Public Service Enterprise Group PSEG Earnings Conference Call 1 Quarter 2013 April 30, 2013 EXHIBIT 99.1 st |
1 Forward-Looking Statement Certain of the matters discussed in this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those anticipated. Such statements are based on management’s beliefs as well as assumptions made by and information currently available to management. 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. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Other factors that could cause actual results to differ materially from those contemplated in any forward-looking statements made by us herein are discussed in Item 1. Financial Statements—Note 8. Commitments and Contingent Liabilities, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, and other factors discussed in filings we make with the United States Securities and Exchange Commission (SEC). These factors include, but are not limited to: • adverse changes in the demand for or the 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 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, • 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, • any equipment failures, accidents, severe weather events or other incidents that impact our ability to provide safe and reliable service to our customers, and any inability to sufficiently obtain coverage or recover proceeds of insurance on such matters, • increase in competition in energy supply markets as well as competition for certain rate-based transmission projects, • any inability to realize anticipated tax benefits or retain tax credits, • 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 funding requirements, and • changes in technology and customer usage patterns. All of the forward-looking statements made in this report are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by management will be realized or even if realized, will have the expected consequences to, or effects on, us or our business prospects, financial condition or results of operations. Readers are cautioned not to place undue reliance on these forward-looking statements in making any investment decision. Forward-looking statements made in this report apply only as of the date of this report. While we may elect to update forward-looking statements from time to time, we specifically disclaim any obligation to do so, even if internal estimates change, unless otherwise required by applicable securities laws. The forward-looking statements contained in this report are intended to qualify for the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. |
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/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. |
PSEG 2013 Q1 Review Ralph Izzo Chairman, President and Chief Executive Officer |
4 Q1 Earnings Summary $ millions (except EPS) 2013 2012 Operating Earnings $ 433 $ 432 Reconciling Items, Net of Tax (113) 61 Income from Continuing Operations/Net Income $ 320 $ 493 EPS from Operating Earnings* $ 0.85 $ 0.85 Quarter ended March 31 * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. |
5 PSEG – Q1 2013 Highlights Strong Earnings Operating earnings of $0.85 vs. $0.85 per share in Q1 2012 Power benefited from higher pricing and increased output Increased contribution to earnings from PSE&G’s investment in transmission Operational Excellence PSEG Power output up 7.7% in quarter; nuclear capacity factor at 101% Diversity and location of Power’s fleet provided flexibility to participate in market PSE&G’s O&M on track to meet full-year expectations PSEG Disciplined Capital Investment BPU decision pending on Solar 4 All extension and Solar Loan III agreement 33 local NJ governments have approved resolutions in support of PSE&G’s Energy Strong proposal to fortify its electric and gas distribution systems Credit ratings upgraded by Standard & Poor’s for PSEG, PSE&G and Power Increased common dividend to indicative annual rate of $1.44 per share in Q1 |
6 $2.25 - $2.50E PSEG – Maintaining 2013 Guidance $2.74 * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. E = Estimate. $2.44 2011 Operating Earnings* 2012 Operating Earnings* 2013 Operating Earnings Guidance |
PSEG 2013 Q1 Operating Company Review Caroline Dorsa EVP and Chief Financial Officer |
8 Q1 Operating Earnings by Subsidiary Operating Earnings Earnings per Share $ millions (except EPS) 2013 2012 2013 2012 PSEG Power $ 250 $ 196 $ 0.49 $ 0.39 PSE&G 179 197 0.35 0.39 PSEG Energy Holdings/ Enterprise 4 39 0.01 0.07 Operating Earnings* $ 433 $ 432 $ 0.85 $ 0.85 Quarter ended March 31 * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. |
9 $0.85 .10 $0.85 (.04) (.06) PSEG EPS Reconciliation – Q1 2013 versus Q1 2012 Q1 2013 Operating Earnings* Q1 2012 Operating Earnings* PSEG Power PSE&G PSEG Energy Holdings/ Enterprise * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. Capacity .05 Net Price .02 Volume .02 Gas Send-Out and Fixed Cost Recovery .04 O&M and Other (.02) D&A (.01) Transmission Net Earnings .03 Weather .02 Distribution O&M (.02) D&A and Other (.01) Absence of Tax Settlement (.06) Absence of Tax Settlement (.07) Other .01 0.00 0.20 0.40 0.60 0.80 1.00 |
PSEG Power 2013 Q1 Review |
11 PSEG Power – Q1 2013 EPS Summary $ millions (except EPS) Q1 2013 Q1 2012 Variance Operating Revenues $ 1,447 $ 1,561 $ (114) Operating Earnings $ 250 $ 196 $ 54 Pro Forma Adjustments, Net of Tax** (113) 57 (170) Income from Continuing Operations/ Net Income $ 137 $ 253 $ (116) EPS from Operating Earnings* $ 0.49 $ 0.39 $ 0.10 * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. **Includes the financial impact from Mark-to-Market positions with forward delivery months. |
12 $0.39 .13 $0.49 (.03) 0.00 0.10 0.20 0.30 0.40 0.50 Capacity .05 Net Price .02 Volume .02 Gas Send-Out and Fixed Cost Recovery .04 PSEG Power EPS Reconciliation – Q1 2013 versus Q1 2012 Q1 2013 Operating Earnings* Q1 2012 Operating Earnings* O&M and Other (.02) D&A (.01) * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. |
13 PSEG Power – Generation Measures Quarter ended March 31 Total Nuclear Total Coal* Oil & Natural Gas Generation by Fuel (GWh) 14,030 13,143 Quarter ended March 31 * Includes figures for Pumped Storage. Also includes natural gas fuel switching intervals during 2012 and 2013. 2011 2012 2013 Combined Cycle PJM and NY 53% 56% 52% Coal* NJ (Coal/Gas) 29% 2% 19% PA 83% 63% 85% CT 24% 2% 36% Nuclear 99% 98% 101% 14,157 Fleet Capacity Factors (%) 57% of Output 27% of Output 15,000 7,500 0 2011 2012 2013 7,928 7,970 8,137 2,312 1,130 2,207 3,813 4,043 3,790 |
14 PSEG Power – Fuel Costs Quarter ended March 31 ($ millions) 2011 2012 2013 Coal $90 $39 $66 Oil & Gas 191 128 178 Total Fossil 281 167 244 Nuclear 46 50 58 Total Fuel Cost $327 $217 $302 Total Generation (GWh) 14,030 13,143 14,157 $ / MWh 23.31 16.51 21.33 PSEG Power – Fuel Costs |
15 PSEG Power – Gross Margin Performance $55 $46 Quarter ended March 31 Q1 2013 Regional Performance Region Gross Margin ($M) 2013 Performance PJM $638 Higher market pricing and higher volumes offset lower pricing from roll off of higher priced hedges. Higher capacity pricing versus a year ago. New England $20 Higher volume and higher pricing. New York $15 Higher pricing. PSEG Power Gross Margin ($/MWh) $48 Return to normal weather and higher spot power and gas prices offset declines in average hedge price Q1 spot prices higher across PJM, ISO-NE, and NYISO Capacity prices higher year-over-year Market support for dispatch of NJ coal units on coal Continued strong portfolio output enables Power to participate in market opportunities $75 $50 $25 $0 2011 2012 2013 |
16 Hedging Update… Contracted Energy* * Hedge percentages and prices as of March 28, 2013. 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. Apr-Dec 2013 2014 2015 Base Load (Nuclear and Base Load Coal) Intermediate Coal, Combined Cycle, Peaking Total Volume TWh % Hedged Price $/MWh Volume TWh % Hedged Price $/MWh Volume TWh % Hedged Price $/MWh 26 35 35 100% 80-85% 40-45% $50 $50 $50 15 19 18 30-35% 0% 0% $50 $50 $50 40-42 53-55 52-54 70-75% 50-55% 25-30% $50 $50 $50 |
17 PSEG Power – Q1 2013 Operating Highlights Operations Financial Regulatory and Market Environment S&P upgraded Power’s senior unsecured debt rating from BBB to BBB+ (Outlook Stable) Superstorm Sandy cost estimates: $28 million O&M in Q1; $113 million storm-to-date; $300 million in total over two-year period (excluding insurance recoveries) Power’s total debt as a percentage of capital at March 31 was 30% Improved spot power prices reflected normal winter weather and higher natural gas prices; basis in the quarter improved from Q1 2012 lows MOPR settlement decision pending at FERC Decision in Federal Court on NJ LCAPP case expected after May RPM 2013 anticipated base load output hedged at an average price of $50/MWh Q1 output up 7.7% on strong portfolio production; nuclear capacity factor at 101% Salem station posted record generation Equipment and design upgrades contributed to excellent nuclear performance Output of NJ coal units was 54% coal, 46% gas fueled |
PSE&G 2013 Q1 Review |
19 PSE&G – Q1 Earnings Summary $ millions (except EPS) Q1 2013 Q1 2012 Variance Operating Revenues $ 1,995 $ 1,939 $ 56 Operating Expenses 967 1,002 (35) 427 376 51 215 190 25 21 29 (8) Total Operating Expenses 1,630 1,597 33 Operating Earnings $ 179 $ 197 $ (18) EPS from Operating Earnings* $ 0.35 $ 0.39 $ (0.04) * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. Energy Costs Operation & Maintenance Depreciation & Amortization Taxes Other than Income Taxes |
PSE&G EPS Reconciliation – Q1 2013 versus Q1 2012 20 Q1 2013 Operating Earnings* Q1 2012 Operating Earnings* * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. Transmission Net Earnings .03 Weather .02 D&A and Other (.01) Absence of Tax Settlement (.06) Distribution O&M $0.39 .05 $0.35 (.07) (.02) 0.50 0.40 0.30 0.20 0.10 0.00 |
21 PSE&G – Q1 Operating Highlights Operations BPU decision pending on agreement to spend up to $247 million on Solar 4 All extension and up to $199 million on Solar Loan III program PSE&G pursuing Energy Strong infrastructure proposal with the NJBPU to invest $3.9 billion over the next ten years on electric and gas system hardening and resiliency Advancing plans for Transmission hardening program of $1.5 billion over 10 years NJBPU initiated two generic proceedings with the NJ EDCs on storm response Construction of major transmission lines progressing on schedule Regulatory and Market Environment S&P upgraded PSE&G’s senior secured debt rating from A- to A (Outlook Stable) PSE&G earned its authorized return in the quarter Financial Q1 weather was significantly colder than a year ago but about normal Heating degree days 26% above Q1 2012, flat versus normal weather Residual impacts of Sandy and a still-slow economy continue to weigh on demand More normal O&M spend in Q1 2013; expect O&M to even out over balance of year |
PSEG Energy Holdings/Enterprise 2013 Q1 Review |
23 PSEG Energy Holdings/Enterprise – Q1 2013 Earnings Summary $ millions (except EPS) Q1 2013 Q1 2012 Variance Operating Earnings $ 4 $ 39 $ (35) Lease Transaction Activity - 4 (4) Net Income $ 4 $ 43 $ (39) EPS from Operating Earnings* $ 0.01 $ 0.07 $ (0.06) * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. |
24 PSEG Energy Holdings/Enterprise EPS Reconciliation – Q1 2013 versus Q1 2012 Q1 2013 Operating Earnings* Q1 2012 Operating Earnings* * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. Absence of Tax Settlement (.07) Other .01 $0.01 (.06) $0.07 0.10 0.05 0.00 |
PSEG |
26 PSEG Financial Highlights Maintaining 2013 operating earnings guidance of $2.25 - $2.50 per share Focused on maintaining operating efficiency and customer reliability PSE&G expected to grow at double-digit rate in 2013 and provide ~50% of operating earnings Executing existing $3.4 billion transmission capital spending program on schedule PSE&G pursuing Energy Strong, its $3.9 billion, ten-year infrastructure spending program to strengthen electric and gas distribution, communications, and customer reliability and resiliency. In addition, PSE&G plans to invest $1.5 billion during this time-frame to harden its transmission system Financial position remains strong S&P upgraded PSEG’s corporate credit rating from BBB to BBB+ (Outlook Stable) Positive cash from Power and increasing cash flow from PSE&G supports dividend growth and funds capital spending program without the need to issue equity Debt as a percentage of capital was 41% at March 31, 2013 Long history of returning cash to the shareholder through the common dividend, with opportunity for future growth Increased common dividend to indicative annual rate of $1.44 per share in Q1 |
27 PSEG 2013 Operating Earnings Guidance - By Subsidiary $ millions (except EPS) 2013E 2012A PSEG Power $535 – $600 $644 PSE&G $580 – $635 $528 PSEG Energy Holdings/Enterprise $25 – $35 $64 Operating Earnings* $1,140 – $1,270 $1,236 Earnings per Share $2.25 – $2.50 $2.44 * See Slide A for Items excluded from Income from Continuing Operations/Net Income to reconcile to Operating Earnings. E = Estimate A = Actual |
28 PSEG Liquidity as of March 31, 2013 PSE&G 5-year Credit Facility Mar-18 $600 $178 $422 5-Year Credit Facility (Power) Mar-17 1,600 60 1,540 5-Year Credit Facility (Power) Mar-18 1,000 0 1,000 5-Year Bilateral (Power) Sep-15 100 100 0 5-year Credit Facility (PSEG) Mar-17 500 4 496 5-year Credit Facility (PSEG) Mar-18 500 0 500 Total $4,300 $342 $3,958 $289 $0 $4,247 $3,825 PSEG / Power Expiration Total Available Company Facility Date Facility Usage Liquidity ($Millions) Total Liquidity Available PSEG Money Pool ST Investment PSE&G ST Investment Total Parent / Power Liquidity |
A Items Excluded from Income from Continuing Operations/ Net Income to Reconcile to Operating Earnings Please see Slide 2 for an explanation of PSEG’s use of Operating Earnings as a non-GAAP financial measure and how it differs from Income from Continuing Operations/Net Income. 2013 2012 2012 2011 Gain (Loss) on Nuclear Decommissioning Trust (NDT) Fund Related Activity (PSEG Power) 9 $ 5 $ 52 $ 50 $ (105) 52 (10) 107 Lease Related Activity (PSEG Energy Holdings) - 4 36 (173) Storm O&M (PSEG Power) (17) - (39) - Gain on Sale of Qwest Building (PSEG Energy Holdings) - - - 34 Total Pro-forma adjustments (113) $ 61 $ 39 $ 18 $ Fully Diluted Average Shares Outstanding (in Millions) 507 507 507 507 Gain (Loss) on NDT Fund Related Activity (PSEG Power) 0.02 $ 0.01 $ 0.10 $ 0.10 $ (0.21) 0.10 (0.02) 0.21 Lease Related Activity (PSEG Energy Holdings) - 0.01 0.07 (0.34) Storm O&M (PSEG Power) (0.03) - (0.08) - Gain on Sale of Qwest Building (PSEG Energy Holdings) - - - 0.06 Total Pro-forma adjustments (0.22) $ 0.12 $ 0.07 $ 0.03 $ Three Months Ended Year Ended December 31, March 31, Pro-forma Adjustments, net of tax Gain (Loss) on MTM (PSEG Power) Gain (Loss) on Mark-to-Market (MTM) (PSEG Power) PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED Reconciling Items Excluded from Income from Continuing Operations/Net Income to Compute Operating Earnings (Unaudited) Per Share Impact (Diluted) Earnings Impact ($ Millions) (a) (a) |