Public Service Enterprise Group
A Presentation to the Financial
Community
The Waldorf-Astoria, New York City
March 26, 2007
Forward-Looking 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
Agenda
PSEG Strategic Overview Ralph Izzo
PSE&G Review and Outlook Ralph LaRossa
PSEG Power Frank Cassidy
Overview
Fossil Operations
Nuclear Operations William Levis
--- Break ---
PSEG Power (continued)
Market Overview Kevin Quinn
Financial Outlook Dan Cregg
PSEG Energy Holdings Review and Outlook Tom O’Flynn
PSEG Financial Review and Outlook Tom O’Flynn
Summary Ralph Izzo
PSEG Positioned for the Future
Strategic Overview
Ralph Izzo
President and Chief Operating Officer
Chairman of the Board and Chief Executive Officer Elect*
*Effective April 1, 2007
PSEG’s family of businesses combine the right set of
assets …
Domestic Generation
Regulated Transmission &
Distribution
- Domestic / International
T&D and Generation
- Leveraged Leases
… providing opportunity for growth in their respective markets.
4
Financial
Strength
Operational excellence is our foundation for success …
… and this will yield financial strength that will be deployed
through disciplined investment.
Operational
Excellence
Disciplined
Investment
5
Members of Management Team …
Chairman, President
& CEO Elect*
Ralph Izzo
President and COO
– PSEG Power
Frank Cassidy
President and COO
– PSE&G
Ralph LaRossa
EVP & CFO, PSEG
President & COO –
PSEG Energy
Holdings
Thomas O’Flynn
EVP & General
Counsel
R. Edwin Selover
President and COO,
PSEG Services
Corporation
Elbert C.
Simpson
VP Finance - Power
Dan Cregg
President and CNO
– PSEG Nuclear
William Levis
President – ER&T
Kevin Quinn
VP – Investor
Relations
Kathleen Lally
*Effective April 1, 2007
6
Regulatory
Operations
Financial / Asset Rationalization
Management
Much has been accomplished since the termination of
the merger …
September 2006
October
November
December
January 2007
9/14 – Merger
Termination
Announced
11/16 – PSE&G named
America’s Most Reliable
Electric Utility
11/9 –
PSE&G Rate
Settlements
12/20 – PSEG resumes direct management
of Nuclear stations and Exelon’s senior
management team joins PSEG
11/30 – PSEG
Power Consent
Decree
1/31 – Operating Earnings at
upper end of guidance;
Confirmed strong ’07-’08
9/25 – CEO
Succession
Announced
12/7 – New Senior
Team Announced
12/31 – Achieved 96%
annual nuclear capacity
factor
February
2/22 – Election
of Chairman
and CEO
March
3/26 – Raised
2007
Guidance
1/16 –
Dividend
Increase
1/2 – Sale of
Lawrenceburg
announced
… thereby re-establishing clear operational focus.
7
Announcing increased earnings guidance for 2007 and
2008 …
$0.00
$1.00
$2.00
$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
2007 Guidance
raised by $0.30
Initial
Guidance:
$4.60 -
$5.00
… driven largely by improved operations and power markets.
*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
*
8
Improved earnings causes our dividend payout ratio to
quickly decline below 50% ...
… providing us the flexibility to raise our dividend at a rate
higher than prior increases.
Payout
Ratio
?
*Indicated annual dividend rate
$2.60
$2.50
$2.40
$2.30
$2.20
$2.10
$2.00
2004
$2.20
2005
$2.24
$2.28
2006
$2.34 *
2007
2008
70
65
60
55
50
45
40
35
9
The current business environment …
Convergence of market forces and policy
creates the need to address:
Critical infrastructure requirements
Environmental requirements
Capacity requirements in constrained markets
… creates opportunities for PSEG’s long-term growth.
10
Carbon Reduction – A common focus …
International directives
- More support globally since adoption of Kyoto Agreement in
1997 for reduction in greenhouse gas
On the national level
Multiple carbon legislative proposals are currently under
consideration by Congress
Legislation probable by 2008
Regional Greenhouse Gas Initiative (RGGI)
A nine state collaborative calling for a 10% reduction in
carbon from 2000 – 2004 levels by 2019
In New Jersey, Governor Corzine has signed
Executive Order No. 54 and the Legislature has
introduced multi-sector carbon legislation with
aggressive reduction targets.
… an issue we support and an opportunity for investment
11
NJ Energy Master Plan …
Identifies the same issues as those at the international and
national levels
Provides PSEG the opportunity to:
Meet environmental goals that we have long supported
Expand PSE&G through broader investment opportunities
Support growth in the State’s urban areas through investment in the
“Smart Growth Initiative” program
Expand Power through carbon-free generation
Shape the debate, find the solution and implement the plan
PSEG has pledged its full support to the effort launched by
Governor Corzine
PSEG expects to implement several proposals during 2007 to
support the Energy Master Plan, consistent with PSEG’s
business interests
… an Intersection of Energy – the Environment – PSEG
12
PSE&G – A consistent, strong performer …
Continued top quartile/top decile performance
National ReliabilityOne Award winner – two years running
American Customer Satisfaction Index (ACSI) Customer
Satisfaction Survey
Regulatory agreements provide opportunity to earn
reasonable returns over 2007-2009
Energy Master Plan initiatives fuel long-term growth
New customer information system investment (2007 - 2009)
Advanced Metering technology investment (2008 - 2012)
Renewables and energy efficiency enhanced by utility
participation (2008 – 2020)
… providing stability and multiple platforms for growth.
13
PSEG Power – Solidly positioned …
Nuclear and fossil fleet operating at historically high
levels with opportunity for improvement
Near-term growth fueled by strong markets and roll-off
of below market contracts
Long-term growth influenced by
Tightening reserve margins
Expansion capability at existing sites
Carbon advantaged portfolio
Debate on energy policy will influence investment
Environmental compliance driving current investment
Meeting EMP objectives may require a look at new nuclear
investment
… to provide strong growth for PSEG.
14
PSEG Energy Holdings - Improving returns and reducing
risk …
Diverse asset base with improved stability
Stable Latin American distribution assets in stable economies
Gas-fired combined cycle generation in Texas
A source of capital
Asset sales have reduced risk and contributed to an improved
balance sheet at PSEG
A source of growth
Texas generating assets benefit from location, low cost
structure and opportunity for expansion
… to create opportunities to redeploy capital.
15
Right set of assets…
Large, diverse mix of low-cost, base-load, load-following generating assets
Reliable electric and gas distribution and transmission systems
Stable portfolio of investments in domestic generation, international distribution and leases
Right markets…
Generation assets operate in tightly constrained and growing markets
Nuclear and coal base-load capacity operate in markets where the price for power is set by
gas
Transmission and distribution assets provide service in a modest growth market with
reasonable regulation
At the right time…
Mid-Atlantic, New England and Texas recognizing the value of capacity in constrained areas
A move to control carbon benefits our nuclear-based fleet
Power has opportunity for brownfield development at existing sites
Values are improving for international assets
T&D set to benefit from implementing state’s energy plan
PSEG – Excellent position for today …
… ready for tomorrow
16
PSE&G
Review and Outlook
Ralph LaRossa
President and Chief Operating Officer, PSE&G
Positioned for growth in 2007 and beyond
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive Market
Fundamentals
Growth
Opportunities…
with Manageable
Risk
At or approaching top decile
performance in key operating measures
Reasonable rate case outcome
Valued partner on State policy
Constructive State policies with reasonable
prices to customers
Baseline capital growth of 4-5% in near-term
with State energy policy providing potential
for longer-term growth
18
PSE&G is favorably located …
Attractive market (NJ is ranked 3rd
nationally in personal income per capita)
National ReliabilityOne Award winner -
two years running
Solid regulatory relationships on
traditional utility matters
Reasonable returns and strong cash flow
3,169 M Therms
43,678 GWh
Electric Sales and
Gas Sold and
Transported
1.4%
1.7 Million
Gas
1.2%
2.1 Million
Electric
Projected Annual
Load Growth
2007 - 2011
Customers
11,108
Billing Peak (MW)
1,408
Network Circuit Miles
1.1%
Projected Annual
Load Growth
2007 - 2011
Electric and Gas Distribution Statistics (12/31/06)
Transmission Statistics (12/31/06)
… and is the largest transmission operator in “classic” PJM and the
11th largest electric and gas distribution company in the nation (by
customers).
19
PSE&G’s operational focus …
… measures results at all levels of the business.
20
We achieve great performance …
People
OSHA Incident Rate
Lost Time Severity Rate
Vehicle Accident Rate
Absenteeism
Operations
SAIFI (Excluding Major Storms)
MAIFI (Excluding Major Storms)
Customers
CAIDI (Excluding Major Storms)
O&M Productivity
O&M Expenditures per Customer
O&M Expenditures per MWh Sold
Capital Productivity
CapEx per Customer
CapEx per MWh Sold
Total Expenditures
Expenditures per Customers
Expenditures per MWh Sold
2000
2001
2002
2003
2004
Electric Distribution Trends vs. National Benchmarks
Below Mean
Above Mean
Above Target
N/A
2005
2006
*
*
*
* 2006 projections based on preliminary FERC data
… by setting targets to achieve top level performance and
measuring our progress toward achieving those goals.
21
Great performance is the basis for high levels of
customer satisfaction …
Below Mean
Above Mean
Above Target
N/A
People
OSHA Incident Rate
Lost Time Severity Rate
Vehicle Accident Rate
Absenteeism
Operations
CI Breaks Repaired / Mile of CI Main
3rd Party Damages / Miles of Main & Service
Leak Response Rate
Leak reports / Mile
Gas Damages / 1,000 Gas Locate Requests
Customers
Regulatory Complaint Rate
O&M Productivity
O&M$/Customer
O&M$/Mile of Mains & Services
O&M$/DThm
Capital Productivity
CapEx$/Customer
CapEx$ /Miles of Mains & Services
CapEx$/DThm
Total Expenditures
Total Expenditures per Customers
Total Expenditures per Miles Mains/Services
Total Expenditures per DThm
Gas Distribution Trends vs. National Benchmarks
2000
2001
2002
2003
2004
2005
2006
*
*
*
* 2006 projections based on preliminary FERC data
… and fair regulatory treatment.
22
Typical residential electric bills are better than the
average of our neighboring utilities …
13.7
14.6
13.9
13.0
20.6
16.6
15.0
10.8
0.00
5.00
10.00
15.00
20.00
25.00
PSE&G
Atlantic
Electric
JCP&L
Rockland
Electric
Con Ed
O&R
PECO
PP&L
Based on tariff rates in effect on December 31, 2006
The BGS construct enables us to average in commodity price effects and
avoid major shocks to customer bills.
New York
Pennsylvania
New Jersey
… with the result being best-in-class operations at better than
average prices. In other words, an exceptional value for
customers.
23
While performance continues to get even better, when
adjusted for inflation, …
PSE&G Average Residential Electricity Rates
(1990 – 2007E)
4
6
8
10
12
14
16
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007E
15.4
13.7
9.8
10.4
Source: Rates from US DOE and PSE&G, NJ CPI from Moody’s Economy.com; PSEG
… PSE&G customers pay less for electricity than they did in 1990.
So, service value continues to rise.
Nominal
(What Customers Pay)
Real
(Adjusted for Inflation)
CPI Tracking
24
This is not an electric only story …
1.45
1.52
1.54
1.61
1.84
1.60
1.72
1.28
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00
PSE&G
NJN
E’Town
SJG
ConEd
O&R
BUG
PECO
Based on tariff rates in effect on December 31, 2006
New York
Pennsylvania
New Jersey
… gas customers enjoy superior value as well through best-in-
class operations at better than average prices.
25
Fair outcome on recent gas and electric cases will help
ensure …
Settlement agreement with BPU staff, Public Advocate, and other
parties within weeks of merger failure
Gas Base Rate case provides for $79M of gas margin:
- $40M increase in rate
- $39M decrease in non-cash expenses
Electric Distribution financial review provides $47M of additional
annual revenues
Base rates remain effective at least until November 2009
New Jersey regulatory climate providing a fair return to investors
Opportunity to earn a ROE of 10%
… our continued ability to provide safe, reliable service to
customers and fair returns to shareholders.
26
Regulated electric transmission, electric and gas distribution system
Characteristics
FERC regulation for electric transmission; NJ BPU regulation for electric
and gas distribution
Electric and Gas distribution rates frozen through November 2009
PSE&G’s base investment plan …
Gas
Distribution
36%
Electric
Transmission
14%
Electric
Distribution
50%
Gas
Distribution
35%
Electric
Transmission
11%
Electric
Distribution
54%
2006 Actual
Rate Base = $6.0 B
2011 Base Plan
Rate Base = $7.5 B
Equity Ratio ~ 48%
… coupled with fair regulatory treatment provides a solid base
for future earnings growth.
PSE&G Rate Base
27
PSE&G’s capital program is supported by internally
generated cash …
PSE&G Base Capital Requirements*
(2005 – 2011)
*Excludes impact of NJ Energy Master Plan; Reflects completion of infrastructure improvement projects by 2010. Base CapEx is consistent with 10-K but includes adjusted amounts for ICSP project.
**Excludes Securitization
… and supports a payout ratio of more than 75% in the forecasted
period.
$630
$673
$611
$568
$538
$572
$551
$0
$100
$200
$300
$400
$500
$600
$700
$800
2005
2006
2007
2008
2009
2010
2011
ICSP
RTEP
Dist Reinforcement
Transmission
Gas
Electric
Depreciation & Amortization**
28
$0
$50
$100
$150
$200
$250
$300
2005
2006
2007
2008
2009
2010
2011
New Business
System
Reinforcement
Replacement
Enviro /
Regulatory
Support
2006-2010
Spending Plan
Electric Distribution
$0
$50
$100
$150
$200
$250
$300
2005
2006
2007
2008
2009
2010
2011
$0
$25
$50
$75
$100
$125
$150
2005
2006
2007
2008
2009
2010
2011
Electric Transmission
Gas Utility
* Capital spending includes
allocations from customer
operation and utility
operations support
We are planning to invest over $3B in our infrastructure
between 2007 - 2011, a 6% increase over last year’s plan …
… to improve service quality and earnings growth.
PSE&G Capital Spending by Line of Business
29
Three areas of additional potential growth for PSE&G …
T&D Expansion
Opportunities
PJM backbone transmission
and RTEP projects
Distribution System
Reinforcements
PSEG EMP Strategies
Renewables/Emissions
Strategies
Solar initiative
Greenhouse Gas Offset
Demand-Side Strategies
Advanced Metering
Infrastructure
Residential Energy Efficiency
Commercial and Industrial
Energy Efficiency
PSE&G Facility and System
Efficiency
Integrated Customer
System Platform (ICSP)
Leveraging State of the Art
Technology – SAP CCS
Improving capabilities to
implement strategic
functionality
Enabling GPS technology to
improve dispatching
Creating new opportunities
through web-based
empowerment
Moving to a platform with full
AMI capability
… have preliminary annual earnings impacts in the $25M-$150M
range by 2015.
Potential Range of Capital Spending:
$150M - $1.5B
$140M - $150M
$500M - $1.5B
Aggregate $500M - $3.0B
30
By 2016, NJ’s load is expected to grow by 4,000MW …
Projects to NY
The Neptune HVDC project
(685 MW) connecting
Sayreville to Long Island.
The Linden VFT project
(330 MW) connecting
Linden to Staten Island.
The Bergen O66 project
(670 MW) connecting
Bergen to ConEd’s West
49th Street substation.
The Bergen Q75 project
(1,200 MW) connecting
Bergen to ConEd’s West
49th Street substation.
Projects to NJ
PSEG’s evaluation of
the proposed
backbone
transmission projects:
Northern 500kV
route into
Jefferson and
Roseland
Central 765kV
route into Deans
Southern 500kV
route into Salem.
… yet the net import capability into NJ is only increasing by
~2,000MW indicating need for additional generation, DSM or
transmission imports requiring RTEP investment.
Total Import
Capability
~ 5,000MW
Total Export
Capability
~ 3,000MW
2006-2016 NJ Summer Peak
Growth Rate = 1.8%
Sources: Imports: PSE&G Estimates, Exports and Load Growth: PJM 2006 Regional Transmission Expansion Plan
31
New Jersey Smart Growth Initiative …
Goals
Revitalize the State’s cities and
towns
Promote beneficial economic
growth, development and renewal
for all residents of New Jersey
PSE&G Investment
Additional $101M in distribution
substation reinforcements
Potential for an additional $80M in
distribution system reinforcement
for circuit level overloads and
planned replacement program for
aging infrastructure
… matches well with the PSE&G service territory and will create
long term growth within New Jersey’s urban centers.
The Governor’s plan to revitalize New Jersey’s urban centers has worked
as planned, resulting in PSE&G needing to invest to support its electrical
systems.
32
The New Jersey Energy Master Plan’s challenges for
PSE&G include …
PSEG Key Strategies with the Potential for Helping the State:
1.
Advanced Metering Infrastructure
2.
Solar Green Towns
3.
Residential Energy Efficiency
4.
Commercial and Industrial Energy Efficiency
5.
Other options: Hybrid vehicles, company facility investments,
distributed generation
In support of Governor Corzine’s initiative, PSEG proposed strategies for
helping New Jersey achieve what are truly aggressive targets, and present
opportunities for future growth.
… competing proposals and receiving proper regulatory treatment
(i.e., decoupling and proper regulatory incentives).
33
Advanced Metering Infrastructure …
Advanced Metering Infrastructure (AMI) Benefits
More detailed usage information
on customers
Ability to create tailored price
options to customers
Opportunities for new revenue
streams
Opportunities to meet energy
conservation targets
Opportunities to develop a
competitive market that benefits
all customers
Lower operational costs
Fewer customer billing
complaints
Real time identification of
outages and verification of
service restoration
Reduced energy theft
Remote account connects and
disconnects
Better load monitoring
Improved employee safety
Accurate and timely bills
More accurate information on
service restoration
Pricing options that can result
in lower bills
Customers
Distribution Company
Energy Retailers
Regulators
Billing System
Utility
User
Consumer
Advanced
Metering
Information
System
Wide Area
Networks:
• Telephone
• Wired
• Wireless
Premise
AMI empowers customers to manage their energy usage more efficiently
and provides operational and financial benefits to PSE&G.
… represents up to $600M of capital investment between 2008-2012.
34
Solar Initiative helps to reduce local government energy
expenses and benefits taxpayers/consumers statewide …
NJ RPS requires ~2% of
energy supplied in 2020 to
originate from Solar Sources
~ 1,400 – 1,500MW at 14%
capacity factor
Green Towns Proposal:
PSE&G installations of
Photovoltaic panels on
municipal and school
buildings
Benefits:
Emissions-free power
Lower municipality / school
costs = lower property taxes
… It represents upwards of $1B of capital investment between 2007-
2020 to help achieve New Jersey’s goal for solar energy.
35
EMP and additional T&D investments …
$0
$200
$400
$600
$800
$1,000
$1,200
2005
2006
2007
2008
2009
2010
2011
Representative Potential EMP
Potential Incremental T&D
Base CapEx
Potential PSE&G Capital Requirements
(2005 – 2011)
… provide additional upside growth potential to our base plan.
36
In the near-term, rate relief and normal weather …
$0
$100
$200
$300
$400
2005 Operating
Earnings
2006 Operating
Earnings
Gas Rate Relief
Electric
Financial
Review
Weather/Other
2007
Guidance
2008
Expectations
$262M*
$30M - $40M
$20M - $25M
$340M
to
$360M
$28M - $33M
… provide opportunity to earn allowed returns.
*Excludes $3M and $1M of Merger costs in 2005 and 2006, respectively
ROE Range: 10.5% - 11.5%
Consistent
with 2007
Modest
Sales
Growth
Offset by
O&M
Increases
$347M*
37
Positioned for growth in 2007 and beyond …
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive Market
Fundamentals
Growth
Opportunities…
with Manageable
Risk
Approaching Top Decile Performance in Key Operating
Measures: CAIDI, SAIFI and Leak Response
National ReliabilityOne Award winner – two years
running
Rate Case result reasonable and received within weeks
of the merger failure
Attractive Market
Constructive state policies
Electricity and gas prices better than average of region
and less than 1990 levels on a “real” basis creating
superior value for customers.
Near Term Growth
RTEP
Distribution Reinforcement
ICSP
Long Term Growth
Incremental RTEP
Distribution Reinforcements
EMP and AMI
Manageable Risks
Regulatory Recovery at FERC and BPU
Competing Proposals in EMP
Proper Regulatory Incentives for EMP Investments
38
PSEG Power
Overview
Frank Cassidy
President and Chief Operating Officer, PSEG Power
Record production
Liquid markets structure and
stable NJ BGS model
Favorable energy and capacity
outlook
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive Market
Fundamentals
Growth
Opportunities…
with Manageable
Risk
Tightening reserve margin and site
expansion opportunities
Positioned for growth in 2007 and beyond …
40
Low-cost portfolio
Strong cash generator
Regional focus with demonstrated
BGS success
Assets favorably located
Many units east of PJM constraint
Southern NEPOOL/ Connecticut
constraint
Near customers/load centers
Integrated generation and portfolio
management optimizes asset-
based revenues
* After sale of Lawrenceburg
… which provides for risk mitigation and strong returns.
Power’s assets reflect a diverse blend of fuels and
technologies …
18%
47 %
8 %
26 %
Fuel Diversity – 2007*
Coal
Gas
Oil
Nuclear
Pumped
Storage
1%
Energy Produced - 2006
55%
27%
16%
Oil 1%
Pumped
Storage
1%
Nuclear
Coal
Gas
Total GWh: 53,617
Total MW: 13,600*
41
... which experience higher prices during periods of high
demand.
Power’s assets are located in attractive markets near load
centers …
Current plant locations,
site expansion capability
Bethlehem Energy Center
(Albany)
New Haven
Bergen
Kearny
Essex
Sewaren
Edison
Linden
Mercer
Burlington
National Park
Hudson
Conemaugh
Keystone
Bridgeport
Peach Bottom
Hope Creek
Salem
System Interface
42
Baseload units:
- Very low variable cost, low
bid price into the energy
market
- Always, or almost always
called upon to provide
power to serve load
Load following units:
- Primarily gas-fired,
higher variable cost
- Intermittently called
upon to provide power
to serve load
Peaking units:
- Gas- and oil-fired, high variable cost,
leading to high bid price into the
energy market
- Called upon to provide power only
during periods of peak demand to
serve load
Salem
Hope
Creek
Keystone
Conemaugh
Hudson 2
Linden 1,2
Burlington
Edison
Essex
Bergen 1
Sewaren
Hudson 1
Megawatts (MW)
Mercer 1, 2
Bergen 2
… position the company well to serve full requirement load contracts.
Sewaren
Kearny
Linden / Essex
Burlington 12 / Kearny 12
Peach
Bottom
Bridgeport
New
Haven
Nuclear
Coal
Combined Cycle
Steam
GT Peaking
Power’s assets along the dispatch curve …
BEC
Illustrative
43
… and capitalize on multiple alternatives to grow the generation
business.
Near-term:
Optimize our existing generation portfolio
Environmental improvements at NJ coal stations
Nuclear uprate
Longer-term:
Flexibility to pursue growth in core businesses and regions
Power well-positioned for growth in attractive Northeast markets
Strong and improving operations
Attractive cash flow
Opportunities for growth in tightening markets
Expansion possibilities at multiple existing brownfield sites
Proximity to high-priced New York City market
Capacity market mechanisms may support moderate expansion of existing
peaking fleet
Preliminary consideration of nuclear expansion
From a position of financial strength, we will make
disciplined investments …
44
PSEG Power
Fossil Operations
Total Fossil Output (GWh)
A Diverse 10,000 MW Fleet
25,000
20,000
15,000
10,000
5,000
0
2002
2003
2004
2005
2006
Coal
Combined Cycle
Peaking & Other
2,400 MW coal
3,200 MW combined cycle
4,400 MW peaking and other
Strong Performance
Continued growth in output
Improved fleet performance
Achieved resolution regarding
Hudson / Mercer
… contribute to a low-cost fossil portfolio in which two-thirds of
fleet output is from coal facilities.
Strong Fossil operations …
46
Improved unit performance
$60M - $70M (pretax)
Capture O&M efficiencies in
execution of planned maintenance
$15M - $25M (pretax)
Fossil’s value enhancement plan …
$95M
$75M
2006
Existing Fleet
Improved unit reliability
and output
Outage management
Cost management
… resulted in achieving its target of over $75M in 2006 versus 2004.
Reduced wholly-owned Coal unit
forced/maintenance outage rate by
more than 2% (~ 24 days per year)
Reduced Combined Cycle unit trip
events by 50%
Increased Combustion Turbine
units operation by 20-30% with
continued 99% starting reliability
Met or bettered planned
outage duration targets
Met outage spending
plan that included
built-in 3% efficiency
targets
Non-Outage O&M lower
by $0.70 MWH
47
$490
$600 - $750
2007 – 2010
Total
($ million)
2010
Mercer**
2010
Hudson Unit
2
Completion
Date
Environmental Capital Requirements
Emissions Control Technology Projects
- NOx control – SCR
- SO2 control – Scrubber
- Hg and particulate matter control -
Baghouse
Hudson Unit 2* (608 MW)
NOx control – SCR installation complete
SO2 control – Scrubbers
Hg and particulate matter control –
Baghouse
Mercer (648 MW) – Units 1&2
**EPC Contract signed
Our environmental strategy…
… will help preserve the availability of our fossil fleet.
*PSEG Fossil to notify USEPA and NJDEP by end of 2007 on decision to install emissions controls at Hudson Unit 2
** Capital investment $40M above 2006 10-K disclosure
Power’s New Jersey coal units are
mid-merit, with capacity factors
averaging 50% to 60%
As markets tighten, increased
production is anticipated
48
… will continue to drive enhancements to Power’s financials
Conduct of
Operations
Engineering
Programs
Conduct of
Maintenance
Outage
Management
Financial
Controls
36-Month
Plans
(Performance
Metrics,
Targets,
Specific
Action Items
and Owners)
Shorter
Outage
Durations
Improved
Reliability
Better Fuel
Efficiency
Minimize
Recurring
O&M
Achieving
ICAP Ratings
Compensation
(Targets/Payouts)
Peer
Benchmarking
Core
Competencies
Business
Results
Fossil’s 2007 activities …
49
PSEG Power
Nuclear Operations
William Levis
President and Chief Nuclear Officer, PSEG Nuclear
Operated by PSEG Nuclear
PSEG Ownership: 100%
Technology:
Boiling Water Reactor
Total Capacity: 1,061MW*
Owned Capacity: 1,061MW
License Expiration: 2026
Operated by PSEG Nuclear
Ownership: PSEG - 57%,
Exelon – 43%
Technology:
Pressurized Water Reactor
Total Capacity: 2,304MW
Owned Capacity: 1,323MW
License Expiration: 2016 and
2020
Operated by Exelon
PSEG Ownership: 50%
Technology:
Boiling Water Reactor
Total Capacity: 2,224MW
Owned Capacity: 1,112MW
License Expiration: 2033
and 2034
Hope Creek
Salem Units 1 and 2
Peach Bottom Units 2 and 3
Our five-unit nuclear fleet …
… is a critical element of Power’s success.
*Uprate of 125MW scheduled for fall 2007
51
We have exceeded our expectations for nuclear output …
GWh of NJ Nuclear Output (000s)
15
18
20
2004
2005
2006
… while reducing costs of operation.
O&M Incurred Cost ($M)
431
374
357
2004
2005
2006
At our investor conference in 2004, we said we would
increase output by nearly 3,000 GWh by 2007
We achieved that result in 2005, and increased output
further in 2006
52
January – September 2005
Critical mass of talent from
Exelon
Near-term focus
Complete Hope Creek
outage
Enhance operational
focus and discipline
Increase accountability
Reinforce management
behaviors
… producing several early wins and immediately lifting morale.
The operating service agreement had an immediate
impact at the Salem and Hope Creek nuclear stations …
Results
Successful Salem outage
Recovered maintenance
training programs
Recovered security
program
53
September 2005 – December 2006
Realign organization around
stations
Increased accountability / line
ownership
Implement new processes
Work management
Outage preparation / execution
Fiscal responsibility
Capital projects planning /
execution
Expand critical mass
Ensure station alignment top to
bottom
… and continued improvements have been recognized.
Performance gaps have been closed …
Results
Safety Conscious Work
Environment (SCWE) and
Identification and Resolution of
Problems (PI&R) issues
cleared
Record outage performance
Top quartile production
54
82.3%
65.6%
92.0%
82.8%
92.6%
97.2%
50%
60%
70%
80%
90%
100%
Salem
Hope Creek
Capacity Factor
6.5%
20.2%
0.9%
7.6%
0.7%
0.4%
0%
6%
12%
18%
24%
Salem
Hope Creek
Forced Loss Rate
81.0
64.8
95.2
65.0
99.2
91.4
60
70
80
90
100
Salem
Hope Creek
INPO Index
80.2%
97.4%
84.7%
99.9%
99.8%
100.0%
50%
60%
70%
80%
90%
100%
Salem
Hope Creek
Summer Capacity Factor
… and corresponds directly with improved regulatory relations and
financial outcomes.
Improvement in nuclear performance can be seen in
numerous measures of operations ...
2004
2005
2006
55
Complete Management Model
implementation
Maintain operational focus
Resume independent
operation
Establish succession plan
… which will strengthen Power’s results going forward.
Continuing efforts are focused on sustaining the
improving trend …
Maintain stakeholder
confidence
Preserve nuclear options
for Power
Ongoing Initiatives
Expected Results
56
Day to day support
Provide key Exelon managers and individual contributors
with critical skills
Perform key functions (totally or partially)
Licensing / Fuels
Corporate Support
Provide independent corporate oversight
Ensure continued performance improvement - best
practices / benchmarking
Perform comparative audits / peer checks
Provide engineering technical support
Program / SME
Implement management controls
Participate in strategic industry organizations
… in establishing independent operations.
Critical support has been received from Exelon …
57
Stage 1
Identify Requirements
(Jan-Mar)
Determine organization required
Complete leadership staffing
Review Management Model Controls
Identify Critical Skill Gaps
Identify industry participation and
support
Stage 2
Create Plan
(Mar-Jun)
Develop plan to resume functions
from Exelon
Transition into station organization
Transition into Corporate Function
Transition into Operations Support
Organization
Outsource
Eliminate
Complete organization staffing
Stage 3
Execute Plan
(Jul-Dec)
Implement Plan
Check and adjust accordingly
Resume PSEG Corporate Support
How we execute day to day will not change.
How we manage the corporate support functions will be determined.
Continue Day to Day Management Model Execution
… is continuing to be implemented.
The plan for establishment of independent operations …
58
CNO & Sr. VP
Station VP Salem
Station VP Hope Creek
Plant Support Manager
INPO Rotational
Assignments
Regulatory Assurance
Director
VP Nuclear
Assessments
Engineering Director
Training Director
Regulatory Assurance
Manager
Salem Plant Manager
Nuclear Oversight Manager
Operations Director
Maintenance Director
Work Management Director
Radiation Protection Manager
Chemistry Radwaste and
Environmental Manager
Engineering Director
Training Director
Regulatory Assurance
Manager
Hope Creek Plant Manager
Nuclear Oversight Manager
Operations Director
Maintenance Director
Work Management Director
Radiation Protection Manager
Chemistry Radwaste and
Environmental Manager
NDO
Outage Services Sr. Manager
Projects Management Director
Manager Emergency
Services/Security
Maintenance Services Director
Manager Nuclear Fuel
Fire Department
Superintendent
Site Supply Manager
NOS Director
SCWE Leader
Emergency Preparedness
Manager
Corrective Action Manager
Director of Finance
Communications
Human Resources
Legal
IT/TI
… as personnel have transitioned to Power.
Critical mass has been achieved …
0
Superintendent / Supervisor
6
Individual Contributor
17
Director / Manager
6
Senior Leadership / PM
2005
Organization Level
Exelon Employees
PSEG Employees
59
8
1
2
0
2007
0
Superintendent / Supervisor
6
Individual Contributor
17
Director / Manager
6
Senior Leadership / PM
2005
Organization Level
… as personnel have transitioned to Power.
Critical mass has been achieved …
President and CNO
Station VP Salem
Station VP Hope Creek
VP, Operations Support
INPO Rotational
Assignments
Licensing
Director, Nuclear
Assessments
Engineering Director
Training Manager
Regulatory Assurance
Manager
Salem Plant Manager
Nuclear Oversight Manager
Maintenance Director
Work Management Director
Radiation Protection
Manager
Chemistry Radwaste and
Environmental Manager
Engineering Director
Training Manager
Regulatory Assurance
Manager
Hope Creek Plant Manager
Nuclear Oversight Manager
Operations Director
Maintenance Director
Work Management Director
Radiation Protection
Manager
Chemistry Radwaste and
Environmental Manager
Outage Services Sr.
Manager
Engineering Services
Director
Security Director
Fire Department
Superintendent
Performance Improvement
Director
Site Supply Manager
Employee Concerns
Manager
Director of Finance
Communications
Human Resources
Legal
IT
Manager Nuclear Projects
Operations Director
Manager Nuclear Projects
Nuclear Fuels
Director
Emergency Preparedness
Manager
Exelon Employees
PSEG Employees
Function provided by Exelon
60
Continue safe and reliable operations
Two refueling outages
Hope Creek extended power uprate
Inventory control
Project implementation
Succession planning
Act as One
… further embedding a culture of success and winning.
2007 station priorities will drive focus for the year …
61
PSEG Power
Market Overview
Kevin Quinn
President, PSEG Energy Resources & Trade
Electric markets have improved significantly
Capacity pricing mechanisms are being implemented in
Power’s key markets
Power’s hedging strategy enables stable cash flows
and opportunities for growth
Gas asset optimization and other products round out a
strong portfolio
Overview
63
$20
$30
$40
$50
$60
$70
2002
2003
2004
2005
2006
2007 Est(2)
2008
Fwd(2)
2009
Fwd(2)
$0
$3
$6
$9
$12
$/mmbtu
$/MWh
… benefiting Power’s coal and nuclear fleet.
(1)
Central Appalachian coal
(2)
Forward prices as of March 8, 2007
Increases in fossil fuels have driven up energy prices …
Electricity
(left scale)
Coal(1)
(right
scale)
Natural Gas
Henry Hub
(right scale)
64
$20
$30
$40
$50
$60
$70
2002
2003
2004
2005
2006
2007
Est
2008
Fwd
2009
Fwd
$/MWh
PS Zone Basis
Historical spot basis
Forward basis
Large portion of sales are into forward market where forward basis has remained high.
Zonal prices in the eastern portions of PJM have
historically been higher than the Western Hub…
… allowing Power to realize higher prices due to its favorable
location.
(1)
Forward prices as of March 8, 2007
(1)
(1)
(1)
65
-
50
100
150
200
250
300
1999
2000
2001
2002
2003
2004
2005
2006
-
50
100
150
200
250
300
1999
2000
2001
2002
2003
2004
2005
2006
Source: Data per PJM’s State of the Market report March 2007
*Annualized payment required to make an investment
-
50
100
150
200
250
300
1999
2000
2001
2002
2003
2004
2005
2006
… which may serve to tighten reserve margins.
Despite the recent run up, prices have not
consistently supported new capacity construction …
Economic Dispatch Net Revenue
20-year Levelized Fixed Cost*
Combustion Turbine ($/KW-yr)
Combined Cycle ($/KW-yr)
Pulverized Coal ($/KW-yr)
66
Regional Generation Balance 2007 - 2011
(Percent above or below target Reserve Margin)
7%
5%
5%
4%
3%
5%
2%
-1%
-2%
-3%
-1%
-1%
-4%
-7%
0%
-10%
-5%
0%
5%
10%
PJM (RM Target = 115%)
NY ISO (116.5%)
NE ISO (114.5% implied)
2011
2010
2009
2008
2007
Data Source: PJM, NY ISO and NE ISO
Reserve margins in the key Power markets are expected
to continue to decline …
… which should sustain higher energy prices as heat rates expand.
67
May 2008
2011 – 2012
January 2008
2010 – 2011
Annual base auction in May of each
subsequent year
October 2007
2009 – 2010
July 2007
2008 – 2009
April 2007
2007 – 2008
Auction Date
Planning Year
(6/1 to 5/31)
New England
Forward Capacity Market (FCM) began
12/1/06
Transition period prices have been
established
Increases from $37/KW-yr to
$49/KW-yr through May 2010
Descending clock auction
First auction scheduled in 2008 for June
2010 delivery
… to provide meaningful market signals for capacity expansion.
PJM
FERC approval 12/22/06
Anticipated implementation 6/1/07
Locational pricing
4 Locational Delivery Areas (LDAs);
23 in 2010
Auction schedule:
New York
Has a market demand curve for capacity
payments
PJM and New England are strengthening the design of
capacity markets …
68
$0
$20
$40
$60
2001
2002
2003
2004
2005
2006
2007
Range of
recent prices
for ’07 – ’08
year
Capacity Prices
Sept 2006
$45/KW-yr = $123/MW-day
@ 50% load factor » $10/MWh
More structured, forward-
looking, transparent pricing
model
Gives prospective investors in
new generating facilities more
clarity on future value of
capacity
Pricing based on “cost of new
entry” (CONE): standard
simple cycle gas turbine
adjusted for location
Sends locational pricing signal
to encourage expansion of
capacity where needed for
future market demands
… in which longer-term price signals are provided.
PJM’s Reliability Pricing Model (RPM) reflects a change
in market design …
Recent market activity has shown considerable price increases
for the 2007/2008 year.
Feb 2007
69
… provides a transparent market signal.
The RPM demand curve …
*Based on 170MW CT with 12% IRR levelized over 20 years ($72/KW-yr gross for New Jersey)
Supply
% +/- of Installed Reserve Margin (or Local Delivery Area Requirement)
Existing supply units
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
-10
-9
-8
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Clearing Point: All
units to the left of this
point receive 0.6x Net
CONE
At 1% above IRM, Capacity
Payment = Net CONE
Units not taken
receive no
capacity payment
ILLUSTRATIVE
70
As RPM is implemented, the capacity market construct
will recognize locational differences …
… and will provide higher capacity payments to units in constrained
zones.
4 Locational Delivery Areas (LDAs)
2007 - 2009
2010 and beyond
Potential 23 LDAs (Including 2 in
PSEG Zone)
(PJM Mid-Atlantic + APS; Eastern MAAC;
Southwestern MAAC; Rest Of Market)
71
… as market fundamentals and regulatory policy impact market
conditions.
Looking ahead, Power is well positioned to benefit from
generation value improvement …
Tightening reserve margins should:
Put upward pressure on capacity prices, and
Drive heat rate expansion if baseload additions are
insufficient
The implementation of carbon is becoming more likely
Anticipated to put upward pressure on prices
Nuclear generation stands to benefit from carbon constraints
72
-
1,000
2,000
3,000
4,000
5,000
6,000
2007
2008
2009
2010
Nuclear / Pumped Storage
Coal
CC
Steam / CT
Existing Load + Hedges + Future BGS
Existing Load + Hedges
Existing Hedges
2007
2008
2009
2010
… while preserving market growth opportunities.
Power’s hedging strategy aims to balance stable
earnings …
0 – 20%
35 – 50%
90 – 100%
~100%
Percent of Power’s coal and nuclear energy output
hedged (total portfolio)
2010
2009
2008
2007
PJM RTC (GWh)
73
-
10,000
20,000
30,000
40,000
50,000
2007
2008
2009
2010
Year
Coal
Uranium
Contracted sales
… is aligned with its low-cost generating output and our hedging
strategies.
Power has contracted for 100% of its nuclear uranium fuel through 2011 and
approximately 70% of its coal needs through 2009.
Coal and Nuclear Fuel
Power’s hedging of coal and nuclear fuel …
Gas supply secured
based on sales of output
-
10,000
20,000
30,000
40,000
50,000
2007
2008
2009
2010
Year
Nuclear and Coal output
Contracted sales
Coal and Nuclear Output
74
The New Jersey BGS auction successfully mitigates risk
for both suppliers and customers …
… and is a critical component to Power’s hedging strategy.
20,000
4,000
8,000
12,000
16,000
2002
2003
2004
2005
2006
2007
2008
2002 FP
Auction
1 Year
170
Tranches
2003 FP
Auction
10
months
104
Tranches
2003 FP Auction
34 months
51 Tranches
2004 FP
Auction - 1 Yr.
50 Tranches
2004 FP Auction - 3 Years
51 Tranches
2006 FP Auction Load
54 Tranches
2005 FP Auction Load
50 Tranches
2007 FP Auction Load
51 Tranches
New Jersey BGS - FP Auction
2009 2010
Note: 1 Tranche = ~100MW Peak
75
2003 Auction
2004 Auction
2005 Auction
2006 Auction
2007 Auction
Capacity
Load shape
Transmission
Congestion
Ancillary services
Risk premium
Full Requirements
Round the Clock
PJM West
Forward Energy
Price
$33 - $34
$36 - $37
$55
$55
$66
$44 - $46
~ $21
~ $18
~ $21
$102
$67 - $70
~ $32
Increase in Full Requirements Component Due to:
Increased Congestion (East/West Basis)
Increase in Capacity Markets/RPM
Volatility in Market Increases Risk Premium
$99
~ $41
$58-$60
Market Perspective – BGS Auction Results
… has enabled successful participation in each BGS auction.
Power’s fleet diversity and location ...
76
Gas Asset Optimization
Large wholesale provider to PSE&G and others
Storage capacity of 80 Bcf (in the Gulf and market regions)
Firm transportation of 1.1 Bcf/Day (on ten pipelines)
Off-system sales margins shared with residential customers
Commercial & Industrial customers (C&I) sales priced monthly at market
Storage spreads capture Summer/Winter price differential on C&I sales
Weather and price volatility drive results
Colder than normal weather increases unitized fixed cost recovery
Ancillary Services
Emissions
… to round out a robust portfolio.
In addition to energy and capacity, Power has other
attractive sources of revenues …
77
Electric markets have improved significantly
Capacity pricing mechanisms are being implemented
in Power’s key markets
Power’s hedging strategy enables stable cash flows
and opportunities for growth
Gas asset optimization and other products round out a
strong portfolio
Summary
78
PSEG Power
Financial Outlook
Dan Cregg
Vice President – Finance, PSEG Power
Favorably Located Diverse Portfolio
Operational Improvements
Energy Market Improvements
Capacity Market Design Changes
Generation Value Improvement
Growth Opportunities
V
A
L
U
E
… fuel Power as the growth engine for PSEG.
Fundamental strengths and growth drivers …
80
-
10,000
20,000
30,000
40,000
50,000
2007
2008
2009
2010
A significant portion of Power’s low-cost coal and nuclear
output has been sold at increasingly attractive rates …
… with remaining output available to capture future market opportunities.
2007
$63-65/MWh
2008
$65-67/MWh
2009
$72-75/MWh
Power’s Generation Output
Other output
Contracted coal & nuclear output
Open coal & nuclear output
Contracted Prices
Estimated impact of $10/MWh
PJM West RTC price change*
$0.01 - $0.10
$0.45 - $0.80
*Assuming normal market dynamics
Includes roll off of 4 year,
500MW RTC contract ($100M+)
and other recontracting
81
0%
20%
40%
60%
80%
100%
2007
2008
2009
2010
Power will realize increasing margin improvement …
… through the repricing of capacity at market prices.
2007
$20-24/KW-yr
2008
$30-34/KW-yr
2009
$39-43/KW-yr
Total Capacity
Contracted Capacity
Open Capacity
Contracted Prices
Estimated impact of $10/KW-yr
capacity price change
$0.05 - $0.10
$0.10 - $0.20
82
Total Generating Capacity
PSEG Power
PJM
NY
NE
Total Capacity 13,600MW*
(1,500MW under RMR)
*After sale of Lawrenceburg
… with a similar increase anticipated in 2008 due to a full year of RPM,
and further increases as more capacity comes off existing contracts.
Capacity markets provide a meaningful increase in Power’s
expected margin ($125M - $175M) for 2007 over 2006 …
83
$0
$10
$20
$30
$40
$50
$60
$70
2005
2006
2007 Est
2008 Est
2009 Est
… are expected to drive significant increases in Power’s gross
margin.
Operational improvements and recontracting in
current markets …
Realized Gross Margin ($/MWh)
Energy
Capacity
(Energy prices based on recent forward markets;
Illustrative capacity prices based on recent market for 2007/2008 in all years)
84
… drive the increase in PSEG’s 2007 earnings guidance.
* Excludes Merger costs of $12M in 2005, Cumulative Effect of a Change in Accounting Principle of $16M in 2005 and Loss from Discontinued
Operations of $226M and $239M in 2005 and 2006, respectively
$515M*
$446M*
2005 Operating
Earnings
2006 Operating
Earnings
Energy
Capacity
Other
2007 Guidance
$825M to
$905M
$15M - $25M
$220M - $260M
$75M - $105M
Improvements across the portfolio …
85
… drive PSEG’s earnings expectation for 2008 and beyond.
Drivers of 2009 Earnings
Recontracting
Operational excellence
Free cash flow
Growth opportunities
Further improvements at Power…
$825M to
$905M
2007 Guidance
Energy
Capacity
Other
2008
Expectations
2009
86
Highest output ever from Nuclear
Highest output ever from Fossil
Balanced hedging strategy at ER&T
Strong, liquid markets
Sustainable BGS auction structure
Consent decree resolution
Rising energy prices
Favorable capacity market design
Diverse assets in constrained zones
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive Market
Fundamentals
Growth
Opportunities…
with Manageable
Risk
Near term – Hope Creek Uprate, RPM auctions
Longer term –
Tightening reserve margins
CO2 benefit to nuclear
Site expansion opportunities
Surrounding market opportunities
New nuclear investment potential
Manageable risk –
Enhanced operations
Balanced hedging strategy
Existing sites
Increasingly stable earnings base through
capacity market design
Positioned for growth in 2007 and beyond
87
PSEG Energy Holdings
Review and Outlook
Tom O’Flynn
President and Chief Operating Officer,
PSEG Energy Holdings
Positioned for growth in 2007 and beyond
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive
Market
Fundamentals
Growth
Opportunities…
with
Manageable
Risk
Global
Resources
International Distribution
Domestic Generation
Improving valuations
and debt capacity could
present opportunity to
redeploy capital
Opportunities for:
Expansion, Hedging
and Debt capacity
Residual
value
upside
Stable F/X rates and
sovereign spreads
Tightening reserve
margins, gas-driven
market
Tax issues
monitored
closely
Reasonable rate case
outcomes
ERCOT – liquid and
transparent
Credit
ratings
Focus on Safety,
Reliability and line
losses
Forced outage
rates;
Heat rates
89
Holdings’ Portfolio has …
Two businesses focused on maximizing value of existing investments
$130M - $145M Projected 2007 Earnings Contribution
Represents 10% of PSEG’s total earnings
70% of earnings from Global (50% US Generation, 50% Chile & Peru Distribution)
30% from Resources
… a diverse asset base with improved stability.
PSEG
Resources
Chile & Peru
Distribution
Texas Merchant
Generation
(2,000 MW)
International
Generation
Other fully
contracted
US Generation
Two 1,000MW CCGT 7FA plants with record
2006 results in an attractive market
395MW owned primarily in California and
Hawaii fully contracted with utilities / state
agencies
1.9M customers served
by 3 company groups
Very modest
contributor in a sector
with decreased
investment
2006 Earnings Contribution
86% of the Resources
portfolio is in energy-related
leveraged leases
2007 Earnings Contribution
90
ERCOT Electric Zones
Odessa
(West Zone)
Projects are connected to
the 345kv transmission
system (red lines)
Guadalupe
(South Zone)
Projects connect to multiple NG pipelines for reliability of fuel
supply
Global’s Texas assets are a driver of Global’s results …
Two 1,000MW CCGT 7FA plants built
in 2000, 2001
Increased ownership from 50% to 100% in
2004
2006 Forced outage rate less than 2%
Strong capability in ancillary services
20% hedged from 2008 – 2010 at ~ $19/MWh
spark spread
Marketing agreement with BP provides credit
support and broad market access
Low leverage at $185/kw project debt
20%
13%
Reserve
Margin
2007*
2.5%
2.5%
Annual
Growth
20,000
4,625
Total
Gas
Nuclear,
Coal,
Hydro
Load
Zone
12,500
7,500
16,750
South
Guadalupe
3,900
625
4,100
West
Odessa
… which provided record results in 2006 and offer a strong outlook.
Gas units are on margin – competitive heat rates lead to 50-60% capacity factors
*Reserve Margins provided by ERCOT
91
2006 benefited from open position
Open position sensitivity to market (Calendar 2008):
Natural Gas: +/- $1/MMBtu = +/- $13 M
Heat Rate: +/- 500 Btu/KWh = +/- $25 M
Potential growth opportunities:
Potential opportunity for reasonable return at appropriate valuations
Current debt levels offer additional leverage capacity
The Texas Market has shown significant improvement …
$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
Gas Prices and reserve margins have driven spark spreads higher, generating strong results:
… and with strong demand growth and uncertain future capacity
additions, reserve margins may be pressured, presenting
opportunities.
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)
92
Global’s Latin American investments …
$1.4B invested at December 31, 2006
Approximately $100M - $120M in annual dividends and
contribution at OpCo level
70% Chilean distribution companies (SAESA &
Chilquinta Group)
20% Peruvian distribution company (Luz del Sur)
10% Peruvian hydro-generation company
(Electroandes)
Regulatory model for distribution companies
Reasonable treatment in rate cases (next major
cases in 2009)
Cost of energy is a pass-through
PSEG distribution
company
Peru
Lima
Edelaysen
Frontel
SAESA
II
III
IV
V
VI
VII
VIII
X
XI
XII
IX
RM
Creo
STS (transmission)
Chilquinta,
Casablanca,
Luz Parral and
Luz Linares
Chile
100%
180
—
Electroandes
300
1,939,000
Total
38% (PSEG), 38% (Sempra),
24% (Public)
—
788,000
Luz del Sur
50% (PSEG), 50% (Sempra)
—
534,000
Chilquinta
100%
120
617,000
SAESA
% Ownership
MW
# of Customers
… are primarily in stable distribution companies in Chile.
93
Global’s Distribution Companies provide …
Improved returns and valuations with upside
Stable and growing earnings and cash flow
Annual sales growth of 7% dampened by 1-2% projected F/X devaluation
Low Sensitivities: 5% F/X fluctuations yield $5M change; Rate case impact +/- $5M
Organic growth opportunities
Continued focus on cost reductions and decreased energy losses at SAESA
Risk profile has significantly improved
Macroeconomic growth, economic policies
Chile’s credit rating is A, Peru BB+ and improving
… stable earnings, cash flow and growth with decreased risk
profile.
50
150
250
350
2003
2004
2005
2006
Chile
Peru
450
475
500
525
550
575
600
625
2003
2004
2005
2006
2007
2008
2.75
3
3.25
3.5
3.75
Chile
Peru
Actual
Projected
Chilean Peso
Peru Sol
Source: March 2007 LatAm Consensus – LatINFOcus (eop)
Sovereign Spreads to US Treasuries
F/X Appreciated and Stabilized
94
57%
$104
$41
$(40)
$20
$108
$168
$(35)
$(25)
Reshaped Portfolio - Improved risk profile by reducing
capital invested in non-strategic assets …
… while increasing returns and sharpening focus on G&A.
2004
2006
$2.6B
$2.0B
Chile &
Peru
US
Other
$900M
$400M
$1.3B
$150M
$500M
$1.4B
42%
16%
42%
15%
60%
25%
$296M**
48%
45%
2004
2006
2007
Projected
$202M**
$210M-$230M**
Composition of Global’s Pre-tax
Contribution by Region*
G&A
Chile &
Peru
US
Other
29%
51%
20%
8%
35%
57%
7%
Global’s Invested Capital
$500M
~$1 B
12/31/07
Projected
$1.6B
69%
31%
*Includes both consolidated and unconsolidated investments after project debt, before allocation of parent debt
**Excludes interest, taxes, G&A and other corporate items to arrive at Global’s Operating Earnings
95
Global’s near-term strategy is to improve returns and
further reduce risk …
International – reducing generation risk
Proactively exploring potential sale of Electroandes ($160M Book Value)
Significant amount of interest expressed in non-strategic asset
Opportunity to reallocate capital if valuations attractive
Continue to assess opportunities regarding remaining modest international generation
investments (Turboven, PPN and Prisma - aggregate $150M investment)
Economically relever distribution companies in Chile & Peru – returning capital and
improving returns ($150M - $250M)
Incremental capital available
Optimize operations in distribution companies to improve returns and increase values
Will consider further monetizations as appropriate based upon valuations and alternate
use of capital
Ability to further leverage Texas assets could also generate incremental capital
… by continuing to return capital through opportunistic monetizations
and debt financing.
96
Resources is focused on its current investment
portfolio …
$20
$60
$100
$140
2006
2007
2008**
Cash flows decrease as the portfolio matures,
with fluctuations as leases terminate
Taxes
Equity
Rent
**Impacted by lease terminations
… which has experienced an improvement in credit ratings (A3/A-)
and residual values.
2005*
2006
2007E
2008E
PSEG Resources - Earnings Profile
(Operating Earnings)
2007 Adoption of FIN 48/FSP 13-2
Changes accounting methodology to record reserves
Results in lower lease revenues and higher interest expense totaling approximately
$25M per year
$63M
$92M
$35M-
$45M
$35M-
$45M
* Includes $43M gain from sale of Seminole
97
Holdings has generated substantial operating cash
flow and monetized non-strategic assets …
… which has supported debt reduction and return of capital to
PSEG over the past three years.
36%
4.5x
$520
$609
$740
$159
2006
$1,423
$920
$1,617
$835
Total
$273
$403
Operating Cash
Flows
$435
$442
Asset Sale
Proceeds
41%
47%
Recourse
Debt / Capital
2.5x
3.4x
FFO/Interest
$412
$491
Dividends / Return
on Capital
-
$311
Net Recourse Debt
Reduction
2005
2004
Net after-tax gain of over
$50M on major asset sales
Improved returns on
recourse capital from 6% to
over 10% (using Operating
Earnings) from 2004 – 2006
Improved credit metrics
Improved risk profile of remaining portfolio - Global’s portfolio now comprised of:
$500M US generation companies in TX, CA and HI
$1.4B in distribution and generation companies in Chile & Peru
$150M in other international generation
98
Resources continues to monitor its tax risks …
PSEG position:
IRS disallowed deductions in November 2006 (as part of 1997-2000 audit)
PSEG filed protest in February 2007
Next steps
Expect Conference with Appeals Division of IRS
Ultimate resolution expected to take several years
Other cases / Legislative Activity:
IRS received summary judgment against BBT in January 2007 – BBT
stated they will appeal
Monitoring several cases scheduled for 2007 / 2008
Draft Legislation (HR 2) in Committee contemplates retroactive tax increase
… and is prepared to meet reasonable stress cases.
99
PSEG Energy Holdings – 2007 Drivers
$0
$100
$200
$300
2005
Operating
Earnings
2006
Operating
Earnings
Texas
FIN 48 /
FSP 13-2
Taxes
Asset Sales
2007
Guidance
2008
Expectations
$227M*
$25M - $35M
$10M - $20M
$5M - $10M
$35M - $45M
*Excludes Loss on Sale of RGE of $178M in 2006 and Income from Discontinued Operations of $18M and $226M in 2005 and 2006, respectively
Underlying project results are stable, but Operating Earnings are lower driven by
absence of MTM gain on Texas contract and adoption of new accounting rule.
Consistent with
2007
Modest
increase due to
organic growth
at Distribution
Companies
$130M to
$145M
$196M*
100
Positioned for growth in 2007 and beyond
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive
Market
Fundamentals
Growth
Opportunities…
with
Manageable
Risk
Global
Resources
International Distribution
Domestic Generation
Improving valuations and
stable F/X allow opportunity
to monetize / refinance and
reallocate capital
Opportunity to leverage
position for acquisitions/
new build
Medium term hedges
Opportunity to relever
Upside to residual
value of leases –
particularly
merchant energy
sector.
Strong energy demand
growth
Improved and stable F/X
rates and sovereign spreads
Tightening reserve
margins, improved spark
spread
Tax issues
monitored closely
Reasonable rate case
outcomes
Successful supply auctions
(pass-through)
ERCOT – Continues to
become more liquid and
transparent
Improved lessee
credit ratings
Chilquinta & LDS – strong
reliability
SAESA – improved reliability,
improving line losses
Low Forced outage rates
Competitive heat rates in
TX
101
PSEG
Financial Review and Outlook
Tom O’Flynn
Executive Vice President and Chief Financial Officer
Growth opportunities …
Achieve Credit Targets
Sustainable and Growing Dividend Increases
Operational Excellence Builds Financial Strength
… Near-Term, Long-Term, with Manageable Risk.
Manageable Risk
Strong Earnings from Existing Assets and Base Capital Plan
Share Repurchases and New Investment
Annual Excess Cash $500M
103
196
227
347
262
446
515
130-145
130-145
340-360
330-350
825-905
770-850
(71)
(66)
(50)-(40)
(60)-(50)
2005
2006
2007 (Initial)
2007 (Revised)
2008
$5.60 - $6.10
Strong earnings growth in 2007 resulting in …
… a 37% increase over 2006 and an additional 15% in 2008.
$3.77*
$3.71**
$4.60 - $5.00
$4.90 - $5.30
Holdings
PSE&G
Power
Parent
Operating Earnings by Subsidiary
37%
15%
68%
0
*Excludes ($.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
104
Holdings
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
2005
2006
2007
2008
2005
2006
2007
2008
Strong earnings will generate Cash from Operations…
…which will exceed our capital requirements.
Holdings
PSE&G
Power
$1.0B
$1.3B
$1.3B
Capital Expenditures (2)
Cash from Operations (1)
$1.8B
$2.1B
$2.4B
Power
PSE&G
(1) Non-GAAP view: excludes revenues collected for securitization
principal payment & taxes associated with asset sales.
(2) Excludes nuclear fuel & includes cost of removal
$1.0B
$0.7B
105
($3.0)
($2.0)
($1.0)
$0.0
$1.0
$2.0
$3.0
2005
2006
2007
2008
Represents a Non-GAAP view excluding revenues
collected for securitization principal repayments
Excess
Cash
Available
Asset Sales/
Return of Capital
Excess
Cash
Ops
Cash from
Ops
Net Dividends
Investment
incl. Nuclear
Fuel
…beginning in mid-2008, annual excess cash of approximately
$500M will be available for new investments and/or repurchasing
shares.
We are currently using excess cash to reduce debt
and...
BGS
Securitization
Offshore
Cash
Repatriation
106
.
Reducing Parent debt in 2007 and 2008 will support our
credit targets ...
… while lowering interest expense and minimizing the Parent
impact on earnings.
Debt Maturity Schedule
as of March 2007
0
200
400
600
800
1,000
1,200
1,400
1,600
Enterprise
689
424
249
Energy Holdings (Non Rec)
34
105
339
27
127
34
35
26
23
9
Energy Holdings (Rec)
207
400
544
Power
250
800
666
250
300
PSE&G
250
60
300
450
250
171
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Enterprise
Holdings
Non-Recourse
Holdings Recourse
PSE&G
Power
Note:
(1) The 2007 maturities at Enterprise include a trust preferred of $180 million @ 8.75% with a first call date of December 2007.
(2) Excludes securitization debt
107
$0.0
$2.5
$5.0
$7.5
$10.0
$12.5
Sources
Uses
Cash
from
Ops
Net Shareholder
Dividend
Financing /
(Debt Reduction)
Share Repurchases /
New Investments
PSEG Sources and Uses
2007 - 2011
Asset
Sales
Excess cash between $1.5B and $2.0B will be available
through 2011…
…which could translate into approximately $4.0B of new
investment (50/50 capital structure) with asset sales by Holdings
providing upside potential.
Investment
$1.5 – $2.0
108
Given our improved credit profile …
… we will work hard to remove negative outlooks during 2007.
Following the merger termination:
Credit ratings remained
unchanged
S&P revised the outlook to
“Negative” for the Enterprise
family of companies
Reflects improvement from Dec ‘04
Moody’s revised the outlooks to
“Negative” for PSEG and
PSE&G
Views subsequent rate settlements
positively
PSEG:
Moody's
S&P
Fitch
Outlook
Neg
Neg
Pos
Corporate Credit Rating
-
BBB
-
Commercial Paper
P2
A3
F2
Senior Unsecured Debt
Baa2
BBB-
BBB
PSE&G:
Outlook
Neg
Neg
Stable
Corporate Credit Rating
-
BBB
-
Mortgage Bonds
A3
A-
A
Commercial Paper
P2
A3
F2
Power:
Outlook
Stable
Neg
Pos
Corporate Credit Rating
-
BBB
-
Senior Notes
Baa1
BBB
BBB
Energy Holdings:
Corporate Credit Rating
-
BB-
-
Outlook
Neg
Neg
Neg
Senior Notes
Ba3
BB-
BB
109
… which will enable excess cash to be used for share
repurchases and/or new investments beginning in mid-2008.
During 2007/2008, PSEG will achieve key target credit
measures …
2006
Target
Achieved
PSEG Consolidated
Total Debt / Total Capitalization
52%
50%
2007
PSEG excl. EH
FFO/Total Debt
18%
Mid-20's
2008
POWER
FFO/Total Debt
25%
Mid-30's
2007
PSE&G
Debt/Total Capitalization
50%
50%
Ö
HOLDINGS
FFO Coverage
4.5
3.0x - 4.0x
Ö
110
Company
Facility
Expiration
Date
Total
Facility
Available
Liquidity
12/31/06
PSEG
5-year Credit Facility
Dec-11
1,000
$
646
$
PSE&G
5-year Credit Facility
Jun-11
600
600
Energy Holdings
5-year Credit Facility
Jun-10
150
144
Power
5-year Credit Facility
Dec-11
1,600
1,580
Bilateral Credit Facility
Mar-10
100
100
Bilateral Credit Facility
Jun-07
200
181
Total
3,650
$
3,251
$
We have recently established credit facilities with
favorable terms and conditions …
…and maintain substantial liquidity supporting our credit profile.
($ Millions)
111
Improving returns on existing investments
Texas assets benefit from location and cost
Reasonable regulated returns
New Customer System
Transmission & Distribution expansion
NJ Smart Growth Initiative
Strong energy markets and contract repricing
Implementing capacity market mechanisms
Nuclear uprates
Environmental improvements preserve availability of
NJ coal stations
“Growth Opportunities Near-Term” are contributing to
earnings improvements …
… resulting in increases of 37% in 2007 and 15% in 2008.
112
Opportunity to leverage Texas position for new
acquisition / build.
Redeploy capital to Enterprise
EMP initiatives (energy efficiency, advanced
metering, renewables)
Generation value improvement (upward pressure on
capacity prices / heat rate expansion / carbon)
Growing markets (PJM, NY, NEPOOL)
Expansion capability at existing sites
Preliminary consideration of nuclear expansion
“Growth Opportunities Long-Term” are available to the
PSEG Family of Companies …
… to address infrastructure, environmental, and capacity
requirements.
113
Reshaped portfolio through asset sales
Continuing to evaluate capital invested internationally
Solid regulatory relations
Appropriate regulatory incentives for EMP investments
Established markets and mechanisms
Hedging strategy adds stability
Capacity auctions increases visibility of earnings
“Growth Opportunities with Manageable Risk” …
… adds stability to strong earnings and cash flow.
114
Growth opportunities …
Achieve Credit Targets
Sustainable and Growing Dividend Increases
Operational Excellence Builds Financial Strength
… Near-Term, Long-Term, with Manageable Risk.
PSE&G
Holdings
Share Repurchases and New Investments
Power
Expansion capability at existing sites
Preliminary consideration of nuclear expansion
EMP Initiatives (new CIS, advanced metering, renewables)
Opportunity to leverage Texas position for new aquistion / build
Power
PSE&G
Holdings
Manageable Risk
Hedging strategy adds stablility and capacity auctions increases visibility of earnings
Solid regulatory relations and appropriate regulatory incentives for EMP investments
Reshaped portfolio and continuing to evaluate capital invested internationally
PSEG
Growing markets (PJM / NY / NEPOOL)
PSE&G
Holdings
Strong Earnings from Existing Assets and Base Capital Plan
Customer growth and network investment - ->
Improving returns on existing investments and Texas assets benefit from low cost - ->
Power
Attractive energy markets and recontracting
Generation value improvement (upward pressure on
capacity prices / heat rate expansion / carbon)
Guidance reflects strong growth
Implementing capacity market mechanisms
Annual Excess Cash $500M
115
Summary
Ralph Izzo
President and Chief Operating Officer
Chairman of the Board and Chief Executive Officer Elect*
*Effective April 1, 2007
Positioned for growth in 2007 and beyond
Strong
Operations
Constructive
Regulatory and
Business
Environment
Positive Market
Fundamentals
Growth
Opportunities…
with Manageable
Risk
PSE&G named America’s most
reliable electric utility for second consecutive year
Generating fleet operating at record levels
NJ BPU approved rate changes providing
opportunity to earn authorized return
Natural gas setting price for generation
Capacity values recognized in tight markets
Potential for development at existing sites
Value for international assets improving
Free cash flow of $1.5B – $2.0B over
2007 – 2011 powers growth of incumbent
utility and generation businesses
117
Summary
Operating strength - foundation of our performance
Strong markets and improved regulated returns
propelling earnings growth of 15-20% per year over
2005-2008
Financial targets for leverage and coverage ratios will
be met in 2008
Policy and market forces converging to provide
investment options across our asset base
An Intersection of Energy -- the Environment -- PSEG
118
Why invest in PSEG?
Growing stream of earnings
Visible earnings stream
Hedging and RPM
Regulated utility operations
Strong balance sheet
Cash available for growth
Competitive dividend yield
Opportunities to invest in markets we know
… And, we still sell at a discount?
17.0
15.9
2007E
P/E
Earnings Per
Share*
3.0%
15.2
$3.40
$3.03
Merrill Lynch
Index**
2.9%
13.9
$5.85
$5.10
PSEG
Yield %
2008E
2008E
2007E
*Mid-point of guidance range
Priced as of March 23, 2007
**Merrill Lynch Index of Less-Regulated Utilities
119
Public Service Enterprise Group
APPENDIX
PSEG Overview
Electric Customers: 2.1M
Gas Customers: 1.7M
Nuclear Capacity: 3,500 MW
Total Capacity: 13,600 MW*
Traditional T&D
Leveraged
Leases
2007E Operating Earnings (4): $1,245M - $1,370M
2007 EPS Guidance (4): $4.90 - $5.30
Assets (as of 12/31/06): $28.6B
Market Capitalization (as of 3/22/07): $20.2B
Domestic/Int’l
Energy
Regional
Wholesale Energy
Operating Earnings = Earnings Available and Excludes:
(1) Merger Costs of $1M
(2) Loss from Discontinued Operations of $239M
(3) Loss on Sale of RGE of $178M and Income from Discontinued Operations of $226M
Includes Operating Earnings from Global of $166M, Resources of $63M and Energy Holdings of ($2M)
(4) Includes the parent impact of $(50)M –$(40)M
*After sale of Lawrenceburg
2006 Operating Earnings: $262M(1) $515M(2) $227M(3)
2007 Guidance: $340M - $360M $825M - $905M $130M - $145M
122
2006 Results - Earnings Variance
Power
Re-contracting &
Higher Margins
$.84
Nuclear
Operations $.20
Depreciation,
Interest & Other
$.04
New Assets ($.23)
BGSS ($.22)
NDT ($.13)
Turbine
Impairment ($.10)
Shares O/S ($.07)
Environmental
Reserve ($.06)
O&M ($.06)
PSE&G
Transmission
$.06
Other $.01
Weather ($.19)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
Expiration of
Depreciation
Credit ($.15)
O&M ($.04)
Depr./Amort.
($.04)
Shares O/S
($.03)
2006
Operating
Earnings**
2005
Operating
Earnings*
Holdings
Texas Ops $.21,
including MTM of
$.13
Lower Interest &
Taxes $.18
2005 UAL Write-
off $.05
FX Gains/Losses
$.03
Prior Year Gains:
Eagle Point,
Seminole,
SEGS, MPC
($.31)
RGE Sale ($.06)
Turboven
Impairment
($.02)
Enterprise
Interest
Savings $.03
.21
.08
(.38)
.03
$3.77
$3.71
*Excludes ($.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
123
Operating Power Plants
Total
Owned
Principal
Capacity
Capacity
Fuels
(MW)
(MW)
Used
NJ
991
100
%
991
Coal/Gas
Load Following
NJ
648
100
%
648
Coal/Gas
Load Following
NJ
453
100
%
453
Gas/Oil
Load Following
PA
1,700
23
%
388
Coal
Base Load
PA
1,700
23
%
382
Coal
Base Load
CT
518
100
%
518
Coal/Oil
Base Load
CT
455
100
%
455
Oil/Gas
Load Following
6,465
3,835
NJ
1,061
100
%
1,061
Nuclear
Base Load
NJ
2,304
57
%
1,323
Nuclear
Base Load
PA
2,224
50
%
1,112
Nuclear
Base Load
5,589
3,496
NJ
1,225
100
%
1,225
Gas/Oil
Load Following
NJ
1,186
100
%
1,186
Gas
Load Following
IN
1,080
100
%
1,080
Gas
Load Following
NY
793
100
%
793
Gas
Load Following
4,284
4,284
NJ
617
100
%
617
Gas/Oil
Peaking
NJ
504
100
%
504
Gas/Oil
Peaking
NJ
443
100
%
443
Gas/Oil
Peaking
NJ
557
100
%
557
Gas/Oil
Peaking
NJ
340
100
%
340
Gas/Oil
Peaking
NJ
129
100
%
129
Oil
Peaking
NJ
129
100
%
129
Oil
Peaking
NJ
21
100
%
21
Gas
Peaking
NJ
21
100
%
21
Oil
Peaking
NJ
21
100
%
21
Gas
Peaking
NJ
38
57
%
22
Oil
Peaking
CT
15
100
%
15
Oil
Peaking
2,835
2,819
PA
11
23
%
2
Oil
Peaking
PA
11
23
%
3
Oil
Peaking
22
5
NJ
400
50
%
200
Peaking
19,595
14,639
(A)
(B)
(C)
(D)
(E)
(F)
Mission
Location
Steam:
Hudson
Mercer
Sewaren
Keystone(A)(B)
Conemaugh(A)(B)
Bridgeport Harbor
New Haven Harbor
Total Steam
Nuclear:
Hope Creek.
Salem 1 & 2(A).
Peach Bottom 2 & 3(A)(C).
Total Nuclear
Combined Cycle:
Bergen
Linden
Lawrenceburg(F).
Bethlehem
Total Combined Cycle.
Combustion Turbine:
Essex
Edison
Kearny
Burlington
Linden
Mercer
Sewaren
Bergen
National Park
Kearny
Salem(A)
Name
Power’s share of jointly-owned facility.
Keystone(A)(B)
Total Internal Combustion
Pumped Storage:
Yards Creek(A)(D)(E)
Bridgeport Harbor
Total Combustion Turbine
Internal Combustion:
On December 29, 2006, Power entered into an agreement to sell Lawrenceburg.
Owned
%
Operated by Reliant Energy.
Operated by Exelon Generation.
Operated by JCP&L.
Excludes energy for pumping and synchronous condensers.
Total Operating Generation
Conemaugh(A)(B)
124
Power Generation Measures
2006
2005
2006
2005
Nuclear - NJ
38%
40%
37%
36%
Nuclear - PA
18%
18%
18%
19%
Total Nuclear
56%
58%
55%
55%
Fossil - Coal - NJ
12%
14%
11%
13%
Fossil - Coal - PA
12%
12%
11%
12%
Fossil - Coal - CT
5%
5%
5%
6%
Total Coal
29%
31%
27%
31%
Fossil - Oil & Natural Gas - NJ
9%
5%
12%
9%
Fossil - Oil & Natural Gas - NY
4%
2%
4%
2%
Fossil - Oil & Natural Gas - CT
2%
4%
1%
2%
Fossil - Oil & Natural Gas - Midwest
0%
0%
1%
1%
Total Oil & Natural Gas
15%
11%
18%
14%
Fossil - Pumped Storage
0%
0%
0%
0%
100%
100%
100%
100%
% Generation by Fuel Type
Quarter Ended
12 Months Ended
December 31,
December 31,
125
Power Generation Measures
2006
2005
2006
2005
Nuclear - NJ
4,977
4,859
19,642
18,119
Nuclear - PA
2,366
2,271
9,466
9,196
Total Nuclear
7,343
7,130
29,108
27,315
Fossil - Coal - NJ
1,604
1,810
6,041
6,537
Fossil - Coal - PA
1,609
1,461
6,122
5,989
Fossil - Coal - CT
602
568
2,827
2,736
Total Coal
3,815
3,839
14,990
15,262
Fossil - Oil & Natural Gas - NJ
1,197
648
6,418
4,660
Fossil - Oil & Natural Gas - NY
505
201
2,329
1,003
Fossil - Oil & Natural Gas - CT
221
437
443
1,039
Fossil - Oil & Natural Gas - Midwest
10
3
478
510
Total Oil & Natural Gas
1,934
1,289
9,668
7,212
Fossil - Pumped Storage
(36)
(31)
(149)
(141)
13,056
12,227
53,617
49,648
MWhr Breakdown
Quarter Ended
December 31,
12 Months Ended
December 31,
126
$1.60
$4.0
40%
Gas CC
$7.20
100%
Total
-
-
-
Nuclear
$0.60
$6.0
10%
CTs
$5.00
$10.0
50%
Coal
Impact
($/MWh)
$/MWh
Percent of time
on margin
Illustrative dispatch curve implication of CO2 @ $10/ton
Carbon Implications
$7.20 / MWh represents a 14% increase on the 2006 RTC price of $50/MWh
127
Capacity value conversion table ($)
$140
$110
$100
$90
$80
Megawatt / Day
11.50
9.00
8.20
7.40
6.58
= Megawatt hour
50.40
39.60
36.00
32.40
28.80
= Kilowatt / Year
4.20
3.30
3.00
2.70
2.40
= Kilowatt / Month
Megawatt / Day Kilowatt / Month = (1 Megawatt / 1000) * 30 days
Kilowatt / Month Kilowatt / Year = (1 Kilowatt per month *12 months)
Kilowatt / Year Megawatt hour = (($ per Kilowatt / Year * 1000) / (# of hours in a year)) * load factor
Load factor for PEG = 50%
128
Global’s US Generation Assets
2007
PSNH
Biomass
(wood chips)
40%
16
Bridgewater
(New Hampshire)
2,395
2,720
Total
Contracted:
2016
HECO
Oil
50%
209
Kalaeloa
(Hawaii)
2021
PG&E
Pet coke
50%
132
GWF QF
(California)
2012
CDWR
Natural Gas-Fired
Peaker
60%
363
GWF Energy
(California)
Merchant,
350MW thru
2010
Natural Gas-Fired
7FA CCGT
100%
2,000
PSEG Texas – Odessa
(West) & Guadalupe
(South)
Term
Counter-
party
Fuel / Technology
%
Owned
Total
MW
Merchant
129
Other International Generation: Turboven, PPN, Prisma
Modest investments: Total of $150M (book value at 12/31/06)
Modest contributor: Approximate 2006 earnings of $5M and dividends of $2M
Partner with API
’09 – ‘12
CIP 6 contracts
with Italian grid
Biomass
(Wood)
42.5%
60
Prisma Biomasse
Crotone & Strongoli,
Italy
Shutdown due to
environmental
investigation,
expect Q2 restart
’09 – ’12
CIP 6 contracts
with Italian grid
Biomass
(Wood)
85%
20
Prisma
San Marco, Italy
2032
n/a
Term
TNEB payments
improved, expect
natural gas in 2008.
Expect
nationalization in
2007
Comments
168
530
Total
TNEB (State
Electricity Board)
Naphtha /
Natural Gas
20%
330
PPN
Tamil Nadu, India
Merchant
Natural Gas
50%
120
Turboven
Maracay & Cagua,
Venezuela
Counter-party
Fuel /
Technology
%
Owned
Total
MW
130
Resources’ Portfolio – Leased Assets
AA/Aa2
3%
105
Gas distribution network in Netherlands
EDON
55%
$1,642
TOTAL
AAA/Aaa
4%
111
Gas distribution network in Netherlands
Nuon
A+/A1
4%
121
1,100 nuclear station in Mississippi
Grand Gulf
BBB/
Baa2
4%
130
Reservoir in NJ
Merrill Creek –
(PECO, MetEd,
Delmarva Power &
Light)
AA+/Aa1
4%
133
540 MW coal-fired generation facility in Netherlands
EZH
AA+/Aa1
5%
145
Electric distribution system in Austria
ESG
AA+/Aa1
6%
168
Gas distribution network in Netherlands
ENECO
BB-/B1
7%
206
2 coal-fired generating facilities (2,896 MW) –
Powerton & Joliet in IL
Midwest Gen (EME)
B/B2
8%
239
2 generating facilities –
1,200 gas-fired Roseton facility and 370 MW coal-
fired Danskammer in NY
Dynegy Holdings
B/B2
10%
$284
3 coal-fired generating stations (4,402 MW) –
Keystone, Conemaugh & Shawville in PA
REMA (Reliant)
Credit
Rating*
% of
Portfolio
$ Invested
(millions)
Equipment
Lessee
*Reflects lessee or additional equity collateral support
131
Energy Holdings’ Adjusted EBITDA
Adjusted EBITDA
2006
Global
465
$
Resources
147
Other
13
Total Energy Holdings
625
$
Debt Information
Holdings' Senior Notes
1,149
$
Global Project Debt
1,034
Resources Project Debt
40
EGDC Project Debt
19
Holdings Total Debt
2,242
$
2006 Global EBITDA Detail
Adj EBITDA**
Project Debt
PSEG Share
PSEG Share
Texas *
174
$
375
$
SAESA
73
178
Electroandes
36
105
Prisma
14
3
Chilquinta
47
162
Luz del Sur
51
77
GWF - QF
33
0
GWF - Energy
19
72
Kalaeloa
28
62
Other, including G&A
(10)
-
Total Global
465
$
1,034
$
* Texas EBITDA includes mark to market gains of $44 million.
**EBITDA is adjusted for Global's share of depreciation, interest and other items
so as to include those investments accounted for under the equity method.
132