![]() Public Service Enterprise Group PSEG Earnings Conference Call 4 th Quarter and Year-end 2011 February 23, 2012 Exhibit 99.1 |
![]() 1 Forward-Looking Statement Readers are cautioned that statements contained in this presentation about our future performance, including future revenues, earnings, strategies, prospects, consequences and all other statements that are not purely historical, are forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. When used herein, the words “anticipate”, “intend”, “estimate”, “believe”, “expect”, “plan”, “should”, “hypothetical”, “potential”, “forecast”, “project”, variations of such words and similar expressions are intended to identify forward-looking statements. Although we believe that our expectations are based on reasonable assumptions, they are subject to risks and uncertainties and we can give no assurance they will be achieved. The results or developments projected or predicted in these statements may differ materially from what may actually occur. Factors which could cause results or events to differ from current expectations include, but are not limited to: • adverse changes in the demand for or price of the capacity and energy that we sell into wholesale electricity markets, • adverse changes in energy industry law, policies and regulation, including market structures and a potential shift away from competitive markets toward subsidized market mechanisms, transmission planning and cost allocation rules, including rules regarding how transmission is planned and who is permitted to build transmission in the future, and reliability standards, • any inability of our transmission and distribution businesses to obtain adequate and timely rate relief and regulatory approvals from federal and state regulators, • changes in federal and state environmental regulations that could increase our costs or limit our operations, • changes in nuclear regulation and/or general developments in the nuclear power industry, including various impacts from any accidents or incidents experienced at our facilities or by others in the industry, that could limit operations of our nuclear generating units, • actions or activities at one of our nuclear units located on a multi-unit site that might adversely affect our ability to continue to operate that unit or other units located at the same site, • any inability to balance our energy obligations, available supply and trading risks, • any deterioration in our credit quality, or the credit quality of our counterparties, including in our leveraged leases, • availability of capital and credit at commercially reasonable terms and conditions and our ability to meet cash needs, • any inability to realize anticipated tax benefits or retain tax credits, • changes in the cost of, or interruption in the supply of, fuel and other commodities necessary to the operation of our generating units, • delays in receipt of necessary permits and approvals for our construction and development activities, • delays or unforeseen cost escalations in our construction and development activities, • any inability to achieve or continue to sustain, our expected levels of operating performance, • increase in competition in energy markets in which we compete, • challenges associated with recruitment and/or retention of a qualified workforce, • adverse performance of our decommissioning and defined benefit plan trust fund investments and changes in discount rates and funding requirements, and • changes in technology and customer usage patterns. For further information, please refer to our Annual Report on Form 10-K, including Item 1A. Risk Factors, and subsequent reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. These documents address in further detail our business, industry issues and other factors that could cause actual results to differ materially from those indicated in this presentation. In addition, any forward-looking statements included herein represent our estimates only as of today and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if our internal estimates change, unless otherwise required by applicable securities laws. |
![]() 2 GAAP Disclaimer PSEG presents Operating Earnings in addition to its Net Income reported in accordance with accounting principles generally accepted in the United States (GAAP). Operating Earnings is a non-GAAP financial measure that differs from Net Income because it excludes gains or losses associated with Nuclear Decommissioning Trust (NDT), Mark-to-Market (MTM) accounting, and other material one-time items. PSEG presents Operating Earnings because management believes that it is appropriate for investors to consider results excluding these items in addition to the results reported in accordance with GAAP. PSEG believes that the non-GAAP financial measure of Operating Earnings provides a consistent and comparable measure of performance of its businesses to help shareholders understand performance trends. This information is not intended to be viewed as an alternative to GAAP information. The last slide in this presentation includes a list of items excluded from Income from Continuing Operations to reconcile to Operating Earnings, with a reference to that slide included on each of the slides where the non-GAAP information appears. |
![]() PSEG 2011 Q4 and Full Year Review Ralph Izzo Chairman, President and Chief Executive Officer |
![]() 4 Q4 Earnings Summary $ millions (except EPS) 2011 2010 Operating Earnings $ 237 $ 303 Reconciling Items, Net of Tax 123 (13) Income from Continuing Operations 360 290 Discontinued Operations, Net of Tax - (8) Net Income 360 282 EPS from Operating Earnings* $ 0.47 $ 0.60 Quarter ended December 31 * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 5 Full-year Earnings Summary $ millions (except EPS) 2011 2010 Operating Earnings $ 1,389 $ 1,584 Reconciling Items, Net of Tax 18 (27) Income from Continuing Operations 1,407 1,557 Discontinued Operations, Net of Tax 96 7 Net Income 1,503 1,564 EPS from Operating Earnings* $ 2.74 $ 3.12 For the twelve months ended December 31 * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 6 PSEG – 2011 2011 Earnings at Top End of Guidance Operating earnings of $2.74 compared with guidance of $2.50 - $2.75 Another Year of Accomplishment, Despite Challenging Market Conditions Hope Creek Nuclear produced record levels of generation Record generation from CC fleet demonstrates benefits of diverse fuel mix Hope Creek and Salem license extensions obtained PSE&G won its 10 th consecutive Reliability One Award PSE&G received NJBPU approval for additional $368 million of capital spend, with supportive recovery mechanisms Transmission investments received incentive rate treatment Holdings continues to reduce financial risk through asset sales Awarded 10-year contract to manage the LIPA electric system Holdings acquired 25 MW solar project in Arizona O&M Growth Contained, Focus on Operating Efficiency Balance Sheet Strengthened, Flexibility Preserved |
![]() 7 PSEG – 2012 Operating Earnings Guidance for 2012 of $2.25 - $2.50 per share Power’s outlook influenced by low price for natural gas PSE&G benefits from increased investment Responding to Market Challenges U.S District Court action proceeding on constitutionality of LCAPP law under Supremacy and Commerce clauses Foundation for the Future On pace with Capital Program over 2012-2014 Balance Sheet strong 400 MW of new peaking capacity additions for 2012 in CT and NJ Common Dividend Raised 3.6% to $1.42 per share Change in Dividend Policy provides opportunity for growth |
![]() 8 2010 Operating Earnings* 2011 Operating Earnings* 2012 Guidance $2.25 - $2.50E PSEG – Introducing 2012 Guidance $3.12 * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. $2.74 |
![]() PSEG 2011 Q4 Operating Company Review Caroline Dorsa EVP and Chief Financial Officer |
![]() 10 Q4 Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2011 2010 2011 2010 PSEG Power $ 134 $ 212 $ 0.27 $ 0.42 PSE&G 99 83 0.19 0.16 PSEG Energy Holdings (1) 5 - 0.01 Enterprise 5 3 0.01 0.01 Operating Earnings* $ 237 $ 303 $ 0.47 $ 0.60 Quarter ended December 31 * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 11 Full-year Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2011 2010 2011 2010 PSEG Power $ 845 $ 1,091 $ 1.67 $ 2.15 PSE&G 521 430 1.03 0.85 PSEG Energy Holdings 5 49 0.01 0.10 Enterprise 18 14 0.03 0.02 Operating Earnings* $ 1,389 $ 1,584 $ 2.74 $ 3.12 For the year ended December 31 * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 12 $0.60 (.15) .03 (.01) $0.47 0.00 0.35 0.70 PSEG EPS Reconciliation – Q4 2011 versus Q4 2010 Q4 2011 Operating Earnings* Q4 2010 Operating Earnings* Lower Pricing (.12) Coal Optimization .02 Lower Volume (.01) O&M (.01) D&A (.02) Call Premium (.02) Taxes and Other .01 PSEG Power Transmission .02 Capital Infrastructure Investments .01 Weather (.02) D&A (.01) Taxes and Other .03 PSE&G PSEG Energy Holdings Lower Asset Sale Gains, Taxes and Other * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 13 $3.12 (.48) .18 .01 $2.74 (.09) 0.00 0.65 1.30 1.95 2.60 3.25 PSEG EPS Reconciliation – Full-year 2011 versus Full- year 2010 2011 Operating Earnings* 2010 Operating Earnings* Interest and Other Lower Pricing (.36) Coal Optimization .07 Volume (.03) O&M (.07) D&A (.08) Call Premium (.02) Taxes and Other .01 PSEG Power Transmission .05 Capital Infrastructure Investments .06 Rate Relief .04 O&M .06 Weather .01 D&A (.03) Interest (.01) PSE&G PSEG Energy Holdings Enterprise Lower Asset Sale Gains and Impairment (.05) Interest, Taxes and Other (.04) * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 14 PSEG – Meeting Challenges by: Delivering superior results from our fleet of well positioned assets Achieving earnings targets with focus on attaining top quartile performance across the enterprise Investing in areas with attractive risk-adjusted returns that also support system reliability Maintaining a strong balance sheet Increasing cash return to shareholders through the dividend |
![]() PSEG Power 2011 Q4 Review |
![]() 16 PSEG Power – Q4 2011 EPS Summary $ millions (except EPS) Q4 2011 Q4 2010 Variance Operating Revenues $ 1,493 $ 1,575 $ (82) Operating Earnings 134 212 (78) NDT Funds Related Activity, Net of Tax 0 15 (15) Mark-to-Market, Net of Tax 92 (28) 120 Income from Continuing Operations 226 199 27 Discontinued Operations, Net of Tax - (8) 8 Net Income 226 191 35 EPS from Operating Earnings* $ 0.27 $ 0.42 $ (0.15) * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 17 $0.27 (.05) (.11) .01 $0.42 0.00 0.10 0.20 0.30 0.40 0.50 Lower Prices and Lower Volume (.06) Lower Capacity (.07) Coal Optimization .02 PSEG Power EPS Reconciliation – Q4 2011 versus Q4 2010 Q4 2011 operating earnings* Q4 2010 operating earnings* O&M (.01) D&A (.02) Call Premium (.02) * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. Taxes and Other |
![]() 18 29,571 30,125 10,932 7,937 16,224 15,918 0 30,000 60,000 2010 2011 PSEG Power – Generation Measures 6,993 7,474 3,532 3,830 2,286 897 0 7,500 15,000 2010 2011 Quarter ended December 31 Total Nuclear Total Coal* Oil & Natural Gas * Includes figures for Pumped Storage PSEG Power – Generation (GWh) 12,811 12,201 Twelve months ended December 31 56,727 53,980 -4.8% -4.8% +1.9% -1.9% +8.4% +6.9% |
![]() 19 Hedging Update… … our strategy is to hedge our base load generation long term. Contracted Energy* * Hedge percentages and prices as of February 9, 2012. Revenues of full requirement load deals based on contract price, including renewable energy credits, ancillary, and transmission components but excluding capacity. Hedges include positions with MTM accounting treatment and options. Volume TWh 34 34 34 Base Load % Hedged 100% 85-90% 30-35% (Nuclear and Base Load Coal) Price $/MWh $59 $53 $57 Volume TWh 19 18 20 Intermediate Coal, Combined % Hedged 35-40% 0 0 Cycle, Peaking Price $/MWh $59 Volume TWh 53 52 54 Total % Hedged 75-80% 55-60% 20-25% Price $/MWh $59 $53 $57 2012 2013 2014 |
![]() 20 PSEG Power – Fuel Costs Quarter ended December 31 ($ millions) 2010 2011 Coal 78 31 Oil & Gas 160 136 Total Fossil 238 167 Nuclear 41 46 Total Fuel Cost 279 213 Total Generation (GWh) 12,811 12,201 $ / MWh 22 17 PSEG Power – Fuel Costs Twelve months ended December 31 ($ millions) 2010 2011 Coal 405 302 Oil & Gas 764 666 Total Fossil 1,169 968 Nuclear 164 182 Total Fuel Cost 1,333 1,150 Total Generation (GWh) 56,727 53,980 $ / MWh 24 21 |
![]() 21 PSEG Power – Gross Margin Performance $0 $25 $50 $75 2009 2010 2011 $0 $25 $50 $75 2009 2010 2011 $51 $53 Quarter ended December 31 Twelve months ended December 31 $60 $54 Prices declined with reduction in energy and capacity pricing Migration volumes in line with expectations, margins influenced by warmer-than-normal weather Output influenced by weather and compression in dark spreads Regional Performance Region 2011 Gross Margin ($M) 2011 Performance PJM $2,672 2011 contribution to gross margin declined by 9.5% versus year ago reflecting lower pricing and capacity payments, partly offset by strong production from nuclear units. New England $92 Bridgeport Harbor hurt by low prices offset by coal sales. New York $43 Lower contract prices. PSEG Power Gross Margin ($/MWh) $49 $52 |
![]() 22 Full Requirements Component Capacity Markets/RPM Growing Renewable Energy Requirements Component for Market Risk Market Perspective – 2012 BGS Auction Results Note: BGS prices reflect PSE&G Zone 3 Year Average Round the Clock PJM West Forward Energy Price Capacity Load shape Transmission Congestion Ancillary services Risk premium Green 2005 2006 2007 2008 2009 2010 2011 2012 $44 - $46 $67 - $70 $58 - $60 $68 - $71 $56 - $58 $48 - $50 $65.41 ~ $21 $102.51 ~ $32 $98.88 ~ $41 $111.50 ~ $43 $103.72 ~ $47 $95.77 ~ $47 $45 - $47 ~ $48 $94.30 ~ $46 $37 - $38 $83.88 |
![]() 23 PSEG Power – Q4 2011 Operating Highlights Q4 2011 and full-year output declined by 4.8% 2011 capacity factor for PS share of nuclear fleet at 92.8% with record annual generation production for Hope Creek Combined cycle output at record level; improvements in forced outage rate Operations Regulatory and Market Environment Financial 2012 BGS auction priced at $83.88/MWh vs. $103.72/MWh for expiring contract 2012 anticipated coal and nuclear output hedged at average price of $59/MWh Customer migration expanded to approximately 34% at year-end 2011 Power redeemed early $600 million of 6.95% Senior Notes due June 2012 in December, reducing debt at year-end 2011 to 34% of Power’s capitalization |
![]() PSE&G 2011 Q4 Review |
![]() 25 PSE&G – Q4 Earnings Summary $ millions (except EPS) Q4 2011 Q4 2010 Variance Operating Revenues $ 1,608 $ 1,882 $ (274) Operating Expenses Energy Costs 827 1,083 (256) Operation & Maintenance 358 358 - Depreciation & Amortization 171 187 (16) Taxes Other than Income Taxes 31 35 (4) Total Operating Expenses 1,387 1,663 (276) Operating Earnings / Net Income 99 83 16 EPS from Operating Earnings* $ 0.19 $ 0.16 $ 0.03 * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 26 $0.19 .03 (.01) (.02) .03 $0.16 0.00 0.05 0.10 0.15 0.20 0.25 PSE&G EPS Reconciliation – Q4 2011 versus Q4 2010 Q4 2011 operating earnings* Q4 2010 operating earnings* Transmission and Other Investments Taxes and Other * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. D&A Weather |
![]() 27 PSE&G – Q4 Operating Highlights Annual transmission revenue increase of $94 million effective on January 1, 2012 North East Grid Project received incentive rate treatment and a 25 bp ROE adder NJBPU reviewing industry response to storm restoration efforts in 2011 PSE&G’s distribution operations earned their authorized return Operations Regulatory and Market Environment Financial Heating Degree Days 24% below level experienced in 2010 and 18% below normal O&M remains under control Focused on maintaining reliability |
![]() PSEG Energy Holdings 2011 Q4 Review |
![]() 29 PSEG Energy Holdings – Q4 2011 Earnings Summary $ millions (except EPS) Q4 2011 Q4 2010 Variance Operating Earnings $ (1) $ 5 $ (6) Lease Transaction Loss (3) - (3) Gain on Asset Sale 34 - 34 Net Income $ 30 $ 5 $ 25 EPS from Operating Earnings* $ 0.00 $ 0.01 $ (0.01) * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 30 $0.01 (.01) 0.00 0.05 PSEG Energy Holdings EPS Reconciliation – Q4 2011 versus Q4 2010 Q4 2011 operating earnings* Q4 2010 operating earnings* 2009 Lease Sales * See page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. Lower Asset Sale Gains, Taxes and Other $0.00 |
![]() 31 PSEG Energy Holdings – Q4 Operating Highlights Financial Definitive agreement reached with the IRS that settles the tax treatment for challenged lease transactions (LILO/SILO) for all tax years Qwest building sold in December 2011 for gain of $34 million 10-year LIPA management services agreement begins January 2014 Expanded interest in solar with purchase of 25 MW facility for $75 million Settlement reached in December 2011 with Dynegy in regard to the lease arrangements for the Roseton and Danskammer facilities leased to subsidiaries of Dynegy Holdings LLC (DH) |
![]() PSEG |
![]() 33 PSEG Capital Expenditures 2012 - 2014 2012E 2013E 2014E 2012-14E PSE&G – Transmission $995 $1,320 $1,200 $3,515 – Distribution $660 $410 $435 – Renewables/EMP $250 $60 $25 Total PSE&G $1,905 $1,790 $1,660 $5,355 Power – Maintenance $330 $185 $175 – Environmental $70 $95 $80 – Growth $140 $120 $120 Total Power $540 $400 $375 $1,315 Other $45 $40 $30 $115 Solar $75 $0 $0 $75 Total PSEG $2,565 $2,230 $2,065 $6,860 Spending on transmission represents 51% of total budget and 66% of PSE&G’s forecast level of spend Power’s environmental capital expenditures below $100 million/year $ in Millions; E = Estimate |
![]() 34 PSEG Financial Highlights 2012 operating earnings guidance of $2.25 - $2.50 per share Guidance by operating company Financial risk associated with LILO/SILO investments eliminated Financial position strengthened Dividend increase continues practice of returning cash to shareholders Debt : Capital ratio remained strong at 41% at year-end 2011 Limited impact of higher pension expense for 2012 |
![]() 35 PSEG 2012 Operating Earnings Guidance - PSEG 2012 Operating Earnings Guidance - By Subsidiary By Subsidiary $ millions (except EPS) 2012E 2011A PSEG Power $575 – $665 $ 845 PSE&G $530 – $560 $ 521 PSEG Energy Holdings/Parent $35 – $45 $ 23 Operating Earnings* $1,140 – $1,270 $ 1,389 Earnings per Share $ 2.25 – $ 2.50 $2.74 * See Page 37 for Items excluded from Income from Continuing Operations to reconcile to Operating Earnings. |
![]() 36 PSEG Liquidity as of December 31, 2011 Expiration Total Available Company Facility Date Facility Usage Liquidity ($Millions) PSE&G 5-year Credit Facility Apr-16 $600 $0 $600 5-Year Credit Facility (Power) Dec-12 $1,525 1 $75 $1,450 5-Year Credit Facility (Power) Apr-16 $1,000 $0 $1,000 5-Year Bilateral - (Power) Sep-15 $100 $100 $0 5-year Credit Facility (PSEG) Dec-12 $477 2 $12 $465 5-year Credit Facility (PSEG) Apr-16 $500 $0 $500 Total $4,202 $4,015 $643 PSE&G ST Investment $115 Total Liquidity Available $4,773 Total Parent / Power Liquidity $4,058 1 Power Facility was reduced by $75 million in 12/2011 2 PSEG Facility was reduced by $23 million in 12/2011 PSEG / Power PSEG Money Pool ST Investment |
![]() 37 Items Excluded from Income from Continuing Operations to Reconcile to Operating Earnings Please see Page 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Net Income. 2011 2010 2011 2010 Earnings Impact ($ Millions) Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) - $ 15 $ 50 $ 46 $ Gain (Loss) on Mark-to-Market (MTM) (PSEG Power) 92 (28) 107 (1) Lease Transaction Loss (Energy Holdings) (3) - (173) - Market Transition Charge Refund (PSE&G) - - - (72) Gain on Sale of Qwest Building (Energy Holdings) 34 - 34 - Total Pro-forma adjustments 123 $ (13) $ 18 $ (27) $ Fully Diluted Average Shares Outstanding (in Millions) 507 507 507 507 Per Share Impact (Diluted) Gain (Loss) on NDT Fund Related Activity (PSEG Power) - $ 0.03 $ 0.10 $ 0.09 $ Gain (Loss) on MTM (PSEG Power) 0.18 (0.06) 0.21 - Lease Transaction Loss (Energy Holdings) - - (0.34) - Market Transition Charge Refund (PSE&G) - - - (0.14) Gain on Sale of Qwest Building (Energy Holdings) 0.06 - 0.06 - Total Pro-forma adjustments 0.24 $ (0.03) $ 0.03 $ (0.05) $ December 31, December 31, PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Reconciling Items Excluded from Continuing Operations to Compute Operating Earnings (Unaudited) Pro-forma Adjustments, net of tax For the Three Months Ended For the Year Ended |