET in service on schedule at year-end 2010 meeting all Consent Decree requirements Texas asset sales for approximately $687 million, $343 per KW |
PSE&G 2010 Q4 Review * * * * * * * |
23 PSE&G – Q4 Earnings Summary $ millions (except EPS) Q4 2010 Q4 2009 Variance Operating Revenues $ 1,882 $ 1,922 ($ 40) Operating Expenses Energy Costs 1,083 1,165 (82) Operation & Maintenance 358 384 (26) Depreciation & Amortization 187 146 41 Taxes Other than Income Taxes 35 33 2 Total Operating Expenses 1,663 1,728 (65) Operating Earnings / Net Income 83 68 15 EPS from Operating Earnings* $ 0.16 $ 0.13 $ 0.03 * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
24 $.16 (.02) .02 .01 .02 $.13 0.00 0.10 0.20 PSE&G EPS Reconciliation – Q4 2010 versus Q4 2009 Q4 2010 operating earnings* Q4 2009 operating earnings* Margins Electric, Gas & Transmission D&A * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. O&M Rate Increase |
25 PSE&G – Q4 Operating Highlights Annual transmission revenue increase of $45 million effective on January 1, 2011 Resolved Societal Benefits Clause with NJ BPU PSE&G’s distribution operations earned a 9.7% return on equity in 2010 Operations Regulatory and Market Environment Financial Economic recovery remains slow but commercial sales up slightly in Q4 O&M remains under control Focused on maintaining reliability |
PSEG Energy Holdings 2010 Q4 Review * * * * * * * |
27 PSEG Energy Holdings – Q4 2010 Earnings Summary $ millions (except EPS) Q4 2010 Q4 2009 Variance Operating Earnings $ 5 $ 12 ($ 7) Net Reversal of Lease Transaction Reserves - 29 (29) Net Income (Loss) $ 5 $ 41 ($ 36) EPS from Operating Earnings* $ 0.01 $ 0.03 ($ 0.02) * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
28 $.01 (.02) .00 $.03 0.00 0.05 PSEG Energy Holdings EPS Reconciliation – Q4 2010 versus Q4 2009 Q4 2010 operating earnings* Q4 2009 operating earnings* 2009 Lease Sales * See page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. Resources Lower Lease Sales (.03) Other .01 Global GWF (Impairment) (.01) Taxes & Other .01 |
29 PSEG Energy Holdings – Q4 Operating Highlights Financial All 18 international leveraged leases have been terminated, reducing potential cash tax liability at year-end to $260 million $320 million on deposit with IRS to meet potential tax liability Redeemed all outstanding recourse debt at Holdings’ level |
PSEG * * * * * * * |
31 PSEG Financial Highlights 2011 operating earnings guidance of $2.50 - $2.75 per share Guidance by operating company Financial risk associated with international lease investments eliminated Financial position strengthened All Holdings’ long-term, recourse debt eliminated at year-end 2010 Debt : capital ratio remained strong at 45% at year-end 2010 |
32 PSEG 2011 Operating Earnings Guidance - PSEG 2011 Operating Earnings Guidance - By Subsidiary By Subsidiary $ millions (except EPS) 2011E 2010A PSEG Power $ 765 – $ 855 $ 1,091 PSE&G $ 495 – $ 520 $ 430 PSEG Energy Holdings $ 0 – $ 5 $ 49 Enterprise $ 5 – $ 15 $ 14 Operating Earnings* $ 1,265 – $ 1,395 $ 1,584 Earnings per Share $ 2.50 – $ 2.75 $ 3.12 * See Page 34 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
33 PSEG Liquidity as of January 31, 2011 Expiration Total Available Company Facility Date Facility Usage Liquidity 5-Year Credit Facility (Power) Dec-12 $1,600 1 $144 $1,456 5-Year Credit Facility (PSEG) Dec-12 $1,000 2 $14 $986 5-Year Bilateral Facility (Power) Sep-15 $100 $100 $0 2-Year Credit Facility (Power) Jul-11 $350 $0 $350 PSE&G 5-Year Credit Facility Jun-12 $600 3 $0 $600 Total $3,650 $3,392 1 Power Facility reduces by $75 million in 12/2011 2 PSEG Facility reduces by $47 million in 12/2011 3 PSE&G Facility reduces by $28 million in 6/2011 PSEG / Power ($Millions) |
34 Items Excluded from Income from Continuing Operations to Reconcile to Operating Earnings Please see Page 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. Pro-forma Adjustments, net of tax 2010 2009 2010 2009 Earnings Impact ($ Millions) Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 15 $ 8 $ 46 $ 9 $ Gain (Loss) on Mark-to-Market (MTM) (PSEG Power) (28) 3 (1) (11) Net Reversal of Lease Transaction Reserves (Energy Holdings) - 29 - 29 Market Transition Charge Refund (PSE&G) - - (72) - Total Pro-forma adjustments (13) $ 40 $ (27) $ 27 $ Fully Diluted Average Shares Outstanding (in Millions) 507 507 507 507 Per Share Impact (Diluted) Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.03 $ 0.02 $ 0.09 $ 0.02 $ Gain (Loss) on MTM (PSEG Power) (0.06) 0.01 - (0.02) Net Reversal of Lease Transaction Reserves (Energy Holdings) - 0.05 - 0.05 Market Transition Charge Refund (PSE&G) - - (0.14) - Total Pro-forma adjustments (0.03) $ 0.08 $ (0.05) $ 0.05 $ For the Three Months Ended For the Twelve Months Ended December 31, December 31, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings (Unaudited) |