Exhibit 99
Public Service Enterprise Group
New York Investor Meetings
New York, New York
December 10, 2008
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 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 reasonable ssumptions, we can give no assurance they will be achieved. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, but are not limited to:
Adverse changes in energy industry, policies and regulation, including market rules that may adversely affect our operating results.
Any inability of our energy transmission and distribution businesses to obtain adequate and timely rate relief and/or regulatory approvals from
federal and/or state regulators.
Changes in federal and/or 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 that might adversely affect our ability to continue to operate that unit or other units at the same site.
Any inability to balance successfully our energy obligations, available supply and trading risks.
Any deterioration in our credit quality.
Availability of capital and credit markets at reasonable pricing terms and ability to meet cash needs.
Any inability to realize anticipated tax benefits or retain tax credits.
Increases in the cost of or interruption in the supply of fuel and other commodities necessary to the operation of our generating units.
Delays or cost escalations in our construction and development activities.
Adverse capital market performance of our decommissioning and defined benefit plan trust funds.
Changes in technology and/or increased customer conservation.
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 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 the impact of the sale of certain non-core domestic and international assets and material impairments and lease-transaction-related charges. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. PSEG believes that the non-GAAP financial measure of Operating Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information. The last slide in this presentation includes a list of items excluded from Net Income to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears.
3
PSEG Strategic Overview
Ralph Izzo
Chairman, President and Chief Executive Officer
Tom O’Flynn
Executive Vice President and Chief Financial Officer
PSEG’s diverse asset mix, operational excellence and strong
balance sheet …
… position it to provide value and benefit from multiple growth
opportunities.
Stable electric and gas
distribution and electric
transmission company
rated top quartile for
reliability, providing
service in mature
service territory in New
Jersey.
Major merchant
generation company with
13,487 MW* of base-
load, intermediate and
load-following capability
operating in attractive
Northeast markets with
operating control of
additional 2,000 MW of
capacity in Texas.
Redeployment of capital
through the sale of
international assets.
Focused on managing
Texas assets, lease
portfolio, modest
domestic PPA capacity
and potential investment
in renewable energy
development.
2007 Operating
Earnings:
$949M**
$115M**
$376M**
2008 Guidance:
$1,010M - $1,110M
$75M – $90M
$350M – $370M
** See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)
5
Our strategic objective is to maximize the value of our existing assets …
… while building a strong platform for future growth.
Produce and
deliver safe,
reliable,
economic
and clean
energy.
Support
competitive
market
structures
through
strong
regulatory
relationships.
Maintain
strong
balance
sheet to
support
disciplined
investment.
Operational
Excellence
Regulatory and
Market Environment
Meet
shareholder
expectations
for growth
with
reasonable
risk.
Growth with
Manageable Risk
6
PSEG is well-positioned …
Regulatory contract for new peaking capacity in CT (in-service date 2012)
Potential to leverage existing brownfield sites
Compressed Air Energy Storage (CAES)
Garden State Offshore Energy exploring development of 350MW offshore
wind farm (could be fully operational in 2013)
Capacity
Needs
Significant new transmission capital program to improve reliability
FERC approved request for cost of service formula rates for existing and
future transmission investments effective October 1, 2008
Capital investment in coal fleet to meet environmental requirements
maintains critical infrastructure and expands capability
Infrastructure
Requirements
PSEG Power’s base-load nuclear assets well situated in carbon
constrained environment
RGGI auction provides guide for eventual Federal action
NJ releases Energy Master Plan (EMP)
PSE&G pursuing investments in energy efficiency and renewables
Climate
Change
… to capitalize on the challenges of the current business environment.
7
PSEG – 2008 Highlights
$3.35 billion of available liquidity; capital needs funded from
internal cash
Responding to challenging credit markets – capital expenditures
for 2009 reduced by $275 - $325 million
Strong balance
sheet
SAESA and Bioenergie sale closed; reserve established for
potential lease liability
Ratings outlook for PSEG, PSE&G, and Holdings moved from
Negative to Stable
Improved risk
profile
NJ releases Energy Master Plan
FERC Transmission rate order effective October 1, 2008
FERC endorses Reliability Pricing Model
RGGI auction in September 2008 – price for carbon at $3.07/ton
Supportive
regulatory
environment
PSE&G honored as America’s Most Reliable Electric Utility
PSEG Power – Nuclear capacity factor at 93% YTD September 30
– Nuclear uprates yield 173MW of new capacity
Strong operating
performance
maintained
Maintaining 2008 guidance of $2.80 - $3.05 per share
Supporting lower half of 2009 earnings of $3.05 - $3.35 per share
Solid earnings
performance
8
2007 Operating Earnings*
2008 Guidance
2009 Guidance
$2.71
$2.80 - $3.05
On track to meet 2008 earnings guidance…
* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
9 Months YTD
Operating
Earnings:
$2.43*
$3.05 - $3.35
… but, potential increases in coal prices and pension / financing
costs may limit growth in 2009 to lower half of forecast range.
9
PSEG Power – Business Drivers
2009E
2010E+
2008E
$1,010M - $1,110M
Operating Earnings
2007A: $949M*
Operations
Markets
Financial
* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
Full year of RPM
Recontracting
Strong nuclear
operations
including uprates
Planned fossil and
nuclear outages
Continued strong
cash flow
Dividend to PSEG
of $475M
Recontracting
improvements continue
RGGI begins
Full year of
nuclear uprates
Improvement in
CC capacity
utilization
Higher coal costs
Strong cash flow
supports higher
leverage
Attractive liquid
markets leveraged to
carbon
Supply and Demand
dynamic tightens
Installation of BET at
Hudson and Mercer
could affect availability
in 2010 with
improvement thereafter
Coal supply flexibility
improves
Significant reduction
in capital
expenditures with
completion of BET
10
Low-cost portfolio
Strong cash generator
Regional focus in competitive,
liquid markets
Assets favorably located
Many units east of PJM constraints
Southern NEPOOL/Connecticut
Near customers/load centers
80% of fossil capacity has dual-fuel
capabilities
Integrated generation and portfolio
management optimizes asset-
based revenues
… with numerous competitive advantages over the long-term.
PSEG Power - right set of assets in right markets …
18%
46 %
8 %
27 %
Fuel Diversity – 2008
Coal
Gas
Oil
Nuclear
Pumped
Storage
1%
Energy Produced - 2007
54%
25%
19%
Oil 1%
Pumped
Storage
1%
Nuclear
Coal
Gas
Total GWh: 53,200**
Total MW: 13,487*
* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)
** Excludes 2,000MW of combined cycle generation in Texas under PSEG Power’s operating control.
11
0%
25%
50%
75%
100%
2008
2009
2010
2011
$0
$50
$100
$150
0%
25%
50%
75%
100%
2008
2009
2010
2011
$40
$50
$60
$70
$80
Power’s hedging program provides near-term stability from market
volatility …
… while remaining open to long-term market forces.
Estimated EPS
impact of $10/MWh
PJM West around the
clock price change*
Contracted Capacity
% sold
(left
scale)
Estimated EPS
impact of $30/MW-
day capacity price
change*
Price
(right
scale)
* As of October 2008; Assuming normal market commodity correlations
Power has
contracted for a
considerable
percentage of its
output over the
next two years at
attractive prices.
The pricing for
most of Power’s
capacity has been
fixed through May
2012, with the
completion of
auctions in PJM
and NE.
% sold
(left
scale)
$0.25 - $0.65
$0.10 - $0.40
$0.01 - $0.10
$0.01 - $0.02
$0.00 - $0.02
$0.00 - $0.01
$0.00 - $0.01
$0.00 - $0.01
Contracted Energy
Price
(right
scale)
12
Natural gas spark spreads are trading in line with rising
historical averages.
Dark spreads have improved with recent decline in coal prices.
Forward prices as of 11/25/08
($10)
$0
$10
$20
$30
$40
$10
$20
$30
$40
$50
$60
Annual Average
Historical
Forecast
Western Hub Spark Spread (On-Peak Henry Hub * 7.5 Heat Rate)
Western Hub Dark Spread (RTC Central Appalachian Coal * 10 Heat Rate)
13
PSE&G – Business Drivers
* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
FERC rate order
effective 10/1/08
supports formula rate
treatment on
transmission
Modest decline in
electric sales with
slowdown in economy
National ReliabilityOne
Excellence Award –
third time in four years
Strong operations hold
cost growth to less
than inflation
Reasonable ROE
Credit metrics
achieved
Rate of electric sales
growth expected to
decline
NJ BPU rate case to
be filed mid-year
I-Power customer
system in service
1Q 2009
Decline in sales
and increased
investment could
lower ROE for
E&G to 8.5 – 9.0%
Responding to NJ
EMP goals: energy
efficiency, carbon
abatement and
renewables
Managing O&M
growth below rate of
inflation
Investment in
transmission grows
Recovery under formula
rate treatment
NJ rate order provides
for normalized ROE
Operations
Markets
Financial
2009E
2010E+
2008E
$350M - $370M
Operating Earnings
2007A: $376M*
14
Through its highly skilled workforce and disciplined capital
investments …
2008 National ReliabilityOne Award winner
– Winner in three of the last four years
Solid regulatory relationships on traditional
utility matters
NJ is ranked 2nd nationally in personal
income per capita
(0.2%)
1.6%
Historical Annual
Sales Growth
2003 - 2007
3,397M Therms
44,354 GWh
Electric Sales and Gas Sold
and Transported
LTM 9/30/08
0.2%
1.7 Million
Gas
0.5%
2.1 Million
Electric
Projected Annual
Sales Growth
2008 - 2012
Customers
1.3%
Historical Annual Peak Growth
2003-2007
10,654
Billing Peak (MW)
1,429
Network Circuit
Miles
1.4%*
Projected Annual Peak Growth
2008 - 2012
Electric and Gas Distribution Statistics (9/30/08)
Transmission Statistics (9/30/08)
… PSE&G has become a nationally recognized leader in delivering
safe and reliable service.
* to be updated in December, preliminary estimate of update is ~1.0%
15
Regulated electric transmission, electric and gas distribution system
Characteristics
FERC regulation for electric transmission (formula rates)
NJ BPU regulation for electric and gas distribution
Managing recovery lag on electric and gas distribution investments
PSE&G’s investment plan and expected fair regulatory treatment …
Equity Ratio ~ 48%
… create a solid foundation for projected annual earnings growth
of 7 to 8% between 2008 and 2011.
EMP
1%
Gas
Distribution
28%
Electric
Transmission
25%
Electric
Distribution
46%
Electric
Distribution
52%
Electric
Transmission
13%
Gas
Distribution
35%
2007 Actual
Rate Base = $6.4B
2011 Projected
Rate Base = $9.1B
PSE&G Rate Base
16
PSEG Energy Holdings – Business Drivers
* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
Global: 2,000MW of
combined cycle
capacity influenced
by gas price and
congestion
Addition of wind
resources in west TX
affected availability of
CC availability
Sale of Latin
American assets
concluded
Reserve for potential
tax liability reduced
return on lease
portfolio
Anticipate more
normal spark spreads
versus strong 2008
market
Increase in wind
resources in west TX
could affect capacity of
Odessa
Focused on managing
small domestic PPA
portfolio
Global: Reversal of MTM gain ($58M pre-tax) booked
on TX assets begins in 2009 and ends in 2010
Plans to pursue
development of renewable
resources
Anticipate normal spark
spreads in TX market
Additional transmission in
TX could aid availability
Focused on
maintaining long-term
operating capability of
CC generation and
small PPA portfolio
Anticipate sale of remaining international investments by year-end 2010
LILO/SILO tax payment
2009E
2010E+
2008E
$75M - $90M
Operating Earnings
2007A: $115M*
Operations
Markets
Financial
Plan is to limit exposure
to LILO/SILO lease tax
liability
LILO/SILO tax payment
17
With the sale of international assets, Holdings is now focused …
… on its domestic generation assets, leveraged lease portfolio and
potential renewables development.
PSEG
Resources
47%
Chile & Peru
Distribution
Texas
Merchant
Generation
Other US
Generation
2007 Operating Earnings*
86% of the portfolio is
in energy-related
leveraged leases
2008 Guidance - Operating Earnings
13%
23%
17%
Texas
Merchant
Generation
67%
PSEG
Resources
15%
Other US
Generation
18%
~390MW owned in
CA, HI, NH
fully contracted
$ 115M
$ 75M - $90M
Two companies sold
and SAESA in Disc
Ops. in 2007
Two 1,000 MW CCGTs
1 in Central Texas (South Zone)
1 in West Texas
* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
18
PSEG – Business Drivers
2009E
2010E+
2008E
$1,420M - $1,560M
Operating Earnings
2007A: $1,377M*
Operations
Markets
Financial
* See page 54 for Items excluded from Net Income to reconcile to Operating Earnings
19
• Hedging and
recontracting at Power
provide stability in
volatile markets
• Improved
performance from
nuclear fleet
• PSE&G recognized at
national level for
reliability
• Credit metrics achieved
• Risk reduced with sale
of international assets
• Recognition of potential
lease tax liability
• Dividend increased
• Market mechanisms
and recontracting
support liquidity
• RGGI in place
• Focus on operating
efficiency measures
to contain growth in
costs, including coal
Power uprates
• PSE&G installs new
customer system
• Disciplined
approach to
capital spending
• Pension expense
• Responding to EMP
goals and need for
transmission
• Tightening markets
leveraged to carbon
• PSE&G rate
programs in place
• Maintain strong
nuclear fleet
operating levels
• Fossil plant flexibility
improves with BET
• Strong cash flow
supports capital
program
• Plan is to limit exposure to LILO/SILO lease tax
liability
PSEG Liquidity as of October 31, 2008
Expiration
Total
Primary
Usage at
Available
Company
Facility
Date
Facility
Purpose
10/31/2008
10/31/2008
PSEG
5-year Credit Facility
Dec-12
$1,000
1
CP Support/Funding/LCs
$13
$987
Bilateral Credit Facility
Jun-09
100
CP Support/Funding
0
100
Uncommitted Bilateral Agreement
N/A
N/A
Funding
0
N/A
PSE&G
5-year Credit Facility
Jun-12
600
2
CP Support/Funding/LCs
116
484
Uncommitted Bilateral Agreement
N/A
N/A
Funding
0
N/A
Energy
5-year Credit Facility
Jun-10
136
Funding/LCs
21
115
Holdings
Power
5-Year Credit Facility
Dec-12
1,600
3
Funding/LCs
205
1,395
Bilateral Credit Facility
Jun-09
100
Funding/LCs
0
100
Bilateral Credit Facility
Mar-09
150
Funding/LCs
48
102
Bilateral Credit Facility
Sep-09
50
Funding
50
0
Bilateral Credit Facility
Mar-10
100
Funding/LCs
24
76
Total
$3,836
$3,359
1
PSEG Facility reduces by $47 million in 2012
2
PSE&G Facility reduces by $28 million in 2012
3
Power Facility reduces by $75 million in 2012
($ millions)
20
PSEG’s share repurchase program is a means of returning cash to
shareholders …
$658 million remaining of $750 million program
authorized by the Board to be executed over 18 month
period effective August 1, 2008.
Program halted in late September to preserve liquidity
in the face of instability in the credit markets.
Resumption of program dependent on re-opening of
the credit markets.
… in the absence of financially attractive investment opportunities.
21
$1.12
$1.14
$1.29
$1.17
2005
2006
2007
2008
2009E
Our recent 10% dividend increase continues 100-year history of paying common dividends.
A payout objective of 40 – 50% provides opportunity for growth
with earnings.
* Indicated annual dividend rate
*
44%
Payout
Ratio
40 – 50%
43%
66%
63%
?
Dividends per Share
22
PSEG Value Proposition
PSEG is well-positioned in current business environment
Operational excellence efforts support:
Asset mix provides opportunities in attractive markets
Strengthened balance sheet supports capital investment
• $3.35 billion available liquidity to support business
Return of cash to shareholders through dividends and share
repurchase provides discipline to investment process
• maintaining reliability
• controlling costs
• providing value to the customer
23
PSEG Power
Operated by PSEG Nuclear
PSEG Ownership: 100%
Technology:
Boiling Water Reactor
Total Capacity: ~1,211MW
Owned Capacity: ~1,211MW*
License Expiration: 2026
Operated by PSEG Nuclear
Ownership: PSEG - 57%,
Exelon – 43%
Technology:
Pressurized Water Reactor
Total Capacity: ~2,345MW
Owned Capacity: ~1,346MW*
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 with recent uprates …
… is a critical element of Power’s success.
* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)
25
Total Power Output (GWh)
… as we maintain our focus on achieving operational excellence.
The output of our generation fleet is increasing …
0
10,000
20,000
30,000
40,000
50,000
60,000
2004
2005
2006
2007
Year
Nuclear
Coal
CC
Peaking/Steam
Strong Performance
• Continued growth in output
• Improved fleet performance
3,669
Nuclear
4,314
Peaking / Steam
3,156
Combined Cycle
2,348
Coal
A Diverse 13,487 MW Fleet*
* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)
26
Power’s eastern coal units are in attractive markets …
… and after capital investments, should experience improved capacity
factors.
System Interface
Power is also making considerable
investments beyond the pollution
control facilities for its coal assets.
Power’s New Jersey coal units are
mid-merit, with capacity factors
averaging 50% to 60%.
Mercer 1&2
(648MW)
Hudson 2
(558MW)
Bridgeport Harbor 3
(372MW)
27
Understanding recent power market volatility …
PJM market - slight tightening in reserve margins forecast over next
5 years; FERC remains supportive of RPM capacity mechanism.
Financial market volatility has adversely affected liquidity in
commodity markets, particularly in out years.
– PSEG Power carefully screening credit capability of trading
partners.
Coal and gas prices have come off recent historical highs to more
traditional values
Recent vacating of CAIR has depressed forward energy prices, and
uncertainty remains around prospective treatment.
28
PJM RTO Summer Peak Forecasted Reserve Margin
18
19
20
21
22
23
2008
2009
2010
2011
2012
PJM Market Overview
Source: PJM, Sept. 26, 2008 (based on PJM’s January 2008 load forecast, using 1.7% load growth rate)
• PJM forecasts tightening RTO-wide reserve margins
• MAAC, and especially Eastern MAAC, have tighter reserve margins than RTO-wide
• Current financial and economic crisis will impact both demand and new supply:
• Demand – Recent signs of slowing growth (not reflected in PJM’s forecast)
• Supply additions – Slowdown in construction due to financial uncertainty, counteracting
effect of demand slow-down
29
$/mmbtu
$/MWh
… are benefiting Power’s coal and nuclear fleet.
The impact of fossil fuels on energy prices …
$20
$30
$40
$50
$60
$70
$80
2003
2004
2005
2006
2007
2008
2009
Fwd
2010
Fwd
$0
$3
$6
$9
$12
Natural Gas Henry Hub
(right scale)
Coal*
(right
scale)
Electricity
(left scale)
**
**
* Central Appalachian Coal
** Forward prices as of November 25, 2008
30
$20
$30
$40
$50
$60
$70
$80
$90
2003
2004
2005
2006
2007
2008
2009
Fwd
2010
Fwd
Zonal prices in the eastern portions of PJM have
historically been higher than the Western Hub…
… allowing Power to realize higher prices due to its assets’ favorable
location.
* Average of 11 historical months and 1 forward month.
** Forward prices as of November 25, 2008
Historical spot basis
Forward basis
PS Zone Basis
*
**
**
31
Through the new capacity constructs, and repricing at market prices …
… Power expects to maintain strong margins.
Power’s capacity is located in three Northeast markets.
Delivery Year ($/MW-Day)
** Majority of Power’s assets
(a) – includes APS
Total Capacity 13,487MW*
(~ 1,000 MW under RMR)
The RPM Auction to date has provided strong price signals in PJM.
$174.29
$174.29
$174.29
2010 / 2011
$110.00
$110.00
$110.00
2011 / 2012
$102.04
$191.32 (a)
$191.32
2009 / 2010
$111.92
---
$148.80
2008 / 2009
2007 / 2008
Zones
$40.80
Rest of Pool
---
MAAC
$197.67
Eastern MAAC**
NY
NE
PJM
* Includes recent uprates at Hope Creek (150MW) and Salem 2 (23MW)
32
2003
2004
2005
2006
2007
2008
Ancillary services
Capacity
Congestion
Load shape
RECs
Transmission
Risk premium
(commodity,
credit, collateral)
Full Requirements
Round the Clock
PJM West
Forward Energy
Price
$33 - $34
$36 - $37
$55.59
$55.05
$65.41
$44 - $46
~ $21
~ $18
~ $21
$102.51
$67 - $70
~ $32
$98.88
~ $41
$58-$60
$68 - $71
~ $43
$111.50
Increase in Full Requirements Component Due to:
Increased Congestion (East/West Basis)
Increase in Capacity Markets/RPM
Volatility in Market Increases Risk Premium
Power’s fleet diversity and location ...
Market Perspective – BGS Auction Results
… has enabled successful participation in each BGS auction and
cushioned customer impacts.
Note: BGS prices reflect PSE&G Zone
33
0
4,000
8,000
12,000
16,000
2008
2009
2010
2011
Contracted
Coal
Total Output
95-100%
70-80%
50-60%
Power has contracts for supply of its coal …
… and after installation of pollution control equipment, Power
anticipates added flexibility in fuel choices.
Coal Output
Note: Percent coal hedged as of October 2008
15-25%
34
Historical and Contracted Nuclear Fuel Cost
Power’s contracting strategy for nuclear fuel has mitigated market
price increases.
100% of PSEG Nuclear’s fuel needs are contracted through 2011.
Contracted
$0
$2
$4
$6
$8
$10
2004
2005
2006
2007
2008
2009
2010
2011
35
ME
NY
NH
VT
MA
NJ
PA
MD
CT
RGGI
States
Cooperative effort by Northeast
states to design a regional cap-and-
trade program to reduce carbon
dioxide (CO2) emissions
Timeline
First RGGI allowance auction
September 2008
Clearing price of $3.07/ton on 12.57M
allowances
Quarterly auctions scheduled
Next auction – December 17, 2008
31.5M allowances to be offered
January 1, 2009 – Implementation
The Regional Greenhouse Gas Initiative (RGGI) …
Participating
Observer
… has the potential to influence both market prices and the adoption
of a national program.
36
The RGGI cap on CO2 emission shows that headroom exists …
… compared to historical emission levels.
Affected Sources
Fossil-fired electric generating
units with a capacity of 25MW
and larger
Targets and Timing
Three-year compliance periods
with the first running from
2009-2011
Stabilization of CO2 emissions
at recent levels through 2015
(~188 million tons per year)
Achieve a 10% reduction of
CO2 emissions below recent
levels by 2019
This translates into ~13%
reduction below 1990 levels or
~35% reduction from Business
as Usual (BAU) levels by 2020
CO
2
Emissions vs. RGGI Cap
(Actuals through 2007)
130
140
150
160
170
180
190
200
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
RGGI Cap
Projected
Actual &
Forecast CO
2
Actual
37
The implementation of federal carbon legislation …
$14.4
100%
Total
$0.0
$0.0
0%
Nuclear
$3.2
$8.0
40%
Gas CC
$1.2
$12.0
10%
CTs
$10.0
$20.0
50%
Coal
Impact
($/MWh)
$/MWh
On margin
(Illustrative)
Dispatch curve implication @ $20/ton**
By Fuel Type
$12.0
$18.0
$30.0
@$30/ton
$8.0
$12.0
$20.0
@$20/ton
$4.0
$6.0
$10.0
@$10/ton
Price ($/MWh)
0.4
0.6
1.0
Carbon tons/MWh
CC
CTs
Coal
PSEG Power Generation by Fuel
54%
25%
19%
Oil 1%
Pumped
Storage
1%
Nuclear
Coal
Gas
2007 Total GWh: 53,200*
… will put additional pressure on energy prices.
** For illustrative purposes – potential impact of CO2 on power prices with current dispatch; $20/ton improves EBITDA by $400 million/year; relationship of carbon price and EBITDA is not linear.
* Excludes 2,000MW of combined cycle generation in Texas under PSEG Power’s operating control.
38
Power Pricing Assumptions
~ $40M
$1/MWh
~ $60 - $63/MWh
(PJM-West)
Energy
~ $12M
~ $15M*
$1 spark
$1 dark
Gas ~$7.40 to $7.90/MB
Coal ~ $4.00 to $5.00/MB
Fuel
~ $1.1B – $1.2B
O&M
Capacity
~ $120M
$10/kW-yr
~ $64 - $68/kW-yr
EBITDA
Impact
Sensitivity
Assumption
55
2008
Volume Forecast (GWh)
61
56
56
2011
2010
2009
* PSEG Power consumes approximately 150 MMBtu of coal annually; $0.25/MMBtu = $25MM Net Income
39
PSE&G
PSE&G’s capital program is focused on reliability investments that can
earn a fair return.
2008
2009
2010
2011
Sept 2008 10-Q
2009 capital program reduced by $125M
91
-
EMP
$9,146
$6,371
TOTAL
4,183
3,362
Electric
2,549
2,213
Gas
2,323
796
Transmission
2011 Base Plan
2007 Actual
PSE&G Rate Base ($ millions)
The near-term capital program has been adjusted to ensure fair returns
without significant regulatory delay. Longer-term, we assume capital
markets return to normal.
2007 10-K
4-year capital program: $4.1B
41
Investments focused on improving customer support,
enhancing efficiency and upgrading infrastructure.
Expect to file electric and gas rate case in 2009 with rates
effective in mid-2010.
Future investment associated with meeting State energy
efficiency and renewable goals dependent on receiving
regulatory support before committing new capital.
BPU approved $105M investment in solar in April 2008 and $46M
Carbon Abatement program in November 2008. Both are earning
WACC with contemporaneous recovery.
Rate base growth supported by investment in new 500kV lines
and upgrade of sub-transmission system to improve reliability.
Fully-forecasted formula rates beginning October 1, 2008.
Allowed ROE of 11.68%. Received FERC approval for CWIP in
rate base on approved projects and 12.93% ROE on
Susquehanna line.
PSE&G’s investments and regulatory profiles:
Transmission
Electric and
Gas
Distribution
New
Programs
42
By 2018, NJ’s load is expected to grow by 4,000MW while net import
capability decrease by 1,300MW …
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 (1,000 MW)
connecting Bergen to ConEd’s West
49th Street substation
U2-046 project (660MW) originating at
Roseland 500kV
U2-047 project (672) connecting Deans
500kV with Long Island
U2-077 project (300MW) originating at
Linden 230kV
U2-100 project (1,000MW) originating
at Bergen 230kV
Projects to NJ
PSEG’s evaluation of the
proposed backbone
transmission projects:
Northern 500kV route
into Jefferson and
Roseland
Southern 500kV route
into Salem
… indicating the need for additional generation, DSM or transmission
investments.
Total Import
Capability
~ 4,000 MW
Total Export
Capability
~ 5,317 MW
2008-2018 NJ Summer Peak
Annual Growth Rate = 1.8%
Sources: Imports: PSE&G Estimates; Exports: PJM 2008 Regional Transmission Expansion Plan; and Load Growth: PJM 2008 Load Forecast Report
Projects within NJ
Branchburg to
Roseland
Roseland to Hudson
43
FERC’s recent transmission formula rate order grants an 11.68%
ROE and fully-forecasted cost of service …
… creating an attractive investment environment for PSE&G’s
Transmission Capital Program.
Branchburg
Roseland
Jefferson
New Freedom
Smithburg
Deans
MAPP
Hope Creek
Salem
Project
Transmission Growth
Effective October 1, 2008, PSE&G is operating under
fully forecasted transmission formula rates
PJM approval was received for the Susquehanna to
Roseland line in October 2007
Siting and permitting process underway
FERC approved Incentive rate filing:
125 BPS adder to ROE
100% CWIP in Rate Base
Current cost estimate $750 million
FERC approval of Sub-Transmission to Transmission system reliability investments represents about $375 million through 2012, post-2012 ~$60 million/year
Other approved RTEP projects ~$250 million also contribute meaningfully to improved reliability and earnings growth
Backbone projects are in various stages of consideration/approval, but present real opportunity to improve reliability throughout the state, with the potential investment of ~ $1.5B through 2015
Hudson
44
The New Jersey Energy Master Plan released on October 22, 2008 …
2020 Goals:
20% reduction in peak demand
20% reduction in energy consumption
30% of energy requirements supplied by renewables
EMP, to help achieve its goals, calls for:
Redesign and transition of the State’s current energy efficiency programs
Expanded utility company participation in demand response programs,
procurement of demand-side resources through BGS Process and direct load
control and the piloting of different technologies (including AMI) and rate
structures to determine the best way to achieve peak demand reductions
Energy Institute of NJ that will focus on energy technology developments
Development of 1,500 MW of new cogeneration capacity in New Jersey by 2020
new commissions/committees that include an advisory stakeholder group (a
possible sub-group to examine nuclear issues), an Offshore Wind Planning
Group and the Energy Institute of New Jersey
Governor Corzine also announced immediate action on an energy
efficiency investment program for 2009 designed to increase job
growth and stimulate the State’s economy
... provides blueprint for State’s energy future and potential
opportunities for PSE&G to invest for growth.
45
PSE&G’s customers pay delivery rates lower than the regional
average and ...
6.8
5.4
5.1
0.00
4.00
8.00
2007
2011
2007
Regional
Average
Note: 2007 Rates are based on tariff rates in effect on December 31, 2007; Regional Average may not include Electric Transmission for all firms
… even with the planned investments, are expected to grow less
than the rate of inflation.
Electricity
0.48
0.44
0.42
0.00
0.20
0.40
0.60
2007
2011
2007
Regional
Average
Gas
2007-2011 Growth = 1.5%
Inflation = 2.3%
2007-2011 Growth = 1.3%
Inflation = 2.3%
Distribution
Transmission
Source: Rates from PSE&G, NYPSC and PAPUC; Inflation from Moody’s Economy.com, October 2008
46
PSEG Energy Holdings
The performance of the Texas assets drives PSEG Global’s results.
Two 1,000MW combined cycle facilities
- Highly efficient gas-fired plants, on-line in 2001
- Forced outage rate less than 2%
Market Characteristics:
Bilateral forward market
Day ahead balancing and ancillary services bid
market
No capacity payments…margins derived from
energy and ancillary services
Nodal market transition likely in 2010
Natural gas units on the margin over 90% of
the time
40%
5,703
4,257
1,446
1.7%
4,083
West
Odessa
-10%
19%
Reserve
Margin
2008*
1.7%
1.7%
Annual
Growth
15,365
20,170
Total
Gas
Nuclear,
Coal, Wind**
Hydro
Load
Zone
12,218
3,147
17,116
Houston
12,068
8,102
16,943
South
Guadalupe
* Reserve Margins calculated on data provided by ERCOT
** Wind is based on 8.7% of installed capacity (ERCOT Peak reliability % as of August 2008)
Odessa
Midland
Guadalupe
Austin
San Antonio
48
Strong 2008 performance from favorable market in Spring 2008
Looking forward to 2009:
Uncertainty on gross margin impact from new wind additions
Operations and maintenance costs approximately $20M higher in 2009 than 2007
Mark-to-Market:
Earnings in 2009 – 2010 will be affected by the reversal of prior mark-to-market gains
Longer-term:
Continued uncertainty from wind
Positive impact from transmission build-up
The Texas market has been very dynamic.
75 – 85
30 – 40%
150 – 160
16%
7.42
2009
PSEG
Market
210 – 220
162
$186
Gross
Margin ($M)
135 – 145
45 – 47%
14%
8.90
2008
104
48.7%
15%
6.94
2007
$130
54.4%
16%
$6.74
2006
EBITDA*
($M)
Capacity
Factors
Reserve
Margin
Nat. Gas
Henry Hub Spot
PSEG Global’s EBITDA reflects higher maintenance costs and
market uncertainty.
* Excluding Mark-to-Market Accounting effects
49
As renewable opportunities emerge …
… Global will focus on developing a renewable presence.
Emerging aggressive RPS targets create an opportunity
PSEG is well-positioned to participate
– Familiarity with infrastructure development, asset management, energy policy, project financing and power markets
– Experience with domestic and international renewable assets
PSEG Global is pursuing potential development of renewable projects
– In October 2008, the New Jersey Office of Clean Energy (OCE) awarded a $4 million grant to a joint venture owned equally by a subsidiary of Global and an unaffiliated private developer, to advance the development of a 350MW wind farm approximately 16 miles off the shore of southern New Jersey.
– Joint Venture established to market and deploy Compressed Air Energy
Storage (CAES)
50
-40
-20
0
20
40
60
80
2007
2008E
2009E
2010E
2011E
PSEG Resources is managing its current investment portfolio …
… and earnings reflect potential resolution of tax matters.
PSEG Resources - Earnings Profile
Most of exposure related to cross border leases dealt with in 2nd quarter
2008.
$355 million charge to reflect potential changes to timing of tax cash flow.
$135 million increase to interest reserve.
$58
$15 -$20
($20) –
($30)
$15 - $25
(Net Income)
($20) –
($30)
51
PSEG Resources – Traditional lease investments
* Includes booked residual
Reliant
Power Plant
Aug-00
2026 & 2034
Y
423
305.4
Dynegy
Power Plant
May-01
2031 & 2035
Y
362.3
264.2
EME 2
Power Plant
Aug-00
2030 & 2034
Y
332.6
215.9
Merrill Creek
Reservoir
Jun-88
2032
N
327
123.3
Grand Gulf
Nuc. Plant
Dec-88
2015
N
133.5
103.5
Qwest
Real Estate
Dec-91
2012
Y
130.9
86.9
Dutch Rail
Rail Cars
Oct-92
2010
Y
48.7
48.6
Renaissance Ctr
Real Estate
Apr-88
2021
Y
62.5
38.3
Wal-Mart
Real Estate
Sep-91
2011-2023
Y
54.0
35.5
E-D Centers
Real Estate
Jun-90
2020 & 2021
Y
29.6
24.9
Whitehorn
Power Plant
Feb-00
2009
Y
17
15.0
Wal-Path
Real Estate
Apr-91
2021
Y
15.6
11.4
TOTAL
1,936.7
1,272.9
50%
55%
$671
$525
Discounted Value @ 6%
Discounted Value @ 8%
% Total Lease Portfolio
Average Life: 18.5 Years
Residual
2008-2035 Pre-tax
Cash Flow*
($ million)
Book Investment
as of 10/31/08
($ million)
Agreement
Property
Type
Start
Lease
Termination
52
Impact of Lease Reserves
2008 results include a charge of $490 million:
$135 million after-tax increase to the interest reserve recorded in Income Tax
Expense during 2Q 2008.
$355 million after-tax charge reflecting a change in assumptions relating to the
amount paid and timing of cash flow for certain leases in the portfolio. This charge
will be recognized in income over the remaining terms of the affected leases.
Reserves represent our view of most of the book exposure related to the
leases under challenge.
In addition, our forecast of cash available includes potential cash outflows of $900 -
$950 million over 2 – 3 years.
Based on status of discussions with IRS, PSEG has made an $80M deposit in
2008 (in addition to $100 million deposited in 2007) to defray potential interest
costs associated with this disputed tax liability.
PSEG anticipates paying between $230 - $360 million in tax, interest and
penalties for tax years 1997 -2000 in first half 2009, with a possible additional
$270 - $550 million in late 2009.
Declined IRS August 5th Global settlement offer in October.
53
Items Excluded from Net Income to Reconcile to Operating Earnings
Please see Slide 3 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how
it differs from Net Income.
Nine Months
Nine Months
Ended
Year Ended
Ended
Year Ended
September 30,
September 30,
2008*
2007**
2008*
2007**
Lease Transaction Reserves:
(490)
$
-
$
(0.96)
$
-
$
Impact of Asset Sales:
Chilquinta & Luz Del Sur
(23)
-
(0.05)
Write down of Turboven
(7)
-
(0.01)
Premium on bond redemption
(1)
(28)
-
(0.06)
Total Impact of Asset Sales
(1)
$
(58)
$
-
$
(0.12)
$
Discontinued Operations:
208
$
16
$
0.41
$
0.03
$
*
As stated in Form 10-Q for the quarterly period ended September 30, 2008.
**
As stated in 2007 Form 10-K .
December 31,
December 31,
($ millions)
(EPS)
54